Youth Unemployment and the Determinants of Employability: Application to Tunisian Data

Aljane A

Published on: 2021-02-14

Abstract

This paper seeks to emphasize the factors that explain the participation of young people in the labour market in Tunisian context. The problem of youth unemployment is analysed, not only from the supply side where individual characteristics of active young people are determinant but also from the demand side where macroeconomic and institutional factors are important. Based on the Employment Survey data of 2010, the analysis allows us to understand the determinants of access to employment which turn to be the region of residence, the individual characteristics and the diploma. The results show that, beyond the structural determinants of unemployment of young graduates that turn to be related to the limits of the production system and its performance, the institutional factors are far from being negligible.

Keywords

Youth Unemployment; Employability

Introduction

Among all other categories, young people occupy a special position in the labour market. They are the most affected by unemployment and job insecurity. In spite of the relatively higher level of education of the young population, the rate of unemployment among young people aged between 15 and 29 years are in Tunisia among the highest in the world [1]. This rate reached an alarming level of 30 per cent against an average of 12 per cent in the world in 2008. This rate was about 24 per cent in Algeria and 18 per cent in Morocco (ILO, 2010). Otherwise, these figures understate the extent of unemployment because they do not take into account the young people in precarious situations and under-employed. In Tunisia, the active young people have on average 3 to 5 times more likely to be unemployed than the active adults. The distribution of unemployed persons by age shows that two-thirds of the unemployed have less than 30 years. Youth unemployment is a huge mess [2]. A study for Egypt estimates at 17.4% the economic costs of youth unemployment in term of GDP lost The ILO experts estimate that a reduction by half of the youth unemployment would add between 7 and 11% of the Gross Domestic Product The GDP is mesured in current dollars PPP of 2003. The estimates are based on historical elasticities of the national GDP in regard of the young people employment [3-5]. In Tunisia, the creation of jobs remains far below the additional demand. In average, the economy creates annually 70-80 thousands of jobs against an annual additional demand of 80-85 thousands, this is in addition to the current stock of unemployed estimated at 800 thousand. According to some estimates, to reduce the unemployment rate in Tunisia even by only 3 per cent in 5 years, it will be necessary to achieve a growth rate of GDP by around 6.5 % per year, which require an increase in the rate of investment by around 7 percentage points of GDP in order to support productivity and competitiveness (Casero and Varoudakis, 2004: 9).Given the current potential growth, a high rate of unemployment will persist. The opportunity for young people to get a decent job depends on various factors: aggregate demand, demographic trends, labour market regulations, the level of education and training, professional experience, the quality of companies management, youth people representation and possibilities offered to them to make their voices heard by policymakers. What is the relative influence of these factors? What is the role of individual characteristics, including the nature of the diploma of young people? This study seeks to emphasize the factors that explain the participation of young people in the labour market in general. It attempts to shed lights on the youth unemployment problem who turn to be at the origin of the spring revolution in Tunisia. The analysis of the determinants of participation of young people is based on data provided by the employment survey carried out by the  Institut National de Statistique in 2010 [4]. The assumption made in the present study is that, beyond the structural determinants relative to the limits of the production system and its performance, the institutional factors are far from being negligible. The remain of the paper is organized as follow: in the second section, we present the characteristics of youth unemployment and emphasise on a few relevant variables such as level of education, the diploma and the region of residence. In the third section, we analyse the reasons for the persistence of youth unemployment in Tunisia. The fourth section deals with the econometric estimation of the microeconomic determinants of youth involvement in the labour market. The fifth section presents the various institutional barriers to the creation of jobs for the young and the sixth section conclude.

The Youth Unemployment In Tunisia: Characteristics And Evolution

The Definition of Youth Unemployment

According to the old international definition, young people include people aged between 15 and 24 years. This definition is based on the minimum age at which it is acceptable to leave the school and on the age at which most of the people have completed their post-secondary studies. However, in practice, the definition used to develop a youth employment policy varies from a country to another. In some countries, the arrival in the labour market can happen before the age of 15. However, in many countries, the transition from the educational system to the labour market usually happened at the end of the twenties and early thirties. That is why a broader definition of youth people has been adopted to include the persons aged 35 years or less. In this paper, young people apply to people aged between 15 and 29 years. Since 2004, the INS follows the ILO definition: an unemployed is a person of working age (15 years or more) and responding to three criteria:

  • To be without employment (have not worked during the week of reference),
  • To be available to take a job in the 15 next days,
  • And to be actively searching for a job.

However, this definition does not take into account the unemployed discouraged and the degree of under-employment

The Demographic Factors of Unemployment

Some young people are more likely to be unemployed than others, this depends on the two following factors:

  1. The age: in most countries for which data are available, the unemployment rate tends to decrease with age. As a result, in Tunisia, the unemployment rate for 15-19 years is more than two times higher than that of young adults (20-24 years);
  2. The sex: the unemployment rate for young women is higher than that of young men. Women, including the graduates, are more exposed to unemployment than men. Some women, discouraged, decide to abandon the search for employment to help care for their homes.

In Tunisia, two-thirds of the unemployed have less than 30 years. This proportion is particularly high among women (73 %). The unemployment rate for young people is almost two times higher than that of adults. This rate follows an increasing trend for the population aged 15 to 34 years. Two factors contributed to the high unemployment rate among young people:

  1. The decline in the rate of activity of young people in general because of the school retention. In Tunisia, one young people among five is active against one among two 20 years ago.
  2. The decline in the rate of activity of the young women who abandon the labour market. For Tunisia, this activity rate is currently estimated at 33 per cent below the world average of 51 per cent (Achy, 2010: 5; BIT, 2009) (Table 1).

Table 1: Number of young people by status (in 000).

Statue

1999

2004

2009

Working

809

841

839.5

Unemployed

308.5

265.9

356.1

Secondary

323.9

396.1

431.4

Student

157.3

294

363

Other inactive

534.8

495.4

442.6

Total

2133.5

2292.4

2432.6

Source: INS, EnquŒtes emploi (2005-2009).

