Economy And Jobs Essays

Given his calm and reasoned academic demeanor, it is easy to miss just how provocative Erik Brynjolfsson’s contention really is. ­Brynjolfsson, a professor at the MIT Sloan School of Management, and his collaborator and coauthor Andrew McAfee have been arguing for the last year and a half that impressive advances in computer technology—from improved industrial robotics to automated translation services—are largely behind the sluggish employment growth of the last 10 to 15 years. Even more ominous for workers, the MIT academics foresee dismal prospects for many types of jobs as these powerful new technologies are increasingly adopted not only in manufacturing, clerical, and retail work but in professions such as law, financial services, education, and medicine.

That robots, automation, and software can replace people might seem obvious to anyone who’s worked in automotive manufacturing or as a travel agent. But Brynjolfsson and McAfee’s claim is more troubling and controversial. They believe that rapid technological change has been destroying jobs faster than it is creating them, contributing to the stagnation of median income and the growth of inequality in the United States. And, they suspect, something similar is happening in other technologically advanced countries.

Perhaps the most damning piece of evidence, according to Brynjolfsson, is a chart that only an economist could love. In economics, productivity—the amount of economic value created for a given unit of input, such as an hour of labor—is a crucial indicator of growth and wealth creation. It is a measure of progress. On the chart Brynjolfsson likes to show, separate lines represent productivity and total employment in the United States. For years after World War II, the two lines closely tracked each other, with increases in jobs corresponding to increases in productivity. The pattern is clear: as businesses generated more value from their workers, the country as a whole became richer, which fueled more economic activity and created even more jobs. Then, beginning in 2000, the lines diverge; productivity continues to rise robustly, but employment suddenly wilts. By 2011, a significant gap appears between the two lines, showing economic growth with no parallel increase in job creation. Brynjolfsson and McAfee call it the “great decoupling.” And Brynjolfsson says he is confident that technology is behind both the healthy growth in productivity and the weak growth in jobs.

It’s a startling assertion because it threatens the faith that many economists place in technological progress. Brynjolfsson and McAfee still believe that technology boosts productivity and makes societies wealthier, but they think that it can also have a dark side: technological progress is eliminating the need for many types of jobs and leaving the typical worker worse off than before. ­Brynjolfsson can point to a second chart indicating that median income is failing to rise even as the gross domestic product soars. “It’s the great paradox of our era,” he says. “Productivity is at record levels, innovation has never been faster, and yet at the same time, we have a falling median income and we have fewer jobs. People are falling behind because technology is advancing so fast and our skills and organizations aren’t keeping up.”

Brynjolfsson and McAfee are not Luddites. Indeed, they are sometimes accused of being too optimistic about the extent and speed of recent digital advances. Brynjolfsson says they began writing Race Against the Machine, the 2011 book in which they laid out much of their argument, because they wanted to explain the economic benefits of these new technologies (Brynjolfsson spent much of the 1990s sniffing out evidence that information technology was boosting rates of productivity). But it became clear to them that the same technologies making many jobs safer, easier, and more productive were also reducing the demand for many types of human workers.

Anecdotal evidence that digital technologies threaten jobs is, of course, everywhere. Robots and advanced automation have been common in many types of manufacturing for decades. In the United States and China, the world’s manufacturing powerhouses, fewer people work in manufacturing today than in 1997, thanks at least in part to automation. Modern automotive plants, many of which were transformed by industrial robotics in the 1980s, routinely use machines that autonomously weld and paint body parts—tasks that were once handled by humans. Most recently, industrial robots like Rethink Robotics’ Baxter (see “The Blue-Collar Robot,” May/June 2013), more flexible and far cheaper than their predecessors, have been introduced to perform simple jobs for small manufacturers in a variety of sectors. The website of a Silicon Valley startup called Industrial Perception features a video of the robot it has designed for use in warehouses picking up and throwing boxes like a bored elephant. And such sensations as Google’s driverless car suggest what automation might be able to accomplish someday soon.

