MENA’s biggest challenge also represents the region’s greatest opportunity – it’s its youth, says World Economic Forum (WEF) in its latest study.

With more than half of its population under 25 and the world’s highest regional youth unemployment rate, the MENA region stands at a critical juncture, says the WEF’s ‘Rethinking Arab Employment’ study report.

This youthful population segment can be either a “youth dividend” or turn into a “youth liability”.

Solutions to date, enabling the region’s leadership to create an environment in which young people’s aspirations are fulfilled, the report says, show little progress in confronting the challenges of youth unemployment in a structured manner.

Despite the favourable financial means and the widely acknowledged importance of the challenge and with many efforts already in action, little progress has been achieved to effectively address youth unemployment.  “Persisting high youth unemployment rates in the GCC clearly show that effectively addressing the problem would require more than just budgetary capacity and economic growth”, says the WEF report’s study.

Explanations of the on-going limited progress point at a possible lack of understanding of the problem and / or that a perception that the related risks with comprehensive solutions are far too high.

Stakeholders tend to view the issue of youth unemployment from varying standpoints all based upon their assumptions about the root cause of the problem.  Shaped by these assumptions, policies often tackle the issue in a selective manner, without fundamentally confronting the issues.

The first phase of the World Economic Forum’s New Vision for Arab Employment initiative with this in mind, invited leaders from business, government, civil society and academia to develop a holistic analysis of the employment system in Arab resource-endowed economies, with specific emphasis on GCC countries.  This approach sought to create a shared understanding of the structural reasons for youth unemployment, while raising awareness of future pressures to the current system were it to be continued, as well as the potential consequences of interventions.

Youth unemployment is driven by deep-rooted social and economic behaviours and can be a complex structural problem.  An integrated, holistic approach helps identify the fundamental reasons for youth unemployment and the vulnerabilities of the current employment model.

The study explored stakeholders’ different perceptions of the region’s youth unemployment challenge and integrated them into a framework that provides a “full picture” of the employment system in GCC countries.  The current employment system fulfils two specific purposes: securing social stability, through the social contract established between the state and its citizens; and ensuring economic prosperity, through an economic contract, which represents the relationship between non-national workers and their host country.  However the result of the current employment system is that the private and public labour markets are disconnected from each other, with high barriers for national young people to be productively employed in the private sector. The massive demand for an expatriate labour force brought about by the oil boom, which coupled with a pervasive protective attitude by governments towards their own citizens are believed to be at the roots of this disconnection.

The foundations of the social contract need therefore to be modified so that national workers become integrated into the private sector if both purposes – social stability and economic prosperity – are to be sustained over the long term.

Improved frameworks should include for young people’s independence, creativity, motivation and responsibility, as well as a regulatory framework that harmonizes the employment of national and non-national workers, whilst creating opportunities for business generally, and increasing the attractiveness of the private sector for young nationals when compared with the public sector

Perpetuating the current employment system implies exposure to current pressures, such as budgetary and public productivity constraints, as well as to potential future pressures, such as declining oil and gas prices, political pressures, stagnant low productivity in the private sector and lack of non-national labour supply.

An employment system that is more reliant on the productivity of its own national workforce, with its foundation therefore being in the hands of national decision-makers, would be one in which social stability and economic prosperity are appreciably more sustainable.