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Unlocking the Employment Potential in the Middle East and North Africa
BOX 7.2
Path to Reforming Labor Markets in MENA The Arab Republic of Egypt and Morocco recently joined Jordan and Tunisia in introducing important reforms to labor market regulations. The reforms grew out of protracted processes that began in the 1990s—even earlier in some cases—and involved delicate negotiations among government, business, and labor. The laws seek to usher in a new era of labor relations, which embodies a balance between greater flexibility in hiring, firing, and wage setting for businesses and enhanced recognition of trade union rights for workers. The inclusion of all stakeholders was considered critical to advancing the reform agenda. Yet, despite the long incubation and consultations, the new codes do not necessarily enjoy widespread acceptance among all affected constituencies. Some business owners have expressed reservations. Moroccan textile factory owners fear that the shorter workweek and higher minimum wage will make them uncompetitive in international markets. Entrepreneurs there and in Tunisia have also complained that mandated severance payments are higher than before, although it is now easier to lay off permanent workers and business owners are increasingly using temporary workers to avoid severance payments. In Egypt, where enforcement of workers’ protections has been particularly weak outside the public sector, business owners fear the threat of legal strikes while their de facto hiring and firing prerogatives have not really improved. Many workers are also unenthusiastic. Egypt, Jordan, and Tunisia, with a history of government interference in union leadership selection, permit only one union confederation. Union leaders must both satisfy governments and achieve legitimacy among the membership base, although corporatism has restricted the ability of workers to remove unresponsive leaders. Jordan’s union confederation leaders, seeing little advantage to workers in the proposed code revisions, walked out of the negotiations, and the new law was enacted over their objections. In Egypt and Tunisia, senior unionists endorsed the new codes, but dissidents charged them with failing to consult local leaders and the rank and file. Even in Morocco, the only country with a competitive union environment, some workers have complained that unionists are co-opted by owners, affiliated party leaders, or the government. Further steps are needed to promote acceptance of the letter and the spirit of the new laws. Restrictions on trade union activity need to be relaxed as part of broad efforts to encourage political reform. Top-down management of unions should be reversed unless it reflects workers’ preferences rather than governments’ efforts at control. Empowering unions may slow labor market reforms, as has happened in some Latin American countries, but it is the only way to ensure that workers take ownership of reforms. Source: Posusney 2003.