A less dramatic change, but one with a potentially far larger impact on employment, is taking place in clerical work and professional services. Technologies like the Web, artificial intelligence, big data, and improved analytics—all made possible by the ever increasing availability of cheap computing power and storage capacity—are automating many routine tasks. Countless traditional white-collar jobs, such as many in the post office and in customer service, have disappeared. W. Brian Arthur, a visiting researcher at the Xerox Palo Alto Research Center’s intelligence systems lab and a former economics professor at Stanford University, calls it the “autonomous economy.” It’s far more subtle than the idea of robots and automation doing human jobs, he says: it involves “digital processes talking to other digital processes and creating new processes,” enabling us to do many things with fewer people and making yet other human jobs obsolete.

It is this onslaught of digital processes, says Arthur, that primarily explains how productivity has grown without a significant increase in human labor. And, he says, “digital versions of human intelligence” are increasingly replacing even those jobs once thought to require people. “It will change every profession in ways we have barely seen yet,” he warns.

McAfee, associate director of the MIT Center for Digital Business at the Sloan School of Management, speaks rapidly and with a certain awe as he describes advances such as Google’s driverless car. Still, despite his obvious enthusiasm for the technologies, he doesn’t see the recently vanished jobs coming back. The pressure on employment and the resulting inequality will only get worse, he suggests, as digital technologies—fueled with “enough computing power, data, and geeks”—continue their exponential advances over the next several decades. “I would like to be wrong,” he says, “but when all these science-fiction technologies are deployed, what will we need all the people for?”

New Economy?

But are these new technologies really responsible for a decade of lackluster job growth? Many labor economists say the data are, at best, far from conclusive. Several other plausible explanations, including events related to global trade and the financial crises of the early and late 2000s, could account for the relative slowness of job creation since the turn of the century. “No one really knows,” says Richard Freeman, a labor economist at Harvard University. That’s because it’s very difficult to “extricate” the effects of technology from other macroeconomic effects, he says. But he’s skeptical that technology would change a wide range of business sectors fast enough to explain recent job numbers.

Employment trends have polarized the workforce and hollowed out the middle class.

David Autor, an economist at MIT who has extensively studied the connections between jobs and technology, also doubts that technology could account for such an abrupt change in total employment. “There was a great sag in employment beginning in 2000. Something did change,” he says. “But no one knows the cause.” Moreover, he doubts that productivity has, in fact, risen robustly in the United States in the past decade (economists can disagree about that statistic because there are different ways of measuring and weighing economic inputs and outputs). If he’s right, it raises the possibility that poor job growth could be simply a result of a sluggish economy. The sudden slowdown in job creation “is a big puzzle,” he says, “but there’s not a lot of evidence it’s linked to computers.”

To be sure, Autor says, computer technologies are changing the types of jobs available, and those changes “are not always for the good.” At least since the 1980s, he says, computers have increasingly taken over such tasks as bookkeeping, clerical work, and repetitive production jobs in manufacturing—all of which typically provided middle-class pay. At the same time, higher-paying jobs requiring creativity and problem-solving skills, often aided by computers, have proliferated. So have low-skill jobs: demand has increased for restaurant workers, janitors, home health aides, and others doing service work that is nearly impossible to automate. The result, says Autor, has been a “polarization” of the workforce and a “hollowing out” of the middle class—something that has been happening in numerous industrialized countries for the last several decades. But “that is very different from saying technology is affecting the total number of jobs,” he adds. “Jobs can change a lot without there being huge changes in employment rates.”

What’s more, even if today’s digital technologies are holding down job creation, history suggests that it is most likely a temporary, albeit painful, shock; as workers adjust their skills and entrepreneurs create opportunities based on the new technologies, the number of jobs will rebound. That, at least, has always been the pattern. The question, then, is whether today’s computing technologies will be different, creating long-term involuntary unemployment.

At least since the Industrial Revolution began in the 1700s, improvements in technology have changed the nature of work and destroyed some types of jobs in the process. In 1900, 41 percent of Americans worked in agriculture; by 2000, it was only 2 percent. Likewise, the proportion of Americans employed in manufacturing has dropped from 30 percent in the post–World War II years to around 10 percent today—partly because of increasing automation, especially during the 1980s.

