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The context

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					   Managing without growth:
challenges confronting the Syrian
         labour market
                      Iyanatul Islam
              Email: i.islam@griffith.edu.au

    UNDP-IPC International Conference on employment
             Brasilia, January 11-12, 2005




                                                      1
                             The context



• Syria – low middle income [about US$1000 p.a.] and oil dependent
  economy
• Expected to run out of oil reserves in about 10-12 years
• Faces uncertain international climate
• Seeking closer ties with EU and Arab states to offset frosty
  relationship with US
• Struggling to recover from recession of 1999, with per capita growth
  in recent years less than 1 per cent p.a.
• Yet, maintained respectable progress in human development and
  expected to reach most of the MDGs by 2015
• Labour market caught in a ‘double squeeze’, with rapid labour force
  growth and slow economic growth.
• Labour market policies will have to be more astute than in the past.

                                                                         2
                      Labour market-poverty linkage



•   The public sector-private sector divide is a defining feature of the
    Syrian labour market
•   27 per cent work in the public sector, the rest in the private sector
•   Within the private sector, the relative size of the informal economy is
    36 per cent
•   66 per cent of employed university graduates and 82 per cent of all
    employed graduates from intermediate institutions work in the public
    sector
•   The proportions are even higher for female workers
•   Gender wage gap much higher in private than in public sector
•   The sectoral distribution of workers with higher educational
    qualifications lies at the core of the labour market-poverty nexus in
    Syria
•   The private sector accounts for 85 per cent of the share of poverty
•   Incidence of low paid workers are much higher in the private sector
    than in the public sector [53 per cent vs 26 per cent]
•   Public sector wages are 1.5 times private sector wages


                                                                              3
              Unemployment, underemployment and poverty



•   Unemployment rates for 2003 vary from 7 per cent to 16 per cent, with
    labour force survey [LFS] suggesting 12 per cent
•   Ministry of Social Affairs and Labour endorses LFS figure, but the
    State Planning Commission prefers to work with a ‘range’ of
    estimates.
•   Significant share of unemployment [47 per cent] may be attributed to
    those with elementary education
•   75 per cent of the total stock of unemployed in the 15-29 age group
•   Female unemployment lower than males in the 15-19 age group as well
    as for cohorts with elementary education, but the converse is true for
    other groups
•   Duration of unemployment is high – 65 per cent of total experience a
    spell of unemployment lasting one year
•   Multiple job holdings reported to be widespread but not reflected in
    data
•   ‘Gross’ underemployment afflicts 52 per cent of the labour force


                                                                         4
          Unemployment, underemployment and poverty – con’td



•   Unemployment-poverty nexus quite close for those with elementary
    education, but not for other cohorts
•   At the regional level, only four governorates account for 50 per cent of
    total stock of unemployment
•   But these are not the regions with the highest poverty incidence
•   Also, areas with high underemployment rates are not synonymous
    with high poverty rates
•   In general, the correlation between poverty, unemployment and
    underemployment at the regional level is either statistically
    insignificant or of the ‘wrong’ sign
•   Hence, regional unemployment map constructed by the Syrian
    government in 2003 likely to be an unreliable guide for identifying
    impoverished regions.




                                                                           5
                   Child labour and poverty



• In recent years, child labour has become a prominent
  and contentious issue in Syria
• Coincides with publication of a major report by UNICEF
• Incidence of child labour around 18 per cent
• Child labour much higher in poorer rural areas [64 per
  cent] than in urban areas [36 per cent].
• It is also higher in agriculture [56 per cent] than in
  manufacturing [18 per cent]
• Child labour rates much higher in regions with an
  extensive rural and agricultural base
• Girls represented disproportionately in urban based
  agriculture, but the gender gap is less conspicuous in
  rural based agriculture.

                                                           6
           Policy issues – growth, investment and employment



•   Government and other stakeholders agree that rapid, investment-led
    growth is key to durable employment creation and poverty reduction
•   State Planning Commission maintains that 185,000 jobs need to
    created to maintain ‘flow’ equilibrium in the labour market, but others
    [eg World Bank, CAIMED] suggest much higher figures
•   State Planning Commission maintains that growth of 6-7 per cent
    required to reach job creation target, but Damascus Chamber of
    Commerce and others maintain growth rate of 8 per cent required
•   State Planning Commission recommends investment ratio of 47 per
    cent of GDP to sustain growth rate of 7 per cent, but this threshold has
    historically never been reached
•   Less attention seems to have been paid to employment elasticity,
    although global evidence shows link between poverty reduction and
    high employment elasticity
•   Modest improvements in employment elasticity can reduce required
    growth to meet job creation targets from 8 per cent to 6 per cent


                                                                           7
         Policy issues – growth, investment and employment



• Lack of a modern financial system that is able to tap new
  investment funds is a major institutional impediment
• Legislative initiative in place for setting up a stock market
• Trade liberalization is on the policy agenda, but
  privatization is not
• Rigorous assessment required for monitoring
  employment consequences of liberalization-cum-
  privatization
• Global evidence shows that such a reform agenda can
  engender negative employment consequences in the
  short run, but not in the long run
• Hence, prudent management of policy reform required

                                                              8
    Policy issues – The Agency for Combating Unemployment [ACU]



• ACU set up as supra-ministerial agency to deal with unemployment
• Granted mandate to disburse US$ 1 billion and create 440,000 jobs
  over five years [2001-2005]
• Policy instruments include credit for business start-ups, microfinance
  and training and re-training, esp. self-employment
• According to ACU’s own forecasts, at best 250,00 jobs will be
  created by end 2005.
• Maintains that this is due to funding shortfall and acknowledges that
  ultimately job creation will depend on investment-led growth
• Given heavy investment of human capital in ACU [more than 70
  PhDs], the agency could be transformed into a policy advisory unit
  working on labour market-poverty linkages
• Collaborative arrangements between, ACU, State Planning
  Commission and Ministry of Social Affairs and Labour need to be
  designed


                                                                       9
                        Policy issues – child labour



•   Syria has ratified the ILO convention on eliminating the worst forms of
    child labour
•   Current approach is to penalize firms and families using child labour
•   Ministry of Social Affairs and Labour is arguing for an alternative
    incentive-driven approach
•   The aim is to design schemes that will provide financial incentives for
    poor families to invest in children’s education
•   A resolution of alternative policy approaches is required




                                                                         10
        Policy issues – employment security and social protection



•   About 19 per cent of Syrians are vulnerable to at least a transient spell
    of poverty. Also the incidence of both seasonal
    employment/intermittent work is quite high
•   Hence, employment security and social protection are high on the
    Syrian policy agenda
•   Need a combination of policy instruments – such as unemployment
    insurance, public works and microfinance
•   Syria does not have unemployment insurance, but uses stiff anti-firing
    legislation as a surrogate
•   Such legislation is both ineffective and a source of contention with
    investors
•   Cross-country evidence suggests that unemployment insurance can
    be fiscally affordable and designed to mitigate disincentive effects
•   Both public works and microfinance part of the ACU’s role, but they
    need to be a regular feature of labour market policy
•   Given that these initiatives are in their infancy, Syria can learn from
    best practice elsewhere



                                                                           11
             Policy issues – wage disparities and wage policy



•   In May, 2004 public sector wages increased by 20 per cent, private
    sector urged to adopt pay increases between 5 to 20 per cent, while
    minimum wages are poised to increase by more than 40 per cent
•   Given that the wage gap is currently in favour of the public sector,
    such wage policy will worsen wage disparities
•   It could help those employed in the formal sector, bypass those in the
    informal sector and hurt those seeking work
•   An effective solution to improving wages in the private sector is to
    improve its human capital endowment
•   This requires reform of education and training system to produce
    graduates with skills pertinent to private sector needs and by fostering
    in-firm training
•   Promising initiatives in place – reform of VET and conclusion of ‘EFA
    assessment’, industrial scholarship schemes and private sector-public
    sector collaboration in industrial training
•   Minimum wages should be indicative rather than mandatory and used
    to monitor conditions of ‘working poor’



                                                                          12
                  Policy issues – labour market flexibility



•   Engendering labour market flexibility is now a major part of the policy
    agenda
•   There is a good deal of support among key stakeholders to reform
    labour laws that have remained largely unchanged over the last 40
    years
•   At the same time, Syria has ratified the core ILO conventions on
    fundamental principles and rights at work
•   In pursuing an agenda of labour market flexibility, some issues need
    to be kept in perspective
•   Comparative data show that, apart from high firing costs, Syria is not
    too far out of line with international norms
•   More importantly, international evidence shows that the benefits of
    labour market flexibility have probably been oversold
•   The challenge for Syria is to combine reform of labour laws with its
    commitment to uphold labour rights

                                                                          13