Then, age is one of the microeconomic factors that explain the high rate of unemployment among young people. This rate is almost two times higher than that of adults and we observe a tendency to increase among the population aged between 15 and 34 years. The youth-to-adult unemployment ratio is increased from 3.1 in 2004 to 3.5 in 2011. In 2011, the distribution of unemployed persons by age shows that 70% of the unemployed have less than 30 years. In general, unemployment decrease with the age. As the age of people is increasing, individuals with advanced age withdraw gradually from the labour market. In terms of evolution on the last decade, unemployment rates among the young active people have virtually increased (Table 2,3).

Table 2: Unemployment rate by age class (in pc).

Age class

2005

2007

2009

2011

15-19

27.7

29.3

33.6

43.6

20-24

28.4

27.3

29.9

41.8

25-29

21.6

21.8

25.7

34.5

30-34

11.6

11.6

11.4

19

35-39

6.3

5.8

5.6

8.8

40-44

4.8

3.9

4.3

4.3

45-49

3.8

3

3.9

2.8

50-59

3.2

2.5

3.2

2.5

>60

1.2

2.4

1.2

1.4

Average

12.9

12.4

13.3

18.3

Source: INS (2011), Note sur lemploi.

Table 3: Number of young unemployed (in 000).

Age class

2005

2007

2009

2011

15-19

58

56.8

56.3

70.2

20-24

125.5

124

129.8

196.3

25-29

119.7

130.8

163.6

240.8

30-34

56.5

58.7

64.3

113.1

Source: INS (2012).

Education and Youth Unemployment in Tunisia

In Tunisia, the unemployment of the young graduates is generally much higher than that of young people without instruction. The rate of unemployment of the young people trained in higher education has increased from 14 percent in 2005 to nearly 22 percent in 2009, when it declined during the same period for those who had not done any studies (ILO, 2011) (Table 4).

Table 4: Unemployment rate by instruction level (in pc).

Instruction level

2005

2007

2009

2011

Illiterate

6.3

4.4

6.1

8

Primary

14.3

11.5

10.4

12.4

Secondary

13.3

13.5

14

20.6

Tertiary

14

18.2

21.9

29.2

Total

12.9

12.4

13.3

18.3

Source: INS (2012), Note sur lemploi.

Among those whose level of instruction is higher than unemployment is the most important: for example, even though it was declining among the young people with primary school level or without any instruction, it increased among those with a secondary or a tertiary education level. The unemployment rate for young people from the university is increased from 14 per cent in 2005 to nearly 29 per cent in 2011, while that of young people without education, which had begun to decline regularly from 6.3% in 2005 to 6.1% in 2009 and increased to 8% in 2011. The young people are more affected by the unemployment that the instruction level is high. Nevertheless, the unemployment of young graduates is generally much higher than that of young people without instruction. In fact, the unemployment rate is much lower among young people who have not completed their primary education, as they accept jobs which are little safe and of poor quality. By opposite, young people who have pushed further their studies do not accept this kind of jobs even if their skills do not correspond to that requested by the labour market. Data from the survey of 2009 revealed that the rate of unemployment among young people aged 18 to 29 years who have attended the high school reaches 44.9 %, exceeding as well and by far the registered unemployment rates of 28.3% and 23.3% among young people with only the secondary and the primary level of instruction, respectively. It goes without saying that a lot of young graduates of the above would be during their first years of job searching. In effect, as in the past, graduate young people want a job in the public sector. But what has changed is the fact that these jobs are less numerous and, hence, more difficult to obtain in light of the increased competition among a greater number of candidates. In spite of the evolution of this reality, many young people still waiting for the government to give them such jobs, and as they often come from a more comfortable environment, they are willing to wait a long time rather than to take the jobs of the private sector more easily available. Another explanation concerning this high rate of unemployment among young graduate people comes from the private sector, which could make the counterweight to the decline of employment in the public sector. In fact, the private sector continues to discriminate against the young to the hiring, in particular, the young women, very probably in order to avoid additional wage loads such as those driven by the maternity leave and child care. The private sector also argues that the graduates do not have the types of skills required. Regardless of the offset between the supply and the demand of the labour market for young people, the limited economic growth and the low rise in productivity in the region have led to restricted creation of decent and productive jobs (Table 5).

Table 5: Unemployed by instruction level (in 000).

Instruction level

2005

2007

2009

2011

Illiterate

26.8

18.2

23.7

29.2

Primary

181.6

147.5

132

157.9

Secondary

161.6

173.6

194.5

299.8

Tertiary

62.3

97

139.4

217.8

n.a

0.1

0.1

0.7

0.2

Total

432.4

436.4

490.3

704.9

Source: INS (2012), Note sur lemploi;n.a: not available.

The data show an increase in the number of youth unemployed from the upper level of education which have doubled during the period 1999 and 2004 but was multiplied by 3.5 during the period 2005 - 2011. Consequently, the unemployment rate of young graduates has more than doubled during the late five years to reach 29.9 % in 2011 against 14 % in 2005. The rate of unemployment of the young people of outgoing high schools, training centres and universities are higher compared to that of the outgoing of basic education. In 2011, young women graduates have an unemployment rate of 43.8 %, almost twice higher than that of the young boy’s graduates. The young people who come on the labour market must have the equalisations requested to be inserted in the few positions available. However, there has been a great diversity. Poorly armed to face the labour market requirements and in the face of the inadequacy and the lack of services offered by the agencies for the promotion of employment, the young people spend quite a lot of time at the unemployment before a first insertion. The young graduates are familiar with a higher unemployment rates and a longer duration of unemployment. On average, graduates continue to be unemployed for 28 months, compared to 19 months for non-graduates (Stampini and Verdier Chouchane). Thus, the scarcity of jobs in the public sector led to an increase in unemployment among graduates, in particular women (Table 6).

Table 6: Unemployment rate of young graduates by sex (in pc).

