GLOBAL MEGATRENDS AND HUMAN DEVELOPMENT IN THE MENA REGION Preparing for Demographic, Climate and Technological Change Johannes Koettl Sofia Gomez Tamayo Matteo Morgandi Ramy Zeid May 2025 A ©2025 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved. This work is a product of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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This report is part of the task “Embracing and Shaping Change: Human Development for a Middle East and North Africa in Transition” (P502135) produced by the MENA People team. Attribution—Please cite the work as follows: “World Bank. 2025. Preparing for Demographic, Climate and Technological Change - Global Megatrends and Human Development in the MENA Region. © World Bank.” Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e mail: pubrights@worldbank.org. Cover design: Dania Kibbi Contents Overview 6 1  The impact of the megatrends on the people in MENA 14 1.1  Increasing old-age dependency 14 1.2  The impact of climate change: Rising seas, extreme weather, scarce water 18 1.3  The impact of technology: job destruction, job creation, and productivity boost 21 1.4  Megatrends are unfolding amid heightened fragility and conflict 24 2  Shaping, embracing, and managing 28 2.1  Shaping the megatrends to the better 28 2.1.1  Healthy aging and redefining old-age 29 2.1.2  Empowering families to reach their desired fertility 30 2.1.3  Supporting youth mobility for opportunities abroad 31 2.1.4  Reducing greenhouse emissions 32 2.1.5  More labor-complementing innovations 34 2.2  Embracing and harnessing the opportunities of the megatrends 35 2.2.1  The demographic dividend 35 2.2.2  Longer work lives 36 2.2.3  The care economy 38 2.2.4  The green economy 40 2.2.5  The digital economy 42 2.2.6  More mobile and flexible forms of work 42 2.3  Managing the risks of the megatrends 43 2.3.1  Obsolete skills 43 2.3.2  More time spent in dependency 44 2.3.3  More frequent and more severe shocks 44 3  Human development policies for shaping change, embracing opportunities,   and managing risk 46 3.1  Long-term care 49 3.2  Lifelong learning, including skills for the digital, green, and care economy 50 3.3  Early childhood development and childcare 51 3.4  Mobility and migration 52 3.4.1  Internal mobility 52 3.4.2  Safe external migration 52 1 3.5  Extending work lives and flexible forms of work 53 3.6  Prevention and management of noncommunicable diseases 53 3.7  Reproductive, maternal, newborn, child, and adolescent health and nutrition (RMNCA) 54 3.8  Replacing subsidies with means-tested social and investment benefits for households 55 3.9  Research and development for labor-complementing innovations 55 3.10  Social dialogue on the use of technology in the world of work 56 Annexes Annex 1: The demography of MENA 58 Annex 2: The demand for long-term care in MENA 62 Annex 3: The impact of technological advancement on the labor market 63 Annex 4: The role of fragility, conflict, and violence 69 References 72 Figures Figure 1. Three lenses to look at the three megatrends to identify HD policies for healthy, productive, and secure lives 9 Figure 2. The main avenues to shape megatrends, embrace opportunities, and manage risks 10 Figure 3. Emerging and foundational HD policies for healthy, productive, and secure lives 11 Figure 1.1. MENA’s demographic landscape is set to age dramatically 15 Figure 1.2. MENA had one of the world’s youngest populations in 2020 15 Figure 1.3. By 2050, MENA will have a stationary population with most people in middle age 16 Figure 1.4. MENA’s total fertility rate has plummeted from 6 to 4, or even 3 in some countries 16 Figure 1.5. MENA’s old-age dependency is set to more than double by 2050 17 Figure 2.1. Approximately 45 percent of current work activities could be automated using existing technology 21 Figure 2.2. Egypt had a drop in manual tasks and a rise of nonroutine analytical tasks, while nonanalytical interpersonal tasks remained stable 22 Figure 2.3. These changes favored the employment and wages of higher educated workers in Saudi Arabia 23 Figure 2.4. While MENA hosts substantially more refugees than it contributes to the global stock, the number of refugees originating from the region more than quadrupled 25 Figure 3.1. Changing the concept of old-age paints much less of a doom-and-gloom scenario 29 Figure 3.2. Families wish to have fewer children than the current, relatively high, fertility rates might suggest 30 Figure 3.3. MENA sends and receives many migrants, which could enable demographic arbitrage 32 Figure 3.4. Allocating 3.9 percent of MENA’s GDP to energy subsidies is unmatched by any other region 33 Figure 3.5. The proportion of idle youth exceeds 20 percent in many MENA countries 36 Figure 3.6. The average effective retirement age is currently 54 37 Figure 3.7. The need for long-term care ranges from 2.8 percent of the population to 18.8 percent and is projected to rise 38 Figure 3.8. Women in MENA committed 4.8 times more total daily time to housework and family care than men 39 Figure 3.9. Green skills are widely sought after across various economic domains and skills 41 Figure 4.1. Emerging and foundational HD policies for healthy, productive, and secure lives 48 Figure A1.1. Life expectancy at birth in MENA countries and comparators 59 Figure A1.2. Healthy life expectancy at age 60 for men and women 59 Figure A1.3. Start and end year of the demographic transition and MENA and comparator countries and country groups 60 2 Figure A1.4. Emigration intent by age group (2019–24) 60 Figure A1.5. Reasons for considering emigration among the youth 61 Figure A2.1. Prevalence of NCDs in select MENA and comparator countries 62 Figure A3.1. What will be the net impact on jobs? 63 Figure A3.2. How much does the skills and task content of jobs change 64 Figure A3.3. How will income change? 65 Boxes Box A4.1. The megatrends are influencing fragility and vice-versa 70 Maps Map 2.1. Egypt and the United Arab Emirates have the highest share of the population exposed to rising sea levels 18 Map 2.2. Eight MENA countries face high risks from water scarcity 19 Tables Table A3.1. Typology of jobs according to complementarity of and exposure to AI 68 3 Acknowledgements This report is part of the MENA People Flagship “Embracing and Shaping Change: Human Development for a Middle East and North Africa in Transition” (P502135). This note was written by Johannes Koettl (Senior Economist, HMNSP), Sofia Gomez Ta- mayo (Consultant, HMNSP), Matteo Morgandi (Lead Economist, HMNSP), and Ramy Zeid (Economist, HMNSP), with inputs from Dana Alrayess (Consultant, HMNSP), Gael Fostier de Moraes (Consultant, HMNSP), Andrea Petrelli (Consultant, HMNSP), Nayib Rivera (Econo- mist, HMNSP), and Yara Sleiman (Consultant, MHNSP). The report incorporates findings from background papers prepared by Priyanka Kanth (Economist, HMNHN), Shwetlena Sabarwal (Lead Economist, HMNED), Ishac Diwan (Con- sultant, HMNDR) and Bassam Ramadan (Consultant, HMNDR) on long-term care, green and digital skills, and the impact of fragility on human development, respectively. Comments and strategic guidance from peer reviewers and MENA People Flagship team members are also gratefully acknowledged, including Roberta V. Gatti (Chief Economist), Cristobal Ridao-Cano (Practice Manager, HMNSP), Ammar Abdo Ahmed (Manager, Human Development, Islamic Development Bank), Sameera Al Tuwaijri (Lead Health Specialist, HMNHN), Subhashini Rajasekaran (Education Specialist, HEDGE), Jamele Rigolini (Se- nior Advisor, HSJDR), Yosra Alajlan (E T Consultant, HMNDR), Arwa Alhilal (E T Consultant, HMNHN), Ghassan Alkhoja (Senior Operations Officer, HMNDR), Denizhan Duran (Senior Economist, HMNHN), Ugo Gentilini (Lead Economist, HMNSP), Serene Jweied (Senior Ex- ternal Affairs Officer, ECRMN), Ellen van de Poel (Senior Economist, HMNHN), and Juul Pinxten (Economist, HMNSP). The flagship is a product of the MENA People team, produced under the strategic lead- ership of Fadia Saadah, (MENA People Regional Practice Director) and co-led by Matteo Morgandi (Lead Human Development Economist, HMNDR) and Fadila Caillaud (Practice Manager). 4 Abbreviations AI Artificial Intelligence ECA Europe and Central Asia region ECD Early Childhood Development FCV Fragility, Conflict, and Violence GCC Gulf Cooperation Council GDP Gross domestic product HD Human Development HIC High-income countries ILO International Labor Organization IMF International Monetary Fund LIC Low-income countries LTC Long-term care MENA Middle East and North Africa region NCDs Noncommunicable diseases NEETs Idle youth who are neither in employment, education nor training OECD Organization for Economic Co-operation and Development R&D Research and Development RMNCA Reproductive, maternal, newborn, child, adolescent health and nutrition STEM Science, Technology, Engineering, and Mathematics TFR Total fertility rate UAE United Arab Emirates UN United Nations WEF World Economic Forum WHO World Health Organization 5 OVERVIEW The global population is facing unprecedented changes in the coming decades. After many years of rapid population growth, driven by high fertility and an extraordinary increase in life expectancy, the global population is now entering a phase of slowing growth, falling fertility, and aging. High-income countries are at the forefront of aging, with developing countries beginning to follow. But unlike high- income countries, the developing world is undergoing this demographic transition much faster, posing steep challenges for their labor force and economy. At the same time, climate change is now fully unfolding across the globe, affecting many aspects of life, including health, work, and the economy. Some of these impacts are slow to materialize, with land, especially coastal areas, becoming less suitable for agriculture, production, and living over time. But there will also be sudden shocks, with the frequency and severity of natural disasters caused by climate change increasing significantly. All this is happening against a backdrop of unabated technological advance that, at a minimum, will profoundly change how people work and use their human capital to produce goods and services. This technological disruption will, hopefully, complement workers’ abilities and create new jobs, occupations, and opportunities for people, but in the worst case, it could also displace workers and increase income inequality. The people of the Middle East and North Africa (MENA) region are not exempt from the three megatrends of aging populations, climate change, and technological disruption.1 While the region’s 500 million people are still a relatively young population, MENA will age rapidly over the next decades.2 The population aged 65 and older in MENA will grow by 243 percent between 2020 and 2050—the fastest growth of any world region. At the same time, fertility will fall, by one estimate from 2.6 to 2.1 (United Nations 2024), resulting in an increase of the old-age dependency from 7.8 to 18 people aged 65 and older per 100 people of working age. MENA is also among the regions most exposed to climate change—perhaps even the most exposed. The maximum temperature during the hottest days in the recent past was about 43°C, on 1 In line with World Bank terminology, the MENA region comprises Algeria, Bahrain, Djibouti, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Tunisia, United Arab Emirates, West Bank and Gaza, and Yemen 2 World Development Indicators. Global Megatrends and Human Development in the MENA region 6 Preparing for Demographic, Climate and Technological Change Photo: © Dana Smillie/World Bank average, and could increase to almost 50°C by the end of the century (Lelieveld et al. 2016). Climate change will significantly exacerbate water scarcity in the MENA region, potentially reducing freshwater availability by up to 45 percent with a 2°C global temperature rise (World Bank 2020a) and degrade the quality and availability of arable land. In addition, technological progress could potentially displace millions of workers in MENA from their jobs, with estimates suggesting that nearly 45 percent of jobs are automatable, and more than half in occupations classified at risk of displacement by artificial intelligence (AI) (IMF 2024a).3 At the same time, due to its economic structure and high prevalence of informal and low productivity jobs, MENA countries’ exposure to automation and AI is lower than in other world regions, raising the prospect that MENA might lose out on any future productivity boom enabled by technology. 3 These figures include only Egypt, Iraq, Jordan, Lebanon, Tunisia, United Arab Emirates, and Yemen. 