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The Arab Region Losses Reach $50 billion Due to Youth Unemployment

Middle East : 19 April 2011

The Arab region experienced between $40 and $50 billion in losses thanks to youth unemployment, according to a McKinsey report. This issue is set to worsen given the unmatched condition of the skills youth have and the skills needed to work.

The report was commissioned by both the Islamic Development Bank and the International Finance Corporation. It stated that losses due to this problem of unemployment surpasses $40 to $50 billion on an annual basis, which is equal to Lebanon or Tunisia’s national GDP.

Nations covered in the report include those with the most pressing jobless issues, such as the Palestine Territories, Oman, Saudi Arabia, Iraq and Morocco, as well as Yemen, Algeria, Jordan and Egypt.

The most important findings in the report that indicate the vastness of this problem include:

* The Middle East region has the world’s highest rate of youth unemployment, currently sitting at more than 25 percent – the rate in North Africa is around 24 percent.

* Unemployment among female youth is much worse, surpassing 30 percent in the Arab region, according to McKinsey.

* In this region the rate of youth participation in the workforce is also one of the lowest rates across the globe. The average global rate is 52 percent, while the Arab region reports only 35 percent participation.

* The massive amount of young Arabs will add more and more pressures to the job market in the coming years. Right now about one third of the population is below 15 years of age and one third is aged 15 to 29. As a consequence, there will be tens of millions of youthful Arabs coming into the labour force over the coming decade, looking for a job either locally or throughout the region.

Dealing with this particular unemployment problem requires a dual focus. There must be more employment creation, including opportunities for self-employment, as well as a concerted effort to be sure the young people have the necessary skills to handle the positions available. As of the current times the government has been lacking positive movement on the second focus.

There are three messages revealed in the McKinsey research. First of all, there is a significant demand for E4E (or education for employment). Also, the supply of this education is only just budding and those enablers vital to E4E are not present in the region.  The E4E supplied should lead youth to better prospects of employment.

It is widely recognized that should nothing be done the jobless levels will go even higher due to the demographic bubble created by one third of the population being under 15 years old. This will result in millions of Arabs looking for work in the next decade, according to McKinsey.

There are 1,500 Arab youths interviewed in the report, which is full of comments regarding those who finished their education only to find out that it did not supply them with the skills necessary to obtain work. The skill sets simply did not match. This common condition is trapping the youth population and creating brewing frustration in the population. The anger has sparked issues in many different areas including Jordan and Egypt, Tunisia and Saudi Arabia.

It is worrisome that governments were surprised by this development. The stormy conditions have been obvious for years and the changes in the dynamics of the regional population have been well documented.

These conditions cannot be resolved overnight, as the regional governments are finding out. The problem of youth joblessness has not been solved immediately after Hosni Mubarak left Egypt or Ben Ali fled from Tunisia.

As of today the regional governments have not been focusing on the importance of providing the Arab youth with the skills necessary to fill the jobs available, stated the McKinsey report. This will require the education system to be oriented with the job opportunities, from full time to part time positions and also self-employment opportunities. Also, there is not enough focus on encouraging those in private industry, whether they are employees or employers, to work alongside the government to address the needs of the region.

The report indicates that the youth of the Arab region have plenty of aspirations and enthusiasm, but the employers are frustrated in equal measure by the inability to find skilled employees.

Those private businesses included in the survey estimated that just one third of those graduating today are trained in the skills required by the workplace. This rate is significantly lower than those seen in other areas. As a consequence, over half of those employers provide the necessary training themselves to get the new employees up to par, based on findings in the report.

However, the services that would help create students ready for work are just in the beginning stages. Between 15 and 20 percent of students in the Mena region are attending private institutions, while between 50 and 75 percent of those in Malaysia and Brazil are.

In the meantime, the structure in place to help those willing to work find jobs are lacking. There are very little independent standards for education and the student funding systems are inadequate. There are not many providers of quality education and even less information on those jobs available.

McKinsey states that this challenge is massive, urgent and not to be ignored. Action must be taken immediately. Youth in the Arab world are set up for dire conditions and disastrous consequences unless all those with a stake in the job market come together to work on plans addressing these issues and gaps.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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