New World Bank report: Social protection policies are key to addressing labor market exclusion in the Middle East and North Africa

WASHINGTON, June 7, 2023— Exclusion from the labor market is at the root of poverty and vulnerability in the Middle East and North Africa (MENA), says a new World Bank report, proposing a series of actions that governments in the region can take to make social protection systems more inclusive and efficient

COVID-19 and the Russian invasion of Ukraine have had, and continue to have, a devastating impact on living standards. But even before these crises, most MENA countries were already struggling with poverty and vulnerability, as job opportunities in the region are limited, particularly for women and youth, and most workers are engaged in low-productivity informal jobs. While creating more and better jobs requires a vibrant, competitive and dynamic private sector, the report, Built to include: reimagining social protection systems in the Middle East and North Africaargues that social protection policies can play a crucial role in reducing exclusion from the labor market by facilitating access to productive employment, protecting workers and providing a safety net for those left behind.

However, according to the report, social protection policies in MENA countries are not fulfilling that role. For example, most of the poor do not receive income support and most workers are not covered by pensions or unemployment insurance. And social protection policies are not prepared to face the challenges derived from the aging of the population, as well as the impacts of advanced technology and climate change.

“MENA countries need to build inclusive and adaptable social protection systems to respond to the immediate crises they face today, while reducing labor market exclusion in the future in a fiscally responsible manner.,” saying Ferid Belhaj, World Bank Vice President for the Middle East and North Africa. “The World Bank is committed to working with countries in the region as they undertake reforms to expand and increase the level of protection for people in need while ensuring financial sustainability..”

The report identifies reform priorities to make social protection systems in MENA more inclusive and efficient. The first order of priority is to build a shock-responsive system to provide income support and opportunity to the poor, something some MENA countries are already making good progress on. The next priority should be to expand social insurance coverage among vulnerable informal workers. This should be accompanied by increased support to improve the productivity of informal workers and increase the employability of youth and women, along with removing barriers to employment for women. This will require more resources, but not at any price. In a tight fiscal environment, MENA countries must address the reform of widespread energy and food subsidies. They also need to redesign their pension systems to support active ageing, including by removing incentives for early retirement.

“While there is no single reform path, there are some guiding principles that can be followed to move towards a more inclusive social protection system.,” saying Cristóbal Ridao-Cano, lead economist and lead author of the report. “Many countries in the Middle East and North Africa have already started their reform processes and offer examples of what the reform sequence might look like and how to gain political support for reform..”

According to the report, evidence from countries in the region and around the world that have already embarked on a reform path suggests ways to build political support. Actions that countries can take include setting a vision and ensuring clear and frequent communication to explain why decisions have been made and how people can best benefit from social protection programmes. In addition to packaging and sequencing the reforms, it will also be key to ensure political leadership and ownership.