Developing emerging technology while retooling education for the modern labour market, among other strategies, has the potential to reverse decades of youth unemployment in the Middle East, creating millions of new jobs and doubling the region’s economic output, according to a new report from McKinsey.
“When I was younger, opportunities for youth and a better economic future in the region were few and far between, especially for youth who grew up in lower-income parts of the region,” said Khalid Aljihrish, a co-author of the report.
“I was one of the lucky ones who had one of those few tickets to a brighter future. Even though many countries in the region, both through private and public initiatives, are undergoing impressive transformations today to broaden economic opportunities available to their youth, there is still much to be done.”
Despite vast differences in political, economic and social conditions among nations in the region, youth unemployment remains a pervasive issue. Joblessness among young people in the Middle East and North Africa has been the highest in the world for more than 25 years,with young people often looking for years before finding work, a 2019 study from the Brookings Institution shows.
Without broad structural changes, the trend is set to continue, given the demographics of the region.
Between 2020 and 2040, about 127 million young people will enter the labour force in the Mena region, facing an unemployment rate of 23 per cent. At the same time, nearly 29 million jobs are at risk of being displaced by 2030 because of automation, McKinsey says.
The consultancy proposes expanding on priorities that are already taking root across the region. It found such efforts would create 100 million new jobs and double the economic output of the region over the next two decades.
Big home-grown companies
For the Middle East to drive employment and productivity, the region must increase its share of home-grown global companies, according to McKinsey. The top 10 per cent of the world's largest employers command 80 per cent of total economic profit. They on average employ five times more people, spend double on research and development and extract up to 20 per cent more from expended capital, the consultancy said.
To tap into a talent pool necessary to build and support larger home-grown companies, McKinsey proposes reconsidering barriers on existing inter-regional capital movement as well as removing movement restrictions for highly skilled workers to provide a more connected talent pool.
A major funding priority should be expanding education that readies young people for the realities of this century's work. Greater access and public funding for early childhood education, which has an outsize impact on cognitive abilities later in life, as well as subsidising learning credits to help re-skill existing workforces, are two of the recommended priorities.
A growing population and the resulting fiscal burden will limit the ability of governments to create jobs for the next generation of workers. Young people will need to take an active role in creating economic opportunity for themselves, and an environment that enables R & and entrepreneurship can support that, the report said.
The report recommends a leave of absence policy for government employees starting a new business, which would help both eliminate the risk of entrepreneurship and reduce dependence on the government to provide jobs in the region.
The other half
Closing the gender gap in the economy is an enormous source of unrealised economic potential globally. However, the Covid-19 pandemic is a dampening force. It is estimated that women’s jobs were 1.8 times more likely to be at risk than men’s jobs. In the Middle East, North Africa and Pakistan, boosting female employment could add $1.9 trillion in incremental gross domestic product by 2040.
Educating females is on an upward trend in the region, with improvements in literacy and greater access to formal education. The share of women active in the region’s workforce rose between 2000 and 2019, but today’s participation is still very low by global standards — only 26.7 per cent of women work, compared with 54 per cent globally.
Rebuild conflict zones
Conflict in the region has significantly depressed the population’s job opportunities. It is estimated that only one in three adults in conflict zones, the equivalent of 4 million adults, will be employed by 2040 if conflicts in the region persist, according to McKinsey.
The firm recommends establishing a joint recovery fund and mechanisms to help overcome the impacts of conflict.
“A successful reconstruction of conflict zones could potentially recover the economic damage [which is] up to $175 billion to the region’s GDP and, if the region returns to its pre-conflict growth rates, improve overall employment levels. This impact is likely to touch all sectors of the economy, not only for conflict countries but also for other countries in the region,” McKinsey said.