Fostering decent jobs, formalising informal employment and spurring job mobility in MENA countries

Longstanding evidence in Middle East and North Africa (MENA) countries shows a high prevalence of unemployment and informality among a large fraction of population, and at the same time gender disparities in labour force participation and occupational mobility. Why is there such persistent labour‐market segmentation? What is the impact and potential of various formalisation policies? An overview of the informal economy across three middle‐income MENA countries (Egypt, Jordan and Tunisia) is provided with respect to taxonomy, coverage and drivers. Transition matrices and multinomial logistic regressions are applied to longitudinal microdata from Labour‐Market Panel Surveys, focusing on workers' occupational mobility in relation to their previous status, age cohort, gender and other demographics. Persistent segmentation and low occupational mobility in all countries suggest that informal employment is not driven by choice on the labour supply side but by structural constraints on the demand side. Existing formalisation policies based on distinct stick and carrot strategies, and targeting of existing businesses and workers achieve rather modest impacts. One recommendation to supplement policies for decent jobs creation is to promote social and solidarity enterprises and extend microfinance to informal enterprises.