Impact of Education, Economic and Social Policies on Jobs

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1 Impact of Education, Economic and Social Policies on Jobs Mohamed Ali Marouani Paris1-Pantheon-Sorbonne University Let s Work Workshop, London 17 September 2015

2 Introduction Good jobs creation depend on economic growth, but also on the existence of adequate education, training, labor market and social security institutions Objective: set a comprehensive framework to assess the impact of various reforms on labor and macroeconomic outcomes What are the interactions between the different reforms? Are the policies implemented coherent and sustainable? Presentation based on various case studies

3 Potential reforms simulated Improving the efficiency of the education and training systems Ensuring the sustainability of the social protection system Reforming the migration policy Skills improvement Impact of minimum wage policies Impact of investment at the macro or sectoral levels

4 The outcomes of the assessment framework Employment and unemployment by skill at a disaggregated level The social security balance Investment and GDP growth The Government budget balance Relevant sectoral variables (employment, wages, labor productivity, investment, etc.)

5 Case studies The MILES Program Tunisia : Marouani (2010) - Innovations: Labor disaggregation by skill, Efficiency wage model for unemployment determination Morocco: Marouani and Robalino (2012) - Innovations: informal sector modeling, social security and education external blocks Lebanon: World Bank (2012a) - Innovations: Age dimension, international outward migration, the over-education issue, foreign and public debts, social security and education internal blocks

6 Malaysia Minimum wages in Malaysia - Innovations: immigration, age and gender dimensions and monopsonistic behavior - See World Bank (2012b) Skills and migration in Malaysia - Innovations: Skills disaggregation, feed-back effect on education performances, endogenous skill accumulation, immigration behavior; econometric estimations of the elasticities of substitution - See Del Carpio et al. (2015); Marouani and Nilsson (2015)

7 Emigration and Employment: Jordan and Tunisia - Innovations: Endogenous remittance rate, migration duration and labor supply - See David and Marouani (2015) Impact of Syrian refugees on the Lebanese economy (World Bank, 2013) Recent case studies Investment and jobs Kazakhstan Lebanon Tunisia Simulate potential labor market impacts of investments across sectors

8 Lessons learnt from the studies on investment and jobs The effect of investments on the number and types of jobs depend on the sectors where they take place High indirect effects for some sectors Some of the large government investment programs tend to favor capital intensive sectors Substitution of labor by capital, but higher labor productivity They mainly generate temporary jobs in construction sectors Potential tradeoffs between quantity of jobs created in the short term and long term goals of raising productivity The effect of investments on jobs is very heterogeneous across various groups among the workforce

9 The methodology A dynamic general equilibrium model linked to external modules General Equilibrium: suitable tool for analyzing interactions, trade-offs and multisectoral issues Dynamics: to capture mainly the impact of demographic changes, education reform and investment policies

10 Different blocks Production, Labor markets, Migration, Human Capital Accumulation, Government revenues and expenses, Income distribution, Consumption, Investment, Market equilibrium conditions, Closure

11 The labor market block X labor categories (education + training) We distinguish labor demand for permanent workers (who pay social security contributions) and for temporary workers (exempted) Wages differentials by skill are estimated using micro-data from a household or labor force survey An endogenous labor supply function An informal sub-sector in each sector (extended Harris-Todaro)

12 Rural-urban migration Decisions regarding international migration We distinguish Government and Private jobs Formal private wages are set according to a wage curve Estimated on the basis of social security time-series Private formal wages increase with government wages and decrease with unemployment

13 The Human Capital Block Dropout and continuation rates calibrated from historical data Levels and fields of study are distinguished Endogenous demand for education based on wage premia. Explicit modeling of the supply of educational services. Vocational/ Academic trade-off.

14 The Immigration Block Dual labor market migrants/ locals. Endogenous total migrant supply according to home country/host country wage differentials. Migrants allocate between sectors according to relative wages. Sectoral demand for migrants according to relative wages.

15 The dynamic framework Sectoral investment varies according to differentiated profitability rates Labor supply by skill is provided by the external human capital accumulation model An external module provides us with the evolution of replacement rates to compute pensions (endogenous wage bill)

16 The data Social Accounting Matrix Labor force survey Household survey Social security series Demographic estimations Enrollment figures Macro data (IMF, World Bank, etc.) Data on migration Investment matrix

17 Education, training, employment promotion and social security reform must be assessed in a comprehensive framework Many trade-offs. Decisions depend on the relevant variables at a given time An ex ante assessment of investment policies is crucial to anticipate the effects on jobs in different sectors and for various categories The specifications of the model must be modified to take into account local contexts

18 References DAVID, A. and M.A. MAROUANI, (2015), Migration and Employment Interactions in a Crisis Context : the case of Tunisia, Economics of Transition, Volume 23, Issue 3, pages DEL CARPIO, X., M.A. MAROUANI et al., (2015), Foreign Workers in Malaysia: Labor Market and Firm Level Analysis, Malaysian Journal of Economic Studies, Vol 52 No 1, [2015], pages MAROUANI, M.A., and B. NILSSON, (2015), The Labor Market Effects of Skill-biased Technological Change in Malaysia, chap. 8 in : Internal Migration, Urbanization and Poverty in Asia, Jayanthakumaran, Verma, Wan and Wilson eds., Springer, forthcoming.

19 MAROUANI, M.A. and D. ROBALINO, (2012), Assessing Interactions among education, social insurance and labor market policies in Morocco, Applied Economics, volume 44, N 24, pp MAROUANI, M.A., (2010), More jobs for University Graduates: some policy Options for Tunisia, Applied Economics Letters, , volume 17, N 10, pp World Bank, (2013), Lebanon: Economic and Social Impact of the Syrian Conflict. World Bank, (2012a), Good Jobs Needed in Lebanon:The Role of Macro, Investment, Education, Labor and Social Protection Policies. World Bank, (2012b), Optimal Design for a Minimum Wage Policy in Malaysia.