Sex

2005

2007

2009

2011

Male

10.3

12.9

14.6

23.7

Female

21.6

27.4

34.9

43.8

Total

14.6

18.7

23.4

33.6

Source: INS (2012).

The Regional Disparities

The unemployment rates among young people under 30 years old are high enough in virtually all major regions of Tunisia. They are particularly high in the Northwest where half of the young people aged between 15 and 19 years are unemployed. Moreover, three to four people among ten aged between 15 and 19 years are unemployed in the regions of the South, the district of Tunis and the Center West. The Center East is the region where the unemployment rate is the lowest regardless of the age group. The unemployment rate for young people under the age of 25 years vary from 40 to 50% in the governorates of Tataouine, Kasserine, Gafsa, Manouba, Kef and Gabes. This rate is between 30 and 40% in the governorates of Jendouba, Tozeur, Siliana and Kasserine. On the other side, the governorates located on the East coast (Tunis, Monastir, Nabeul, Sousse, Sfax and Zaghouan) are experiencing the lowest rates of unemployment for young people (less than 20 %).

To resume for this section, we can say that:

  • The size of the Tunisian young population has been steadily increasing due to the demographic boom and the increase in the number of university graduates has led to a higher participation rate to the labour market, especially among women.
  • The young graduates are the most exposed to unemployment. The education and training do not give them enough ways to be hired without a painful and long period of unemployment.
  • Face to the high mobility in the private sector, the young graduates seem to be ready to deal with the queues for the highly skilled jobs in the public administration.
  • Some labour-intensive sectors in term of the young people, including public administration, have recorded modest growth rates.
  • The public sector remains the main provider of jobs for the graduates, especially for women.

The Causes of the Unemployment Persistence among Young People

In Tunisia, the substantial improvements in the level of education have not fully translated to better employment results. On the one hand, the reduction of the gender gap in term of education has led to a reduction of the gap in the rate of participation in the labour market between man and women, but the unemployment rate remains high, especially for women. Furthermore, the increase in school attendance rates has led to a tightening of budgets and falls in the quality of education. In addition, vocational training has been relegated to the background with the weak ties between the outcome of the education and training system and the needs of the private sector. The lack of an adequate system of information on the market needs doesn’t help to ensure that students are provided with the skills requested by the economy. As a result, the unemployment rates were higher among individuals with the highest levels of education. The young people form a social group that faces many problems and an uncertain future. These problems are due in part to the limited employment opportunities offered to them but also to their vulnerability which is apparent at several levels:

  • For young people, the period of transition between the time they get their degree and the one they pick up a permanent employment is often extended over several years. The university graduates looking for a job are familiar with the long periods of unemployment estimated to 28 months on the average;
  • During the next few years, the level of education of the working-age population will continue to grow. This will increase the pressure on the employment market and the competition between the young graduates.
  • Students at the university form the group which increases the most quickly among the newcomers on the labour market, in the same time, this group is the most dependent on public employment which is today stagnant or declining.

In this section, we will try to answer the question to know why the unemployment of young people was always too high in Tunisia. In general, the literature offers several explanations of the high rate of unemployment among young people. Among these explanations of the persistence of unemployment, we can mention:

  • The rapid growth of the population in general and the educated population in particular, under the effect of the demographic factor and the increasing enrolment;
  • The weakness of the level of investment in the formal private sector, in the infrastructure and public services;
  • The inadequacy of demand for qualified labour due to the change in the structure of employment in favour of industries related to the export sector, which pays low wages and employ massively the workers without qualification.
  • Some other reasons are related to the institutional context who turn to be important as the dualism public-private or the adverse environment of doing business as a determinant of the investment.

To understand the causes of youth unemployment, we will analyse the following factors:

The weakness intensity of the economic growth in young employment creation;

The unemployment queue of young graduates;

The inadequate training-employment;

The failures of programs-employment;

The business climate (Table 7).

Table 7: Unemployment rate of young graduates by region (in pc).

Region

Unemployment rate

District of Tunis

14.4

North East

21.9

North West

31.6

Center East

19.4

Center West

38.1

South East

35.4

South West

41.7

Total

22.9

Source: INS (2011).

The weakness intensity of the economic growth in young employment creation

The economic growth is the central determinant of unemployment, but we can ask: is there a mechanical relationship between growth and unemployment? In the Tunisian context, the Okun relationship seems not validated. In the 1960s, Arthur Okun has shown that the United States needs a growth rate of 3 per cent of the Gross National Product to increase by 1 per cent the job creation. So, it seems that there is no mechanical link between growths, employment, and unemployment, intermediate variables are likely to disrupt this relationship. Among these variables, we can mention:

  • The productivity gains that can neutralize the positive effects of growth on the employment and generate low job creation,
  • Changes on the duration of the work are another factor which could influence the sensitivity of employment to growth,
  • The rate of activity trends can also affect the relationship between growth and unemployment.

In Tunisia, the model of economic growth has reached its limits and does not allow to absorb the flow of job seekers entering the labour market. This rentier model has encouraged the investment in high and fast yield at the expense of the productive investment in the promising activities that generate a higher value-added but take more time to generate profits. Also, the private investment flow mainly to the informal sectors, which create few or precarious jobs. As a result, economic growth was accompanied by the creation of a large number of precarious and unskilled jobs. In Tunisia, the rate of economic growth is still insufficient to alleviate the high rate of unemployment among young people. The employment elasticity of the economic growth remains low, particularly for the young graduates as it is shown in data in the table below. We can observe three phenomena:

  • First, high volatility and weakness of young employment;
  • Second, the young employment elasticity is far below the total employment elasticity (0.17 versus 0.5, on average respectively);
  • Third, economic growth is little intensive on young jobs creation.

