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Managing without growth: challenges confronting the Syrian labour market Iyanatul Islam Email: 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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The context

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

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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.

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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

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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

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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.

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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.

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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

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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

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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

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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

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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

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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’

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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

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