Youth Wave Tests Mideast at Creating Jobs

Youth Wave Tests Mideast at Creating Jobs To Avoid Losing Ground Against Unemployment, Nations Try Diversifying, Challenging Attitudes

By Mariam Fam 
Wall Street Journal

Thanks to an oil-fueled boom, the Middle East, long plagued by high unemployment, is generating lots of new jobs. But a key test will be whether it can expand its work force fast enough to keep up with a demographic bulge of young job seekers.

Between 2000 and 2005, overall unemployment rates in the Middle East and North Africa fell to an average 10.8% from 14.3%, according to the World Bank. But a surge in population growth in the 1970s and 1980s means the region faces a tidal wave of young people who are entering the job market.

For those between the ages of 15 and 24 years old, unemployment in the region stands at or above 25%, according to the Middle East Youth Initiative, an international research project. That is nearly twice the world average of 14%. And a World Bank report published this year estimates the region will need to create 54 million jobs over the next 15 years just to keep unemployment rates stable.

Another worry: Many newly created jobs are low-paying, or in relatively low-productivity sectors like construction and agriculture -- not the kind of employment that is likely to lift large segments of the population out of poverty. This would be a good question to ask overseas...how can this level job lift someone out of poverty?

The stakes aren't just economic. Amid a tilt toward social and religious conservatism in parts of the Middle East, some extremist groups are swelling their ranks by tapping into the sense of alienation among economically frustrated youths.

"It tends to be more-educated and young people who are having trouble finding jobs," says Marcus Noland, senior fellow at the Peterson Institute for International Economics in Washington. In Egypt, for example, the unemployment rate among those with a secondary education was 13.5% in 2006, much higher than the 1.4% among those with less education but somewhat less than the 13.7% among those with higher education, according to the World Bank.

"Having a society in which large numbers of educated young people are unemployed and disaffected...is a very combustible situation," Mr. Noland says.

Though the region's economy is enjoying its strongest expansion in a generation -- gross domestic product in the Middle East and North Africa expanded an estimated 6.2% last year -- much of that growth has been more concentrated in the oil-rich Persian Gulf. Job gains in the region also have been uneven.

Jobless rates have fallen in eight of 12 countries in the region studied by the World Bank. But employment has stagnated in Jordan, and joblessness has risen in Kuwait and the United Arab Emirates, as many of the jobs created by the oil boom have gone to foreigners.

Part of the difficulty stems from the relatively isolated nature of the region's economies. Despite some headline-grabbing forays abroad like the Abu Dhabi Investment Authority's recent acquisition of a major stake in Citigroup Inc. for $7.5 billion, economists say countries in the Middle East have had trouble integrating their economies with the rest of the world.

"This is an area of the world that hasn't really integrated and used the global economy as a springboard for growth," says Leslie Lipschitz, director of the International Monetary Fund Institute, a training arm of the IMF.

Many nonoil-producing countries have launched efforts to liberalize and diversify their economies, and that has attracted capital, including from Persian Gulf investors, who are scouting for opportunities closer to home. But economists say the region needs to develop and expand labor-intensive, export-oriented businesses and step up overhauls to attract more foreign investments to projects that can bring in new skills and technologies.

Some countries in the region are grappling with a mismatch between their job markets and the aspirations of their citizens. Generally higher levels of education have led some Middle Easterners to shun menial jobs. But many still lack the kind of high-end skills required by the booming private sector, like proficiency in a foreign language or the specialized training needed for financial services or information-technology jobs.

In Jordan, where the unemployment rate hovers at 14%, most new jobs in the past five years have gone to foreign workers, according to the World Bank. Foreigners dominate the nation's fast-growing construction and manufacturing sectors, partly because many Jordanians want jobs with higher pay or more cachet. Some Jordanians hold out for what they view as better jobs in the public sector. 

To counter this trend, the country's army and Ministry of Labor have joined forces with the private sector in an initiative that provides young Jordanians with incentives, including cash and training, to pursue careers in construction. The country's labor minister credits the involvement of the army, which Jordanians consider one of their most prestigious institutions, with helping attract young people to the program who might otherwise spurn construction jobs. 
 
Despite Saudi Arabia's oil wealth, official unemployment among Saudi citizens stands at 12%, though some economists believe the figure could be twice as high. The country, the world's No. 1 oil exporter, is bent on economic diversification and is building a number of "economic cities" to attract foreign investment and create jobs for Saudis.

Saudi Arabia has emerged as "a magnet for businesses," says Brad Bourland, chief economist at Jadwa Investment in Riyadh. But it also suffers from shortages of skilled job candidates. "The number of Saudi candidates who have educational credentials in finance, economics and accounting are just not enough for the jobs that are available," Mr. Bourland says.
 
In Egypt, the Arab world's most populous country, the government has started a campaign to attract international business and high-skills jobs. It has ambitions to become a regional outsourcing hub. But government officials are also pushing vocational training, like welding and manufacturing. They also urge Egyptians not to hold out for the perfect job.
 
"It's good to get an education and a college degree, but that doesn't mean I say, 'I...will only take an office job,' " Egyptian Prime Minister Ahmed Nazif said during a recent conference of the country's ruling party. "The job markets need people to work in factories, hotels, construction and many other fields."

Write to Mariam Fam at mariam.fam@wsj.com