Economic Research Forum (ERF)

MENA Generation 2030: Prospects for a demographic dividend

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UNICEF’s new report, MENA Generation 2030, focuses on ‘investing in children and youth today to secure a prosperous region tomorrow’. This column discusses the prospects for a ‘demographic dividend’ in the region with the growing share of the working age population in the total population. The authors explore the barriers that impede realisation of the potential benefits and the policy actions that need to be implemented urgently. As the report underlines, the time to act is now.

In a nutshell

MENA countries for which the window of opportunity of the demographic dividend is yet to open – pre-dividend countries – include Iraq, the State of Palestine, Sudan and Yemen.

MENA countries for which the window of opportunity is wide open – early-dividend countries – include Algeria, Djibouti, Egypt, Iran, Jordan, Libya, Oman, Saudi Arabia and Syria.

MENA countries for which the window of opportunity is slowly closing – late-dividend countries – include Kuwait, Lebanon, Morocco, Qatar, Tunisia and the United Arab Emirates.

UNICEF’s report, MENA Generation 2030, published in March 2019, highlights the historic window of opportunity presented by changes in the population structure of the MENA region. These changes could herald a new period of accelerated economic growth if the right investment choices are made.

Favourable demographics

One key feature of the evolving demographic structure of the region is that the working age population is increasing as a proportion of the total population. This can increase income per capita, production and investment, hence stimulating growth and wealth generation – in short, a ‘demographic dividend’.

Youth work-readiness and participation in the labour force is key to achieving a demographic dividend as youth currently represent one third of MENA’s population. Projections estimate that their share will continue to grow in 12 out of 20 MENA countries, despite a general trend of declining fertility rates (Figure 1).

Therefore, in the period between 2018 and 2040, a large proportion of MENA’s population will be of working age. Investing in the next generation would entail giving children, adolescents and youth the tools to become the change-makers of their futures, in their communities and in their countries.

But young people in the MENA region are becoming increasingly frustrated at the absence of quality education, safety, security and decent employment. They often feel disempowered as they lack access to platforms for participation in decision-making for their communities.

Significant barriers

For the region, there are three main barriers that currently obstruct the achievement of a demographic dividend. The first is the state of political and social instability.

The second barrier is that inequitable economic and social policies continue to discriminate against marginalised and vulnerable populations such as adolescents, youth, women, refugees and people with disabilities. Overlapping deprivations in health, education, and protection impede young people from pursuing decent livelihoods and capabilities, hence hindering their chances of becoming active and productive members of society.

A recent report on multidimensional poverty in Arab states suggests that 53 million out of an assessed 118 million children suffer from moderate poverty, while 29.3 million children suffer from acute poverty.

Furthermore, girls and young women in the MENA region are disproportionately affected by gender-based barriers, such as conservative norms, violence and discrimination in schools, at home and in the work place, which limits their engagement in civic, social and economic platforms. Similar issues are also encountered by refugees and people with disabilities.

The third barrier is that access to decent employment opportunities is restricted for many. Youth unemployment in the region is the highest in the world. Data for 2018 show that 29.3% of young people in North Africa and 22.2% in Arab states are unemployed, with higher rates for women of 40.3% and 36.5% respectively.

Education systems do not provide the skills required to prepare graduates to face employment market needs. In addition, markets are failing to generate new jobs and decent employment, leaving many with little or no choice but to resort to informal sector and low productivity work where social protection packages are limited.

By 2030, there will be an estimated 25 million additional students throughout the region, an estimated 39 million new entries to the labour force, and a doubling of the overall population. This all means that there will be an additional burden on education and health systems, but also on national and regional economies, which need to be prepared to accommodate these new needs.

What to do?

As highlighted in the UNICEF report and in Figure 2, the window of opportunity for a demographic dividend will close, especially for ‘late-dividend’ countries, and action must be taken now.

In order to reap the demographic dividend, the cycle of poverty and inequality needs to be broken, and essential services, such as education, health and social protection, must be provided while also addressing issues of civic engagement, transition to employment, and the empowerment of girls and women in the region.

These interventions should be targeted at children, adolescents and youth, who need to be supported by policies that allow them to participate in building futures for themselves and their countries.

The UNICEF report argues that expanding the capacity and quality of education is crucial due to the arrival of a high number of new entrants but also due to outdated education systems. National education systems need to change their curricula to encompass a wider range of twenty-first century life skills that reflect the rapid technological changes taking place within this ‘Fourth Industrial Revolution’ to provide stronger foundations for future employment.

Encouraging civic engagement and personal empowerment are also among the suggested policies.

The report also argues, along with ESCWA’s 2017 report, Rethinking Fiscal Policies, that financing these essential investments will prove difficult for some MENA countries as they already face significant budget deficits and debt. Hence, to expand the current fiscal space, governments need to shift the direction of public expenditure towards children, adolescents, youth and vulnerable populations.

They also need to increase direct progressive taxation on wealth and income in order to combat the current weakened tax laws, which favour the few at the expense of more vulnerable segments of society.

Policies that push for inclusive growth and create high-quality jobs for the masses, particularly private sector-driven ones, are essential. Decent employment generation is important not only for growth, which can depend more on the middle class than any other income groups (due to their tendencies to spend, and to spend on local goods), but also for social and political stability (see ESCWA’s 2015 Arab Middle Class report).

Going forward, there is a need for effective structural transformation and sector diversity plans in the context of more regional integration and with enhanced overall governance quality.

One final and key set of policy recommendations is to provide incentives for women’s employment and labour market participation. This would entail not only shifting cultural standpoints, but also changing macroeconomic policies and enacting regulations to ensure that women have acceptable and safe working conditions.

To this end, any policy framework that could curb informality would also play a major role in increasing women’s labour participation, thus directly contributing to reaping the benefits of the demographic dividend.

 

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