For more than three decades, the unemployment rate in Tunisia has been rising steadily, currently hovering around 16% and expected to reach 16.4% in 2024, according to a forecast by the International Monetary Fund, after hovering above 12% since the 1990s, according to an OECD study.
Behind this spiral lie a number of structural factors that make it difficult for labor supply and demand to adjust and prevent the labor market from contracting.
First and foremost, high barriers to business entry and growth, as well as barriers to international trade, lead to low business dynamism and discourage the creation of more and better jobs.
The lack of sufficient job creation, combined with a strong increase in the working-age population, has led to particularly high levels of youth unemployment.
In addition, improved access to education has increased the supply of high-skilled labor, but the corporate sector has mainly created jobs in low-skilled, low-productivity activities.
This has led to high unemployment rates among tertiary graduates and especially among women, who account for two-thirds of tertiary graduates.
However, low-skilled young men and women also suffer from poor job creation. The lack of formal employment opportunities forces many young men without tertiary qualifications to accept low-paid work in the informal sector.
Informal employment accounted for 47% of total employment in 2021 and is concentrated in agriculture, construction, retail trade, transport and hospitality.
To encourage dynamic and innovative firms and create more and better jobs, the OECD recommends reducing regulatory barriers to market entry and entrepreneurship, increasing the international integration of domestic firms and adjusting labor taxes.
Reducing prior approvals for market entry and investment, reducing administrative burdens and simplifying the tax system would open up new opportunities for young and innovative small businesses, encourage the creation of formal jobs and boost productivity growth.
This should be complemented by a reduction in tariff and non-tariff barriers, as high import barriers reduce access to quality inputs and capital goods for local firms that mainly serve the domestic market, and hinder the adoption of new technologies.
In addition, reducing the personal income tax rate for the lowest income bracket and allowing greater flexibility in wage setting for small enterprises would increase formalization.
Low responsiveness to needs
In addition, despite high unemployment rates, many firms say they cannot find workers with the skills they need. This is due to the low quality of education and training systems and their poor responsiveness to the skills needs of the private sector. In addition to technical and job-specific skills, many candidates lack basic soft skills such as oral and written communication, foreign languages, teamwork, problem solving and conflict resolution. To address this, the quality of education and training needs to be improved.
Thirdly, the regional concentration of economic activities, combined with low interregional labor mobility, reduces the potential supply of labor to firms, further contributing to recruitment difficulties. Unemployment rates are consistently higher in the interior than in the coastal governorates, indicating relatively low internal labor mobility.
In order to increase labor mobility and facilitate better labor market matching, it is essential to improve public employment services by allocating more resources to personalized counseling services, training counselors, combining counseling with targeted training support and allowing greater competition from private providers.
Active labor market policies should be better targeted at those most in need and regular evaluation of the impact of programs should be introduced.
To reduce the incentives for university graduates to remain unemployed while waiting for well-paid jobs in the public sector, pay scales in the public sector and public enterprises should be redesigned to reduce the gap with the private sector, and public recruitment processes should be open to all applicants, including experienced private sector workers, the OECD insists.
