Employment and Unemployment Issues in Algeria


Essay, 2012
28 Pages

Excerpt

CONTENT

SUMMARY

Introduction

1. Economic Context
a. Voluntarism and Economic Development
b. First oil shock, debts and adjustments
c. High energy prices and energy rents

2. Evolution of employment and unemployment in Algeria
a. Supply of labor
b. Demand for labor
c. The intermediation role of ANEM
d. Labor market flexibility

3. Employment policies and related institutions
a. Macroeconomic programs
b. SMEs promotion institutions
c. Evaluating and comparing actions

Final remarks

References

ANNEX 1: Tables and Figures

ANNEX 2: Work at home and unemployment changes in Algeria – IMF data

Authors’ bio

SUMMARY

This short paper concentrates on employment and unemployment issues in Algeria. In a first part, the economic context is presented, from an historical perspective. It underlines that the country’s economy relies excessively on hydrocarbons, which contributes to large distortions and has negative impacts on the creation of stable jobs in productive sectors. The second part analyses the labor supply and demand, and the intermediation role of ANEM, the National Employment Agency. Considering labor markets, there is a lack of reliable statistics, the scope and the quality of data on labor supply and demand must definitely be improved. In particular, there is a strong need for a better assessment of the importance of the informal sector, including so-called work at home. Available statistics underline the vulnerability of young generations and women. The role of ANEM is important; however, its performances could still be improved. The third part overviews the roles and impacts of development programs and key-institutions involved in job creation. Here also, improvements are needed. In addition, there is a need for better data and adequate methodology to assess the performance of these institutions.

Introduction

Following the 1986 oil-shock characterized by the collapse of energy prices on world markets, Algeria was confronted with a sharp terms-of-trade deterioration, large trade deficits and a debt crisis. That situation led to drastic adjustments under IMF supervision, a costly process which contributed to very high levels of unemployment, the collapse of living standards, widespread poverty and growing insecurity in the 1990s – a period named Algeria’s “dark decade” (or “décennie noire” in French).

Thanks to much higher energy prices, the situation improved considerably after 2000. External debts have been eliminated and Algeria presently enjoys fast growing international reserves, amounting to about US$ 200 billion at the beginning of 2012. Such good financial conditions allow the government to spend more money on ambitious development plans, mainly to build new infrastructures and raise social welfare.

Despite improvements, Algeria is still confronted with significant social and economic challenges. The economy relies too much on hydrocarbons and the country could be characterized by the so-called “Dutch disease”, the business environment is not seen as conducive, youth unemployment remains quite important, incomes and wealth inequalities seem to be growing, corruption is perceived as very high by domestic and international communities (see for instance Transparency International ratings), governance must be improved.

This paper addresses selected employment and unemployment issues in Algeria. In the first part, the economic context is briefly presented, taking into account the major changes that took place since the country gained independence in 1962. The second part underlines the main features of the supply and demand for labor, including the role of the national employment agency responsible for intermediation on the labor market – the ANEM or “Agence Nationale de l’Emploi”. Other agencies, policies and measures related to jobs creation (mainly with small businesses) are presented in the third part. Some tentative recommendations are proposed in a last section. Figures and tables are in the Annexes.

1. Economic Context

a. Voluntarism and Economic Development

The central role of planning. After 132 years of French domination and a costly liberation war (1954-1962) in terms of human suffering and loss of lives, Algeria finally became a sovereign state in 1962.[1] Considering social and economic development per se, before independence, Algeria was subordinated to the needs of the colonial power – France. The prospects for industrialization were limited and the majority of the Algerian population was de facto maintained in extreme poverty and ignorance – with significant levels of underemployment and unemployment – within a system of discrimination.

In 1962, development needs were huge: an entire population must have access to education, health cares and be housed adequately. An “urgency plan” was first adopted in 1962 to develop the labor-intensive textile industry, which should help create thousands of new jobs and provide minimum incomes to the people.

