In spite of solid growth, unemployment in Tunisia remains persistent. With growth levels near 5 percent over the last eight years, Tunisia still has a relatively high unemployment rate at 14.7 percent (which was more than double the 6.4 percent for all middle income countries in 2008). The overall rate masks a striking divergence by age, with younger groups of the labor force being more affected. Unemployment also increasingly affects the better-educated. The overall unemployment rate of higher education graduates, which was below 5 percent in 1994, has increased significantly to 23 percent in 2009. Recent graduates face 46 percent unemployment 18 months after graduation.
Analyses of the legal and institutional framework of the labor market pointed to scope for improvement particularly in the regulation of work contracts, employment services for national and international placements, and open dissemination of labor market information.
The Government of Tunisia has chosen to pursue an approach that reaches across several sectors to tackle employment issues, and this approach is reflected in the Country Partnership Strategy (CPS). The different sectors which play a role in employment, (notably education/skills supply, the private sector/labor demand and the labor market and its institutions and regulations) are each addressed with separate loan instruments.
Accordingly, the World Bank’s US$50-million development policy loan to Tunisia, and its follow-up operation, concentrate on the labor market and its institutions and are designed to assist the government in its efforts to (i) facilitate employment through active labor market policies; (ii) enhance domestic and international mobility of the labor force; and (iii) strengthen the monitoring, evaluation and dissemination of employment data and mainstream evidence-based policy-making.
By implementing significant changes in policies and regulations governing the labor market, the program backed by the government and supported by the International Bank for Reconstruction and Development (IBRD) has so far:
- Restructured the portfolio of active labor market policies;
- Reformed operations and processes of the public employment services to enhance efficiency and effectiveness, and allow for better assistance to the more difficult cases of long-term unemployed.
- Supported the hiring of over 16,000 (vocational-technical) jobseekers in 2009 by the private sector through public-private training initiatives. This is figure is expected to reach 20,000 by 2011.
- Helped create 464 jobs so far based on innovative approaches among graduate students, who have found it difficult to find jobs;
- Modernized laws, regulations, and processes of public employment services for the difficult-to-place, long-term unemployed cases. The effort has managed to find 2,300 jobs so far and plans to place 5,000 by 2012.
A development policy loan (DPL) was prepared by the Bank and approved by its Board on July 1, 2010, for US$50 million as one of two DPL Series. Demand for this Series was the culmination of a a multi-year dialogue anchored in economic studies and reports to analyze Macro-, Investment-, Labor Market-, Education- and Social Protection aspects of employment generation.
The Tunisian Government invited the Bank and the European Commission (EC) to join forces to support these reforms on the basis of a shared vision over a five-year perspective. In addition, the United Nations Development Programme (UNDP) supports the Government’s preparation of several targeted studies that inform actions under the second development policy loan.
Toward the Future
Financial support would be granted first from the World Bank followed by the EC, including the following coordinated instruments over the next five years: (a) reform financing through two IBRD development policy loans in 2010 and 2011 and budget support from 2012 to 2014 through the EC, which will support a common set of reforms to improve the functioning of the labor market, especially young graduates’ school-to-work transition; (b) technical assistance from both the Bank and the EC, which will build the capacity for employment intermediation and labor market analysis; and (c) Bank-facilitated trust funds to pilot innovative forms of employment in social entrepreneurship.
The second of these development policy loans is scheduled for early fiscal year 2012. This loan will underpin important changes in the labor legislation on employment (including new forms of work) and layoffs.