Introduction
The general outcomes of the Middle East and North Africa (MENA) labor market have remained lower despite the region recording a positive economic growth. The improvements in the MENA labor markets experienced in the last one decade are negligible. Many factors influence the success of labor markets in the world. Factors such as the rate of unemployment, occupational choice and sector allocation, participation rates in different economic activities, and wages are important indicators of the economic position and success of a labor market. However, the MENA labor market continues facing economic segmentations because of the poor wage structure and inequalities in employment sectors. The following paper discusses the contribution of poor wage structure and inequalities towards the segmentation of the MENA labor market focusing on Egypt.
The analysis
The main lines of segmentation of MENA labor markets
Similar to any other labor market, MENA labor markets came from the tight combination of economic, historical processes of state and social formations with other dimensions of the economy, polity, and society. Social policies, levels of education attainment, and demographic profiles determine opportunities and economic risks experienced in these markets. MENA happens to fall in a geographical region where the rate of unemployment is high leading to strong labor forces. Moreover, members of MENA still cling to traditions and are reluctant to changes causing many challenges in the market. The lack of structured market strategies and the unlimited skilled laborers leads to labor markets segmentation for MENA.
MENA labor markets experience many challenges associated with market segmentation affecting the ability of member countries to achieve a high economic growth and move to high-productivity sectors. MENA member countries are the main cause of the segmentation because they do not have strict labor policies that promote an effective structure and equality in the employment sector. The most successful labor markets segment between labor intensive and capital intensive sectors. The division between the government jobs and the public sector, where people sought opportunities that offer high wages and insurance, and the private jobs form the main lines of segmentation for MENA labor markets.
Egypt is an active member of NEMA and suffers from poor economic growth because of the presence of non-productive market segments. The evolution of wages and wage structure in 1988 in Egypt introduced new trends in the labor markets. The country witnesses several changes in the labor markets between 1988 and 1998 because of the presence of market-led models. Many people, especially professionals and university graduates moved out of the public employment sector and started looking for government jobs because they promised more wages and job securities. Moreover, the private sector that used to offer employment opportunities to many people also started declining. The reduced absorption capacity of the public and the slow growth of the public sector led to the decline of the number of employed workers.
On the other hand, the high rate of population growth, growing demands for public services and rising incomes increased the demand for a better wages and wage structure in Egypt. The country concentrated on protecting workers in the formal sector and maintaining high levels of employment leading to labor market segmentation where unskilled workers were offered employment. The strategy aimed at increased access to income-earning opportunities for all groups including women. Large public sectors prevailed despite the growing pressure on external and fiscal balances in the MENA region. However, the creation of market segmentation in both the public and the private sector led to the occurrence of economic adjustments where MENA labor markets experienced a decline in total factors productivity and a decrease in shares of the world trade.
The main causes of segmentation of MENA labor market
MENA labor markets have experienced challenges for some time that affect economies of countries in the region. The diversity present in the MENA regions causes the labor markets segmentation that occurs in different ways. Labor market structures and institutions have a big role to play in causing segmentation in the MENA labor markets. Institutions and labor market structures influence the standards of living of people in the region and determine structural reforms as well as the stability of labor markets. A survey was done in Arab countries, which are the majority in MENA labor markets, revealed wage-setting policies and public sector employment remain the most common institutional elements affecting the outcome of MENA labor markets in the region. Moreover, gender-based issues that cause wage structure and inequality cause segmentation in MENA labor markets. Other causes of segmentation are high rates of corruption and the lack of transparency and accountability.
Unemployment
Unemployment, one of the primary causes of segmentation in the MENA labor markets, has greatly affected countries in the MENA region. Nations like Egypt continue suffering from high rates of unemployment and lack of skilled laborers in both public and private sectors. The analysis of recent trends of unemployment in the public sector in Arab countries introduces a lot of critics. Until now, many Arab countries have not changed from the traditional role of the public sector in creating overall employment and remunerations. Secondly, public sector practices in these countries have not fully interacted with institutions and structural features of labor markets that determine minimum wage legislation, promote job securities, fight inequalities in employment, and determine the size of informal sector. Changes in public sector policies introduced in these countries influence the operation of MENA labor markets and cause further segmentation of the market.
Governments in Arab countries took the role of promoting economic development after independence. Additionally, governments played the role of shaping socioeconomic structures and ensuring national growth and social development. The public sector emerged as the most influential tool in propagating functions and responsibilities of governments. However, lack of effective strategies to maintain the labor force and the increasing number of university graduates with high qualifications led to a decrease in the number of employment opportunities. The public sector that once promised better wages and job security began deteriorating as more people secured jobs in the private sector. Moreover, the compression of wage structures led to a big difference on pays for the private and the public sector for skilled laborers. The private sector was found out to pay higher wages.