The trend that has emerged is that the economic growth achieved in Tunisia is less and less intensive on young labour. According to our estimates, if these coefficients are kept unchanged, the unemployment rate will worsen particularly for the young unless the rate of activity will decrease. Economic growth cannot alone reduce unemployment. In effect, youth unemployment is highly structural in nature, it cannot be reduced only by aggregate demand measures. Structural unemployment arises from an underlying imbalance in the labour market which exceeds the only "frictions" related to adjustment periods between supply and demand for work. Several elements contribute to this:

  • The labour market segmentation,
  • The characteristics of the tax system,
  • The mismatch of skills,
  • The insufficient geographical and occupational mobility of employees,
  • The information asymmetries between employers and employees.

The unemployment queue of young graduates

Two reasons can be cited to explain why young graduates decide voluntarily to remain unemployed until they found a job in the public sector: a wage premium covered by the public sector and the better working conditions assured by this sector compared to the private sector. By lengthening the duration of unemployment, the existence of a dual labour market between the public sector and the private sector contributed to the worsening of the unemployment of the young graduates. According to Haris-Todaro (1970) model, the rural-urban migration will continue as long as the anticipated revenue in the urban sector exceeds that of the agricultural sector. The authors concluded that the wage gap between the sectors of employment is the root cause of "voluntary" unemployment among the workers who leave the low-wage sector to seek employment in the sector with a high salary. On following the same logic, can we affrm that the wage gap between the public sector and the private sector is in part responsible for unemployment among the young graduates, by creating what we call "the unemployment queue"? The insertion in the labour market and especially in a decent job is following a process of "queue". The job seekers must wait to be offered a vacant post in the public sector to be able to apply. Boudarbat (2004) noted that, in Morocco, the duration of unemployment is much longer for university graduates who prefer waiting for jobs in the public sector- which provides better security and higher initial wages. Half of the unemployed with a university degree wishes to be employed exclusively in the public sector. In Tunisia, the educated young people, particularly young women, form most often a "queue" to obtain jobs in the public sector, which offer wages above market levels as well as generous non-wage benfiets, including the maternity leave (World Bank, 2007a: 28-29; and Stampini Verdier-Chouchane, 2012: 14). However, this sector has shrunk since the 80s because of budget cuts, privatization and deregulation. But the public sector remains the main employer providing decent work which enhances the skills of graduates from the university. The result is a kind of propensity of the public sector to create jobs for graduates. This situation helps to increase the queues among the graduates of the university who prefer to remain unemployed for a long period rather than accepting a less paid job in the private sector (and Stampini Verdier-Chouchane, 2011). The labour market duality which arises from the wage gap between the public and the private sectors is therefore considered as an aggravating factor of the young graduate' unemployment. In fact, some young graduates are interested only by the well-paid job in the public sector and refuse to seek (and accept) a job in the private sector. Some others are willing to work in the private sector while continuing their search for employment in the public sector. The increase of unemployment comes not only from the shortage of job vacancies and the decline in the demand for labour, but also from the behaviour of young graduates concerning their choice of the sector of employment and their expectation about the reservation wage. Several young graduates decide voluntarily to remain unemployed for longer periods in order to nd a job in the formal sector, composed of the public sector and the organized private sector. Instead of accepting a job in the informal sector, the graduates choose to stay unemployed and continuing their search for a job in the formal sector where the employment conditions are more advantageous. Ben Halima 2011 has provided empirical evidence for this behaviour among university graduates in Tunisia when they have to make the choice between employment in the public sector with high wages and employment in the private sector with lower wages. Several other elements of explanation of youth unemployment persistence are involved: The discrimination by the private sector of young people in the hiring, especially the young women, very probably in to avoid additional wage loads such as those driven by the maternity leave and child care. Employers in the private sector preferred hiring adults having a professional experience rather than young people who have the skills but no experience in the field (Table 8).

Table 8: Evolution of the employment elasticities (in pc).

 

Year

Youth employment growth rate

Total employment growth rate

GDP growth rate

Total employment  elasticity

Youth employment  elasticity

2006

1.158

2.609

5.378

0.485

0.215

2007

3.169

2.669

6.222

0.429

0.509

2008

-0.459

2.279

4.581

0.497

-0.1

2009

-4.714

1.379

3.359

0.41

-1.404

2010

5.735

2.454

3.543

0.693

1.619

Source: Author computations.

The Inadequate Between Training and Employment

The public resources affected by the Tunisian government to the education are among the highest of the middle-income countries and those of the same level of development (6-7% of GDP). Certainly, progress has been made to the level of schooling at all levels of education as well as at the level of success rate. However, these advances are offset by continuing weaknesses of the educational system. They concern, on the one hand, the quality of education and the existing disparities between regions and the urban-rural areas, on the other hand. Young people take the difficult transition from the education system to the labour market. The training acquired in school or at the university by the young people are not compatible with the skills required by the current labour market, as evidenced by the high rate of unemployment among young people who are coming out of the high schools, training centres and universities. Alongside an economic structure unfavourable for skilled workers, the young graduates are facing a labour market whose needs are different from their qualification. Many facts reported attesting that the education systems are not able to provide students with the skills that are valued by the private sector and the world economy, in general (World Bank, 2004; Murphy, Salehi-Isfahani, 2003). The result is a widening of the gap between the needs of employers and the knowledge and skills of recent graduates. This affects the employment prospects of young inexperienced but relatively better educated. In contrast, people with poor skills are more sought than those who are highly educated. Consequently, the relationship between the education of young people and employment is biased. The increase in school enrolment rate has coincided with a deterioration in the quality of the educational system. Given the budgetary cuts on resources, this system has not been able to maintain the standards for the quality of education and a high rate of student’s supervision. Infrastructure and programs become obsolete. A more level of schooling is indeed associated with positive results for individuals on the labour market, including higher wages and better opportunities for employment. The private return for an individual of one additional year of schooling, in terms of higher salaries, is estimated at 13% for secondary education and 27% for the tertiary (Psacharopoulos, 1994). However, the higher returns to education for secondary education and university graduates do not always reflect gains in productivity but an improvement in the wage scale of the public sector (Pritchett, 1999; Glewwe, 2002). All the data show unequivocally that the unemployment rates increase with the level of education and that these rates are the highest among university graduates, in addition to a longer duration of unemployment. The graduates remain unemployed for 28 months on average, compared to only 19 months for non-graduates (and Stampini Verdier-Chouchane, 2011: 11). There are two complementary forms of human capital accumulation: attending school or investment in professional experience (Benhayoun and Bazen, 1995). In general, employers preferred professional experience to any diploma or qualification. Often, we blame the young their lack of non-technical skills such as problem-solving and creative thinking, which are acquired through the experience Angel-Urdinola. What are the preferences of employers? Do they seek candidates with characteristics such as discipline, confidence or training and creativity?. This calls into question the valuation of human resources and the development of qualifications by the labour market. The qualities sought by employers are often those that grow with experience on the job and with age. These skills are related to maturity. Therefore, the employers demonstrate a preference for the experience of work and not for the diploma. In the context of the OECD countries, the explanation advanced of youth unemployment is the precariousness of employment contracts of the young people who are victims of the rule of the "last-in-first-out" Scarpeta 2010 and their lack of experience (Perigini and Signorell, 2010). In Tunisia, according to the employers, the reasons for the unemployment of young graduates are related primarily to the weakness of skills that prevent employers from hiring young graduates. The graduates are seeking a job to gain experience. And as long as they did not found employment, they couldn’t get to practical experience and they are always going to have that "lack of experience". This is a vicious circle. Nobody wants to hire them because they lack experience and they do not have opportunities to meet the shortfall. That is the problem of primo insertion where the majority of young educated unemployed are searching for their first job. For these young people, employers prefer to offer temporary labour contracts Contrats a Duree Determinee [5] and that does not help to resolve the problem of unemployment. The number of people who are looking for a job is growing, but employers remain hesitant before the permanent new hires.