7 These megatrends are unfolding in MENA amid other structural challenges. Following the fiscal expansion during Covid and sluggish recovery, most non-oil producing countries are in high debt distress. And nearly half of MENA countries are considered fragile or involved in protracted domestic and cross-border conflicts of various intensity, impairing human capital and spilling over borders. MENA today hosts a third of all world refugees (World Development Indicators). A decade after a severe conflict, per capita output in the region remains about 10 percent lower than before, more than triple the decline of less than 3 percent in other regions. The three megatrends further exacerbate these challenges by fueling displacement, generating new grievances, and adding to fiscal costs. The megatrends thus pose severe challenges for healthy, productive, and secure lives of MENA’s people. The rapid demographic transition combined with the burden of rising temperatures, deteriorating air quality, and water scarcity—put extraordinary strains on health and on public expenditures for healthcare, long- term care, and old-age income. The emergence of new technologies raises serious concerns about how an aging workforce can keep up with evolving technology, changing skills demand, and increasing need for care services—and thus productive lives. Changing climate patterns, natural disasters, the degradation and loss of arable land, freshwater scarcity, and increasing fragility have severe implications for secure lives, including food and income. So, is MENA destined to suffer from the combined challenges of an aging population, climate change, and technological disruption? Will an ever-shrinking younger generation have to devote their lives to take care of an ever-increasing older generation? Will climate change make large parts of MENA inhabitable, freshwater inaccessible, natural disasters the new normal, with all its devastating effects on the health and the livelihoods of people in MENA? Will technological innovation make millions of workers in MENA unemployed while the productivity boom promised by automation and AI will not materialize in MENA? No, these megatrends are not destiny! They can be shaped, at least to some extent. New opportunities need to be embraced. And the emerging risks can be managed. To support this conclusion, the paper examines the scope for human development (HD) policy to shape change, embrace opportunity, and manage the risks. The objective is to help governments and societies identify the HD policies in sectors that can help the people of MENA achieve healthy, productive, and secure lives in the face of the impending megatrends. The flagship’s conceptual framework distinguishes three pillars for government action: Develop new policies that respond to the megatrends. Enhance the resilience and responsiveness of HD institutions to the megatrends and continue pursuing effective coverage of foundational HD programs. Ensure adequate financing of the most needed and effective HD policies, through reforms on both the expenditure and revenue sides (figure 1). Policies are covered in this paper, and institutions and financing are covered in separate papers. Together, the three form the World Bank’s 2025 Human Development Flagship for the MENA region. Global Megatrends and Human Development in the MENA region 8 Preparing for Demographic, Climate and Technological Change FIGURE 1 Three lenses to look at the three megatrends to identify HD policies for healthy, productive, and secure lives Shape megatrends New HD Priorities Responding to Healthy lives Megatrends Aging populations Climate change Technology Resilient HD Manage risks Institutions and Productive lives Fragility Effective Coverage Embrace opportunity Secure lives Adequate Financing for HD Policies Source: Authors. The main avenues to shape the megatrends are through the levers of demography, a reduction in greenhouse gas emissions, and labor-complementing as opposed to labor-substitution innovation (figure 2). The megatrends themselves can be shaped. The demographic transition can be shaped through longevity, fertility, and migration. Climate change can be shaped or mitigated by reducing the consumption of goods and services, especially energy, that cause high greenhouse gas emissions. And technology can be shaped by steering innovation toward complementing—not substituting—more flexible forms of work. All of the megatrends come with new opportunities that need to be embraced. The demographic transition creates the opportunity of a demographic dividend, yielding a boost in growth and, with it, income and wealth, as happened in high-income OECD during their demographic dividend. However, for the demographic dividend to materialize, young people need to find ample opportunities in the labor market—currently not the case in MENA. A second opportunity from the demographic transition is longer work lives. A precondition for longer work lives is healthy aging—and policies that encourage added healthy years of life to be translated into added years of work, allowing for high lifetime income. A third opportunity is the emergence of the care economy, which is a triple opportunity: It creates new job opportunities, especially for women, while also decreasing the care burden of women and increasing the quality of care for the elderly. Similarly, climate change creates many new job opportunities in the green economy, and technological advancement creates new opportunities in the digital economy, which combined with an overall productivity boost leads to more income and wealth. And technology, remote work, platform work, job-sharing, and so on are all opportunities, especially for women, but also other workers more on the fringe of the labor market, including older workers. 9 FIGURE 2 The main avenues to shape megatrends, embrace opportunities, and manage risks Healthy aging & redefining old-age Balanced fertility Well-managed migration Shape megatrends Reducing greenhouse gas emissions Labor-complementing innovation Healthy lives More time spent in sickness and Aging populations dependecy Climate change More frequent and severe livelihood Productive lives Technology Manage risks shocks Obsolete skills Secure lives Demographic dividend Longer work lives Care economy Embrace opportunity Green economy Digital economy Flexible forms of work Source: Authors. Undoubtedly, the megatrends are also bringing significant risks. Aging bears the risk of people spending more time in sickness and dependency. Even with healthy aging, the risk that people spend some time in sickness and dependency toward the end of their life could increase. So, the demand for healthcare and long-term care is bound to rise. Climate change bears the risk of more frequent and more severe shocks to livelihoods. As a result, people might experience longer periods of unemployment, the destruction of housing and productive assets, and even be forced to relocate. Technological innovation, finally, makes the existing skills in the workforce—especially in an aging workforce—less relevant or even obsolete. The need to retrain for jobs in new occupations and sectors throughout one’s lifetime is increasing. But with the right policies in place, people will be able to manage the emerging risks of the three megatrends and shape them to harness the new opportunities. HD policies play a crucial role in shaping the megatrends for the better, empowering people to embrace the new opportunities of the megatrends, and manage the risks. Ten policy areas emerge as new priorities for HD policies, with most areas spanning two or more of the four pillars of HD policies—health and population, social, education, and labor (figure 3). 1. Long-term care for the elderly and disabled must expand considerably, requiring close coordination between the health and social sectors to ensure adequate home-based, community-based, and institutional long-term care services. 2. Adult education systems need to be strengthened to ensure lifelong learning of an increasingly older workforce, including for the new skills required in the digital, green, and care economy. Lifelong learning is also a prerequisite to allow for longer work lives and hence productive lives. 3. Early childhood development and childcare need to be further developed to allow families to balance family and career goals and to lay the foundations for successful lifelong learning. 4. Mobility and migration policies need to better support people to go where the opportunities are, across sectors, occupations, and locations. Global Megatrends and Human Development in the MENA region 10 Preparing for Demographic, Climate and Technological Change 5. To allow for healthy aging, health policies need to focus much more on the prevention and management of noncommunicable diseases, which are also a prerequisite for longer work lives. 6. The extension of work lives, including more flexible work arrangements, encompasses changing in old- age pension programs and raising retirement ages, but also supporting older workers and fostering more flexible work arrangements. 7. A renewed focus on reproductive, maternal, newborn, child, and adolescent health and nutrition (RMNCA) is necessary to better support and reassure families in their fertility decisions and to lay stronger foundations for healthy aging. 8. Replacing subsidies, especially energy subsidies, with means-tested social and investment benefits is key to reducing greenhouse gas emissions. Targeting social benefits can compensate for the increases in prices of formerly subsidized goods and services. And targeted investment benefits can help households to make investments in green technology that are appropriate for their income, and designed in a pro-poor manner. 9. A new approach to government-supported research and development can put much stronger emphasis on universities as hubs for encouraging labor-complementing innovation. 10. A new social dialogue on technology and work can ensure broad adoption of new technologies in the workplace and further spur labor-complementing innovation. FIGURE 3 Emerging and foundational HD policies for healthy, productive, and secure lives Healthy lives Productive lives Secure lives HD Policies for Shaping, Harnessing, and Managing the Risks of the Megatrends Health and Population Social Policies Education Policies Labor Policies Policies Long-term care Lifelong learning, including for the digital, green, and care economy Early childhood development and childcare Mobility and migration Non-communicable disease Extending work lives and flexible work arrangements Emerging HD prevention and management priotities in response to megatrends Reproductive, Maternal, Replacing subsidies with Research and development Social dialogue on Newborn, Child, Adolescent means-tested social and for labor-complementing technology and work Health and Nutrition investment benefits innovation Resilient HD institutions Foundational Effective coverage of HD policies HD policies Sustainable financing of HD policies Source: Authors. 11 As these new policy areas are implemented, foundational policy reforms in the HD sector need to continue. The reforms range from building shock-resilient HD institutions, for health systems that can withstand pandemics and natural disasters, and for targeted social safety nets that can be quickly scaled up during times of crises. Expanding health, education, and social protection system for universal coverage can ensure that all in need have access. All of these reforms require adequate financing, so identifying additional fiscal space is essential. Since the MENA region is very heterogeneous in per capita income and human development, the emphasis among the three policy pillars will vary. Fragile countries will need to prioritize the protection of human capital and institutional reforms that can ensure effective coverage, but they can also aspire to build economic opportunities arising from global trends. High-income and most middle-income countries, which are also ageing faster, will be ready to emphasize “new policies.” But they should also adapt institutions to become more agile and embrace financing reforms that make HD spending robust and sustainable. This paper explores how the three megatrends will affect the people of MENA and how, through emerging HD policies, the region can shape these trends and harness new opportunities while managing the risks. It first delves into the impacts of aging, climate change, and technological disruptions, including a discussion of the links between the megatrends and fragility. It next explores the main avenues for shaping the megatrends, the opportunities arising from the megatrends, and the main risks associated with the megatrends. It then summarizes what HD policies can do to support people in addressing the challenges of the three megatrends (annexes elaborate on some of the issues raised). Global Megatrends and Human Development in the MENA region 12 Preparing for Demographic, Climate and Technological Change 01 The impact of the megatrends on the people in MENA Global Megatrends and Human Development in the MENA region Preparing for Demographic, Climate and Technological Change THE IMPACT OF THE MEGATRENDS ON THE PEOPLE IN MENA The MENA region is undergoing profound transformations that will change the lives of its people. Rapid population aging, climate change, and technological advancements are set to bring sweeping changes, challenging existing economic and social structures. As the population grows older, shifts in fertility and dependency ratios will place new pressures on labor markets and social protection systems. MENA’s high exposure to climate change threatens to exacerbate water scarcity and extreme temperatures, posing serious risks to health, livelihoods, and economic stability. And its exposure to rapid technological progress, though lower than in other regions, is expected to disrupt labor markets and firms’ strategies. Fragility, conflict, and violence further compound the megatrends by disrupting economies and societies across the region. Photo: © Arne Hoel/World Bank 1.1  Increasing old-age dependency While the MENA region is still relatively young and at the early stages of the demographic transition, it is experiencing the world’s fastest aging rate. Gradually, the region’s demography is converging in life expectancy and fertility rates to those in high-income countries (HICs). Life expectancy at birth in MENA countries rose remarkably from 1970 through 2020, with projections suggesting that it will continue until 2050.4 And fertility in the region has dropped significantly in a short period, aligning more closely with global patterns. This transition is happening much faster than in other regions, especially when compared to the historic fertility transition of the HICs, indicating a rapid cultural shift toward smaller families. 