Unemployment Benefits in Algeria: Conditions, Official Gazette, Rates, and Their Relationship with Oil Prices
Oil is one of the significant strategic resources in the global economy, serving as the primary source of energy and an essential financial resource for producing countries. However, the depletable nature of oil and its susceptibility to various economic, political, and even climatic determinants impose numerous challenges on producing countries. These challenges relate to economic diversification and making the local economy reliant on a diverse range of resources.
For Algeria, oil holds a significant place in the economic sector, particularly in exports and foreign currency financing, ensuring a substantial portion of public budget revenues. The decline in oil prices affects all aspects of the Algerian economy. A drop in international oil prices leads to a decrease in the necessary financial resources for funding developmental plans and public economic and social programs. Consequently, while Algeria’s efforts have been focused on protecting and providing employment, recurring oil shocks in the oil market will undermine these efforts, posing a significant obstacle to the state’s economic and social goals.
1- Theoretical Study of Oil Markets and Price Determinants
Oil has received considerable global attention, despite the discovery of many alternative sources. Oil has maintained its importance due to its ease of extraction and diverse uses. The exploitation of oil allows for the production of many different products used as fuel for transportation, heating, and chemical products directed towards industrial and agricultural production. As a result, the oil industry has become one of the factors influencing economic, political, and social balances. The significance of the oil market lies in determining the economic growth factors for both exporting and importing countries.
2- The Importance of the Oil Sector in the Structure of the Algerian Economy
The exploitation of hydrocarbons in Algeria has developed since independence, with the state allocating significant budgets to developing exploration, maintenance of pipelines, and preservation of wells. This approach allows for increasing confirmed reserves of crude oil and natural gas, improving the conditions for their exploitation, developing explored and unexploited fields, and enhancing recovery rates in exploited fields. Algeria’s oil production capacities have grown due to increased global demand for energy and the availability of modern exploration tools and an increase in exploration activities in Algeria.
Oil has thus contributed to supporting economic growth, expanding the inter-sectoral linkages within the national economy, securing the required foreign currency revenues, covering developmental economic plans, supporting national savings, and covering increasing exports.
Exploration and production activities for oil and natural gas in Algeria advanced after opening up to partnerships with foreign investors in 1986. This move led to an increase in the number of explorations and the level of confirmed reserves following a series of reforms initiated by the state, focusing on developing and modernizing the management system of the hydrocarbons sector.
The deep reforms in this sector began with the hydrocarbons law on July 28, followed by the law issued on April 28, 2005. The state developed procedures and measures aimed at increasing hydrocarbon sources, the level of exploration for new oil and gas fields, improving exploitation conditions, enhancing productivity in old fields, developing infrastructure for refining and liquefying natural gas, and improving methods and regulations for transporting oil and natural gas. Algeria’s early accession to global oil organizations increased its negotiation capacities regarding production and prices.
Algeria maintained a stable level of confirmed oil reserves, estimated at 2.12 billion barrels by the end of the year, representing 0.97% of global confirmed reserves, 1.30% of OPEC’s total reserves in 2019, and 1.27% of the total reserves of the Organization of Arab Petroleum Exporting Countries. This was despite the discovery of 13 new oil fields in 2019.
Algeria’s oil reserves are concentrated in the Hassi Messaoud region, which holds 52% of the total reserves. However, Algeria’s share of global oil production has declined, with daily production dropping from 1,157,000 barrels in 2015 to 954,000 barrels in 2019, representing 0.91% of global oil production, 1.83% of OPEC production, and 0.44% of the total production of the Organization of Arab Petroleum Exporting Countries. This decline followed the Algeria Agreement during the OPEC meeting, where it was agreed to reduce production to influence price levels.
3- Impact of Declining Oil Prices on Unemployment in Algeria
Unemployment is one of the priorities of economic and social reform in Algeria. The unemployment problem tops the list of development programs proposed by the Algerian government, with substantial financial allocations and various tax and non-tax exemptions to encourage private companies to employ workers. Unemployment in Algeria has several characteristics: it is prevalent in rural areas, concentrated among university graduates with higher degrees, and characterized by hidden unemployment, where surplus workers and employees in departments and institutions do not contribute added value to their work, with layoffs being a strategy to reduce additional labor costs. Unemployment rates in Algeria are significantly higher among males compared to females.