The Ineffectiveness of Employment Programs

The active programs in favour of the labour market are designed to remedy problems of adequacy of skills and correct the failures of the labour market. In Tunisia, to facilitate the professional integration of young primo job seekers and to encourage the company to recruit, three professional insertion programs have been initiated: Subsidized employment programs which offer incentives to employers in exchange of job creations. Employers receive grants that cover the salaries of young skilled workers as well as other financial benefits (such as the exemption of the contribution to social security) for a fixed period. These beefiness may be extended if the employer agrees to provide permanent employment to the trainee. We can quote, for example, the programs Stage d'Insertion a la Vie Professionnelle [6]. The programs of training/retraining and professional insertion are intended to correct the imbalances of the skills by providing training for the vocational retraining for those in search of a first job or to young people between two jobs.

The programs of self-employment provide young entrepreneurs with technical and financial assistance for the creation of micro-enterprises and often involve non-governmental partners and promoters. These programs For example, the Fonds National de Promotion de l'Artisanat et des Petits Métiers (FONAPRAM) program, in Tunisia [7]. offer a comprehensive set of services to aid in training, mentoring and incubation ensured thanks to a dedicated source of funding by the Tunisian Solidarity Bank (BTS). A quick review of these programs suggests the following remarks:

  • The active labour market programs are inefiective because of their poor targeting of beneficiaries.
  • Wage subsidies can also cause substitution effects (where subsidized jobs replace the non-subsidized jobs), sterile losses (when the programs are used to finance jobs that would have been created in any way) and displacement effects (when the subsidies encourage the creation of jobs in a field at the expense of another). Therefore, they did not necessarily involve an increase in the number of jobs created.
  • The vocational training programs are relatively expensive and little useful when employment opportunities for skilled workers are scare, as is the case of Tunisia Betcherman 2004.
  • The programs of self-employment have not yielded the desired results. The projects are often repetitive and are faced with problems of financing and achievement.

In conclusion, we can see that all these programs have significant breaks in their design. In addition, in the absence of a rigorous evaluation, it is difficult to assess the real impact of the programs in term of job creations.

Estimation Of The Microeconomic Determinants Of Young People Access To The Labour Market

In this section, we will try to bring empirically answers to the following question:

  • What are the factors that influence access to employment for young people?
  • And what are the individual characteristics of the young sought by employers?

Data and Method of Estimation

Access to employment is the result of a combination of factors related to individuals and the environment in which they operate. These factors relate to all aspects of demographic, educational and economic. In their study, Montmarquette, Mourji, and Garni(1996) noted that besides to the socio demographic characteristics and educational of the diploma of vocational training, the explanatory factors of the insertion process are mainly related to the adequacy between the training and employment, the appeal to personal relationships, the reserve wage and the importance of information networks [8-19]. The objective of our estimation is to identify the factors that have a significant impact on the access of young people to employment. The dichotomous model of participation in the labour market used in this section will attempt to answer the following question: what are the key determinants of the participation of young people to the labour market? By answering this question, we seek to identify the factors that influence the probabilities to find a job for the young. We consider that the probability of insertion of the young is represented formally by the following equation:

Where is the likelihood of young i active to insert on the labor market, is a latent variable not directly observable, is a latent variable not directly observable,  is a vector of explanatory variables and β is an associated vector of parameters and  is an alea that we assume that it is following a logistic law. What we observe in the fact is weither the young person is employed or not.

The dependent variable for the logit model of participation is the variable "participate", which takes the value 1 when the individual participated in the labor market as active occupied and 0 when the individual participated as unemployed within the meaning of the ILO In Tunisia, one must work only one hour during the week preceding the survey to be considered as "employed". The insertion may be the result of a combination of factors relating to individuals and the environment in which they operate. In the luck of data on the reserve wage, we consider only the effect of the diploma, the area of residence and the region. To study the role of the diploma in the integration of young people, we retain only the population aged 23 to 29 years [20-29]. The data used are from the employment survey of the INS carried out in 2010 on the national territory. The sample includes 249 014 individuals with 51.1% are women and 48.9% are men. There are 148 319 young people in the sample with 48.2% male and 51.8% female.