4 See annex 1 for a detailed discussion of MENA demography, including graphs on life expectancy, fertility, and more. Global Megatrends and Human Development in the MENA region 14 Preparing for Demographic, Climate and Technological Change The share of the population that is 65 years or older in MENA will grow by 243 percent between 2020 and 2050 (UN 2024), rapidly changing the shape of its population pyramid over the next decades. Among world regions, MENA has the highest growth rate of the population aged 65 or more until 2050, suggesting that the demographic landscape is set to change dramatically within the next 15 years (figure 1.1). But MENA still has one of the youngest populations, with most people below age 30 (figure 1.2). And every age cohort in its population pyramid is larger than the one born before it. The global population pyramid, though still expansive, is already approaching a more rectangular or stationary shape, characterized by relatively stable birth and death rates. Europe is furthest in the demographic transition, with its population pyramid already advanced toward a stationary shape (with most people in mid-age). By 2050, MENA will display a stationary population pyramid as a larger share of its population ages, while Europe will have transitioned to a beehive-like shape, with low birth and death rates (figure 1.3). FIGURE 1.1 MENA’s demographic landscape is set to age dramatically 300 Growth of population 65+ (%), 2020-2050 250 MENA 200 SSA SA 150 LAC 100 EAP NA 50 ECA 0 0 5 10 15 20 25 30 35 Percent of population 65+ in 2050 Source: Recreated from Demarco and Pallares-Miralles (2023) using UN (2024) data. Note: Percentage of population aged 65 and older in 2050 and growth rate (percent) and absolute increase (in thousands) of population aged 65 and over between 2022 and 2050 by region. Bubble size = increase in population aged 65+ (thousands), 2020-50. FIGURE 1.2 MENA had one of the world’s youngest populations in 2020 Northern Africa and Western Asia World population Europe population population by age and sex: 2020 by age and sex: 2020 by age and sex: 2020 Male Female Male Female Male Female Population (million) Population (million) Population (million) observed observed observed Source: United Nations 2024. 15 FIGURE 1.3 By 2050, MENA will have a stationary population with most people in middle age Northern Africa and Western Asia World population Europe population population by age and sex: 2050 by age and sex: 2050 by age and sex: 2050 Male Female Male Female Male Female Population (million) Population (million) Population (million) median 80% prediction interval 95% prediction interval Source: United Nations 2024. Note: Green and yellow areas represent 80 and 95 percent prediction intervals of projections respectively. These two intervals are projected along with the median trajectory in blue. The median trajectory constitutes the medium-fertility assumption. At the same time, fertility in the MENA region, declining sharply in a short period, is expected to continue falling from 2.6 to 2.1 by 2050. The total fertility rate (TFR), which estimates the number of children a woman would bear over her lifetime, has declined in all MENA countries since 1970 and is projected to decline further until 2050. The speed of adjustment is breathtaking: While in most MENA countries, the TFR was above 6 in 1970, it is now below 4—even below 3 in many countries (figure 1.4). This transition is happening much faster than in other countries and regions, especially when compared to the historic fertility transition of the HICs, indicating a rapid cultural shift towards smaller families. For example, in France, it took more than 150 years— from about 1750 to 1900—for fertility to drop from 4.5 to 3.5 FIGURE 1.4 MENA’s total fertility rate has plummeted from 6 to 4, or even 3 in some countries 9 8 7 Total Fertility Rate (TFR) 6 5 4 3 2 1 0 Yemen Jordan Libya Syria West Bank and Gaza Algeria Saudi Arabia Oman Iraq Kuwait Djibouti Iran LIC Morocco Tunisia UAE Qatar Bahrain Egypt Lebanon World HIC Europe 1970 2020 2050 Source: United Nations 2024. Note: Total fertility rate in MENA countries and comparators (1970, 2020, 2050, medium fertility projections). The total fertility rate represents the number of children that would be born to a woman if she were to live to the end of her childbearing years and bear children in accordance with age-specific fertility rates of the specified year. 5 Blanc 2024. Global Megatrends and Human Development in the MENA region 16 Preparing for Demographic, Climate and Technological Change The combination of aging and declining fertility is driving up dependency ratios, with the number of people aged 65 or older per working-age individual set to more than double by 2050. This shift will leave a significantly larger share of the population financially and functionally dependent on others. This is especially the case of countries such Libya and Iran which will complete the demographic transition in less than two decades, while Lebanon, Morocco or Tunisia will not take much longer. The speed of transition is in stark contrast to HICs in, for example, Europe, where the transition unfolded over much longer time. The main implication of this process is the change in old-age dependency ratio—measuring the population aged 65 and older as a share of those aged 15 to 64 (working-age population). This ratio has been low in the MENA region, but over the next 30 years it will increase from 7.8 to 18.0 by 2050 (UN 2024) (figure 1.5). FIGURE 1.5 MENA’s old-age dependency is set to more than double by 2050 60 50 Old-Age Dependency Ratio 40 30 20 10 0 Qatar UAE Yemen LIC Oman Kuwait Iraq Saudi Arabia Bahrain West Bank and Gaza Syria Egypt MENA Jordan Libya Algeria Morocco World Lebanon Tunisia Iran HIC Europe Djibouti 1970 2020 2050 Source: United Nations 2024. Note: Old age dependency ratio (population 65+/population 15–64). Demographic shifts will put more fiscal pressures on social expenditures, mainly through pensions, healthcare, and the need for long-term care. A smaller cohort of working-age individuals will bear the responsibility of supporting a growing number of retirees (the dependency ratio), both financially and in daily living activities. The demand for healthcare and LTC services is projected to increase with an elevated risk of individuals becoming dependent on others and requiring LTC, especially if the high prevalence of chronic disease in MENA does not fall.6 In addition, increased longevity, if not combined with longer work lives, implies longer periods of retirement, which will put additional pressure on pension systems and require greater personal savings. Simultaneously, the labor market, including that of health and care workers, may experience labor shortages due to a declining supply of workers. This scarcity could be exacerbated by a skills shortage if the older workforce fails to update skills.  6 See annex 2 for a projection of LTC needs in the MENA region. 17 1.2  The impact of climate change: Rising seas, extreme weather, scarce water The MENA region faces severe environmental challenges due to climate change, including extreme temperature increases, worsening water scarcity, and rising sea levels. Projections indicate that temperatures could rise by up to 8°C, while freshwater availability may decline by as much as 75 percent. These changes pose significant threats to human health, exacerbating heat exhaustion, respiratory issues, and chronic diseases. Climate-related mortality is expected to surge, with deaths from extreme weather events potentially increasing more than 15-fold. Climate change also has serious implications for maternal and fetal health, as natural disasters can contribute to pregnancy complications and loss. Beyond health impacts, environmental shifts are driving migration, with climate-related disasters emerging as a leading cause of internal displacement worldwide. The implications of rising sea levels are significant for tens of millions of people. The Maghreb region, undergoing one of the swiftest rates of coastal erosion globally, is among the most affected. This is further aggravated by ocean acidification and warming, and changes in ocean wildlife (World Bank 2014). Recent natural disasters have caused damage ranging from $2 billion in Benghazi to $50 billion in Alexandria. Changes in sea levels present large risks for MENA, as regions close to bodies of water are highly populated and relevant for agriculture. Increases in salinization (seawater intrusion) also present large threats for populations near rivers such as the Euphrates and Tigris, the Nile, and the Jordan river. For example, the Nile Delta houses more than 35 million people and is responsible for over 60 percent of the agricultural production in Egypt (World Bank 2014). Within MENA, Egypt and the United Arab Emirates (UAE) have the highest share of the population exposed to rising sea levels (15 to 20 percent), followed by Libya, Saudi Arabia, and Tunisia (map 2.1). MAP 2.1 Egypt and the United Arab Emirates have the highest share of the population exposed to rising sea levels Population exposed to sea-level rise (percent of country total) Population expose to sea level rise (% of country total): < 1% 1–5% Tunisia Islamic Rep. of Iran 5–10 Morocco 10–15% 15–20% Kuwait > 20% Algeria Libya A.R.of Egypt Qatar Saudi Arabia Oman Rep.of Yemen Source: World Bank 2020a. Global Megatrends and Human Development in the MENA region 18 Preparing for Demographic, Climate and Technological Change Climate change is also linked to increased intensity and frequency of precipitation due to higher evaporation rates from warming oceans and accelerated polar ice melt. The resulting rise in rainfall totals and water table levels has contributed to increased flooding. Earth has witnessed an average sea level rise of 20 centimeters since 1880, with the rate of increase accelerating. For instance, the southern Arabian Peninsula may experience up to 50 percent more rainfall in a world that is 2°C warmer, heightening the risk of floods, disrupting agriculture, and causing infrastructure damage (WEF 2024; World Bank 2020a). Conversely, several MENA countries face an acute risk of water scarcity. MENA is the most water-stressed region globally, with 60 percent of its population living in areas of high or extreme water stress. Already today, Libya, Saudi Arabia, and Yemen have the highest freshwater withdrawal as a proportion of available freshwater resources worldwide. In the future, eight MENA countries face high risks from water scarcity, with the rest of the region facing a medium-high risk (map 2.2). If global temperatures rise by 2°C, the region could experience a significant reduction in freshwater availability, with the projected decline ranging from 15 to 45 percent. This scarcity has profound implications for the region’s economy, as it threatens areas that contribute to about 70 percent of the MENA region’s gross domestic product (GDP). Climate-induced water scarcity could potentially lead to a GDP reduction of 6 to 14 percent by 2050, severely impeding economic development. And in a scenario where global temperatures increase by 4°C, the MENA region could be confronted with an alarming 75 percent reduction in freshwater availability, posing a critical challenge to its prosperity—perhaps even survival (WEF 2024; World Bank 2020a). MAP 2.2 Eight MENA countries face high risks from