A multiannual development plan was adopted in 1968. Following the Soviet command economy model characterized by central planning and the direct involvement of the state in all spheres of economic activities, Algerian leaders decided to promote a growth and development strategy based on ambitious investment plans and large national companies financed by the revenues of oil and gas exports.

“Industrializing industries”. The President of Algeria Houari Boumediene insisted on “rapid, massive and comprehensive” industrialization. In addition to Soviet influence, the key-concepts that supported that strategy were also based on the work of the French economist Gérard Destanne de Bernis from Grenoble University; he was a strong supporter of the independence of French colonies and developed the idea of “industrializing industries” (“industries industrialisantes”) or industries that are expected to promote other activities with the production of intermediates and final goods, for consumption and investment (Boudjenah, 2002, page 65).[2] From a technical perspective, Nobel Prize winner Leontieff’s input-output tables may allow the identification of forward and backward linkages among industries and help identify the best ones for fast GDP growth.

Considering economic sectors or industries, three priorities were identified:

- Investing heavily in steel and petrochemicals industries because they can rely on the abundant domestic natural resources (iron ore, oil and gas),
- Developing mechanical industries (that can process further steel outputs),
- Imports substitution, in particular for consumption goods.

That strategy required the nationalization of key-sectors and the creation of large companies that will become national monopolies, fully isolated from international competition. In 1969, 49 state-owned companies controlled most of the industrial outputs. The largest company was (and still is) the SONATRACH (the National Company for Research, Production, Processing and Commercialization of Oil and Gas or “Société Nationale pour la Recherche, la Production, la Transformation et la Commercialisation des Hydrocarbures”). SONATRACH was created in 1963; it actually represents more than one third of the country GDP, it is one of the largest companies in Africa.

Considering the 1960s international context, Algeria’s development strategy was not an exception. Protectionism and import-substitution industrialization (with regional integration among developing nations) were seen as essential by the Argentinian economist Raul Prebisch, the former head of the United Nations Economic Commission for Latin America (better known by its acronym – “CEPAL”), who became the first Secretary General of UNCTAD (1964-1969); he was also one of the Third World fathers of the “structuralist school” and “dependency theory” in the field of development economics.

b. First oil shock, debts and adjustments

1970s euphoria. The oil shock of 1973/74 generated enormous export receipts that permitted to increase substantially the number of investment projects, and acquire modern equipment and fully equipped new plants, or “turnkey factories”. During the second four-year plan of 1974-1978, more than 500 medium size enterprises were created, which reinforced and diversified the economic structure of the country.

Limits of a policy. The new development strategy seemed very promising and was even praised in international circles. To some extent, Algeria became a model for economic and social development. However, overall, the industry was lacking competent management and a qualified labor force, new equipment were not fully, efficiently and properly used, productivity and returns were very low, maintenance was rather poor, products were not competitive on international markets.

The restructuring of public enterprises started during the 1980s. There were three major objectives:

- Equipment must be amortized,
- Companies must be made profitable, and
- All loans to companies must be repaid.

The impact of these measures was mitigated because of the excess of economic centralism, a reflection of the mono-party political system. The changes were far too slow and there was no real debate in the country.

[...]


[1] According to scholars, the two first decades of French colonization led to a collapse of the domestic population, from 4 million in 1830 to 2.7 million twenty years after, a loss of more than 30% – genocide-like figures. It will take more than 80 years for France to control all Algerian territories. Thus, the Touareg tribes of the Southern part of Sahara will be defeated after WWI only.

[2] Destanne de Bernis was also an innovative follower of another French economist, François Perroux, who developed original views in development economics, giving importance to history, structures and institutions.

Excerpt out of 28 pages

Details

Title
Employment and Unemployment Issues in Algeria
Authors
Year
2012
Pages
28
Catalog Number
V203741
ISBN (eBook)
9783656344247
ISBN (Book)
9783656344827
File size
568 KB
Language
English
Tags
employment, unemployment, issues, algeria
Quote paper
Daniel Linotte (Author)Khaled Menna (Author), 2012, Employment and Unemployment Issues in Algeria, Munich, GRIN Verlag, https://www.grin.com/document/203741

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