The variables used to estimate different models are of several categories: among these variables, we distinguished the variables linked to the human capital and variables related to the family environment and the area of residence of the individual. Our objective is to identify which variables have a significant impact on the determination of income of young people and their access to job. We present hereafter these variables:

  • The variables relating to the individual characteristics of the individuals: the sex with the modality 1 for men and 0 for women and the age which is numeric;
  • The variable related to the diploma of the individual: this is a dichotomic variable in order to perceive the effect of the diploma on the probability of insertion.
  • The variables related to the environment of the house hold: two variables are considered, the area of residence (1 for urban and 0 for rural for) and the region of residence

Data used for estimation are for the people aged between 23 and 29 years from the national survey conducted in 2010 by the National Institut of Statistics (INS) [30].

Results

The estimation of the logit model gives the following results:

Overall, the test of the likelihood ratio validates the estimation of the model as attested by an LR Chi2 of 4647.17 and a Prob>Chi2=0.0000. All the explanatory variables considered are significant as determinants of the participation of young people in the labor market. Paradoxically, obtaining a diplom increased the probability of young people to be unemployed because the labor market is unable to accommodate a qualified workforce [31-35]. Among the other microeconomic factors which aggravate the rate of unemployment among young people, we found:

  • The sex: women are more affected by the unemployment than men;
  • The area of residence: paradoxally, young people resident on the urban ereas are more threatened by unemployment;
  • The region of residence: young people resident in the South and West regions are more exposed to the unemployment than those resident in the North East and Center East.

On the other hand, we found that with age augmenting, people become less exposed to unemployment. Ceteris paribus, having a university degree, whatever it is, increases the probability to be unemployed. This is consistent with our hypothesis that the graduates are aimed of secured jobs in the administration (Table 9).

Table 9: Results of the logistic regression (dependent variable = 1 if employed, 0 if unemployed).

 

Logit

Marginal Effects

age

0.145***

0.0271***

(-0.00622)

(-0.00115)

diploma 1

-1.32***

-0.298***

(-0.0414)

(-0.01)

diploma 2

-1.172***

-0.259***

(-0.0356)

(-0.0085)

diploma 3

-1.05***

-0.235***

(-0.0526)

(-0.0129)

urb

-0.293***

-0.0537***

(-0.028)

(0.005)

gender

-0.363***

-0.0697***

(0.0257)

(0.005)

ne

0.337***

0.0592***

(0.046)

(90.00756)

no

-0.479***

-0.0971***

(0.0429)

(0.00929

ce

0.437***

0.0763***

(0.0418)

(0.00674)

co

-0.444***

-0.0898***

(0.0456)

(0.00985)

se

-0.537***

-0.111***

(0.0443)

(0.00986)

so

-0.752***

-0.159***

(0.0435)

(0.0101)

N

39290

R2 McFadd

0.101

 

Notes: Marginal effects; Standard errors in parentheses *p<0.005, **p<0.01, ***p<0.001.

The Institutional Barriers to Job Creation for Young People

Beside the microeconomic determinants of youth unemployment presented above, we will try to study hereafter the other factors which can act as barriers to job creation in the Tunisian context. We think about the institutional barriers related to the development model itself, the quality of governance and the legislative framework that governing the labour market.

The Development Model

According to the Femise report (Femise, 2011), the growth regime in Tunisia remains predominantly extensive with a very low growth of TFP. This is the paradox of the productivity observed in all MENA countries. To resume and adapt the famous formula of Solow (1987), in these countries, the graduates are everywhere except in the statistics of productivity. In the Tunisian context, the comparative advantage is based on the wage costs following the policy on the promotion of exports and sub-contracting. This kind of specialization creates a distortion on the labour market toward unskilled and cheap labour. In addition, the economic model is based on the allocation of economic rents and economic gains in the form of grants, agreements and tax exemptions granted in selective and non-transparent way. This has contributed to exacerbating the problem of unemployment for young graduates by giving the advantage to the extensive use of the workforce (strategy based on the benfiet wage cost) [36-38].

A bad governance

The decit of good governance prevents the creation of jobs in discouraging potential investors and encouraging the growth of the informal sector. There is evidence that the quality of governance plays an important role in the promotion of economic growth and productivity Kaufmann and Kraay, Makdisi, Kaufmann. Have developed indicators of governance covering six dimensions: voice and accountability, the effectiveness of the government, rule of law, the control of corruption, political stability, and the quality of regulation. Thus, the rank of Tunisia is relatively low compared to that of the average for the countries of the Middle East region. Freedom House also provides data, which show that Tunisia has accused a lot of delay in the area of political rights and civil liberties. The result of an authoritarian regime in place until the revolution of January 14, 2011 is a spread corruption in the highest decision-making bodies. This corruption has facilitated the development of a financial empire without precedent in Tunisia, in particular in the sectors of the media, transport, banking, telecommunications, tourism, airport services and retail. According to Global Financial Integrity Foundation the cost of corruption is estimated at approximately $1 billion per year. According to the Doing Business report of the World Bank 2011 the administrative burdens, corruption and the binding costs of business start-up procedures encourage small businesses to evolve in the informal sector and to remain modest in size to avoid being detected. The high rates of taxation of corporations, particularly for enterprises with the workforce, encourage employers to hire the workers in the "black market". Access to financing is a major obstacle to commercial activity, according to 18 per cent of companies in Tunisia (WEF, 2010: 76; 246; 328-9). The lack of access to financing on the one hand, and the high cost of the procedures of the formal establishment of a company, on the other hand, have resulted in a proliferation of small businesses not registered that provide little of jobs and are not likely to grow. The model has blocked the entrepreneurial spirit and a willingness of investment. In fact,Tunisia is lagging in comparison of other emerging countries. On average, the rate of private investment accounts for 12 - 13% of the GDP in Tunisia when this rate usually exceeds 25% in emerging countries. The lack of visibility due to the adverse environment and to the deterioration of the quality of governance could be a factor in the explanation of the employment situation for young people [39, 40].