While such changes can be painful for workers whose skills no longer match the needs of employers, Lawrence Katz, a Harvard economist, says that no historical pattern shows these shifts leading to a net decrease in jobs over an extended period. Katz has done extensive research on how technological advances have affected jobs over the last few centuries—describing, for example, how highly skilled artisans in the mid-19th century were displaced by lower-skilled workers in factories. While it can take decades for workers to acquire the expertise needed for new types of employment, he says, “we never have run out of jobs. There is no long-term trend of eliminating work for people. Over the long term, employment rates are fairly stable. People have always been able to create new jobs. People come up with new things to do.”

Still, Katz doesn’t dismiss the notion that there is something different about today’s digital technologies—something that could affect an even broader range of work. The question, he says, is whether economic history will serve as a useful guide. Will the job disruptions caused by technology be temporary as the workforce adapts, or will we see a science-fiction scenario in which automated processes and robots with superhuman skills take over a broad swath of human tasks? Though Katz expects the historical pattern to hold, it is “genuinely a question,” he says. “If technology disrupts enough, who knows what will happen?”

Dr. Watson

To get some insight into Katz’s question, it is worth looking at how today’s most advanced technologies are being deployed in industry. Though these technologies have undoubtedly taken over some human jobs, finding evidence of workers being displaced by machines on a large scale is not all that easy. One reason it is difficult to pinpoint the net impact on jobs is that automation is often used to make human workers more efficient, not necessarily to replace them. Rising productivity means businesses can do the same work with fewer employees, but it can also enable the businesses to expand production with their existing workers, and even to enter new markets.

Take the bright-orange Kiva robot, a boon to fledgling e-commerce companies. Created and sold by Kiva Systems, a startup that was founded in 2002 and bought by Amazon for $775 million in 2012, the robots are designed to scurry across large warehouses, fetching racks of ordered goods and delivering the products to humans who package the orders. In Kiva’s large demonstration warehouse and assembly facility at its headquarters outside Boston, fleets of robots move about with seemingly endless energy: some newly assembled machines perform tests to prove they’re ready to be shipped to customers around the world, while others wait to demonstrate to a visitor how they can almost instantly respond to an electronic order and bring the desired product to a worker’s station.

A warehouse equipped with Kiva robots can handle up to four times as many orders as a similar unautomated warehouse, where workers might spend as much as 70 percent of their time walking about to retrieve goods. (Coincidentally or not, Amazon bought Kiva soon after a press report revealed that workers at one of the retailer’s giant warehouses often walked more than 10 miles a day.)

Despite the labor-saving potential of the robots, Mick Mountz, Kiva’s founder and CEO, says he doubts the machines have put many people out of work or will do so in the future. For one thing, he says, most of Kiva’s customers are e-commerce retailers, some of them growing so rapidly they can’t hire people fast enough. By making distribution operations cheaper and more efficient, the robotic technology has helped many of these retailers survive and even expand. Before founding Kiva, Mountz worked at Webvan, an online grocery delivery company that was one of the 1990s dot-com era’s most infamous flameouts. He likes to show the numbers demonstrating that Webvan was doomed from the start; a $100 order cost the company $120 to ship. Mountz’s point is clear: something as mundane as the cost of materials handling can consign a new business to an early death. Automation can solve that problem.

Meanwhile, Kiva itself is hiring. Orange balloons—the same color as the robots—hover over multiple cubicles in its sprawling office, signaling that the occupants arrived within the last month. Most of these new employees are software engineers: while the robots are the company’s poster boys, its lesser-known innovations lie in the complex algorithms that guide the robots’ movements and determine where in the warehouse products are stored. These algorithms help make the system adaptable. It can learn, for example, that a certain product is seldom ordered, so it should be stored in a remote area.