water scarcity Level of water stress: Freshwater withdrawal as a proportion of available freshwater resources, 2020 Source: World Development Indicators. With changes in water availability and rainfall patterns, climate change is anticipated to further undermine agricultural productivity in the MENA region, aggravating food insecurity. Around 70 percent of the agricultural production in the region depends on rain, making it highly vulnerable to changes in temperature and rain patterns. Moreover, crop yields and agricultural productivity are expected to fall due to climate change, with a drop of 30 to 60 percent in yields projected with an increase in temperatures from 1.5 to 4°C (World Bank 2020a). Moreover, climate change will profoundly affect everyday life, disrupting health, livelihoods, and living conditions. The health impacts of climate events are predominantly characterized by morbidity, with long- term disabilities and health conditions that arise after such events accounting for a significant 79 percent of 19 the overall health impact. Mortality, while still a critical concern, is projected to constitute about 21 percent of the health impacts from climate events. Between 2010 and 2020, human mortality from floods, droughts, and storms was 15 times higher in highly vulnerable regions, compared with regions with very low vulnerability (WEF 2024). Moreover, natural disasters can disrupt reproductive health, leading to spontaneous pregnancy loss and increased risks of infecundity (Wilde 2025). MENA is also particularly vulnerable to temperatures rising to extremes and the associated adverse health effects. If global warming were to reach 4°C above preindustrial levels, MENA could experience extreme temperatures of up to 56°C. By the end of the century, summer temperatures in countries like Algeria, Iraq, and Saudi Arabia might increase by as much as 8°C, posing unprecedented challenges to the region. In Riyadh, the number of hot days could increase from 3 to 132 days per year.7 Higher temperatures have significant impacts on the body, especially for those working outdoors. They can lead to heat exhaustion and heat stroke and are especially challenging for vulnerable groups such as pregnant women, children, and those suffering from chronic diseases. Effects on health might be further aggravated by other diseases connected to climate change such as diarrheal diseases due to deteriorating water quality and vector-borne diseases such as malaria and leishmaniasis (World Bank 2014). Heat also prevents pregnancies and causes early pregnancy loss (Wilde 2025). Beyond health consequences, climate disasters also have a significant impact on migration patterns, forcing millions to relocate. According to the Internal Displacement Monitoring Centre (2022), of the 38 million internal displacements recorded in 2021, 23.7 million were triggered by disasters, with floods being the most common cause of displacement in the MENA region. This highlights the growing role of environmental factors in population movements. Climate change will also impede future human capital attainment. A 10-year-old today will experience three times more river floods, twice as many tropical cyclones and wildfires, four times more crop failures, five times more droughts, and 36 times more heat waves over their lifetimes compared with a 10-year-old in 1970. Between January 2022 and June 2024, at least 12.3 million students experienced significant climate-related school closures across Iraq, Kuwait, Libya, Oman, Saudi Arabia, UAE, and Yemen. These closures, often frequent and long-lasting, cause serious learning disruptions (Sabarwal et al. 2024). Rising temperatures are also inhibiting learning (Park et al. 2020). MENA countries do very poorly on the Children’s Climate Risk Index— which ranges from 1 to 8.7, with 1 the lowest risk and 8.7 the highest. MENA countries are consistently in the high-risk range—with Yemen at 7.4 and both Djibouti and Egypt having scores higher than 5.5, which puts them in the high-risk category (UNICEF 2021). The economic impact of changes in agricultural productivity would also be large. Agriculture accounts for 35 percent of employment and 13 percent of GDP in the region (World Bank 2014). More than 40 percent of the population lives in rural areas, with many relying on agriculture, leaving them vulnerable to changes in production and food prices. Countries that rely heavily on food imports, and not production, are also susceptible, as they depend on fluctuations in international food prices. Since 40 percent of rice consumption and 70 percent of maize is imported, this is likely to create large challenges for food security (World Bank 2014). In 2019, approximately 55 million people in the region were already facing food insecurity, a situation that is bound to deteriorate as climate change accelerates (World Bank 2020a). Climate change will also change the occupational and employment landscape. As climate change unfolds, the skills required from the workforce will shift. The transition toward greener production methods, coupled with the unpredictable changes triggered by climatic events, will continually alter the demand for skills. At a minimum, there will be a shift toward certain conventional skills, like those needed in the construction sector due to the considerable infrastructure investments needed to green the economy. In addition, the demand for already existing green skills is bound to increase—for example, as the demand for skills related to installing and managing renewable energy facilities rises. Moreover, the evolution of production techniques and the emergence of new service requirements may require more diverse and sophisticated skill sets. 7 Defined as exceptionally high temperatures and high thermal discomfort. Global Megatrends and Human Development in the MENA region 20 Preparing for Demographic, Climate and Technological Change 1.3  The impact of technology: job destruction, job creation, and productivity boost Technological advances are difficult to foresee, but a few guiding questions can help to understand the potential consequences for people. The first question relates to the overall net impact of technological advance on labor demand: What will be the scale of job destruction and creation. The second question is how much the task content of jobs will change and with it, the skills required from the workforce. And the third question is how income will change in response to technological advancement.8 Technological advances during the Industrial Revolution and automation boosted employment and productivity, but the impact was uneven. While the Industrial Revolution created more jobs than it destroyed, many mid-skilled artisanal workers lost their work as new roles emerged in unskilled sectors, resulting in skill mismatches and increasing inequality. It took more than 50 years for demand to rise again for mid- and high-skilled jobs, eventually spurring a new middle class (Autor 2024). Now look at artificial intelligence. MENA’s labor markets have lower AI exposure scores and more limited complementarity with AI than other regions, putting them at risk of missing out on its potential productivity gains. Research focusing on six Middle Eastern countries—Bahrain, Egypt, Kuwait, Oman, Saudi Arabia, and the United Arab Emirates—finds that approximately 45 percent of current work activities could be automated using existing technology (figure 2.1). This is slightly below the global average of 50 percent, with only minor variations among the six countries. The potential impact of automation also varies significantly across industries, with sectors that rely on routine tasks having an automation potential exceeding 50 percent; while industries requiring human interaction, creativity, and nonroutine skills have a lower-than-average automation potential (Aus dem Moore et al. 2018). Most Arab League nations face lower levels of AI exposure than advanced economies, but with significantly weaker AI readiness—characterized by gaps in digital infrastructure, human capital, and regulatory frameworks (Cazzaniga et al. 2024). MENA labor markets place less emphasis on nonroutine cognitive and interpersonal skills, further restricting their ability to leverage AI technology. This skills gap means that many workers who stand to benefit the most from AI-driven productivity gains lack the necessary capabilities to do so. The Gulf Cooperation Council (GCC) countries—including Qatar, Saudia Arabia, and the United Arab Emirates—stand out as exceptions, with both high exposure to AI and strong levels of preparedness, positioning them to harness its benefits more effectively. FIGURE 2.1 Approximately 45 percent of current work activities could be automated using existing technology Occupational distribution by potential exposure and complementarity to artificial intelligence 100% Share of Work Activities That Can Be Automated 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% EGY TUN JOR IRN AE EM LIC High Exposure & High Complementarity High Exposure & Low Complementarity Low Exposure & High Complementarity Low Exposure & Low Complementarity Source: Cazzaniga et al. 2024. Note: AE for advanced economies; EM for emerging markets; LIC for low-income countries. 8 See annex 3 for a detailed discussion and illustration of these three questions and how they apply to the history of techno- logical innovation in developed countries. 21 The emerging evidence for Egypt and Saudi Arabia suggests that jobs that are less automatable are rising, at the expense of occupations more intensive in routine and manual tasks. This shift aligns with global trends—a move toward employment that demands more nonroutine cognitive and interpersonal skills, which are surpassing manual and routine cognitive tasks. Badran (2019) finds a significant impact of technological change on job polarization and a hollowing out of middle-paying jobs, with growth in certain occupations, such as science and engineering professionals—and a decline in others, such as agricultural laborers. Moreover, female employment fell over the years compared with males due to technological advances. Similarly, Viollaz and Winkler (2021), using panel data for Egypt, identified a drop in manual tasks and a rise of nonroutine analytical tasks over a six-year period, while nonanalytical interpersonal tasks remained stable (figure 2.2). These changes favored the employment and wages of higher educated workers, a trend visible also for Saudi Arabia (figure 2.3), which saw a significant change in task composition of private sector employment from 2013 to 2020 towards nonroutine tasks (Rivera, Azam, and Ajwad 2021). FIGURE 2.2 Egypt had a drop in manual tasks and a rise of nonroutine analytical tasks, while nonanalytical interpersonal tasks remained stable Trends in task content in Egypt, 2012–18 1 Standardized Task Intensity (Relative to Germany) 0.5 0 -0.5 -1 -1.5 -2 -2.5 2012 2018 Manual Non-routine interpersonal Non-routine analytical Source: Viollaz and Winkler 2020. Note: The y-axis represents the result of the following three steps process: first, standardizing each task-related variable using the mean and standard deviation of Germany’s workers; second, obtaining a score for each task category by summing the standardized variables; and third, re-standardizing these scores to have a zero mean and standard deviation of one, again using Germany’s task measures. This means that a task index of zero indicates a task intensity similar to Germany’s average salaried worker, with values above or below zero representing deviations from this benchmark. Only observations available for both years have been included. Global Megatrends and Human Development in the MENA region 22 Preparing for Demographic, Climate and Technological Change FIGURE 2.3 These changes favored the employment and wages of higher educated workers in Saudi Arabia Change in task composition of private sector employment Saudi Arabia, 2013–20 Non-routine cognitive Non-routine social Task Type Routine cognitive Routine manual Non-routine manual -3% -2% -2% -1% -1% 0% 1% 1% 2% 2% Percentage Point Change (2013-2020) Source: Rivera, Azam, and Ajwad 2021. However, the extent to which AI will concretely affect workers and occupations is uncertain, especially given the digital divide in the region, with significant gaps in infrastructure and capacity for certain countries. Whether AI’s potential is realized depends on how much existing firms adopt the required technologies, or more technology-intensive entrants disrupt less technologically intensive incumbents, as well as on the available skills-mix of the working population. Despite notable advances in social media usage and broadband subscriptions, the region’s digital divide remains significant, with internet use almost universal in Jordan, Lebanon, and Morocco but low in Libya, Syria, and Yemen. There are also challenges in affordability and infrastructure of mobile data and technological devices. In Lebanon, mobile data costs can reach 10 percent of monthly income, while high device taxes in Algeria and Tunisia exacerbate access barriers. Limitations in digital health solutions impede healthcare access, and those in education slow the introduction of online learning and other digital tools (Melhem and Richani 2024). AI’s impact on employment, skills, and income may differ significantly from the automation of the past 50 years, potentially reviving the middle class. Unlike automation, AI has the potential to complement formal knowledge with tacit expertise, enabling medium-skilled workers to participate more in decision-nmaking roles traditionally reserved for experts like doctors, lawyers, and engineers. Advanced algorithms can democratize access to specialized insights, allowing a broader segment of the workforce to engage in higher- level tasks. This shift could compress wages at the top, raise them at the middle and lower levels, and reduce inequality (Autor 2024). AI could also increase productivity, particularly benefiting low performers within occupations, further narrowing wage disparities. But the evidence remains limited. Some OECD studies show that AI exposure is higher in white-collar jobs, while manual roles face lower exposure, with a selection effect leading low performers to move into less AI-intensive roles (Georgieff 2024). 