Gender-based issues and inequality
Gender-based issues and inequalities are problems experienced in labor markers in developing countries. Egypt records lower indexes on gender when it comes to employment. The country also ranks poorly in education attainment and participation in the MENA labor force. Women in Egypt experience a lot of challenges securing well-paying jobs in the public sector because of the high rate of gender discrimination. The high rate of discrimination for women in the public sector is contributed by the delayed efforts by Egypt to join labor markets. The private sector now plays a big role in creating employment opportunities for both men and women with the diminishing role of the public sector as the primary source of employment for people in MENA trade region.
On the other hand, high levels of inequalities in employment experienced in the region cause segmentation of MENA labor markets. Wage distribution in the member countries depends on the individual occupation and qualifications. A survey from the Central Agency for Public Mobilization and Statistics analyzed by El-Hamidi and Said from the American University in Cairo showed a rate of employment in the public sector between 2000 and 2004 but the number decreased as from 2004 with the private sector taking the lead. The number of males exceeded the number of women in all occupational categories studied in both 200 and 2004, showing high rates of wage inequality and gender discrimination. The lack of wage bargaining power in both public and government sectors led an increase in levels of wage inequality with only skilled laborers received higher wages. Moreover, developing countries like Egypt that experience weak labor markets face high rates of wage discriminations and gender-based issues.
The consistency with labor economics theories of wage structure
Labor economies try to describe dynamics and functioning of markets for wage labor by analyzing the interaction between employers and workers. The main factors considered in labor economies demands of labor services, the supply of labor, and resulting patterns of wages. Labor economics theories such as the Neoclassic microeconomic theory that analyze supply, demand and equilibrium play a critical role in understanding the nature and dynamics of a labor market. The neoclassical microeconomic theory assumes that markets are fully competitive, there is no government, and the market operates as private property. Additionally, the theory analyzes the supply, demand, and equilibrium elements of a labor market.
The theory finds application in analyzing causes of segmentation of markets in MENA labor markets. The main causes identified were the high rate of unemployment, gender-based inequalities, and poor wage structures. Under the neoclassical microeconomic theory, MENA labor markets experienced poor productivity and growth because of the presence of poor wage structures and inequalities. Additionally, the lack of many skilled laborers to promote productivity and poor educational achievements reduced the labor force in the region. The lack of adequate labor force created a scenario where capital and labor depended on upon each other. Countries could not generate enough capital to grow their markets while there was a lack of skilled labor to generate the much-needed labor. Moreover, the lack of advancements regarding technology and overreliance on cultural practices contributed to the diminishing returns in labor markets.
Recommended policies to address the inequality
Countries in the MENA region need to overcome segmentation and create dynamic labor markets that promote equality in all sectors of employment. A dynamic labor market gives equal chances to every individual irrespective of gender, age, and education level and makes the labor force achieve the highest level of productivity. Economic experts stress the need for economies in the region to come up with new and sustainable sources of growth, create more employment opportunities, and integrate the increasing number of graduates into the labor market. One of the policies that help address the inequality in MENA labor markets is the expansion of the essential labor market institutions. Members of MENA labor markets lack effectively organized trade unions and employer representatives capable of addressing challenges facing individuals and institutions in the region. Moreover, these institutions should be diversified to include equal representation of all genders and nations.
Second, governments should introduce regulatory reforms in all sectors of employment and conduct vetting programs to ensure these sectors comply with new regulations. The recommendation makes it easier for the government to make close follow-ups on practices in different firms. Additionally, it protects workers from different forms of discriminations that bring about inequalities in the workplace. Finally, it ensures a reduction of labor costs (wages and taxes) to promote productivity and allow organizations to hire more workers.
Conclusion
MENA experiences market growth and productivity challenges because member countries fail to engage in projects that promote reforms in the labor force. The analysis of the MENA labor markets shows a high rate of segmentation occurring in lines of the public and private sector because of employment and wage structures. The main causes of segmentation are high rates of unemployment, gender-based inequalities, and poor wage structures. The pattern of wages and inequalities present in some countries like Egypt requires total reforms for the country to make significant in the international labor markets and achieve a positive economic growth. The paper recommends two main policy implementations to address the issue of inequality in MENA. These are the expansion of the essential labor markets institutions and introducing regulatory reforms in all sectors of employment.
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