Investing in Youth for the Development of Human Capital

April 4, 2017
Investing in Youth for the Development of Human Capital
Sura Salaam
Sura Salaam Development & Capacity Building Researcher

The Carnegie Endowment for International Peace recently published a report titled Arab World Horizons: Arab Fractures: Citizens, States, and Social Contract. The Report examines the widespread lack of human development in the MENA region and attempts to identify key areas where governments can take action. Investing in human capital is an imperative for the region in order to create stronger economic growth that will in turn support security and stability, hopefully leading to sustainable and prosperous futures.  At the core of developing human capital in the region is taking effective measures that support the youth, including young women, in education and the economy. The Report, however, finds that many governments in the region view youth as a security threat rather than as an asset and resource for long term economic growth and stability. Governments in the region need to develop a model that focuses on youth empowerment – enhancing capabilities and enabling opportunities that encourage innovation and support entrepreneurship. Three key factors need to be addressed when discussing the development of human capital for the MENA region: quality of education, women empowerment, and unemployment, in particular, the lack of employment prospects for youth. In an effort to bring about regional stability in the Middle East, Arab countries need to appreciate the value of investing in building human capital. Today, the MENA region is witnessing a youth bulge, which should be viewed as a resource that is instrumental to building human capital.

Initiatives in the economic and education sectors directly address the critical issues of unemployment and demographic change and, in turn, correlate to overall stability and sustainability. However, building human capital is not the endgame, but a step towards stabilizing countries in the region setting a path to sustainable growth and development. In order to maintain stability and create any possibilities for future sustainability, governments and political institutions need to adopt new policies and create jobs in order to accommodate the youth as an opportunity for development. We have previously discussed the value of human capital and identified the foundation of building human capital rests in the quality of education to ensure that skills development and training is producing employable graduates that will support economic growth. Additionally, with rapidly changing technologies, it is critical to educate youth for high-value jobs based on innovation and creativity. Furthermore, countries need to construct knowledge-based economies instead of relying upon dependency based economies where either the national economy is based on a single resource, or the society becomes dependent upon the government for jobs. An empowered youth, through knowledge, will not depreciate and will contribute to bringing about security and stability.

Unfortunately, in the MENA region today, many of the societies are highly fragmented on social lines through sectarianism, ethnic divide and segregation. Education is imperative for social stability that will in turn feed into economic stability. Governments in the Arab region need to focus on enhancing such a resource to its youth so that perceptions of a secure and stable state are formed as well as satisfaction with their standard of living. Additionally, education fosters greater appreciation and understanding to cultural differences, creates a feeling of belonging and social inclusion and builds a community based on mutual values. The value of education for human capital can be seen in conflict zones, where makeshift schools are built in order to provide youth basic educational skills as a method of building for the future. Education provides knowledge on life skills, health, and offers healing and rehabilitation for children in conflict zones. It also empowers children with perceptions of normalcy, confidence, protection and security. It is a resource that can be used to restore peace and fuel prosperities of hope, which in turn leads to a more stable society.

Raising the standards of education is a prerequisite for ensuring youth have the necessary skills for private-sector jobs and entrepreneurship, thus, addressing the problem of unemployment in the region. The public sector in the Arab world is extremely inflated, and there is a need for economic diversification. For greater stability, governments need to build a base for private sector-led economic growth which requires creating a competitive economy that is open and innovative and, develop and initiate campaigns for youth involvement. If not addressed, countries risk seeing a ‘lost generation’ or marginalized communities at work and society, which leads to greater instability.  A particular concern for the MENA region is the position of women in marginalization. Arab societies often place limits on women, for example in the workplace, on what they can achieve and are excluded from high-level positions. This gender discrimination underutilizes abilities and capabilities of women and created an over-dependency of women in society, which in turn contributes to economic stagnation, and thus, instability.

Women empowerment in the workforce is a necessary step to overcome the challenges of poverty and development, and for promoting greater sustainability and stability through economic growth. This requires governments to promote the contribution women make to the workforce. This can be done through a range of measures such as public campaigns that challenge social stereotypes, legislation to bring about greater opportunities, and by governments leading on this by allocating greater roles and responsibilities to women.  Only then can women begin to be recognized as equal members of society, and respectively, their confidence is raised, leading to greater involvement in economic and political affairs. This shift also helps alleviate poverty in developing countries in the Middle East, since women represent most of the world’s poor population, according to the UN Women Annual Report 2015-2016, and consequently leads to economic growth. The Arab Human Development Report 2016 brings to light the gap between the Arab region and the rest of the world when it comes to women in the workforce. The report states, female participation is at 18% compared to 39% globally. Due to Arab cultural norms, gender bias is still heavily embedded in the economy, society and political institutions. This type of discrimination affects stability at the societal level, but is also damaging security at the state level as this bias is causing economic stagnation.