23 Photo: © Dominic Chavez/World Bank 1.4  Megatrends are unfolding amid heightened fragility and conflict Fragility and conflict are, arguably, the most severe threats to MENA’s future prosperity and human development. They contribute to human capital depletion through physical and psychological harm, displacement, job and livelihood losses, and the disruption of education and healthcare systems. All these factors reduce the supply and quality of essential services, prevent the formation of generations of healthy and educated youth and skilled workers, and reduce the space for economic diversification and growth, leading to further cycles of fragility and conflict.9 9 See Diwan, Ramadan, and Morgandi (forthcoming) for a more detailed overview on the impact of fragility, conflict, and vio- lence on human development in MENA countries. Global Megatrends and Human Development in the MENA region 24 Preparing for Demographic, Climate and Technological Change Fragility, conflict, and violence also lead to the deterioration of health and education systems, both globally, and in MENA. Conflict and violence result in generations of children missing out on schooling, hindering future economic opportunities, and increasing mortality rates—including maternal mortality—along with higher injury rates and a greater disease burden due to limited medical care. The impact on education is stark. In Syria, the number of expected years of schooling dropped significantly between 2011 and 2022 as widespread insecurity made attending school unsafe. In Yemen, the decline was less severe, as insecurity was concentrated in specific regions, but progress stagnated due to the collapse of central governance (UNDP 2024). Similarly, health systems have suffered devastating consequences, with maternal mortality rising sharply from 2011 onward in Syria and Yemen, and from 2019 in Lebanon (Our World in Data 2024a). Conflicts also drive large-scale displacement, and MENA hosts nearly one-third of the world’s refugees. The region is both a major contributor to and host of a substantial portion of the global refugee population. In 2012, there were 15.4 million refugees worldwide, 1.6 million from the MENA region, which hosted 5.3 million refugees—almost a third of all refugees worldwide. By 2023, the total number of refugees increased to 37.6 million, with 7 million from MENA and 9.4 million hosted by the MENA region. So, while MENA hosts substantially more refugees than it contributes to the global stock, the number of refugees originating from the region more than quadrupled (figure 2.4). This surge not only strains the resources of host countries but also highlights the severe impact of FCV on the region’s stability and development. Displacement disrupts social cohesion, overwhelms public services, and puts immense pressure on infrastructure, healthcare, and education systems. And the presence of large refugee populations can increase competition for scarce resources, such as water and arable land, further exacerbating tensions and potential conflicts within host communities.10 FIGURE 2.4 While MENA hosts substantially more refugees than it contributes to the global stock, the number of refugees originating from the region more than quadrupled Global refugee population by World Bank region, 2012–23 By origing region By hosting region 40 40 35 35 Number of Refugees (Millions) Number of Refugees (Millions) 30 30 25 25 20 20 15 15 10 10 5 5 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 East Asia & Pacific Europe & Central Asia Latin America & the Caribbean Middle East & North Africa South Asia Sub-Saharan Africa Other (non-IDA and non-IBRD) Source: World Development Indicators. Note: Regions based on the World Bank classification (IDA and IBRD countries only, except for Other). 10 See annex 4 for a more detailed discussion on the linkages between FCV and the three megatrends as well as refugee popu- lations in the MENA region. 25 Refugees visibly shape demographics in some MENA countries. For instance, more than 6 million Syrians were displaced since the beginning of its conflict, leading to visible changes not only in Syria, but also in Lebanon and Southern Türkiye. Palestinians displaced during past conflicts in the West Bank and Gaza now form a sizable part of the Jordanian population. Egypt is experiencing a surge of refugees from Sudan. But refugees are just one face of FCV settings. In 2022, the World Bank estimated that 850 million people were exposed to high- or medium-intensity conflict, with the number of FCV countries more than doubling over the last decade (Malpass 2022). Overall, 1.8 billion people lived in 57 FCV settings in 2020, with projections suggesting that this number will increase to 2.2 billion by 2030 and 3.1 billion by 2050 (Marley and Desai 2020). Mitigating the impacts of conflict on human capital, and enabling its formation despite the challenges of conflict, are key to avoid countries forfeiting a more prosperous future for generations. Conflicts in the MENA region have had a larger and more persistent negative economic impact than those in other parts of the world. And conflicts in MENA tend to spill into neighboring countries, reducing their per capita output by about 6 percent after a decade (IMF 2024b). Government spending tends to collapse following the onset of turbulence. In Yemen, it fell from 35 percent to less than 10 percent of a shrinking GDP after 2011, and in Syria from 20 percent to 10 percent. In Lebanon, it fell from 30 percent to 10 percent after 2019, with similar declines in Jordan and Iran, though not in Morocco (IMF 2023). A decade after a severe conflict, per capita output in the MENA region remains about 10 percent lower, whereas in other regions, the decline is typically less than 3 percent and recovering within five years. In this context, protecting human capital and rebuilding it despite the adversities is a critical policy decision for local de facto governments and international actors to avoid long-term collapse of people’s capabilities and the cycle of violence. Without these foundations, restarting economic growth is more complex, as the options for diversification away from a war economy narrow. Global Megatrends and Human Development in the MENA region 26 Preparing for Demographic, Climate and Technological Change 02 Shaping, embracing, and managing Global Megatrends and Human Development in the MENA region Preparing for Demographic, Climate and Technological Change 27 SHAPING, EMBRACING, AND MANAGING Is MENA destined to suffer from the combined challenges of an aging population, climate change, and technological disruption? Not necessarily. While the megatrends pose significant risks, they are not inevitable outcomes but forces that can be shaped. With the right HD policies, the region can turn these challenges into opportunities, harnessing advances and adapting to changes. The key lies in managing risks effectively and seizing the potential for healthy, productive, and secure lives. 2.1  Shaping the megatrends to the better Shaping megatrends requires strategic and decisive actions driven by people, supported by the right incentives and opportunities, to lead healthy and productive lives. Demography can be shaped by redefining aging, empowering families to achieve their desired fertility levels, and implementing well- Photo: © Arne Hoel /World Bank managed migration policies. Climate change can be steered through policies that support reducing greenhouse gas emissions. And technological innovation can be shaped into an advantage by fostering innovations that complement, rather than replace, human labor. Global Megatrends and Human Development in the MENA region 28 Preparing for Demographic, Climate and Technological Change 2.1.1  Healthy aging and redefining old-age Increasing life expectancy cannot moderate the demographic transition, but changing the concept of what constitutes “old” might—and should—be shifting and can shape the demographic transition. The discussion of old-age dependency rests on the assumption that 65 is the dividing line between young and old, a line that first appeared during the senate hearings on the Social Security Act of 1935 (U.S. Senate 1935). But globally, the median life expectancy at birth increased by almost 30 years between 1950 and 2023, rising from 46.4 years to 73.2 years. Healthy life expectancy improved from 58.3 years in 2000 to 63.7 years in 2019, including in all MENA countries (annex 1). So, while a 65-year-old today enjoys much better health than a 65-year-old in 1935, the definition of old age has remained unchanged for 90 years. The challenge, though, is not to change the definition of a statistical indicator, but society’s perception on what actually constitutes old. A simple redefinition of old-age from 65 to 70 by 2050 yields a radically different outcome when looking at old-age dependency ratios (figure 3.1). More elaborate simulations—taking into account currently observable behavioral changes toward longer work lives as well as higher female labor force participation—show even more encouraging results. The ratio of adults aged 15 and older not participating in the labor market to those participating in the labor market is deteriorating much less than the plain old-age dependency ratio and eventually even reversing its deterioration by 2050 (Koettl 2015a). So, changing the concept of what old-age means and taking into account behavioral changes already observable today paints much less of a doom-and-gloom scenario. FIGURE 3.1 Changing the concept of old-age paints much less of a doom-and-gloom scenario Old-age dependency ratios when old age is defined as 65+ (1970 to 2050) versus 70+ (2050 only) 60 50 Old-Age Dependency Ratio 40 30 20 10 0 Qatar UAE Yemen LIC Oman Kuwait Iraq Saudi Arabia Bahrain West Bank & Gaza Syria Egypt Djibouti MENA Jordan Libya Algeria Morocco World Lebanon Tunisia Iran HIC Europe 1970 2020 2050 2050 - For 70+/15-69 Source: United Nations 2024. Increased longevity may lead to aging, but this aging process is quite different when people’s additional years of life are in good health and transformed into longer work lives. Longevity accompanied by healthy aging mean that the extra years are not just more time lived, but more time lived in good health. Note, however, that although MENA made considerable progress in life expectancy over the last decades, the region is still lagging in healthy life expectancy, further stressing the need for healthy aging policies. 