Hiring and Separation Rates Before and after the Arab Spring in the Tunisian Labour Market

• Published date: 01 June 2017
• Author: Ilham Haouas,Kazi Sohag,Muhammad Shahbaz,Almas Heshmati
• DOI: http://doi.org/10.1111/saje.12157
• Date: 01 June 2017

HIRING AND SEPARATION RATES BEFORE AND AFTER

THE ARAB SPRING IN THE TUNISIAN LABOUR MARKET

ALMAS HESHMATI*, ILHAM HAOUAS

†

,KAZI SOHAG

‡

AND MUHAMMAD SHAHBAZ

§

Abstract

We seek to explore the hiring and separation rates in Tunisia before and after the Arab Spring

based on quarterly business level data for 503 firms over the span of January 2007 to December

2012. Furthermore, we examine whether employers are willing to dismiss older workers to trigger

an effective increase in mobility that will open new opportunities for the youth community. We

build our analysis upon six main empirical models to study employment decisions reflected by

major indicators such as the number of hiring, number of separations, total employment effects,

male-female ratio, age cohorts, labour mobility and net employment. The results show that the

Arab Spring has created structural unemployment trends. In addition, we note that the 2008

global turmoil has fostered the firing level of employment. Our conclusions also indicate that the

response of Tunisia’s government to high unemployment rates caused by the financial meltdown

in 2008 and the events in 2011 was not sufficient to remove the attached lingering effects that

still distress the country’s labour market. In addition, our findings emphasize the significant chal-

lenges faced by Tunisian youth that could be mitigated by efficient policy actions to incentivize

training and development geared towards the private sector.

JEL Classification: E24, J23, J63

Keywords: Hiring, separation, labour mobility, net-employment, informal sector, Tunisia, Arab

Spring, global financial crisis

1. INTRODUCTION

The Arab Spring spread rapidly throughout the Middle East and North Africa (MENA)

in 2011, and although it might seem like mere social unrest to general observers, aca-

demics and policymakers, it was a significant response to structural issues in the MENA

labour market. The Arab Spring rocked Tunisia in 2011; it not only symbolized the

power of ordinary people but also shed light on the country’s structural economic prob-

lems. The Arab Spring has introduced an economic necessity and justice problem to the

policy agenda, namely, the failure to sustain inclusive growth, with the educated Tunisian

labour force facing increasingly longer waiting periods for public sector jobs. According

to the Arab governments, the public sector has been considered the main instrument of

economic and social development, especially after the Tunisian independence. However,

due to the rapid increase of the population and educated labour force, it has been diffi-

cult to sustain good working conditions and solid employment growth in the area. In

* Corresponding author: Professor, Department of Economics, Sogang University, Seoul,

South Korea. E-mail: heshmati@sogang.ac.kr

†

College of Business Administration, Abu Dhabi University

‡

Faculty Social Science and Humanities, The National University of Malaysia

§

Energy Research Centre, COMSATS Institute of Information Technology

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C2017 Economic Society of South Africa. doi: 10.1111/saje.12157

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of Economics

this context, the educated work force is confronted with limited access to employment in

the public sector, and the state has failed to honor the employment guarantee (African

Development Bank, 2012).

This article takes a closer look at Tunisia by analyzing the impact of the Arab Spring

on hiring and separation rates ex post the severe recession in 2011, which pushed the

country’s unemployment rate near 17%. The real GDP growth rate picked up to about

3.6% in 2012, but there is still pressure on decreasing exports; in addition, the country

continues to face high unemployment rates. The government responded with a higher

wage bill, job creation programs, and rising subsidies to manage increasing social

demands, but the trade-off of higher government spending swelled Tunisia’s fiscal deficit

in 2012. Higher international prices pushed the overall inflation rate above 6%, which

only added to the problem, as noted by the IMF Mission Chief for Tunisia. In this con-

text, Chiraz and Frioui (2014) highlighted the impact of inflation on the purchasing

power and investment behavior of the Tunisian consumer.

A previously conducted related study found that before the Arab Spring, the financial

crisis had a negative impact on the country’s economy, causing a GDP decrease from

6.3% in 2007 to 4.5% in 2008 (Haouas et al., 2012a). Additionally, labour market char-

acteristics such as gender and age make certain people more vulnerable to recession

because of obstacles they face in the labour market (Tzannatos, 2010; Brosius, 2011).

Hassine (2015) assessed the levels and determinants of economic inequality in 12 Arab

countries using harmonized household survey micro-data. The study sought to identify

the sources of the moderate inequality levels between selected states and described differ-

ences in household endowments, such as demographic composition, human capital, and

community characteristics, as major drivers. We relied on the research conducted by

Malik and Awadallah (2013) for a more recent perspective on the economics of the Arab

Spring. The authors stated that although the Arab world is becoming younger and better

educated, it is still lacking employment opportunities. Hearn (2014) studied the political,

institutional, and firm governance determinants of various liquidity measures, and empir-

ical evidence from North Africa and the Arab Spring showed that the greatest changes in

political risks associated with aggregate liquidity are democratic accountability, the mili-

tary in politics and law and order.

The results of this article, which are based on updated data, increase the pressure on

the state to more actively address the existing structural problems. Our research credits

the point and highlights that age is an important factor in the hiring and separation deci-

sion; however, Tunisian youths gain entry into the labour market mainly via small firms.

Employment mobility

1

is still greater within smaller firms, but youths have a better

chance of sustaining net employment within larger firms, which suggests opportunities

to mitigate labour constraints early by tailoring education to the needs of the private sec-

tor rather than to those of the public sector. Addressing the concerns of the Arab Spring

is a great challenge. The Middle East Monitor (2012) indicated a need for greater reform

in states such as Egypt, Tunisia and Syria, driven by economic necessity. We believe this

should not come at a high cost, but the voice of many scholars and frustrated job seekers

should be enough to place focus on research. Although our article is one of many studies

1

Labour mobility is measured by the total amount of labour hired and fired over a particular

time.

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C2017 Economic Society of South Africa.