Economic Growth, Employment and Poverty in the Middle East and North Africa

This paper1 provides an assessment of economic growth, employment and
poverty reduction in the Arab MENA region. Considering the high rate of
unemployment (especially the youth unemployment) and poverty in most
countries in the region employment and poverty impacts of growth are of
particular concern to policy makers. In the short run for employment growth
to be faster than output growth the employment elasticity of growth has to be
greater than unity. This is an important condition that is rarely satisfied across
all sectors and countries in the region, for good analytical and empirical
reasons. For example growth in high productivity sectors will not boost total
employment nor reduce poverty substantially in the short run, yet growth in
high productivity sectors is essential for accumulation and long term growth.
Moreover, if the poor were to benefit from an employment policy they should
have been integrated in the sectors where jobs are created – the so called
integrability condition of the ‘employment-poverty nexus. Public work projects
have been one of the main short term instruments of job creation for the poor
in the region, but there the long term impact on poverty has varied and
depended crucially on their sustainability, their contribution to improving local
infrastructure and economies. These mixed results in no way invalidate the
importance of economic growth for unemployment and poverty reduction, but
brings into focus the importance of going beyond short term policies for job
creation and poverty reduction as well as complementing such policies with
social policies both for poverty alleviation and improving skill levels of the
work force.