In order for Arab countries to prosper, there is a need for economic growth that is achieved through economic stability. Economic stability often refers to the absence of financial or economic crises and corruption. It includes a role for stable, predictable economic growth and inflation rates that are controlled. It is also the ability to absorb shocks without causing significant disruption. To individuals, economic stability is the provision of employment at salaries commensurate with the cost of living.

Economic initiatives that target youth need to be implemented throughout the Arab region. Governments need to empower them by promoting the entrepreneurial sector and technology innovation strategies and providing them the tools to establish their own businesses. This will help move away from the public-sector dependency and increase job creation. The initiative, Circular 331, executed by the Central Bank BDL, is an example of Lebanon’s effort to inject funds and equity investments into start up businesses to promote entrepreneurship.  There is also the UAE’s “100 Mentors” project where young people are directly connected with private and public sector leaders through a range of activities to help inspire entrepreneurship.   Initiatives like this help build confidence, hope and potential for youth to create a future in their countries, and provide more individual security and stability, hence, fostering sustainability at the individual level. At the state level, countries will expand on their pool of innovation and creativity and be able to be globally competitive in the market.

An underlying cause of economic instability is the problem of youth unemployment in the Middle East. Across the region, there is a significant rise in youth unemployment that is mainly due to socio-economic deficiencies. This is weighing heavily on the security and stability of Arab countries; tipping the scale to a dangerous level. The escalation of war and political violence has further disintegrated the system. Youth are keener to join the public sector due to the higher salaries, attractive pensions and less working hours than any private sector business offers. This has created a youth bulge that is unemployed and straining governments and institutions. In 2014, it was reported by the World Bank that unemployment among youth in the region exceeded twice the global average at 29.73% compared to the rest of the world at 13.99%, and is estimated to reach 30% by 2019.[1]These high levels of unemployment create a heavily-dependent youth; not enough labor in the workforce; and, less creativity and innovation that will drive economies in the region. A youth bulge also results in the extensive demands on social services, contributing to social unrest fuelled by frustrations of unemployment that affects levels of stability and threatens security of the state. Despite the problems a youth bulge creates, there are advantages of having ayoung population that governments need to leverage. A youth bulge can be seen as an economically-productive population that will be the driving force of economic gains.

Governments should address the problem of a youth bulge by investing in them as a means to development and sustainability. The solution is two-fold: firstly, enhance labor markets with nationalization strategies to promote economic growth through the private sector; and, create jobs that incentivize youth to join the workforce. Secondly, implement an educational system that is up to par with global standards and practices. However, the solution is hindered by the following challenges that plague the region: political uncertainty and terrorist attacks that are causing economic stagnation; reinforced security and reforms due to violence and war which further slows down the economic development process; and poor physical infrastructure (roads, networks, phone etc.) effect productivity and economic opportunities to those living in rural areas, as access to markets becomes limited. In addition, access to capital and investment needs are high in the region, and a shortage of foreign capital is making the situation worse, coupled with the vast displacement of people from Iraq and Syria.

The adaptation to technological and cultural transformations is not just a regional problem. Societies worldwide are facing these types of social pressures. This is more augmented in the Middle East because of the additional economic challenges coupled with conflict and sectarianism. Human development is essential to create vibrant and prosperous societies able to cope with the fast-paced technological/innovative push that is driving countries worldwide. Investment in human capital is extremely valuable as it directly correlates to levels of state and individual economic and social stability and security. Placing a focus on education, women empowerment and economic diversification are mechanisms to countering instability in the Arab region.

The Arab region needs to develop a model that focuses on youth empowerment – enhancing capabilities and enabling opportunities that encourage innovation and support entrepreneurship. Economic development, like education, are prerequisites in building human capital and stability, however, other systemic issues such as weak institutions and inadequate governments affect the balance of the stability and need to be explored. The Arab Human Development Report states that, “by 2020, the region needs to create 60 million new jobs to absorb the number of workforce entrants and stabilize youth unemployment”[2].This shows that building human capital is not the endgame, but a step towards stabilizing countries in the region and for ensuring sustainable futures. His Excellency, Sheikh Mohammed bin Zayed Crown Prince of Abu Dhabi, told the participants (all students) at the recent Mohamed bin Zayed Majlis for Future Generations, “It is you, not the three million barrels of oil per day, who are the source of hope of this country, its future and real weapon. “In order to maintain stability and create possibilities for future sustainability, governments and political institutions need to adopt new policies that focus on youth as a necessary benefit and not as a threat.

[1]UNDP, Arab Human Development Report 2016: Youth and the Prospects for Human Development in a Changing Reality (New York, 2016), p. 81.

[2]Arab Human Development Report 2016, p. 78.