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Abu Dhabi, UAESunday 24 March 2019

Regional governments need to match social security with the Fourth Industrial Revolution

The future of work will usher in new types of jobs, leaving low-skilled, unemployed youth further behind

The Panorama Command Centre and Artificial Intelligence space at the Adnoc headquarter in Abu Dhabi. Khushnum Bhandari / The National
The Panorama Command Centre and Artificial Intelligence space at the Adnoc headquarter in Abu Dhabi. Khushnum Bhandari / The National

The future of work will bring both opportunities and uncertainties across the globe but not all workers, nor countries, will benefit equally.

In the Middle East and North Africa, with its surging, highly-skilled and digitally-literate youth population, opportunities for jobs in data science, artificial intelligence and digital technologies are becoming increasingly available. Established industries in the region such as oil and gas, transportation and aviation can act as centres of technology diffusion and innovation to attain higher standards of living.

Despite the increasing level of skills and education among the region's youth, unemployment remains firm around 30 per cent. Due to a stall in public spending that has historically been the engine for growth and employment, the labour market is now unable to absorb the sheer number of university graduates. While it is true that the Fourth Industrial Revolution will usher in new types of jobs, where technologically-skilled young people can leapfrog older workers, low-skilled and, particularly unemployed youth, will fall further behind.

The internet and hand-held devices are ubiquitous throughout the region. Technology platforms across the Middle East connect jobseekers to employers, provide vocational training and host start-up incubators. Although such innovative uses exist, devices are predominantly used for interaction on social media, and not to launch enterprises. To fully benefit, governments need to stimulate conditions for successful initiatives to multiply and make the necessary investments in people.

The 2019 World Development Report considered how we can better protect people and workers in the new economy. While the report highlighted that technology brings opportunity – creates jobs, increases productivity and delivers effective public services – it also said it changes the kind of skills that employers seek. Short-term work and informality are more common. The report analysed these changes and considered how governments can best respond by investing in human capital and enhancing social protection.

Social protection systems are important government tools in a changing jobs landscape, and the existing systems do not match the future of work. These systems were in large part developed for "jobs for life", with social insurance contributions mandatory within the payroll structure. The traditional structures are being challenged by informality and seasonal work contracts. In Mena, employment informality is particularly high for youth and low-skilled workers. Between 2008-2016, informal sector output amounted to around one-quarter of official gross domestic product.

The World Development Report indicated three points on how governments can best respond to these challenges.

First, addressing informality as the primary bottleneck. Most workers, especially the poor, are engaged in informal sector activities with little or no access to social protection. Given the endemic nature of the challenge and slow progress to tackle it, most people would be better-off with a benefits system that does not depend on their work situation. Overcoming the challenges of informality involves a balance of mixed policies that take into consideration the regional context.

Second, social assistance that ensures equity in societies, could be enhanced to include larger amounts of informal sector workers. In developed countries, there are a range of options from a means-tested guaranteed minimum income programme, to universal basic income.

An intermediate option could be a negative income tax that has a relatively high threshold and gradual withdrawal of benefits, or a smaller guaranteed minimum income supplemented with other programmes, such as universal childcare allowances and social pensions.

However, as discussions highlight, the feasibility of implementing such mechanisms at scale in the Middle East appears limited at present. This is not due to fiscal constraints alone, but state capacity concerns, neither of which are trivial. Before testing universal transfers, administrative building blocks for cash delivery and targeting the correct population need to be in place to minimise exclusion. In addition, there has to a clear social protection strategy on how different schemes can be consolidated.

Third, the notion of "progressive universalism", borrowed from the healthcare sector, may help guide a strategy that benefit the poor first. The Middle East can define a core basket of social security benefits relying on a mix of its present programmes. Once guaranteed basic protections are in place, people could keep upgrading their social security with various progressively-subsidised schemes, with contributory social insurance, and also an array of voluntary options offered by the state and markets.

Investing in human capital, particularly early education, to develop higher cognitive and socio-behavioural skills that match the changing nature of work, as well as enhancing social protection with complementary reforms in the labour market, are key avenues that will help governments benefit from the Fourth Industrial Revolution.

If managed well, Mena's highly-educated and young workforce can broaden their talent and support their nations to diversify economic activities, reduce dependence on traditional industries such as oil and gas and increase stability by insulating against external economic shocks. Working together, we can shape the future of social protection and adjust to the changing nature of jobs in ways that ensure broad gains for societies in general, and the poorest in particular.

Mahmoud Mohieldin is a senior vice president and Michal Rutkowski is a senior director and head of global practice, social protection and jobs at the World Bank Group

Updated: March 12, 2019 04:32 PM

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