THE EVOLUTION OF LABOR SUPPLY AND UNEMPLOYMENT IN THE EGYPTIAN

ECONOMY: 1988-2012

Ragui Assaad and Caroline Krafft

ERF CONFERENCE ONTHE EGYPTIAN LABOR MARKET IN A REVOLUTIONARY

ERA: RESULTS FROM THE 2012 SURVEY

DECEMBER 7-8, 2013 AT SOFITEL CAIRO EL GEZIRAH

Key Trends in Egyptian Labor Supply and Unemployment• The youth bulge has been mostly integrated into the labor market

• We would expect unemployment to decline with decreasing demographic pressures, but …

• Unemployment increased slightly, due to deteriorating economic conditions

• Underemployment has increased substantially• Female labor force participation decreased• Demographic pressures on the labor market will resume once the echo of the youth bulge reaches working age

Outline• Why did the unemployment rate not increase that much?

• Age structure and the dynamics of the youth bulge

• Labor Force Growth and Labor Force Participation

• The Characteristics of the Unemployed

WHY DID UNEMPLOYMENT NOT INCREASE THAT MUCH?

Evolution of Unemployment

The unemployment rate has increased only slightly since 2006, from 8.5% to 8.7% using the standard definition and actually declined from 9.7% to 9.6% when using the broad definition

Unemployment by Gender, Urban/RuralMarket LF definition, Search RequiredMales Females

Comparison of Unemployment Rate across the CAPMAS Labor Force Survey and ELMPS 2012

Male Female Total LFS 2010 Q1 4.9 20.8 8.7 2010 Q2 4.9 22.0 8.9 2010 Q3 4.6 23.0 8.8 2010 Q4 4.8 22.4 8.8 2011 Q1 8.9 21.5 11.8 2011 Q2 8.7 22.3 11.8 2011 Q3 8.7 22.7 11.9 2011 Q4 9.2 23.2 12.4 2012 Q1 9.3 23.8 12.6 2012 Q2 9.2 24.1 12.6 2012 Q3 9.1 24.0 12.5 2012 Q4 9.6 24.7 13.0 ELMPS 2012 4.2 23.7 8.7

Visible underemployment (working less than full-time involuntarily) has increased dramatically from 2006 to 2012. This is a sign of serious distress in the labor market

5.0

1.9

4.3

2.8

1.9

2.6

9.6

7.9

9.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Male Female All

Perc

enta

ge U

nder

empl

oyed

199820062012

Why is unemployment relatively stable despite serious distress in labor market?• Unemployment in Egypt is structural not cyclical• It affects a very specific group of people:

• Young, educated, new entrants• It includes very few people who were employed and lose their jobs,

but mostly people looking for formal work for the first time• Unemployment increases when large number of educated

new entrants are trying to enter labor market• This is not the case in this period. The number of youth

entering the labor market has actually declined due to demographic changes

• Unemployment did not actually decline as a result because it is taking longer for people to leave the unemployment queue

AGE STRUCTURE AND THE DYNAMICS OF THE YOUTH BULGE

Population Growth and Changes in Age Structure• Total population growth over 2006-2012 around 2% per

year, very close to 1988-98 and 1998-2006• Growth in working age (15-64) population slowed

substantially from around 3% per year (1988-2006) to 1.2% per year in 2006-2012

• Youth (15-24) population grew 3.4% per year 1988-1998, 2.3% 1998-2006, contracted by 2.3% per year in 2006-2012

• Youth bulge has been absorbed into working age• Young adult (25-29) population still grew substantially

2006-2012 (4.2% per year)

Changing Age Structure, Urban

Age 5 Age

15 Age 22

Age 28

Echotrough

Changing Age Structure, Rural

Shallower troughLarger echo

LABOR FORCE GROWTH AND PARTICIPATION

Labor Force Growth• Market labor force grew 4.0% per year 1998-2006, grew 1.0%

per year 2006-2012• Over 2006-2012, male LF grew 1.8% per year, female LF

contracted by 1.5% per year. • Growth was similar in urban and rural areas for males. • Contraction was greater in rural (-2.5% per year) than urban areas (-0.4%

per year) for females

• Youth market LF (ages 15-24) grew 3.1% per year 1998-2006, contracted 4.2% 2006-2012.

• Young adult (25-29) labor force growth is still growing but more slowly. It grew by 6.5% per year 1998-2006 compared to 2.1% per year 2006-2012

Labor Force Participation Rates (15-64)

73.2

21.4

47.2

77.2

27.3

51.9

80.2

23.1

51.1

0

10

20

30

40

50

60

70

80

90

100

Male Female Total

Labo

r For

ce P

artic

ipat

ion

Rate

(P

erce

ntag

e)

1998

20062012

Market Labor Force, Search Required

Continued increase in participation for males, but reduced participation for females as opportunities in labor market contract

Young Adult (25-29) Labor Force Participation

90.3

28.2

59.5

95.8

32.9

65.5

96.7

27.7

59.1

0

10

20

30

40

50

60

70

80

90

100

Male Female Total

Labo

r For

ce P

artic

ipat

ion

Rate

(P

erce

ntag

e)

1998

2006

2012

Market Labor Force, Search Required

The increase of male labor force participation is primarily due to the aging of the youth bulge. Participation among young adult males did not increase that much. The decline among females cannot be attributed to age structure

Male Labor Force Participation by Age

Age profile of male labor force participation is almost unchanged, since 1998. Increase in participation due to changing age composition

Female Labor Force Participation by Age

Declining participation among women since 2006 is due to decline among women in young and intermediate age groups, but especially among those 30-50

Female Labor Force Participation by Education

Participation has been low and stable for less educated females Participation has been decreasing over time for more educated females Employment to population ratios follow similar patterns

THE CHARACTERISTICS OF THE UNEMPLOYED

Changing characteristics of the Unemployed• The unemployed are increasingly female

• The female share of the unemployed has increased from 54% in 1998 to 63% in 2012 despite the fact that they are only 23% of the labor force

• The unemployed are still predominantly young, but got slightly older over time• Median age for males increased steadily from 23 in 1998 to 25 in

2012 • Median age for females increased faster from 23 in 1998 to 27 in

2006.• The unemployed are still predominantly educated

• Share of secondary and above• 70% in 1998, 85% in 2006 and 77% in 2012 for males• 91% in 1998, 97% in 2006 and 94% in 2012 for females

Distribution of Unemployed Males by Age

Distribution of Unemployed Females by Age

Distribution of Unemployed by Education

The vast majority of the unemployed are still the educated (technical school and university graduates), but there is a slight increase in the proportion of the uneducated unemployed, among males

Distribution of Unemployed by Education, Females

Among, unemployed females, almost all are educated

Conclusions• The youth bulge has mostly been absorbed into the labor

market, temporarily decreasing the pressure of new entrantsslower increases in unemployment

• However, the ‘echo’ will soon start entering the labor market. • Underemployment, which affects a more vulnerable population,

has gone up substantially and is the main indicator of labor market distress

• Women are less likely to participate in the labor force, mostly because of falling participation rates among middle-aged educated women.

• Women are an increasing proportion of the unemployed as well.

• The unemployed are slightly older as the youth bulge moves to older ages and slightly less educated