134 Int'l Lab. Rev. 65 (1995)
The Challenge of Unemployment in the Arab Region

handle is hein.journals/intlr134 and id is 79 raw text is: International Labour Review, 1995, Vol. 134, No. 1

The challenge of unemployment in the
Arab region
Radwan A. SHABAN,* Ragui ASSAAD** and Sulayman S.
U nemployment and labour market problems present policy-makers in the
Arab countries with the most challenging economic dilemmas: poverty
reduction, expanded employment, improved labour conditions, greater
dynamism of the labour market for sustained growth and a reduction in the
budgetary burden of the public sector wage bill. By comparison with the
typical situation in other developing countries, labour markets in the Arab
countries are characterized by high rates of intra-regional labour mobility,
high rates of unemployment, particularly of youth, and the dominance of the
public sector in total employment. These distinctive features of Arab labour
markets were moulded by such fundamental forces as high population and
labour force growth rates, macroeconomic fluctuations caused by oil price
instability, and the pervasive role of the State in the region's economic
activity. It is on these forces that this article is focused.
A demographic transition which resulted in rapid population growth,
combined with large-scale shifts of population from rural to urban areas, led
to severe pressures on labour markets, especially in urban areas. While these
pressures have been operating for at least two decades, their impact on
labour markets was masked during the early period of growth associated
with high oil prices. Only since the mid-1980s, when economic activity
became sluggish and labour absorption slowed down, have policy-makers
and researchers paid attention to these dynamic, long-run forces affecting
labour supply and shaping Arab labour markets.
The first and second oil-price shocks (1973 and 1979) greatly improved
oil-exporters' terms of trade and resulted in large foreign exchange windfalls,
only to be followed by a decline in oil prices in 1982 and their collapse in
1986. The oil windfalls of the 1970s spread to oil-importing Arab countries
through foreign aid and other capital inflows such as migrant remittances
from the oil-exporting countries. The transmission mechanisms of worker
* Georgia Institute of Technology and Palestine Economic Policy Research
Institute.  ** University of Minnesota.  *** University of California-Davis.

Copyright  International Labour Organization. 1995

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