Though advances like these suggest how some aspects of work could be subject to automation, they also illustrate that humans still excel at certain tasks—for example, packaging various items together. Many of the traditional problems in robotics—such as how to teach a machine to recognize an object as, say, a chair—remain largely intractable and are especially difficult to solve when the robots are free to move about a relatively unstructured environment like a factory or office.

Techniques using vast amounts of computational power have gone a long way toward helping robots understand their surroundings, but John Leonard, a professor of engineering at MIT and a member of its Computer Science and Artificial Intelligence Laboratory (CSAIL), says many familiar difficulties remain. “Part of me sees accelerating progress; the other part of me sees the same old problems,” he says. “I see how hard it is to do anything with robots. The big challenge is uncertainty.” In other words, people are still far better at dealing with changes in their environment and reacting to unexpected events.

For that reason, Leonard says, it is easier to see how robots could work with humans than on their own in many applications. “People and robots working together can happen much more quickly than robots simply replacing humans,” he says. “That’s not going to happen in my lifetime at a massive scale. The semiautonomous taxi will still have a driver.”

One of the friendlier, more flexible robots meant to work with humans is Rethink’s Baxter. The creation of Rodney Brooks, the company’s founder, Baxter needs minimal training to perform simple tasks like picking up objects and moving them to a box. It’s meant for use in relatively small manufacturing facilities where conventional industrial robots would cost too much and pose too much danger to workers. The idea, says Brooks, is to have the robots take care of dull, repetitive jobs that no one wants to do.

It’s hard not to instantly like Baxter, in part because it seems so eager to please. The “eyebrows” on its display rise quizzically when it’s puzzled; its arms submissively and gently retreat when bumped. Asked about the claim that such advanced industrial robots could eliminate jobs, Brooks answers simply that he doesn’t see it that way. Robots, he says, can be to factory workers as electric drills are to construction workers: “It makes them more productive and efficient, but it doesn’t take jobs.”

The machines created at Kiva and Rethink have been cleverly designed and built to work with people, taking over the tasks that the humans often don’t want to do or aren’t especially good at. They are specifically designed to enhance these workers’ productivity. And it’s hard to see how even these increasingly sophisticated robots will replace humans in most manufacturing and industrial jobs anytime soon. But clerical and some professional jobs could be more vulnerable. That’s because the marriage of artificial intelligence and big data is beginning to give machines a more humanlike ability to reason and to solve many new types of problems.

Even if the economy is only going through a transition, it is an extremely painful one for many.

In the tony northern suburbs of New York City, IBM Research is pushing super-smart computing into the realms of such professions as medicine, finance, and customer service. IBM’s efforts have resulted in Watson, a computer system best known for beating human champions on the game show Jeopardy! in 2011. That version of Watson now sits in a corner of a large data center at the research facility in Yorktown Heights, marked with a glowing plaque commemorating its glory days. Meanwhile, researchers there are already testing new generations of Watson in medicine, where the technology could help physicians diagnose diseases like cancer, evaluate patients, and prescribe treatments.

IBM likes to call it cognitive computing. Essentially, Watson uses artificial-­intelligence techniques, advanced natural-language processing and analytics, and massive amounts of data drawn from sources specific to a given application (in the case of health care, that means medical journals, textbooks, and information collected from the physicians or hospitals using the system). Thanks to these innovative techniques and huge amounts of computing power, it can quickly come up with “advice”—for example, the most recent and relevant information to guide a doctor’s diagnosis and treatment decisions.

Despite the system’s remarkable ability to make sense of all that data, it’s still early days for Dr. Watson. While it has rudimentary abilities to “learn” from specific patterns and evaluate different possibilities, it is far from having the type of judgment and intuition a physician often needs. But IBM has also announced it will begin selling Watson’s services to customer-support call centers, which rarely require human judgment that’s quite so sophisticated. IBM says companies will rent an updated version of Watson for use as a “customer service agent” that responds to questions from consumers; it has already signed on several banks. Automation is nothing new in call centers, of course, but Watson’s improved capacity for natural-language processing and its ability to tap into a large amount of data suggest that this system could speak plainly with callers, offering them specific advice on even technical and complex questions. It’s easy to see it replacing many human holdouts in its new field.

