Tunisia: From MILES to More

Rebekka Grun

MNSHD

29 March 2010

Contents

1. Tunisia: Country Context2. Issue3. Questions & Methodology4. Findings5. Evolution of the Policy Dialogue6. Going Operational: The DPL

Tunisia is a middle income country….

• With a population of 10.3m (2008)• …a GDP/ capita of $3,632 (2008)• …and an estimated poverty rate of

7%• Main exports are electronic and

mechanical goods, textiles, energy and tourism

• Life expectancy is 74 years• Adult literacy is 86% for males and

69% for females• Gross primary enrollment is 110

(male) and 107 (female) in % of the relevant age

• Infant mortality is 18 per 1000 live births

• There is no measurable infant malnutrition in children under 5yrs

Issue: stubborn unemployment in spite of growth…

0%

5%

10%

15%

20%

25%

1994 1999 2004 2005 2006 2007

Primary

Secondary

Higher

None

Average

• 4.8 % average annual growth of GDP over past 8 years (higher than average growth in MENA, 4.5%, and middle income countries, 4% )

• Unemployment rate relatively high at 14.2 % (6.4% for all middle income countries, 2008) and has barely fallen in the same time frame

• Unemployment affects the better educated:

• 46% of university graduates are unemployed 18 months after graduation, 32% 3.5 years after, and 19% average all people with higher education

0%

5%

10%

15%

20%

25%

30%

35%

40%

1994 1999 2004 2005 2006 2007

15-19

20-24

25-29

30-34

35-39

40-44

45-54

55+

Total

• The younger the jobseekers, the higher their unemployment rate

• Around 35% for the 15-19 year olds, and below 5% for the group 46+

….especially for ‘outsiders’, such as youth and women

•Newcomers, such as the young and women face a more difficult labor market situation. •Unemployment rate of women close to 18% vs. 13% for men•In addition, in 2008, the labor force participation rate among women aged 15 to 64 was 28%, compared to 74% among men (ILO, 2009).

Question: What are the constraints to employment, and in what order?

LABOR DEMAND

Firms invest

Firms shrink or grow

Firms start up

Need capital

Need specific

skills/ labor

LABOR SUPPLY

Graduates from

-former jobs

-university

-vocational

-secondary

-primary

Seek work/life mix

in line with skills

Quantity:

Firms demand labor, in function of

the market wage

People supply labor, in function of

the market wage

Quality:

Firms demand

specific skills, levels, contracts

People supply specific skills, levels

and contractual terms

In a free labor market, the wage (quantity + quality) mediates Demand and Supply

MACRO and LEGAL framework: e.g. social insurance, competition, property rights

LABOR MARKET

Methodology: MILES framework

• Tunisia benefited from a series of Programmatic Economic and Sector Work (Analytical Reports), a so-called ‘ESW’, from 2002 to 2006

• The tools that were used in the analytical work included: • simulation modeling, • surveys, • descriptive analysis from existing (Labor Force Survey LFS) and new surveys, • econometric (ex post) analysis, • legal review, • institutional process assessment

• Strong client co-operation in data collection, programming and increasingly, analysis• Statistical department of Ministry of Employment (Observatoire d’emploi)• Research institute affiliated to the Ministry of Cooperation (Institut d’Economie

Quantitative)• Technical staff of Ministries of Education and Higher Education

• Final integrating summary: MILES report

Methodology: MILES framework

Macro-economic (coop with Institut d’Economie Quantitative IEQ in Tunisia) • Computable General Equilibrium model, programmed in coop between DEC (the

Development Economics Research Group at the World Bank) and IEQInvestment climate (coop with IEQ): • Investment Climate Assessment Survey 2006Labor Market (coop with Observatoire d’Emploi et des Qualifications ONEQ) : • Panel tracer survey of university graduates & analysis & separate reports I and II • Tracer survey of microcredit recipients & analysis & separate report• Technical Note, assessing Tunisian portfolio of Active Labor Market Policies (ALMPs)

and presenting international Best Practice• Process Evaluation of public Employment ServicesEducation (coop with Min Employment and Min Education and Training)• Vocational Education and Training tracer survey & analysis• PISA (Program for International Student Assessment) 2006 micro-data descriptive

and econometric analysisSocial Protection: • Review of Labor Code• Technical Note (confidential) on Unemployment Insurance, simulation of costs

Findings: The main constraints are…

LABOR DEMAND

-Restricted access

to capital (collateral

and cost)

-Restricted access

to formal markets:

costly licensing for firms,

professional services

- Public sector wage and

security premium

-One of world’s most

restrictive firing laws

(need to ask permission

for individual layoff)

-Labor Inspection +

tax inspection

intrusive and highly discretionary

LABOR SUPPLY

-Youth bubble with

no reaping of

demographic dividend

-Edu system unresponsive

to labor market (historic

budgeting , wage distortions,

professors + teachers strong

interest group)

-Some technicians in scarce

supply, some graduates in

over-supply

- Difficulty to migrate

optimally: national

qualifications do

not translate

LABOR MARKET

Labor Institutions

and Regulations-Restrictions on wage flexibility:

Collective wage scales by edu level+seniority

- protection focus on jobs opposed to income:

no unemployment insurance to speak of

-54% of working people have no contract

-Share of fixed term contracts high

Matching of

Demand and Supply

- Queuing for desirable public sector

jobs and jobs with collectively agreed wage

-Employment Services overwhelmed:

no case management, little outsourcing

- Access to data difficult

Results: Where has the MILES influenced policy so far?