29 2.1.2  Empowering families to reach their desired fertility In addition to life expectancy, the dynamics of fertility are an essential component to shape the demographic transition. Experiencing a sharp decline in fertility rates, as observed in numerous Organization for Economic Co-operation and Development (OECD) countries, leads to significant fluctuations in cohort sizes, which in turn can result in retirement surges in certain years, thereby straining pension systems, labor markets, and economies. At the same time, declining fertility rates are a key to achieving the demographic dividend, when large youth cohorts benefit from a relative low number of dependent elderly and children. What smooths the demographic transition is having populations attain a balanced pathway in fertility decline. That is, the decline in fertility stays between the extremes of a sharp drop to ultra-low fertility rates and a stagnant or resurging fertility rate at high levels. Populations can then reap the benefits of lower fertility rates and a demographic dividend while avoiding the pitfalls of shrinking populations. Enabling families to achieve their wanted fertility might be the best way to reach that balance for both high and low fertility countries. Surveys of wanted fertility in MENA show that families wish to have fewer children than the current, relatively high, fertility rates might suggest (figure 3.2). So, by supporting families to achieve their wanted fertility, there might be an opportunity for MENA to reduce fertility rates further. In most MENA countries, wanted fertility is at about replacement level, suggesting further that a drop to very low fertility rates is unlikely, though these preferences variate slightly by gender.11 But concerns for future trends arise as the predictions of fertility rates in the region show a sharp decline in the next 30 years, with 10 countries in the region expecting to see fertility rates below replacement level by 2050 (see annex 1). This is reinforced by the trends in high-income countries, where fertility rates are below replacement levels, but the ideal number of children for women is above actual fertility, and again close to replacement levels (OECD 2016). This ultimately indicates that helping families to achieve their fertility goals is in general also helping to balance the demographic transition. FIGURE 3.2 Families wish to have fewer children than the current, relatively high, fertility rates might suggest Wanted fertility vs actual fertility rate in select countries (latest available number) 5 4.5 4 Total Fertility Rate 3.5 3 2.5 Replacement rate 2 1.5 1 0.5 0 Fertility Wanted Fertility Wanted Fertility Wanted Fertility Wanted Fertility Wanted fertility fertility fertility fertility fertility Egypt Jordan Morocco Yemen LMICs Source: Our World in Data 2024b, compiling World Bank data. Note: The wanted fertility is an estimate of what the total fertility rate would be if all unwanted births were avoided, based on survey data. 11 Studies in Iran and the OECD find that, in general, women do not wish to have fewer children than their male counterparts. But this is not universal, as surveys in the US and UAE reveal opposite preferences, with men having a preference for more children than their female counterparts (OECD 2016; Shukla et al. 2023; Lotfi et al. 2017). Global Megatrends and Human Development in the MENA region 30 Preparing for Demographic, Climate and Technological Change It is crucial to acknowledge the tradeoff that many women face when balancing family formation and work decisions. In the MENA region, female labor force participation remains low, averaging 19 percent in 2023, far below the global average of 48 percent (World Development Indicators). This disparity is rooted in gender- unequal social norms, disproportionate burdens of unpaid care and domestic responsibilities, and a lack of supportive policies and infrastructure. Traditional views that prioritize men’s employment over women’s are also prevalent in the region. In Iraq, Jordan, and Lebanon, a majority of the population believes preschool children suffer if their mother works. Compared with global results, survey data indicate more conservative views on gender, work, and income in MENA (Radaelli et al. 2023). 2.1.3  Supporting youth mobility for opportunities abroad Migration also shapes demographic trends, though only temporarily, by enabling younger countries to narrow their youth bulge and aging countries to attract a younger workforce. This concept, demographic arbitrage, enables countries to balance their demography by actively managing outflows and inflows of people. In other words, when the demographics of two countries separately might look unbalanced—one old and the other young—jointly they feature a balanced demography and migration helps to achieve this balance. While it is not a permanent solution for aging populations—since migrants will also age—it can facilitate a smoother demographic transition by filling labor gaps from decreasing numbers of workers among certain age cohorts. For young countries, migration of youth can help reduce the size of the largest age cohorts, particularly youth bulges, especially when young countries cannot provide sufficient opportunities to their young people at home (see below for a discussion of the demographic dividend). MENA sends many migrants (emigration) and receives many (immigration), which could enable demographic arbitrage even within the region. Algeria, Egypt, Morocco, and Tunisia have small but noticeable shares of their populations living abroad, with each having less than 10 percent of their population as international migrants (figure 3.3). Fragile regions such as Syria and West Bank and Gaza have much higher emigration rates, with more than 40 and 80 percent of their respective populations residing outside their home countries due to ongoing conflict and instability. And GCC countries such as Kuwait, Qatar, and United Arab Emirates stand out as major migrant destinations, with more than 70 percent of their populations consisting of international migrants. Although forced migration plays a significant role, MENA countries are already taking advantage of migration opportunities, both as sending and receiving countries. These trends present the possibility for regional wins-wins, as countries with high shares of emigrating workers could benefit from cooperation with the GCC countries, which are looking for workers to fulfill the labor demand. Surveys confirm that the potential for emigration is considerable, with more than 50 percent of MENA’s youth considering emigration and the majority listing the economy as the main reason for emigration (see annex 1). For the demographic arbitrage to succeed, however, it is essential to ensure that migrating youth can do so safely and through well-managed programs that allow them to seize opportunities in receiving countries and integrate effectively into their labor markets. Ideally, such programs also safeguard against brain drain by facilitating investments in education systems in sending countries. When carefully devised, these migration programs can mitigate demographic challenges, generating advantageous outcomes for all countries involved, regardless of their position in the migration spectrum, and most importantly for the migrants themselves. 31 FIGURE 3.3 MENA sends and receives many migrants, which could enable demographic arbitrage International migrant stock as a percentage of the total population by country of origin or destination, 2020 estimates 100 International Migrants (% of total population) 90 80 70 60 50 40 30 20 10 0 Morocco Tunisia Egypt Algeria Iraq Yemen MICs LICs Iran Syria West Bank & Gaza Libya HICs Lebanon Jordan Saudi Arabia Oman Kuwait Qatar UAE origin destination Source: UNDESA 2020. 2.1.4  Reducing greenhouse emissions People as consumers and investors can shape climate change by reducing the carbon footprint of their consumption and by investing in carbon-reducing technologies. They can stand at the front of the transition to a greener economy by modifying their own consumption and investment behavior. The complex path ahead is paved with inclusive opportunities for individuals as the evolution to a greener and more sustainable way of life can lead to high payoffs for society and the economy, including more secure lives. The MENA region currently allocates 3.9 percent of its GDP to energy subsidies. Such high expenditures are unmatched by any other region (figure 3.4). While they serve as a social policy mechanism to ensure the affordability of essential commodities, they impede sustainability efforts, particularly when they favor high-carbon footprint products, leading to unintended environmental consequences. For instance, fuel tax reductions and lower energy prices lead to increased fossil fuel consumption and a rise in greenhouse gas emissions. Subsidies for the private transport sector may cause more traffic and pollution, and those in agriculture can encourage the overuse of chemicals, and in fisheries, lead to overfishing (OECD 2006). Phasing out subsidies for carbon-intensive products, or even imposing taxes on them, and replacing them with targeted cash transfers can lower carbon emissions while softening the social impact of rising energy prices (Giron and Weedon Chapman 2024). Reducing harmful subsidies decreases pollution and waste, and contributes to a fairer income distribution and to more sustainable community and national growth (ILO 2018b). Global Megatrends and Human Development in the MENA region 32 Preparing for Demographic, Climate and Technological Change FIGURE 3.4 Allocating 3.9 percent of MENA’s GDP to energy subsidies is unmatched by any other region Spending on energy subsidies, social assistance, and cash transfers as a percentage of GDP (2021, or latest year) 14 12 10 Spending (% of GDP) 8 6 4 2 0 Libya Algeria Iran Saudi Arabia Iraq West Bank & Gaza Lebanon Kuwait Egypt MENA Djibouti Tunisia Morocco LMIC UMIC SSA LAC SAR ECA Jordan EAP HIC Energy subsidies Social assistance Cash transfers Source: Ridao-Cano et al. 2023 In the 2010s, Egypt, Iran, Jordan, and Morocco initiated comprehensive energy subsidy reforms. Egypt’s reform, initiated in 2014, gradually reduced subsidies, allowing the government to reallocate financial resources, doubling the healthcare budget and boosting education funding by 30 percent (Giron and Weedon Chapman 2024). Iran also underwent significant reforms with the removal of US$50–60 billion in energy subsidies annually from 2010. In return, Iranian households received a cash transfer and businesses for investment in energy efficiency. The reform ensured that households would get at least 50 percent of the revenue increase, initially as cash payments, with plans to later use some funds for social benefits and public services (Guillaume, Zytek, and Farzin 2011). Significant potential remains for reforming subsidies in the region. Redirecting these funds toward sustainable objectives, like home energy efficiency improvements, public transportation use, and eco- friendly products could enhance environmental outcomes. Studies suggest that encouraging shifts in consumption patterns has considerable potential to lower emissions. For example, modifying transportation habits can cut carbon emissions by 1.7 tons per capita. Adopting a plant-based diet can reduce emissions by 0.9 tons. And moving to renewable energy and home renovations can yield savings of up to 1.6 tons of carbon emissions per person, compared with the current average of 6 tons per capita for overall consumption (Ivanova et al. 2020). And European Union research indicates that changes in consumer behavior can reduce carbon footprints by 25 percent. The most substantial changes arise from altering consumption habits (28 percent of the total), reducing consumption (26 percent), choosing products with a lower carbon footprint in production (17 percent), and selecting goods with lower emissions during use (19 percent) (Moran et al. 2020) People can also shape climate change by investing in carbon-reducing technologies for households. Investments in green household energy consumption, like solar panels or geothermal heating, transport, like electric vehicles, or housing assets, like insulation, can be encouraged through subsidies. In Denmark, for example, wind power subsidies were implemented including a feed-in tariff that ensured wind power producers received a fixed, above-market price for the electricity they generated (Johansen 2021). In the United States, FutureCard, a private sector initiative, incentivizes sustainable living by offering cashback rewards for eco-friendly purchases, demonstrating how financial products can encourage investment in carbon-reducing technologies (Future 2024). 33 But making subsidies for household green investments pro-poor is a challenge. Such programs require an elaborate design that not only gives higher subsidies to poorer households but also assesses what type of investment—and at what level—is appropriate for different income levels. For example, large-scale investments in solar panels, even if highly subsidized, might not be affordable for poorer households, but switching to a green energy provider might be more appropriate. Determining what investments are appropriate for what type of households in combination with determining the size of the subsidy requires complex program design and significant implementation capacities. 