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Managing without growth: challenges confronting the Syrian labour market Iyanatul Islam Email: [email protected] UNDP-IPC International Conference on employment Brasilia, January 11-12, 2005. The context. Syria – low middle income [about US$1000 p.a.] and oil dependent economy

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Managing without growth: challenges confronting the Syrian labour marketIyanatul IslamEmail: [email protected] International Conference on employmentBrasilia, January 11-12, 2005

the context
The context
  • Syria – low middle income [about US$1000 p.a.] and oil dependent economy
  • Expected to run out of oil reserves in about 10-12 years
  • Faces uncertain international climate
  • Seeking closer ties with EU and Arab states to offset frosty relationship with US
  • Struggling to recover from recession of 1999, with per capita growth in recent years less than 1 per cent p.a.
  • Yet, maintained respectable progress in human development and expected to reach most of the MDGs by 2015
  • Labour market caught in a ‘double squeeze’, with rapid labour force growth and slow economic growth.
  • Labour market policies will have to be more astute than in the past.
labour market poverty linkage
Labour market-poverty linkage
  • The public sector-private sector divide is a defining feature of the Syrian labour market
  • 27 per cent work in the public sector, the rest in the private sector
  • Within the private sector, the relative size of the informal economy is 36 per cent
  • 66 per cent of employed university graduates and 82 per cent of all employed graduates from intermediate institutions work in the public sector
  • The proportions are even higher for female workers
  • Gender wage gap much higher in private than in public sector
  • The sectoral distribution of workers with higher educational qualifications lies at the core of the labour market-poverty nexus in Syria
  • The private sector accounts for 85 per cent of the share of poverty
  • Incidence of low paid workers are much higher in the private sector than in the public sector [53 per cent vs 26 per cent]
  • Public sector wages are 1.5 times private sector wages
unemployment underemployment and poverty
Unemployment, underemployment and poverty
  • Unemployment rates for 2003 vary from 7 per cent to 16 per cent, with labour force survey [LFS] suggesting 12 per cent
  • Ministry of Social Affairs and Labour endorses LFS figure, but the State Planning Commission prefers to work with a ‘range’ of estimates.
  • Significant share of unemployment [47 per cent] may be attributed to those with elementary education
  • 75 per cent of the total stock of unemployed in the 15-29 age group
  • Female unemployment lower than males in the 15-19 age group as well as for cohorts with elementary education, but the converse is true for other groups
  • Duration of unemployment is high – 65 per cent of total experience a spell of unemployment lasting one year
  • Multiple job holdings reported to be widespread but not reflected in data
  • ‘Gross’ underemployment afflicts 52 per cent of the labour force
unemployment underemployment and poverty con td
Unemployment, underemployment and poverty – con’td
  • Unemployment-poverty nexus quite close for those with elementary education, but not for other cohorts
  • At the regional level, only four governorates account for 50 per cent of total stock of unemployment
  • But these are not the regions with the highest poverty incidence
  • Also, areas with high underemployment rates are not synonymous with high poverty rates
  • In general, the correlation between poverty, unemployment and underemployment at the regional level is either statistically insignificant or of the ‘wrong’ sign
  • Hence, regional unemployment map constructed by the Syrian government in 2003 likely to be an unreliable guide for identifying impoverished regions.
child labour and poverty
Child labour and poverty
  • In recent years, child labour has become a prominent and contentious issue in Syria
  • Coincides with publication of a major report by UNICEF
  • Incidence of child labour around 18 per cent
  • Child labour much higher in poorer rural areas [64 per cent] than in urban areas [36 per cent].
  • It is also higher in agriculture [56 per cent] than in manufacturing [18 per cent]
  • Child labour rates much higher in regions with an extensive rural and agricultural base
  • Girls represented disproportionately in urban based agriculture, but the gender gap is less conspicuous in rural based agriculture.