The rigidity of the regulation of the labour market: The excessive regulation little incentive for companies to hire the workers formally, which led to an increase in informal arrangements and the creation of a labour market to two speeds (Achy, 2010: 19). Employers in Tunisia who wish to lay off workers must notify and obtain the permission of the regional office or the central control commission of the redundancies (ILO, 2000). Given the high level of costs associated with hiring someone or to the dismissal of workers, the companies are reluctant to hire workers or if they do, tend to the use of informally. Consequently, in Tunisia, 54 per cent of employees have no employment contract Achy, 2010: 21; Enqu Œte sur lEmploi, 2007). The costs of social protection are high, which encourages employers to hire fewer workers or to hire them on a temporary basis or illegal Also, companies that want to lay o⁄ workers must pay for the severance pay corresponding to an average of 17 weeks in Tunisia (Achy, 2010a: 21). However, the mechanisms of social protection are fragile and do not protect many of the workers against the economic shocks. Only 5 per cent of the laid-off workers in Tunisia may seek compensation of unemployment (Blanc and Louis, 2007; Enquete sur la main-d'oeuvre en Tunisie, 2007; Commission Europeenne, 2010b: 25-31). Another important question is: In what extend the minimum wage affects the employment of young people in Tunisia? There is an ongoing debate on the effects on employment of the minimum wage legislation, in particular on the labour market for the young. Studies indicate that there is a small negative impact on employment in some cases and not have a significant impact on others (OHiggins, 2003; Ghellab, 1998). Using the data from Chile, Montenegro and Pages (2003) ND that an increase of 10% of the minimum wage reduces the rate of employment for the young people by of approximately 0.5 percentage point. Another evidence on data from Mexico and Colombia suggested negative effects on employment when the minimum wages are close to the average wage, but no effect when they are too low to be mandatory in the formal sector (Bell, 1995). For Indonesia, Rama (1996) found that the doubling of the minimum wage has resulted in a decrease of 2% of salaried employment, with the effects concentrated in the small business. Similar results (Alatas and Cameron, 2003, and Maloney and Mendez, 2003) argue that the effects of minimum wages in the developing economies can be amplied in the labour market, by financing the distribution of wages and by acting as a signal for the informal sector to learn or x the rate of wage. By using simulation methods, Agenor and El Aynaoui (2003) suggest that, for Morocco, a reduction of 5 per cent of the urban minimum wage would help to reduce the unemployment for non-qualified in the short term by approximately 2.4 %. However, these results seem to overestimate the impact on employment of the minimum wage given that the laws of the minimum wage in Morocco are only weakly enforced (Currie and Harrison, 1997). Given the fact that the laws of minimum wage are not strictly applied in Tunisia, we cannot expect a meaningful effect on employment.

Conclusion

In term of this analysis, we can conclude that the reasons for youth unemployment, particularly graduates are of both institutional, macroeconomic and microeconomic and cover a wide spectrum of public intervention (training-education, productive specialisation, access to finance, business environment, etc.). Among these reasons which contribute to high rates of unemployment, we have pointed out:

  • The strong pressure of the supply of labour, the rise of female participation rate;
  • The segmentation of the labour market (wage premium in the public sector), unemployment queue;
  • An unsuitable educational system;
  • The bad governance which hampered the development of private sector companies.

Our study has shown that the persistence of youth unemployment cannot be attributed to simple temporary factors classically developed in the explanations in terms of deadlines or to strategies to search for employment the unemployed. The reasons for unemployment return not only to the limits of the educational system and productive and to their performance, but also to the factors of institutional and structural order. In effect, the diagnosis of the situation of unemployment of the young graduates indicated precisely a a defficiency of the intermediation system on the labour market that is the origin of an unemployment of inadequacy. In this perspective, comes the role of the organization of public private partnership in the regulation of problems for the integration of young people. Youth unemployment is a concern of structural order which requires long-term solutions. The long term unemployment is more predominant among the graduates of higher level while the unemployment of less than one year is more effective among young people without a diploma, which confirms the structural nature of the difficulties encountered by the first category of young people. The matching between the supply and the demand for skilled workers can be improved by reforming the academic programs, and involving the productive sectors in the design and implementation of training activities. Some proposals for reform of employment aim to design incentives for directing resources toward those industries and knowledge intensive services and in particular with a highly skilled workforce in the country. According to Audrey Verdier-Chouchane (2011) on the unemployment of the young people, the services sector has a high intensity of youth employment, and therefore has the most potential to create jobs for the youth. Marouani (2010) proposed the development of sectors having both a massive investment in research and development and content for the export of services highly qualified. The development policy must take into account the regional disparities. These reforms must be accompanied by the development of a partnership public-private. The professional insertion programs must be reformed to improve the quality of targeting. It should stimulate the creation of businesses through financial, tax and regulatory in order to promote the creation of job opportunities. Access to credit should also be expanded.