2.1.5  More labor-complementing innovations Shaping the megatrend of technological advance through HD policies is more difficult than shaping the other two megatrends, but it is possible. Technological advance relies on scientific progress, on new findings, and on innovations. However, as random as the process might seem, some tools can help shape technology. Rodrik (2022) advocates for proactive policies that encourage the development of technologies designed to complement labor rather than replace it. He argues for lower rebalancing taxation on labor and capital toward the latter, but other scholars point out to the important role of social dialogue in shaping technological development. The first tool to shape technological progress is human capital, which will be especially important for countries further behind. Human capital is the bedrock for building technological progress, as it encompasses the collective skills, knowledge, and experience possessed by an individual and society. Foundational skills, such as literacy, numeracy, critical thinking, and problem-solving—as well as digital skills—are the basis for further learning and innovation. Encouraging students to pursue careers in science, technology, engineering, and mathematics (STEM) fields ensures a steady pipeline of skilled professionals who can drive technological advances. A strong tertiary education sector supports this by providing advanced knowledge and specialized training, while research, often conducted at universities and research institutions, contributes to the development of new technologies. Partnerships with the private sector are equally important, as they facilitate the practical application of innovations and provide the capital and market expertise to bring technological solutions to scale. Together, these elements create an ecosystem that fosters continuous technological development. Governments play a pivotal role by funding research in public institutions, especially universities, with a focus on human-centric technology. These measures can help ensure that technological progress not only drives economic growth but also enriches the quality of work and creates new meaningful tasks for the labor force. A second tool to shape technological progress is regulating how technology is used. In the digital economy, labor regulations not only prevent exploitation and ensure fair wages but also encourage the development of labor-complementing technologies (Acemoglu and Restrepo 2018). Setting standards for wages, hours, and working conditions influences companies to invest in technologies that enhance, rather than replace, human labor. Strong labor institutions can ensure that technological advances are shared equitably. Addison (2005) emphasizes that effective labor practices, including employee involvement, can enhance firm performance. In the U.S. auto industry, the United Auto Workers union negotiated improved conditions, shaping technological investments to balance productivity with worker interests (Milkman 1997). In Hollywood, the 2023 writers’ strike demonstrated how the Writers Guild of America shaped AI’s role in content creation. The guild advocated for AI to complement, rather than replace, human creativity, securing fair compensation and job protections while guiding responsible AI integration (Acemoglu, Johnson, and Lentsch 2023). These cases show how labor regulations and dialogue can align technological progress with the interests of both workers and industries. Global Megatrends and Human Development in the MENA region 34 Preparing for Demographic, Climate and Technological Change 2.2  Embracing and harnessing the opportunities of the megatrends The demographic transition, climate change, and technological advances all present opportunities for people to reach healthy, productive, and secure lives. The demographic dividend, longer work lives, and the expansion of the care economy enable both youth and older workers to thrive, age healthily and well supported, and save, invest, and contribute to economic development. These shifts can also enhance women’s participation in the labor market and improve care services for children, the elderly, and other vulnerable groups. Similarly, the transition to a greener economy reduces carbon emissions, mitigates climate change, and thus ensures more secure lives, but also offers the chance to reshape the labor market by directing workers and their skills toward the growing green sector. Meanwhile, technological advances—particularly in AI—hold the potential to drive significant productivity gains, leading to higher wages and overall economic expansion. 2.2.1  The demographic dividend Populations with a significant proportion of young people and fewer elderly and children have a substantial opportunity for economic development. The demographic dividend occurs when populations with a youth bulge experience accelerated economic growth. This growth is driven by a population’s largest youth cohort entering the labor market, freshly educated and with fewer responsibilities for caring for children or the elderly. This allows this young generation to excel in the labor market, enhance productivity, and reinvest savings into the economy. Notable examples of populations that have successfully leveraged the demographic dividend include the Asian Tigers—Hong Kong SAR (China), Singapore, South Korea, and Taiwan (China)—which experienced remarkable growth during the twentieth century (Mason and Kinugasa 2004). But this demographic dividend materializes only for countries that provide ample opportunities for their youth. Countries reaping the dividend have invested heavily in the human capital of their youngest generation. They have focused on enhancing both the quality and quantity of foundational education (early childhood development, primary, and secondary education), and creating an education system that responds to emerging opportunities. This improvement in education quality has been coupled with substantial investments in health systems, improving child survival rates, preventing noncommunicable diseases, and ensuring access to reproductive health and family planning services (Wilson Center 2013). Investing in women also is essential to reap the demographic dividend. Given the transformative potential of empowering women during demographic transitions, policies should enhance women’s access to productive skills, facilitate their transition to wage labor or self-employment, and support investments in children’s human capital. Leveraging the benefits of lower fertility and fostering sustained economic development requires providing family planning and maternal health programs to generate improved health outcomes for mothers and children and to improve child survival and educational outcomes. Investing in such programs can lead to productivity gains, particularly among women, and increased household physical assets over the long run (Schultz 2009). Even with the investments by MENA governments, a significant share of youth’s talent and human capital is not utilized, putting at stake the potential benefits of the demographic dividend. The proportion of idle youth who are not in education, employment, or training (NEET) exceeds 20 percent in many MENA countries, significantly higher than in emerging economies and OECD countries (figure 3.5). And among young people who have entered the labor market, many are unable to find employment. Several countries in the region face unemployment rates for youth that are nearly double the averages of both low-income and high-income countries (ILO 2024; Ridao-Cano 2024). 35 FIGURE 3.5 The proportion of idle youth exceeds 20 percent in many MENA countries Percentage of youth (15 to 29) not in education, employment, or training (NEET), 2022 35 30 25 NEET Rate 20 15 10 5 0 Jordan West Bank Iran Egypt Oman Tunisia Lower Saudi OECD High UAE and Gaza middle Arabia income income Source: World Development Indicators 2024. To fully realize the advantages of the demographic dividend, MENA countries need to increase investments to raise youth employment rates, such as introducing reforms to boost economic growth, improve regulations for job creation, ensure the inclusion of women in the labor market, and address skill shortages for sectors with growth potential. Among HD policies, investments in education to build strong foundational skills, are essential to reap the benefits of the demographic dividend in the coming decades. Social and labor policies need to support youth in transitioning from education or idleness into work. This will not only help them capitalize on their youthful populations but also ensure they do not face the challenges of an aging population without having achieved substantial economic growth. In the meantime, assisting young people in finding opportunities abroad can also be beneficial. 2.2.2  Longer work lives When added healthy years of life translate into longer work lives, increased longevity translates into additional economic activity and higher welfare. When individuals delay retirement and extend their working lives, they contribute to the economy for a longer period and significantly increase their lifetime earnings. Each additional year of work not only provides another year of income but also allows for continued contributions to retirement savings, which benefits from compounded growth over time. Delaying retirement typically increases retirement benefits while also delaying personal savings withdrawals, preserving capital and allowing it to grow further. The cumulative effect of these factors means that working longer can substantially increase an individual’s financial resources during retirement, enhancing their economic security and overall welfare. People in OECD countries have started to extend their work lives, but not yet in MENA. Their average age of labor force exit has been increasing since the 2000s, from 61.8 years to 64.4 for men and from 59.7 to 63.1 for women in 2022, with a remaining life expectancy at labor force exit of about 18 years for men and 23 for women, showing that increased longevity can translate into longer work lives (OECD 2023a). In the MENA region, the average effective retirement age is currently 54, with the remaining life expectancy at labor force exit at 27 years (figure 3.6). Global Megatrends and Human Development in the MENA region 36 Preparing for Demographic, Climate and Technological Change FIGURE 3.6 The average effective retirement age is currently 54 Average effective retirement age and remaining life expectancy at retirement age in MENA countries in 2021 (years) 90 80 70 24 20 20 18 29 29 26 26 27 23 26 20 22 22 21 27 38 19 60 50 40 30 59 60 60 64 54 54 55 55 55 56 56 57 58 58 58 58 54 20 45 10 0 Qatar Kuwait Bahrain Jordan Iran Oman Egypt Iraq Algeria MENA Morocco (private) Saudi Arabia (private) Tunisia (public) Saudi Arabia (public) Morocco (public) Tunisia (private) Lebanon (public) West Bank & Gaza (public) Average effective retirement age Remaining life expectancy at average effective retirement age Source: Pallares-Miralles et al. (forthcoming). Note: World Bank estimates based on average effective retirement age for 2021. Life expectancy at the effective retirement age is based on UN World Population Prospects for 2021, retrieved in 2024. Moreover, the productivity of older workers is not necessarily declining. Older workers often possess a wealth of experience and a unique set of skills to complement the vibrancy and technological adeptness of their younger counterparts. For example, older employees may excel in problem-solving and have a comprehensive understanding of their industry, making them invaluable for strategic planning and mentorship. They might encounter challenges with new technologies, but workplace adaptations and adjustments to allocate them on tasks that consider their strengths can mitigate such issues. BMW has redesigned assembly lines to accommodate older workers, resulting in productivity that rivals those of lines operated by younger staff (Loch et al. 2010). And neuroscientific evidence suggests that older workers can perform as well as younger workers in certain tasks by relying on different parts of the brain (Koettl 2015b). Nor are older workers taking away the jobs of youth—to the contrary. The notion that increased employment of older workers reduces job opportunities for younger workers, the lump-of-labor fallacy, has been debunked. Countries with higher employment rates of older people also tend to have higher employment rates of youth, indicating a positive correlation between the two groups (Abels et al. 2014). Further, older and younger workers have different skill sets and are thus complements rather than substitutes, with the labor market participation of older workers stimulating the economy and creating higher aggregate demand for labor, including that supplied by younger workers (Schmillen et al. 2020). So, it is important to dispel the myth of older workers crowding out jobs for the young and instead focus on policies that foster the productive and inclusive employment of older workers while also supporting the employment prospects of youth. With work lives increasing and labor becoming scarcer, the returns on human capital investments will increase. As individuals extend their careers, the duration of leveraging their educational and skill-based investments expands, allowing them to capitalize on these assets for a longer period. Concurrently, demographic shifts will contract the labor supply, intensifying the demand for skilled labor. In a market where skilled workers are in short supply; employers are willing to pay a premium for those who possess the requisite competencies and knowledge. This dynamic creates a favorable environment for workers who have invested in their human capital, as their skills become more valuable and sought after, underscoring continuous learning and development to maintain competitiveness and relevance in the evolving job market. 