Labor market intermediation: Where jobs and people meet
This blog is part of a weekly series that we hope will provide some food for thought on the critical questions outlined in the forthcoming MENA Flagship Report on Jobs.
Over the course of our research we have encountered a number of explanations for the difficulties people face in finding jobs in the Middle East and North Africa (MENA) region. Some contend that there are simply no jobs, while others that they don’t have the qualifications for the jobs that are available, and still others feel that they do not have the means or tools at their disposal to find potential jobs – a situation that economists refer to as, “poor labor market intermediation.”
Let’s take a closer look at each of these explanations to determine if perceptions match reality, and what scope there might be for policy makers to address them.
No jobs. Some complain that there simply aren’t any jobs – this is surely the case in certain sectors. However, this cannot be the only reason for the region’s high unemployment. According to a recent study conducted in Tunisia (see World Bank, 2012 below), the National Employment Agency (ANETI) registered more than 150,000 available vacancies in the private sector, but only 20,000 were filled. This is puzzling given that unemployment rates in Tunisia reached almost 19% in 2011.
The "wrong" qualifications. Regional companies express frustration over the lack of basic skills (both hard and soft) in new hires. Surveyed employers mentioned that only about one third of new graduates are ready for the workplace and more than half of all employers add that they must address this lack of work-readiness by providing training, which is time-consuming and can be costly.
Figure 1 illustrates the leading constraints facing employers in the region.
(Click to Enlarge)
Coincidentally, students appeared to be in agreement with employers on the skills mismatch: when interviewed, only one third believed that they were adequately prepared to enter the workforce. Interestingly, over one third were willing to pay for private education if it guaranteed better job prospects.
The "wrong" jobs. One explanation we have not considered is that the jobs that are available are not the ones people want. This is certainly possible. While no empirical evidence is available to support this for the moment, it could be the case that with education comes aspirations for a better life, one that does not include certain careers, so certain jobs remain unfilled. Job-seekers want better.
Or it may be that the young and educated prefer to remain unemployed over accepting a job in the private sector, waiting instead for public service employment that is often better paid, more secure in terms of benefits, and more prestigious.
The "wrong" – or complete lack of – tools for job seekers. The final cause we have yet to consider is the possibility that people are not finding jobs because they don’t know how or where to find them.
Some job seekers in MENA have complained that the avenues available to them in their searches are limited or even closed. This is what we referred to earlier as poor “labor market intermediation,” a term given to those mechanisms or institutions that intercede between job seekers and employers, matching the supply of jobs with the demand for them.
Without good intermediation, the match of skills to jobs will be weak. Poor intermediation can have a number of consequences, including, joblessness and/or idleness, skill shortages alongside gluts, brain drain, and ultimately slower growth. Good intermediation can contribute to a more productive workforce, better employment results with an accompanying reduction in poverty, and, in principle, to faster growth.
There is an interesting story that came out of the many consultations carried out in Tunisia that illustrates the problem well. It turns out that the staff at ANETI do not "code" the educational background (diplomas) of the registered unemployed properly. This takes away one of the principal means employers have for judging the appropriateness of the qualifications of a potential employee. This inability to match qualifications with available jobs can lead employers to hiring the wrong people, and be the source of high staff turnover.
In the forthcoming MENA regional flagship report, better intermediation is suggested as one way to improve the efficiency of matching jobs to skills. It could also be the vehicle, through Active Labor Market Policies (ALMPs), of re-training job seekers with skills that are in higher demand, to give them a second chance.
A more effective and targeted role for publicly funded and private intermediation services would improve the job search process and, at the same time, better match the supply and demand for labor. Some countries may need to adopt legislation to enable and regulate private intermediation services. In order to improve the performance of the services, they will have to adopt systems to measure and track their effectiveness (for example, the tracking of the insertion rate of job seekers and feedback mechanisms for both beneficiaries and the private sector.)
Most MENA countries will need active labor market programs for those who falter in the transition from education to work and to serve the workers who are most difficult to place, or most in need of improving their skills. ALMPs currently serve urban areas and the urban unemployed (some of whom can afford to be unemployed) almost exclusively. They will need to expand their services and reach out to rural areas and informal workers.
There is no single solution to unemployment. It will require a combination of factors, including economic growth and good governance, but good labor market intermediation will guarantee that people are able to find the jobs that are available. It will also ensure that they have the right skills once they meet.
 See e4e, Education for Employment: Realizing Arab Youth Potential. (IFC, Washington, 2010).
This blog is part of a weekly series that we hope will provide some food for thought on the critical questions outlined in the forthcoming MENA Flagship Report on Jobs. The common thread and objective of these blogs are to spur a conversation on “what to tell your Finance Minister.” This is in preparation for the World Bank Annual Meetings in October 2012, where the report's main messages and the results of the live chat will be presented to MENA policy makers. We want to know what YOU think is holding people back, and what can be done to create more and better jobs in MENA.
Read the previous weeks' blogs in the series: