Economic Research Forum (ERF)

Jordan’s labour market: new inputs for informed policy-making

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The labour market in Jordan has deteriorated since 2010: informality and irregular employment have increased; the recent social security reform has had limited impact; and large shares of young people are neither working nor in school. This column reports new high-quality survey data collected by ERF, analysis of which is providing insights into the causes of the deterioration and potential policy responses. Jordanian researchers and policy-makers are now in a better position to ask informed questions and develop better policy.

In a nutshell

The presence of Syrian refugees has not been the cause of the deteriorating labour market facing Jordanians.

To the extent that there has been a direct impact of the Syrian refugees, it has fallen on the large and increasing pool of migrant workers present in the Jordanian labour market.

The increasing numbers of young men and women who are neither working nor in school has been identified as a high priority both economically and socially.

Nearly every day in Jordan, concerns about the labour market are raised in public discourse in the press, in policy discussions and among citizens. There is a widespread sense that the conditions faced by Jordanians – particularly young people and the poor – have worsened dramatically in the past few years. There is also a common belief that the cause of worsening conditions is Syrian refugees taking jobs from Jordanian workers and driving down their wages.

Apart from the unemployment rate that is reported quarterly by the Department of Statistics, there have been few data and even less analysis that can inform our understanding of the situation and its causes. Lacking information, policy-making relies largely on perceptions and anecdotes.

ERF analysis of new data from the Jordan Labor Market Panel Survey (JLMPS), presented at a conference in Amman in May 2018, is having an enormous impact on the discourse by helping to fill gaps in our understanding.

A deteriorating labour market

The ERF studies provide many valuable insights into Jordanian labour market, including the emergence of several worrying trends over the period from 2010 to 2016.

First, regular work performed without a contract or social security has increased from 20% to 24%, while irregular work such as day labour has increased from under 1% to 8% for the labour force as a whole. Among Jordanians the changes have been moderated, with the increase in irregular work (from under 1%) offset by a decline in regular work performed without a contract or social security.

Second, reform of the social security system intended to increase coverage and to make the system financially sustainable has had limited impact. Among the workforce as a whole, coverage has declined from 55% to 47%, though increasing slightly (from 60% to 63%) for Jordanians. Nevertheless, even among Jordanians, coverage has fallen among workers in firms with 50 or more workers, and among young people taking up their first job.

Third, among youth there has been a dramatic increase in the share who are neither employed nor in school: from 17% to 33% among men aged 20-24 and from 14% to 23% among men aged 25-29. Among these young men, fewer are actively searching for work, while an increasing share has completely dropped out of the labour force. Among women, fully 63% of those aged 20-24 are neither employed nor in school, rising to 78% among women aged 25-29.

Causes of the deterioration

The ERF studies help to refine our understanding of the causes of deterioration in labour market conditions. One study uses variations in the concentration of Syrian refugees across localities to examine the widespread belief that deteriorating conditions for Jordanians are caused by the presence of Syrians in the labour market. The analysis finds no significant impact on Jordanian employment and unemployment, and little impact on wages.

Another study helps to explain this surprising finding by examining the impact of the presence of Syrian refugees on the large number of migrant workers in Jordan. While Jordanians were largely shielded from negative impacts, migrant workers experienced a reduction in hours worked in localities with many Syrian refugees.

Together, these studies rule out the hypothesis that the presence of Syrian refugees has been the cause of these trends. Having ruled that out, several other potential explanations need to be explored. In particular, the Syrian crisis – as distinct from the presence of refugees – has affected export routes and may have had a corresponding impact on Jordanian employment.

Several related areas for further investigation were identified by conference participants. For example, one factor that may have mitigated negative consequences of the labour supply shock is the increased demand for goods and services resulting from the presence of Syrian refugees. Further work can be done to examine the employment generated in relevant geographical areas and occupations (such as education and health). Moreover, to the extent that the increased demand was funded from the government budget, negative consequences may occur elsewhere even if not in the labour market. Furthermore, continuing increases in the number of non-Jordanian workers in Jordan – among which Syrians are a small part – may have had important impacts on Jordanian employment and the informality of employment.

Proposed additional analysis

In addition to further analysis on the causes of deteriorating conditions, conference participants proposed additional analysis into the status of key segments of society and their implications. For example, the increasing numbers of young men and women in Jordan who are neither working nor in school was identified as a high priority both economically and socially. More work is needed to understand the situation of the large number of young men in this category and how they see their role in society. And with the country having one of the lowest female employment rates in the world, it will also be crucial to understand the impact of the 2010 reforms of maternity leave.

The research presented at the conference stimulated an active debate and brainstorming about the Jordanian labour market situation, contributing factors and appropriate policy responses. Thanks to the newly available data, it is now possible to ask a more refined series of questions. Moreover, the availability of the JLMPS as a still largely untapped data source will be a crucial resource for informed policy-making as we move forward.

 

 

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