The Demographic Challenge for Economic Policy Makers: Labor Market Developments in a Framework of Sustainable Economic Growth and Financial Sector Development

Abstract

In the years to 2020, the MENA region will have to create something on the order of 55–70 million jobs just to keep pace and bring the level of overall unemployment down to a more palatable norm. If the demographic time bomb cannot be defused, the region will continue to be exposed to social tension and political upheaval. This chapter traces some of the reasons for the region’s chronic unemployment and it sketches a reform agenda based on the requirements associated with financial sector development. The chapter presents an insurance perspective, because insurance, by providing mechanisms for risk transfer, expands the production possibility frontier of economies. Insurance, however, does not exist in a vacuum. Consequently, the chapter’s focus is on the prerequisites for creating an institutional environment that fosters macroeconomic stability, which ultimately also lays a basis for financial market stability. A quick glance at the region reveals that most MENA countries fall short of necessary prerequisites on almost all points.

The author conceived this paper while Chief Economist at a large global insurance group. He is now Economic Counsellor for the International Association of Insurance Supervisors (IAIS). The opinions expressed in this paper are his own; they do not represent those of the IAIS or of any of its member institutions.