Digital Losers

The contention that automation and digital technologies are partly responsible for today’s lack of jobs has obviously touched a raw nerve for many worried about their own employment. But this is only one consequence of what ­Brynjolfsson and McAfee see as a broader trend. The rapid acceleration of technological progress, they say, has greatly widened the gap between economic winners and losers—the income inequalities that many economists have worried about for decades. Digital technologies tend to favor “superstars,” they point out. For example, someone who creates a computer program to automate tax preparation might earn millions or billions of dollars while eliminating the need for countless accountants.

New technologies are “encroaching into human skills in a way that is completely unprecedented,” McAfee says, and many middle-class jobs are right in the bull’s-eye; even relatively high-skill work in education, medicine, and law is affected. “The middle seems to be going away,” he adds. “The top and bottom are clearly getting farther apart.” While technology might be only one factor, says McAfee, it has been an “underappreciated” one, and it is likely to become increasingly significant.

Not everyone agrees with Brynjolfsson and McAfee’s conclusions—particularly the contention that the impact of recent technological change could be different from anything seen before. But it’s hard to ignore their warning that technology is widening the income gap between the tech-savvy and everyone else. And even if the economy is only going through a transition similar to those it’s endured before, it is an extremely painful one for many workers, and that will have to be addressed somehow. Harvard’s Katz has shown that the United States prospered in the early 1900s in part because secondary education became accessible to many people at a time when employment in agriculture was drying up. The result, at least through the 1980s, was an increase in educated workers who found jobs in the industrial sectors, boosting incomes and reducing inequality. Katz’s lesson: painful long-term consequences for the labor force do not follow inevitably from technological changes.

Brynjolfsson himself says he’s not ready to conclude that economic progress and employment have diverged for good. “I don’t know whether we can recover, but I hope we can,” he says. But that, he suggests, will depend on recognizing the problem and taking steps such as investing more in the training and education of workers.

“We were lucky and steadily rising productivity raised all boats for much of the 20th century,” he says. “Many people, especially economists, jumped to the conclusion that was just the way the world worked. I used to say that if we took care of productivity, everything else would take care of itself; it was the single most important economic statistic. But that’s no longer true.” He adds, “It’s one of the dirty secrets of economics: technology progress does grow the economy and create wealth, but there is no economic law that says everyone will benefit.” In other words, in the race against the machine, some are likely to win while many others lose.

David RotmanEditor

As the editor of MIT Technology Review, I spend much of my time thinking about the types of stories and journalism that will be most valuable to our readers. What do curious, well-informed readers need to know about emerging technologies? As a… More writer, I am particularly interested these days in the intersection of chemistry, materials science, energy, manufacturing, and economics.

Credit

Noma Bar (Illustration); Data from Bureau of Labor Statistics (Productivity, Output, GDP Per Capita); International Federation of Robotics; CIA World Factbook (GDP by Sector); Bureau of Labor Statistics (Job Growth, Manufacturing Employment); D. Autor and D. Dorn, U.S. Census, American Community Survey, and Department of Labor (Change in Employment and Wages by Skill, Routine Jobs); Bureau of Labor Statistics (Productivity, Output, GDP Per Capita); International Federation of Robotics; CIA World Factbook (GDP by Sector)

Amr Hamid leaned forward. “I want social insurance and a pension,” he told me. “I want that when I need medical treatment, so I don’t have to pay a lot of money in a private hospital.” For nearly an hour, we have been discussing the difficult challenges facing young Egyptians in the labor market. Hamid has a job, but he is unhappy working as a teacher in a private school. Hamid, who is twenty-nine years old, holds a Bachelor’s degree in sociology from Ain Shams University. He is paid a paltry eight Egyptian pounds (about one dollar) per class session. He receives no social insurance. There is not even a signed contract with the school administration. Prior to this job, he worked as a store assistant in a small gift shop, but quit due to the low pay. His dream job is to work in government. After all, his late father had a government job and the family continues to receive a pension. A job in government has everything that Hamid currently lacks: social insurance, fixed work hours, a fixed salary, paid vacation days, health insurance, and job security. To Hamid, none of these are a luxury; it is what he needs to be able to marry and start a family.

