Jordan’s economy might be improving, but youth unemployment remains a pressing challenge.
By Khalid W. Wazani
Every six months, the World Bank publishes the Jordan Economic Monitor. The wide-ranging report provides a snapshot of how the Kingdom’s economy is performing via a large variety of indicators. The latest edition, which was published last month, focuses on the steady recovery of the Jordanian economy following the Arab Spring, falling unemployment, lower fiscal deficit, improvements in the balance of payments’ external trade figures, and the comfortable level of foreign reserves at the central bank.
Macroeconomic indicators are hard to dismiss. They’re usually used as a testimony of the robustness of the economic policies of any government, not only in Jordan, but all over the world. However, focusing on macro-economic indicators alone is insufficient when trying to devise economic development policies that attempt to target the broadest segment of society. In the case of Jordan, this segment comprises the many people on low or middle incomes.
In this context, Jordan’s targeted economic development policies are worth highlighting. The government claimed a breakthrough when the unemployment rate fell despite the presence of almost 150,000 Syrian refugee laborers working in the market, legally or illegally. The International Labor Organization said Jordan has the highest unemployment rate among youth (30 percent), and the shortage in job openings in the public sector (there are only about 10,000 jobs available regularly for every 100,000 new jobseekers in the market). The report was brave enough to say the drop in the unemployment rate from 12.6 percent to 11.9 percent between 2013 and 2014 wasn’t a result of an increase in economic activities, but rather was a result of a drop in the labor force participation rate to 36.4 percent in 2014, compared to 37.1 percent in 2013. Policy makers should pay close heed to these figures, as they show that almost 1 percent of our youth who are supposed to look for jobs are dropping out of the labor market, or out of the actively participating population.
It’s important to ask what’s becoming of these people? It’s clear they are now classified as discouraged workers, and are becoming susceptible to radical ideologies, crime, and drug addiction. So in this context, the drop in unemployment rate in Jordan is an early warning signal, not an achievement for the government to brag about. Actually, this is one of the outcomes of the demand-side policies that the government has been pursuing for the last three years.
These policies have focused on imposing more taxes and lifting subsidies more than improving the supply-side of the economy through encouraging investments and expanding the local market for the current investors, or by encouraging investors from hot spot areas around the region in Syria, Iraq, Libya, Yemen, among others, to move to a safe and stable economy like ours.
If we continue on this path, we could push these young discouraged workers, or disappointed active population, towards three streams of social unrest: drugs, violence, and radicalism. In the same context, some international and local reports said the unemployment rate among Jordanians between the ages of 20 and 24 is around 30 percent, which is the highest percentage in the MENA region and worldwide.
This is another wake-up call for policy makers about the importance of absorbing young people into the labor market. This shouldn’t necessarily mean finding them jobs, but can also involve helping them create their own jobs. The latter means incentivizing startups. But young people need access to finance to create their own jobs instead of looking for jobs. And as the previous edition of the Jordan Economic Monitor report pointed out, the trend in access to finance in Jordan is weak across all firms and sectors.
Nevertheless, the window is still wide open if the government decides to use some of the Gulf grant to create a micro and small enterprise financing fund, with special focus on youth projects in all governorates, not only Amman. Also, special attention should be given to joint initiatives undertaken by young women and men.