The recent guidelines issued in Jordan
regarding jobs and investments that are banned for non-Jordanians simply serve
to increase the number and scope of professions that are closed to
non-Jordanians. The thinking behind such guidelines is to increase job
opportunities for Jordanians given the persistently high unemployment rate.
However, instead, they tend to raise unemployment and informality — or economic
activities that add value to the economy but are not formal registered with
national agencies.
اضافة اعلان
Informality leads to tax evasion, thus
placing the burden on those businesses and persons who are formalized
(tax-paying). It reduces public revenues and leads the government to raise
taxes.
Informality leads to tax evasion, thus placing the burden on those businesses and persons who are formalized (tax-paying). It reduces public revenues and leads the government to raise taxes.
Informality also harms the welfare of
workers, as they have no legal protections since they do not have formal
contracts. Furthermore, it prevents those workers from accessing formal
financing should they wish to become entrepreneurs.
Data on employment, informalityAccording to official data issued by the
Jordan Department of Statistics, the unemployment and economic growth rates in
the fourth quarter of 2022 were 22.9 percent and 2 percent, respectively. Not
only does Jordan suffer from extremely high unemployment rates, but it also
suffers from high unemployment among the youth and the “missing middle”,
referring to semi-skilled workers such as mechanics, plumbers, sweet makers,
etc. The growth rate is nowhere near that promised in the new Economic
Modernization Vision, which was supposed to guide all economic policies toward
higher growth and job creation.
A relatively recent study by the World Bank
showed that the percentage of the non-observed GDP in Jordan ranges between 36
percent and 40 percent, and the proportion of the labor force that does not
contribute to the social security system falls between 45 percent and 67
percent. Another study by the IMF estimated the size of the informal economy in
Jordan at 26 percent.
These guidelines come along, listing professions in which it is common knowledge that there is no government-provided technical training
Note that most studies of informality offer
ranges, as it is not only difficult to define, but also hard to measure. The
problem of reducing the percentage of informality in the economy is a
significant one that needs to be addressed with enlightened policies,
strategies, work plans, and actions.
Pushing employment into the informal sectorBut despite all these facts, these
guidelines come along, listing professions in which it is common knowledge that
there is no government-provided technical training. These professions represent
the missing middle and can benefit from the skills of the Syrian refugees, who
would enable business owners to lower the cost of labor and provide higher
quality products.
It should be noted that the guidelines come
in the wake of a chain of similar instructions by the Ministry of Labor; they
target Syrian refugees as if Jordan had not committed to integrating them into
the economy in the Jordan Compact of 2016. It is as if one government agency is
working against another.
Since Jordanian labor will not be available — or when available will be more expensive — business owners will most likely hire non-Jordanians, but informally
Consequently, since Jordanian labor will
not be available — or when available will be more expensive — business owners
will most likely hire non-Jordanians, but informally. This will cause the
government to lose revenue while increasing the unemployment rate and
phenomenon of informality, as well as maintaining or even exacerbating the
anemic growth rates of the past decade.
The upshot is that policymakers should
always recall that the economy is circular and connected. Before issuing any
policy statement, they should ask: Who is going to be affected by it, and what
is its long-term impact? Otherwise, such instructions, which are devoid of economic
reasoning, will continue to increase unemployment and informality.
Yusuf Mansur is CEO of the Envision Consulting Group and former minister of state for economic affairs.
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