General Equilibrium Model (Macro) and Technical Note on ALMP (Labor Market):• -> Decree 349-2009 completely re-structures portfolio of Active Labor Market Policies

(ALMP)• introduces access conditionalities for both beneficiaries and employers• Introduces two ALMP which are strictly tailored to the employer and conditional

on an offer made• Employment Services mainstream Monitoring & Evaluation of ALMPs

• -> Ministry of Employment develops a pilot to expand Childcare through re-trained unemployed women

Process Evaluation of public Employment Services & Technical Note (Labor Market):• -> Decree 87-2010 introduces changes to the work processes of Employment

Services:• Case management for the long-term unemployed• Subcontracting to the private and third sectors

Panel tracer survey of university graduates & analysis (Labor Market/ Education)• -> Circulaire and Arrete of Ministries of Employment and Higher Education, 2009 ,

establish “Business Plan Competition for Students”, and Business Plans for Start-Up Companies as a valid Thesis Topic

Results: Where has the MILES changed the policy dialogue – for future measures?

LABOR DEMAND

-Private Sector DPL

addresses access to

finance

-No new dialogue on

access to formal markets

- No new dialogue on

public sector premium

-Presidential program and

Credit package (DPL)

foresee revising hiring

& firing dispositions

LABOR SUPPLY

-Higher Education law

allows more autonomy

for universities

-Decrees need to implement

-New competency-based

National Qualifications

Framework: need to implement

-Credit package (DPL)

foresees analytical work

to establish comparability

of Tunisian and European

Qualifications for

optimal migration

LABOR MARKET

Labor Institutions

and Regulations-protection focus on jobs opposed to income:

-Presidential program foresees revising

employment legislation,

-Credit Package (DPL) foresees evaluation

and reform of safety net of

redundant workers

Matching of

Demand and Supply

-Employment Services:

Credit Package addresses work processes

and subcontracting

- addresses access to data

of National Institute of Statistics

Building the policy dialogue

Instrument Definitions:• MILES = framework for Employment Analysis (Macro, Investment, Labor Market,

Education, Social Protection)• ESW = Economic and Sector Work (analytical studies)• TA = Technical Assistance (“consultancy” to the government, can be paid or un-paid)• IL = Investment Loan, a traditional loan package that finances concrete outputs, e.g.

schools, books, computers• DPL = Development Policy Loan, a credit package that offers non-earmarked budget

support in exchange for a series of reform measures Sector Definitions: • Edu = education• PSD = private sector development• FIN = financial sector

ESW (MILES)

TA & pilot

Supply-side

(Edu) IL

Labor Market

DPL series

Demand -(PSD/FIN)

DPL

Building the policy dialogue

Start by providing proof:• Programmatic ESW 2002-06• Creation of solid data and evidence base: graduate tracer survey, microcredit ALMP

tracer survey, VET tracer survey, ICA, CGE model• Capacity-building ‘on the job’: strong client co-operationTake one pilot operation forward to demonstrate results: • Client desire to reform ALMP portfolio and evaluate results• Pilot experience of Business Plan Thesis Competition (TA) for last year students.

Randomized experiment in order to allow rigor.• Results give good counterparts more profileGo ‘reform’ to tackle deeper constraints: • Client has recognized need for action, and ability of Bank to deliver• Employment = presidential top priority• Reform-minded counterpart has profile to champion• Demand for Employment DPL to implement reform actionsCreate momentum with help of partners:• Employment DPLs part of 5 year programmatic operations in coop with EU

ESW (MILES)

TA & pilot

Supply-side

(Edu) IL

Labor Market

DPL series

Demand -(PSD/FIN)

DPL

The Employment DPL series: Timing, instrument and partners

Client demand is very clear:• Client asks for long-term engagement, and for short-term funding• Funding volume commensurate with reform measures and crisis• Prefers DPL over investment loan: country procedures, package• Client explicitly asks WB and EU to partner

The final programmatic package responds: • Engagement over 5 years• First two years: two separate, but linked, World Bank DPLs• Last three years: EU programmatic grant• Matrix of reform measures over five years jointly elaborated with client and EU• Short term: institutional modernization employment services, pilot ALMPs,

regulation of migration intermediators, setting up commission for labor market reform

• Long term: implementing recommendations of the new commission for reform of (i) labor code (hiring, firing, collective wages) and (ii) introduction of unemployment insurance