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Thursday, 02 April 2020

How Nobel-Prize-winning research is tackling youth unemployment

Bruno Crepon , Thursday 2 Jan 2020
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The 2019 Nobel Prize in Economics was awarded last month to three of the world’s leading economists “for their experimental approach to alleviating poverty.” This experimental approach is gaining popularity in the MENA region, and holds the potential to impact the lives of millions of people.

In 2018, nearly 23 percent of young job seekers in MENA were without a job. Slow economic growth in the region further limits employment opportunities for youth. And a recent report by the International Monetary Fund cites unemployment and lack of economic opportunities as drivers of unrest in several countries in the region.

The experimental approach practiced by this year’s Nobel winners, known as randomized evaluation, breaks down these overlapping issues and sheds light on answers to specific questions. 

And we have lots of questions: Are there enough quality jobs available? Do job seekers’ skills align with the skills employers are looking for? Can employers accurately assess the quality of candidates? Are young people well informed about economic opportunities when making educational choices?

Governments, NGOs, and other practitioners around the world invest lots of resources into labor market programs in an effort to connect people with jobs. Often times we rely on intuition and assume that these programs work.

Randomized evaluations can help us test these assumptions, sometimes with surprising results.

In 2007, I started working with 2019 Nobel laureate Esther Duflo and other colleagues toevaluate the effectiveness of a career counseling program for young, college-educated job seekers in France. The program intended to improve employment rates for those who received the intensive job search counseling.

We found that the program helped participating job seekers find work sooner, but it did not translate into a long-term increase in their employment rates. What’s more, the program actually created worse employment outcomes for those who did not receive the counseling. Particularly in places with more competitive job markets, those who did not get access to the program were worse off—presumably since their peers who got the program were now more able to outcompete them for a limited number of job openings.

This highlights why randomized evaluation is so important: Sometimes policies and programs have unintended effects.

We’re expanding our efforts to bring this experimental approach to address such issues in the MENA region through a new partnership between the American University in Cairo (AUC) and J-PAL, the organization founded by the Nobel laureates. A great deal of this work is focused on the labor markets sector.    

One example of this new research in the region is a study that looks at how young people in Egypt search for jobs. Throughout Egypt, there is high youth unemployment, and yet there are also many unfilled job vacancies. Our research focuses on job fairs. While they are a way to connect young people with many available quality jobs, attendance to job fairs tends to be very low.

There are several potential reasons for this low attendance. It could be because of high transportation costs to travel to the fair. It may also be because youth have misperceptions about the types of jobs available at the fair.

To better understand and address these potential barriers, Adam Osman, Mona Said, and I, in partnership with Egypt’s Micro Small and Medium Enterprise Development Agency (MSMEDA), designed a randomized evaluation. Some youth were given information about what type of job opportunities are available at the job fair, some were given small amounts of cash to offset costs of attending the job fair, and some received both information and cash. We’re now analyzing the results; the government will be able to use this data to inform their decisions about how to make job fairs more effective.

J-PAL and our partners have 18 additional ongoing and completed studies evaluating various types of programs and policies throughout the region that address other important social issues. Our partners, including AUC, Community Jameel, and the Sawiris Foundation, are helping make this work possible. We are working with the Sawiris Foundation on a number of exciting projects, including a study in Upper Egypt on capital assistance to sustain self-employment projects showing large impacts for women. We are also working with Egyptian partners to adapt and test programs proved to be highly efficient elsewhere.

The 2019 Nobel prize recognizes the innovation, importance, and urgency of this work. This is an important start, but there is so much more to learn.

Governments and other organizations in MENA seeking to reduce poverty can look to this important research to inform their decisions about which policies and programs to implement and fund. Of course, policy changes driven by research alone will not completely solve the problem of unemployment and slow economic growth. But evidence from randomized evaluations gives us a rigorous framework to find solutions to some of our most pressing challenges.

Bruno Crepon is co-chair of the Middle East and North Africa Initiative and the global employment program at the Abdul Latif Jameel Poverty Action Lab (J-PAL). He is a professor of economics at France’s National School of Statistics and Economic Administration (ENSAE).

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