policy issues growth investment and employment
Policy issues – growth, investment and employment
  • Government and other stakeholders agree that rapid, investment-led growth is key to durable employment creation and poverty reduction
  • State Planning Commission maintains that 185,000 jobs need to created to maintain ‘flow’ equilibrium in the labour market, but others [eg World Bank, CAIMED] suggest much higher figures
  • State Planning Commission maintains that growth of 6-7 per cent required to reach job creation target, but Damascus Chamber of Commerce and others maintain growth rate of 8 per cent required
  • State Planning Commission recommends investment ratio of 47 per cent of GDP to sustain growth rate of 7 per cent, but this threshold has historically never been reached
  • Less attention seems to have been paid to employment elasticity, although global evidence shows link between poverty reduction and high employment elasticity
  • Modest improvements in employment elasticity can reduce required growth to meet job creation targets from 8 per cent to 6 per cent
policy issues growth investment and employment8
Policy issues – growth, investment and employment
  • Lack of a modern financial system that is able to tap new investment funds is a major institutional impediment
  • Legislative initiative in place for setting up a stock market
  • Trade liberalization is on the policy agenda, but privatization is not
  • Rigorous assessment required for monitoring employment consequences of liberalization-cum-privatization
  • Global evidence shows that such a reform agenda can engender negative employment consequences in the short run, but not in the long run
  • Hence, prudent management of policy reform required
policy issues the agency for combating unemployment acu
Policy issues – The Agency for Combating Unemployment [ACU]
  • ACU set up as supra-ministerial agency to deal with unemployment
  • Granted mandate to disburse US$ 1 billion and create 440,000 jobs over five years [2001-2005]
  • Policy instruments include credit for business start-ups, microfinance and training and re-training, esp. self-employment
  • According to ACU’s own forecasts, at best 250,00 jobs will be created by end 2005.
  • Maintains that this is due to funding shortfall and acknowledges that ultimately job creation will depend on investment-led growth
  • Given heavy investment of human capital in ACU [more than 70 PhDs], the agency could be transformed into a policy advisory unit working on labour market-poverty linkages
  • Collaborative arrangements between, ACU, State Planning Commission and Ministry of Social Affairs and Labour need to be designed
policy issues child labour
Policy issues – child labour
  • Syria has ratified the ILO convention on eliminating the worst forms of child labour
  • Current approach is to penalize firms and families using child labour
  • Ministry of Social Affairs and Labour is arguing for an alternative incentive-driven approach
  • The aim is to design schemes that will provide financial incentives for poor families to invest in children’s education
  • A resolution of alternative policy approaches is required
policy issues employment security and social protection
Policy issues – employment security and social protection
  • About 19 per cent of Syrians are vulnerable to at least a transient spell of poverty. Also the incidence of both seasonal employment/intermittent work is quite high
  • Hence, employment security and social protection are high on the Syrian policy agenda
  • Need a combination of policy instruments – such as unemployment insurance, public works and microfinance
  • Syria does not have unemployment insurance, but uses stiff anti-firing legislation as a surrogate
  • Such legislation is both ineffective and a source of contention with investors
  • Cross-country evidence suggests that unemployment insurance can be fiscally affordable and designed to mitigate disincentive effects
  • Both public works and microfinance part of the ACU’s role, but they need to be a regular feature of labour market policy
  • Given that these initiatives are in their infancy, Syria can learn from best practice elsewhere
policy issues wage disparities and wage policy
Policy issues – wage disparities and wage policy
  • In May, 2004 public sector wages increased by 20 per cent, private sector urged to adopt pay increases between 5 to 20 per cent, while minimum wages are poised to increase by more than 40 per cent
  • Given that the wage gap is currently in favour of the public sector, such wage policy will worsen wage disparities
  • It could help those employed in the formal sector, bypass those in the informal sector and hurt those seeking work
  • An effective solution to improving wages in the private sector is to improve its human capital endowment
  • This requires reform of education and training system to produce graduates with skills pertinent to private sector needs and by fostering in-firm training
  • Promising initiatives in place – reform of VET and conclusion of ‘EFA assessment’, industrial scholarship schemes and private sector-public sector collaboration in industrial training
  • Minimum wages should be indicative rather than mandatory and used to monitor conditions of ‘working poor’
policy issues labour market flexibility
Policy issues – labour market flexibility
  • Engendering labour market flexibility is now a major part of the policy agenda
  • There is a good deal of support among key stakeholders to reform labour laws that have remained largely unchanged over the last 40 years
  • At the same time, Syria has ratified the core ILO conventions on fundamental principles and rights at work
  • In pursuing an agenda of labour market flexibility, some issues need to be kept in perspective
  • Comparative data show that, apart from high firing costs, Syria is not too far out of line with international norms
  • More importantly, international evidence shows that the benefits of labour market flexibility have probably been oversold
  • The challenge for Syria is to combine reform of labour laws with its commitment to uphold labour rights