4- Policies to Combat Unemployment in Algeria
The state has made significant efforts to address unemployment through various programs and the establishment of numerous specialized agencies for employing the unemployed and university graduates. Among these programs are:
- Pre-Employment Contracts Program
Established in 1998, this program targets university graduates and young people with higher technical certificates, offering temporary job opportunities until they secure permanent employment. This program has allowed for the employment of a considerable number of university graduates, enabling them to acquire valuable professional experience. - The Professional Integration Assistance Mechanism
Created by Executive Decree No. 08/126 dated April 19, 2008, this mechanism aims to promote the professional integration of young job seekers, particularly through programs of training, employment, and recruitment. - The Social Network Program
This program aims to employ unemployed youth who lack academic qualifications, benefiting municipalities and provinces by hiring young people for various services. - The Social Development Agency
This program targets the vulnerable segments of society, particularly those with chronic diseases. It is affiliated with the Ministry of Social Security and has benefited a large portion of society. - Public Works of General Utility and Labor-Intensive Public Works
Established in 1996, this program focuses on areas with widespread unemployment, primarily involving local community projects such as guarding, security, and sanitation. - The National Agency for Supporting Youth Employment (ANSEJ)
Established by Executive Decree No. 96-296 dated September 8, 1996, ANSEJ helps unemployed youth create small businesses with limited capital to integrate them into the labor market. The agency provides consultation and project support, offers loans to unemployed youth, and grants various other privileges. It encourages all activities and measures aimed at promoting youth employment, particularly through training, employment, and automatic recruitment programs. - The National Agency for Investment Development
Established by the national reforms initiated by the state to encourage investment, the agency (ANDI) was founded in 2001 by Executive Decree No. 01/282 dated September 24, 2001. It accompanies national and foreign investment projects in performing their tasks and assists youth in matters related to tax exemptions and incentives. - The National Employment Agency
This public institution was created by Executive Decree No. 06/77 dated February 18, 2006, with a special management structure enjoying legal personality and financial independence. It is under the Ministry of Labor, Employment, and Social Security. The agency’s tasks include organizing and understanding the national employment market and labor force, developing a labor system that allows for accurate monitoring of employment fluctuations in Algeria, and conducting all necessary studies. It also acts as an intermediary between job seekers and employers, implementing state policies related to work and employment plans. - The National Unemployment Insurance Fund (CNAC)
Established by Executive Decree No. 94-188 dated July 6, 1994, CNAC provides support and assistance for employment in coordination with public employment services and the municipal and provincial administrations to reintegrate legally eligible unemployment benefit recipients into active life. - Unemployment Benefit 2022
The unemployment benefit announced by President Abdelmadjid Tebboune is set at 13,000 Algerian dinars (approximately 82 euros) and will be disbursed starting from March, along with health coverage. This allowance will be included in the 2022 budget, with the unemployment rate in Algeria around 15%. The minimum wage in Algeria is 20,000 dinars (125 euros), making this benefit more than half of the minimum wage.
5- Relationship Between Oil Prices and Unemployment Levels in Algeria
The period covering the announced five-year plan (2015-2019) included public investments totaling 22.100 billion dinars, equivalent to 280 billion dollars. The state focused on ambitious developmental programs including housing, education, training, and public health projects, and connecting homes to water, electricity, and gas networks. This was aimed at supporting non-hydrocarbon growth, creating wealth, increasing gross domestic product, creating jobs, and eradicating unemployment. However, fluctuating and declining oil prices to low levels led to the postponement of many developmental programs, focusing only on projects with a direct impact on citizens.
From the above, it is evident that most programs aimed at reducing unemployment in Algeria rely on the principle of unemployment benefits and compensation funded by government funds derived from hydrocarbon revenues. Thus, these programs become dependent on global oil prices. On the other hand, it raises the question of whether these benefits can truly replace work as a societal concept, even if the offered wage equals the benefit.
6- Proposed Solutions to Address Unemployment in Algeria
The Algerian economy is predominantly rentier, relying entirely on petroleum resources to support economic development. Hence, the success of this development is directly linked to fluctuations in global oil prices, whether upward or downward. Given this, it is imperative to diversify the economy by focusing on other revenue-generating sectors such as agriculture, tourism, and services, to reduce dependence on oil revenues.
Algeria should seek to increase and improve production, expand its export base, and break into international markets to boost revenue. At the same time, domestic policies must prioritize transparency and efficiency to ensure that the state’s funds are effectively utilized for the development and well-being of the people.