Ahmed Saleh, who is twenty-eight, currently does not work.  He left his position at a building firm after being transferred from an office job to a construction site. His entire monthly pay would have gone toward the extra transportation cost in getting to the new location.  He was angry that he was moved without additional compensation to cover the expense. He was also upset because the owner had repeatedly promised to give him social insurance but never came through. Like Hamid, his solution is to get a job in the government. His retired father, who once held a government position, has been asking former colleagues if there is a job for Ahmed.

Hamid and Saleh are among the millions of young Egyptians who face a constrained labor market. Their cases illustrate two of the main problems: a high unemployment rate that is much higher than the global average, and an increasing deterioration in the quality of jobs, employment informality and a lack of access to social security. In the economic stagnation that has followed the January 25 revolution, limited employment opportunities for the young generation pose a serious challenge to Egypt’s social cohesion and democratic transition.

Two factors have consistently contributed to the poor employment prospects of young Egyptians. On the supply side, the youth population continues to grow due to a demographic bulge. Egypt currently has its largest cohort of youth in its history and equipping this large group with the skills necessary to compete in a globalized knowledge economy is a formidable task within an overly burdened and under-funded education system. On the labor demand side, the slow pace of job creation in the formal economy, and persistent low productivity and underemployment within the informal economy are limiting young people’s options.

The work experiences of Hamid and Saleh speak to what the World Bank describes as a prevalence of “bad” jobs in Egypt and throughout the Middle East region. These jobs offer low income and no benefits in the form of pension schemes, medical insurance, or potential for growth. Most of these low-productivity jobs are within the informal economy, where wage earners have no work contract and where employers and self-employed workers have no work permits and are mostly not registered. This means there are many methodological hurdles in measuring the size of the informal economy in a country. A 2012 report by the International Labor Organization (ILO) notes that 51.2 percent of non-agricultural employment in Egypt falls within the informal economy. And within the working population, a recent survey by the Population Council and the Information and Decision Support Center showed that work informality is more prevalent among working youth. The report showed that only 15.7 percent of young workers have a signed contract with their employers, and only 14.8 percent have social insurance benefits.

Despite the gravity of the job quality issue among working youth, it barely surfaces in policy discussions about youth employment in Egypt. Unemployment, specifically youth unemployment, has always been the focus of policies directed at youth. Policy makers have long been concerned about unemployment among educated youth due to the political volatility of the group. However, the failure to realize the gravity of job quality is proving to be very costly. It is worth keeping in mind that Mohammed Bouazizi, the young Tunisian who helped ignite the Arab Spring revolts with his act of self-immolation in the Tunisian town of Sidi Bouzid, was not jobless (as initially reported by some news media), but a frustrated street vendor protesting the injustices facing the sea of young workers in the realm of the informal economy.

This is not to downplay the problem of youth unemployment in Egypt. While the ILO reported a global youth unemployment rate of 13 percent in 2012, Egypt’s central statistical bureau, the Central Agency for Public Mobilization and Statistics (CAPMAS), reported a 39 percent rate among Egyptians aged twenty to twenty-four in December 2012. That figure is up from 33 percent in September 2011. This means more than one in three young people are unable to find work. Unemployment rates are known to be highest at the point leaving school, and young women are at a particular disadvantage in Egypt’s labor market. The unemployment rate among female youth in the same age bracket is 60.5 percent (compared to 32 percent among male youth). While most unemployed male youth do eventually find work, most young women move out of the labor force in conjunction with marriage and childbearing. Unemployment is actually highest among educated youth, particularly graduates of vocational secondary education.

