Crisis hits Arab employment, financial aid

The global economic downturn is expected to complicate efforts by Arab governments to tackle a festering unemployment problem as it will cause job losses and lower financial aid and remittances, according to the United Nations.

Unemployment, already a major cause of concern to the Arab countries, could hit the Arab young people hardest although they are already suffering from the highest joblessness rate in the world, the UN Economic and Social Commission for Western Asia (ESCWA) said in a study.

“The global slowdown in economic growth, which began in the second half of 2008, is primarily expected to lead to higher levels of unemployment, more specifically in the case of migrant workers who are often the most vulnerable category,” ESCWA said in the study about the post-crisis Arab job market.

“Evidence gathered so far shows that unemployment, depression in wages and worsening working conditions are on the rise in response to the slowing of activities in finance, construction, tourism, services and real estate... to protect the national labour market from job competition a number of labour destination countries are also adopting more restrictive policies on renewal of work permits and new admissions of migrant workers.”

The study said other possible outcomes of the downturn include increases in irregular migration, informal labour and human trafficking.

“In addition, there have been reports of an increase in return migration of migrant workers who lost their jobs. This is likely to result in reduced future remittances which might have otherwise contributed to poverty alleviation and narrowing inequity gaps, while also adding pressure to existing unemployment and underemployment particularly in rural areas,” said ESCWA, which groups the six Gulf Co-operation Council (GCC) states and some other Arab countries.

The report showed remittances, mainly from GCC-based Arab expatriates, constitute the fastest growing and most stable capital flow to their countries.

Data gathered from five Arab countries showed that remittances were higher than foreign direct investment (FDI) and overseas development assistance.

Given their magnitude, the potential decline in remittances resulting from the global economic slowdown will result in adverse effects on development in labour sending countries, according to the study.

“While the economic crisis has taken its toll on employment around the globe, some social groups have been particularly affected. Youth unemployment rates in the Middle East are the highest in the world, ranging between 20 and 40 per cent as compared to the worldwide average of 10-20 per cent,” ESCWA said.

“Youth tend to be the last in and the first out from the labour market, owing to their relative lack of work experience and contacts; also, they often find it difficult to obtain new jobs once they have been laid off.”

The report said this unemployment predicament constitutes an extra burden to be shouldered by this group when, concurrently, they face tremendous challenges transitioning from school to work to family formation.

“At the far end of the age spectrum, older persons face similar hardship in remaining in or re-entering the job market. Persons in the 65 and over age group who are still economically active will face extreme difficulties in competing for jobs and accessing credit,” the study said.

“That said, however, given the traditional family support system, the majority of the elderly population in the Arab region depends for its livelihood on the support provided by younger family members. The loss of employment and the expected decrease in migrant remittances will jeopardise the subsistence of the dependent elderly, especially those living in rural areas, who are already marginalised, vulnerable and lack access to the social protection schemes.”

ESCWA said another important impact of the financial crisis will be a potential decline in official development assistance, which will further constrain the ability of government to spend on socio-economic development, including social services, basic health services, education and training.

“This will affect the most vulnerable and marginalized groups, including the poor, youth and older persons, a situation that aggravates social inequality and halts the progress achieved so far in terms of poverty reduction,” it said.

“Given the importance of social protection in achieving the internationally agreed upon development goals there is a strong and imminent need in the Arab countries to develop and coordinate comprehensive social protection programmes, including social safety nets, to mitigate the medium- and long-term impact of the economic crisis on these vulnerable groups.”

According to the Arab Labour Organisation (ALO), regional countries had nearly 17 million unemployed people at the end of 2008 and the figure could surge to 100 million in 10 years without effective government measures.

Around 26 per cent of the jobless are young educated persons who are rapidly increasing in a regional labour market that is recording slow growth rates, the Cairo-based ALO said in a recent study.

“Arab countries are facing a serious challenge as they entered the new millennium burdened with severe economic and social problems, including unemployment and poverty. They have no choice but to intensify their efforts to support economic development and ensure jobs for their citizens,” it said.

“Developments over the past years have shown that the fiscal policies in Arab countries lack flexibility because they are heavily reliant on limited sources of income, including oil…this reliance has made them highly susceptible to any shocks to those sources. Besides,  the accumulating domestic debt in an increasing number of Arab states is seriously aggravating their financial situation…in some members, the debt has reached alarming levels that are consuming up a large part of their public revenues and seriously affecting their development spending. This is hindering economic growth and their efforts to improve living standards and find jobs for their citizens.”

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