Jordan's Structural Unemployment Problem

The GPRG Economics Program is thrilled to share the release of our paper: "Jordan's Structural Unemployment Problem: Realigning Incentives and Improving Employment-matching," a collaborative effort between Global Policy Research Group (GPRG) and Jordan Strategy Forum.

This publication addresses the pressing economic challenge facing Jordan - a well-educated workforce coupled with soaring unemployment rates, particularly among the youth.

Our in-depth analysis uncovers a significant underlying issue: a strong preference among young Jordanians for public sector employment. This inclination has led to an educational focus that often does not align with the evolving demands of the job market, resulting in skill mismatches and a high rate of unemployment or underemployment among highly educated individuals. Such a trend not only impacts Jordan's economic growth but also its social stability.

To understand and quantify the impact of various institutional and economic factors on unemployment, we employed a Vector Autoregressive (VAR) model in our study. This innovative methodology, featuring the use of Cumulative Impulse Response Functions (CIRFs), provides a nuanced understanding of how these factors collectively influence the labor market dynamics in Jordan.

The paper highlights several key areas:

1. The Trend Towards Public Sector Jobs: An exploration of this preference and its implications for the labor market.

2. Impact of Historical Policies: How previous policy decisions have contributed to the current state of skill mismatches and unemployment.

3. Empirical Analysis: Advanced modeling to understand the multifaceted influences on Jordan’s unemployment rates.

4. Institutional Factors: Investigating how these factors differ across labor groups and influence their career and educational decisions.

In response to our findings, we put forward a comprehensive set of policy recommendations aimed at realigning educational paths with market demands, improving public search-and-match institutions, and reforming public sector hiring practices.

You can find the full version of the paper above.