Unemployment figures, although high, do not really capture the full problem of joblessness in Egypt. Unemployment is not the only criteria for the concept of joblessness. Following international definitions, the unemployed are those who not working for at least one hour per week and are available for work and actively searching for a job. Statistics on joblessness include the unemployed along with people who have given up searching for a job due to limited opportunities. This group of “discouraged” youth is particularly prevalent in rural areas in Egypt. These young people are not included in unemployment statistics because they have given up looking for work upon realizing that the search does not lead to employment. The Human Development Report for Egypt in 2010 estimated that the joblessness rate reached 60 percent in 2009 among young Egyptians between the ages of fifteen and twenty-nine. So, two-thirds of these young people are neither in school nor employed. Unemployment statistics, while significant, only refer to a subgroup within this large group of jobless youth. If Saleh, who had to leave his job, continued to search for work, he would be considered among the unemployed. If he loses hope to find a job, which is a strong possibility, given the state of the economy, he is jobless.

Social Security, Fixed Salaries, and Job Security

Nevertheless, “bad” jobs also have a long-lasting negative impact. While unemployment is a problem that primarily affects young and first-time entrants to the labor market, low productivity jobs within the informal economy are a long-term problem with serious impact on Egyptians’ access to social security and other work benefits. If unemployment is a problem that affects youth currently seeking employment, work informality and low job quality are issues that also affect their future. In the current legal framework in Egypt, informality eliminates the potential for young people’s access social security in old age and at times of an inability to work due to unemployment, illness, or pregnancy. Informality also eliminates the possibility of access to health care insurance in Egypt.

For Hamid, Saleh, and many other young Egyptians I have interviewed, the government remains the dream employer. This has been repeatedly shown in polls and youth-focused studies. The government has everything they lack in their private-sector jobs: social security, fixed salaries, job security, paid leave, and in some cases a better pay structure. For young women, a government job has additional benefits. It would primarily provide paid maternity leave, a right denied by most private sector firms. It would also provide the opportunity of unpaid leave for child rearing, with the option of returning to work when she is ready. This is a benefit that cannot be obtained through a private sector firm. For women, there are some intangible benefits to a government/public sector job.  As one young woman working in the private sector described it, a government job is where “no one owns you,” referring to the relatively democratized relations of power in government job. Another unique feature appreciated by women in a government job relates to workplaces being more populated, compared to the predominantly small-size firms of the private sector. A populated work space has a reputation for reducing the risk of sexual harassment.

Yet, the government cannot and should not continue to provide jobs for the large cohorts of fresh graduates year after year. The government’s program of guaranteed employment for graduates, dating from the mid-1960s, has been slowed with the introduction of structural adjustment policies in the early 1990s. A bloated government body with surplus workers is not sustainable, and hence could not survive. As jobs in government and the public sector are now rare to find, young people speak of favoritism and cronyism as the sole means to secure these positions.

Effectively addressing youth employment requires an unwavering political commitment and concerted and sustained government efforts. These efforts hinge on a strong partnership with the private sector, civil society, and the youth themselves as key stakeholders in the process. International experience points to three areas of focus that should be central in addressing youth employment issues. First, there is a need for an economic environment conducive for job creation and sustained growth to meet the growing need for jobs. Second, interventions are needed to enhance the skill level of youth, to smooth their transition into the labor market and encourage entrepreneurship. Third, measures must be pursued to extend social security to workers within the informal economy, who constitute the majority of working youth.

Toward a Youth-Based Economic Policy

Job creation is central to any meaningful discussion of youth employment issues. While the government can no longer be the main employer of youth, it is the role of the government to enable an environment in which the private sector can develop to its full potential and play a role in generating employment and decent jobs. There is little consensus on what would trigger job creation in a specific economy. Approaches span from a focus on skill specialization to an emphasis on investment in physical capital and infrastructure. The World Economic Forum’s Global Competitiveness Report for 2012 lists a number of pillars for productivity and economic growth. In post-revolution Egypt, a key pillar for economic growth is ensuring economic and political stability and a strong rule of law in the country. A stable institutional and market environment is pivotal to encouraging both domestic and foreign investment to create jobs.