References

  1. Lahcen A. Substituer des emplois precaires un chmage eleve. Les defis de lemploi au Maghreb, Carnegie Middle East Center Paper. 2010.
  2. Agonor PR, Nabli MK, Yousef T, Jensen HT. Labor Market Reforms, Growth, and Unemployment in Labor - Exporting Countries in the Middle East and North Africa. J Policy Modeling. 2007; 29: 277- 309.
  3. Angel-Urdinola D, Kuddo A. Key Characteristics of Employment Regulation in the Middle East and North Africa, World Bank, Discussion paper. 2010.
  4. Arrow K.J. Higher education as a filter. J Public Econo. 1973.
  5. Assaad R, Roudi-Fahimi F. Youth in the Middle East and North Africa: demographic opportunity or challenge?, Washington DC: Population Reference Bureau. 2007.
  6. Banque mondiale, Minist?re de l’Emploi et de l’Insertion Professionnelle Dynamique de l’emploi et adequation de la formation parmi les diplomes universitaires: Analyse comparative des resultats des deux enquetes (2005 et 2007), Ministere de lemploi et de linsertion des jeunes, juillet, 2009.
  7. Banque mondiale (2011), Doing Business 2011, (Washington: Banque mondiale et Societe Financiere internationale) 2011.
  8. Barbier JP. L’intermediation sur le Marche du Travail dans les Pays du Maghreb: Etude Comparative entre l’Algerie, le Maroc et la Tunisie, BIT.
  9. Halima MAB, Kocoglu, BY. Halima B. Ben Halima, Insertion professionnelle des diplmes universitaires en Tunisie: comparaison publicprive, JMA, Tunisia. 2011; 2-3.
  10. Betcherman G, Godfrey M, Puerto S, Rother F, Stavreska A. A Review of Interventions to Support Young Workers: Findings of the Youth Employment Inventory (Washington: World Bank). 2007.
  11. Blanc F, Galal A, Louis M, Reiers JL. Le defi de’lemploi dans les pays mediterraneens, Rapport du FEMISE nFEM3d-02, novembre. 2007.
  12. Boudarbat B. Employment Sector Choice in a Developing Labor Market, Working Paper Department of Economics. University of British Columbia. Canada. 2004.
  13. Boughzala M, Kouki M. Unemployment persistence and the informal sector. Economic Research Forum. 2010.
  14. Boughzala M. The Labor market in Tunisia. Study on the functioning of the labor Markets in the Mediterranean Region and the implications for employment policy and training Systems University of Tunis. 2004.
  15. Chaaban J. Youth and development in the Arab World, Paper presented at the ESCWA Expert Group Meeting. 2007.
  16. Chaaban J. Job creation in the Arab economies: navigating through difficult waters. Arab Human Development Report Paper Series. 2010.
  17. Charmes J, Musette S. Employability au Maghreb: cas des femmes et des diplomes de lenseignement superieur, communication au Colloque Economie Mediterranee Monde arabe, Sousse, 20-21 septembre. 2002; 20-21.
  18. Dennis A. Trade Liberalization, Factor Market Flexibility, and Growth: the Case of Morocco and Tunisia. Policy Research Working the World Bank. 2006.
  19. Dovis M, Kocoglu Y. Marche du travail, capital humain et performances economiques dans le bassin mediterraneen, in Ph. Gilles et S. Mouley (eds.), Attractivite, Competitivite et Financement de la croissance en Tunisie. Nouveaux enjeux, Nouveaux debats, Tunis, Publications de l’Imprimerie Offcielle de la Republique Tunisienne. 2009.
  20. Dyer P. Labour Supply, Unemployment and the Challenge of Job Creation in the Maghreb, Washington: World Bank. 2005.
  21. El Aou N, Bensad M. Chomage et employabilite des jeunes au Maroc, Cahiers de la strategie de lemploi, Unite politiques de lemploi - Departement de la strategie en matiere d’emploi, Bureau International du Travail. 2005.
  22. Harris JR, Todaro MP. Migration, Unemployment and Development: A Two-Sector Analysis. The American Econo Revi. 1970; 60: 1126-142.
  23. Aomar I. Les jeunes diplomes au Maroc face au dilemme de l’emploi: contenu et evaluation des dispositifs mis enuvre, Colloque EMMA. 2004.
  24. Lakoua F. Linsertion des jeunes diplomes et le rendement des investissements dans lenseignement superieu: Cas du Maroc et de la Tunisie, Etude Femise n0 FEM33-24. 2010.
  25. Mahjoub A. Labour Markets Performance and Migration Flows in Tunisia, in European Commission Directorate-General for Economic and Financial Affairs, Labour Markets Performance and Migration, Tunisia, Morocco and Algeria. 2010; 60.
  26. Marouani MA. More Jobs for University Graduates: Some Policy Options for Tunisia. Applied Economics Letters. 2010; 17: 933 937.
  27. Martin I. Labour Markets Performance and Migration Flows in Arab Mediterranean Countries. A Regional Perspective, Robert Schuman Centre, European University Institute, Florence Italy, Final Report, November. 2009.
  28. Ministere de l’Emploi et de l’Insertion Professionnelle (2008), Dynamique de lemploi et adequation de la formation parmi les diplomes universitaires, Volume I: Rapport sur linsertion des diplomes de lannee. 2004.
  29. Montmarquette C, Mourji F, Garni A. L’insertion des diplomes de la formation professionnelle dans la marche du travail marocain: application des modeles de duree, Revue Region et Developpement. 1996.
  30. Nabli MK, Silva-Jauregui C, Silva JD. Job Creation in a High Growth Environment the MENA Region MENA. 2007; 49.
  31. OHiggins N. Youth unemployment and employment policy: A global perspective, Geneva. 2001.
  32. OHiggins N. Trends in Youth Labor Market in Developing and Transition Countries, World Bank Social Protection Discussion. 2003.
  33. Pissarides C. Human Capital and Growth: A Synthesis Report, OECD Development Centre Working Papers. 2000; 168.
  34. Pissarides C, Varoudakis MA. Labor Markets and Economic growth in the MENA region, CERDI, Document de travail de la series Etudes et Documents E 2005; 35.
  35. Redjeb MS, Ghobentini M. Lintermediation sur le marche du travail en Tunisie, Cahiers de la strategie de lemploi n0 2005/19, Unite de recherches et analyses sur l’emploi, Departement de la strategie en matiere d’emploi. Agence Nationale pour l’Emploi et le Travail Independant. 2005.
  36. Scarpetta S, Sonnet A, Manfredi T. Rising youth unemployment during crisis: how to prevent negative long-term consequences on a generation? OECD Social, Employment and Migration OECD. 2010.
  37. Spence M. Job market signaling, Quaterly J Econo . 1973; 87: 3.
  38. Stampini M, Verdier-Chouchane A. Labor Market Dynamics in Tunisia: The Issue of Youth Unemployment. Review of Middle East Economics and Finance. 2011; 7: 2.
  39. Upadhyay MP. Accumulation of Human Capital in LDCs in the Presence of Unemployment, Economica, New Series. 1994; 61: 355-378.
  40. Zabi F. Principales caracteristiques de la demande demploi des diplomes de lenseignement superieur, Ministere de lEmploi et de lInsertion des Jeunes. 2008; 12.