A policy focus on job creation requires mobilizing resources in sectors with high employment potentials such as telecommunications. Recent studies highlight the opportunity of green jobs, such as those in agriculture, water management, recycling and waste management, and renewable energy. However, reports by the ILO on the “green economy” note that the skills required to participate in these markets need cultivating and upgrading.

The second area of policy focus relates to interventions needed to facilitate transition to the labor market are often referred to as active labor market policies. The programs fall within four main categories: providing training for the skills demanded by the labor market; giving search assistance and career counseling for job seekers; promoting entrepreneurship for employment generation; and subsidizing employment programs in the form of public works or temporary guaranteed employment schemes. Many of these have been implemented in Egypt with various degrees of success. The accumulated international experience shows that these programs need to be multifaceted and integrate an array of services in order to have the necessary impact. In skill training, for example, programs that are demand-driven, are connected to employers, and include work-place exposure do increase youth employability by providing them with market-relevant skills and social networks needed to find jobs. There is also a growing focus on “portable” or “soft” skills, which can be used in different jobs and include the ability to read and write, communicate with others, solve problems, and think independently.

Job search assistance and counseling are often described as the most cost-effective active labor market measures for youth employment. Despite this fact, there is little focus on employment services in Egypt. Career development offices are not a common service in public universities in Egypt, and such services are almost nonexistent for youth who do not enter university. Entrepreneurship promotion for youth employment has been one of the most widely implemented active labor market programs in Egypt, primarily through the government’s Social Fund for Development. But entrepreneurship is not a panacea, and young people who are unable to find employment might not be the best entrepreneurs given their limited skills and experience. Research shows that older and more educated entrepreneurs are more likely to be successful.

The third, and least discussed, area of policy focus should address the compromised quality of jobs available to young people. It is baffling that there is such policy neglect of this issue. The fact that most young people are working within the informal economy means that we have a generation who do not contribute to pension schemes and have no access to social security. The national social security scheme has actually suffered from the minimal contributions it receives from (young) workers and the increasing cost of its aging contributors. This alone should be reason enough to point policy intervention in the direction of extending social protection to workers. However, the issue of work informality is rarely addressed in policy circles in Egypt. And when it is addressed, it is often in the context of formalizing the informal to overcome tax evasion and not for the sake of extending social protection to its workers.

Experience in other countries highlights the importance of flexible and simplified contributory social security schemes that take into account the inconsistent income of workers in the informal economy. Progressive contributory schemes allow for government matching of contributions, as in some member countries of the Organization of Economic Cooperation and Development. These programs allow workers to accumulate insurance funds to utilize during times of unemployment, illness, or in old age. Subsidizing the premium for self-employed workers in the informal economy who are unable to pay their contribution has been highlighted by the ILO as a means to extend social protection to the working poor.

Another approach that should be considered in Egypt in response to the limited social security available to working youth is the promotion of micro-insurance schemes provided by cooperatives, unions, non-governmental organizations, and the private sector. These programs have the potential of benefiting workers within the informal economy by protecting insurance policyholders from the financial consequences of various risks, including illness and death. Insurance can be a means through which the workers within the informal economy can amass a lump sum of savings through long-term life insurance policies. An Islamic insurance cooperative system, known as takaful, has grown in a number of Arab and Muslim countries. Because existing insurance models cater to higher income segments of the society, a system that reaches out to a lower-income clientele is needed.

A three-pronged policy approach—focusing on job creation, youth labor market insertion policies, and social security schemes—would place youth employment issues at the heart of Egypt’s economic and social policies. These policies need to take a gendered approach to address the increasing withdrawal of women from the labor market.

Finally, it is important for youth to have a voice in the process of addressing their employment issues. Engagement with youth, particularly those affected by unemployment, joblessness, or bad jobs, is central to a youth-focused policy framework for employment. Fragmentation and limited avenues for advocacy has meant that the youth are absent from policy process. It is unfortunate that angry demonstrations and sometimes violence have been the only means for the youth to be heard.

Ghada Barsoum is an assistant professor in the Department of Public Policy and Administration in the School of Global Affairs and Public Policy at the American University in Cairo.

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