37 2.2.3  The care economy The demand for long-term care is projected to increase across the MENA region. The need currently ranges from 2.8 percent of the population in Oman to 18.8 percent in Morocco and is projected to rise by an additional 0.3 to 0.9 percent of the population until 2030 (Kanth et al. forthcoming) (figure 3.7). Policies focused on health longevity can help mitigate the high projected increase in LTC need and increase healthy years of life. FIGURE 3.7 The need for long-term care ranges from 2.8 percent of the population to 18.8 percent and is projected to rise Projected share of the population in need of long-term care for select MENA countries 25 Population needing long-term care 20 15 10 5 0 Egypt Jordan Lebanon Morocco Oman Tunisia 2024 2030 Source: Kanth et al. (forthcoming), prepared for this report. Childcare is also an important part of the care economy, but its use, especially formal childcare services, is low in the MENA region. Survey data suggest that only 11 (Jordan) to 36 percent (Lebanon) of mothers with children aged 0 to 5 use childcare services, the majority in informal setting by families, friends, or neighbors (Redaelli et al. 2023). Among working mothers, the use of childcare services is much higher than for inactive or unemployed mothers, showing a correlation between the use of childcare services and labor force participation (Redaelli et al. 2023). Women see the in the region see the lack of childcare as the main barrier to employment (figure 3.8). In 2018, women in MENA committed 4.8 times more total daily time to housework and family care, or unpaid care work, than men, leading them to give up the workforce to fulfill care and domestic labor tasks. Unpaid care work is the main reason, with 69 percent of women citing it for why they are not in employment or searching for a job (ILO 2023). Global Megatrends and Human Development in the MENA region 38 Preparing for Demographic, Climate and Technological Change FIGURE 3.8 Women in MENA committed 4.8 times more total daily time to housework and family care than men Barriers to female employment by age group in the MENA region (2021–22) Lack of transparency Barriers to Female Employment No gender separation Socially unacceptable Men given priority Low wages Lack of childcare 0 5 10 15 20 25 30 35 Percentage of women (youth and non-youth) reporting each barrier Youth Non-youth Source: Arab Barometer. Developing the care economy enables more women to enter the labor market while continuing to have a family; it creates a large number of jobs across different occupations in the care industry, especially for women, and it improves the quality of care. Insufficient care options keep women in unpaid caregiving roles. Investing in care will be essential to counteract this effect, since reducing the care burden at home increases women’s employment, participation, and income. Developing the care economy will also create many jobs for women. Women constitute 65 percent of the 381 million individuals employed in this sector globally. MENA stands to benefit immensely from this trend, with women’s participation in the labor force under a quarter, yet more than half of the employed women are in the care industry—the highest proportion worldwide (UN Women 2023). Strategic investments in childcare and LTC services across 12 MENA countries are projected to catalyze job growth, with the ILO forecasting the creation of 5.1 million jobs in childcare, 5.3 million in LTC, and an additional 2.6 million in ancillary noncare sectors by 2035 (ILO 2023). A well-developed care economy also promises to significantly enhance the quality of life for care recipients, including children enrolled in formal early childhood care and education programs. These programs are vital for the foundational stages of a child’s life, supporting their survival, growth, and development. The increased need for care in aging populations around the globe also provides an opportunity for youth in MENA outside their home countries. MENA sits next to the oldest region in the world, Europe and Central Asia (ECA). These shortages will increase in the short to medium term. Similarly, many countries within the MENA region, especially GCC countries, largely rely on migrant workers for their care economies, providing additional opportunities for care workers from other MENA countries. For these opportunities to materialize, policies need to ensure safe migration and safeguard sending countries from a brain drain. 39 2.2.4  The green economy Transitioning to a greener economy, essential to support a drop in carbon consumption, presents an opportunity to reshape the labor market, by shifting workers and their skills toward the growing green demand. A study by the ILO (2018b) forecasts a net positive impact on global employment from initiatives in the energy, transport, and construction sectors to cap global warming at 2°C throughout the century. Specifically, a shift to sustainable practices in the energy sector is projected to generate approximately 18 million additional jobs worldwide by 2030 compared with a business-as-usual trajectory, marking a 0.3 percent increase between the two scenarios. High-income countries in the region will have the financial mechanisms to facilitate this transition, but lower-income countries may face challenges in initiating it due to limited resources. Even so, the trade- related benefits of decarbonization could serve as an underlying catalyst for change. Several MENA countries have set ambitious climate-related objectives, motivated by international commitments, but policymakers are struggling to turn these ambitions into concrete actions. This limited climate action could affect trade and investment, especially as stricter climate-related regulations are being implemented globally. Trade from MENA and foreign direct investment (FDI) into the region are expected to be influenced by climate policies from major partners and investors, such as through the European Union’s Carbon Border Adjustment Mechanism and the Corporate Sustainability Due Diligence Directive. The schemes will require importers of certain products to pay for the unpriced carbon emissions embedded in these goods starting in 2026, with the aim of creating incentives for non-EU companies to reduce emissions and align with global climate goals. The transition to a greener economy will entail both the disappearance and emergence of jobs across sectors and world regions. For instance, the energy sector is likely to see significant job growth in solar thermal and wind electricity generation, while jobs in coal electricity production and crude oil extraction may decline. The Americas, Asia and the Pacific, and Europe are projected to experience net job creation (approximately 3, 14, and 2 million jobs, respectively). In contrast, the Middle East and Africa might face net job losses (300,000 and 350,000 jobs, respectively) if their economic structures continue along historical trends (ILO 2018b). MENA could significantly benefit from greening the economy. The region receives a significant portion of the solar energy striking the earth, with estimates suggesting that 22 to 26 percent is received by MENA. And about 75 percent of the MENA region has average wind speeds that exceed the minimum threshold necessary for utility-scale wind farms. Egypt, Morocco, and Tunisia have some of the world’s highest wind speeds, making them ideal for wind energy development (World Bank 2020a). Transitioning to renewable energy could yield approximately 67,000 net new jobs annually in Egypt and 28,000 in Morocco up to 2030. In the GCC countries, the shift to renewable energy could generate upward of 220,500 direct jobs by 2030. In Tunisia, the aim is to create 70,000 jobs from 2021 to 2035 by switching to clean energy (IRENA 2019; Deloitte 2022). The MENA region as a whole could potentially generate 10 million new jobs by 2050 through decarbonization and green industrial growth. These policies could foster a 7.2 percent increase in GDP and a 5.3 percent boost in employment by 2050 (UN UAE 2023). As people gear up for a shift to new employment opportunities, most will have to either acquire new skills or enhance their existing ones. Green skills are widely sought after across various economic domains, and across skills levels (figure 3.9). They are prevalent across numerous industries and in diverse forms. For example, in Egypt, the industries with the largest share of green skills include not just in construction, water supply, and waste management but also in wholesale and retail trade, jobs not usually linked to greening the economy (Sabarwal, forthcoming). Global Megatrends and Human Development in the MENA region 40 Preparing for Demographic, Climate and Technological Change FIGURE 3.9 Green skills are widely sought after across various economic domains and skills Distribution of green jobs by skill level according to online job postings (January 2022–March 2023) Qatar Morocco Tunisia Low In KSA, UAE and Tunisia, 10% UAE of green jobs posted online required Saudi Arabia only lower-secondary education Egypt Qatar Morocco Tunisia Medium UAE Saudi Arabia Egypt Qatar Morocco Tunisia High UAE Saudi Arabia Egypt 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Proportion of green job postings Source: Sabarwal et al. forthcoming. Three main challenges are related to skill development and greening the economy. First, there is a shift in demand toward roles pivotal for driving the green economy. These positions, which require a deep understanding of green skills, are not new, but the demand for them is expected to surge. For instance, the past five years have seen a dramatic 237 percent increase in renewables and environment roles in the United States, a stark contrast to the 19 percent growth in oil and gas positions (LinkedIn 2022). Second, a significant number of jobs that may not be highly specialized or entirely green will still require upskilling the current workforce. The integration of green and digital skills aligns with the expansion of “greening jobs” such as compliance and facility managers, technical sales representatives, sustainable finance specialists, urban planners, and data scientists (LinkedIn 2022). Such workers should not expect a complete occupational transition but can expect that requirements for specialized knowledge will increase. Third, there will be expanding demand for entirely new skills and job roles to cater to more specialized requirements. Fast-growing positions such as sustainability managers, wind turbine technicians, solar consultants, and environmental health and safety specialists are examples of such emerging occupations. These roles are scarce in the current labor market and will require substantial skill development. With the demand for green jobs rising faster than the existing supply, workers with these skills can find jobs faster and at higher wages. The growth of job listings for green positions is nearly double that of the workforce qualified to fill these roles. And green skills and associated jobs have demonstrated remarkable resilience during periods of economic instability. During general hiring slowdowns, vacancies requiring at least one green skill saw an increase exceeding 15 percent (Willige 2024). In Egypt, the average monthly earnings for salaried workers with post-secondary education stand at about 3,200 Egyptian pounds in nongreen roles, but 5,250 Egyptian pounds for those in highly green occupations, where green skills constitute over 15 percent of the job’s skill set (Sabarwal forthcoming). 41 2.2.5  The digital economy Artificial intelligence has the potential to enhance and transform existing jobs—if workers are properly trained on how to use it. AI’s ability to assist in and, to a certain extent, automate decision-making allows workers to focus on more complex and creative aspects of their jobs, enhancing their skills and productivity. For instance, AI can aid teachers in providing personalized education, enabling them to cater to individual student needs more effectively. And in healthcare, AI can assist nurses and technicians in performing advanced procedures, elevating their roles and responsibilities (Chen, Li, and Tang 2022). But integrating AI into workflows requires that workers have an adequate set of skills to use them correctly. In a study of radiologists incorporating AI predictions into their diagnosis, the results showed that these professionals must address their cognitive biases and improve how they work with these tools (Agarwal et al. 2023). Radiologists did not adjust their diagnostic probabilities sufficiently based on AI inputs and failed to adjust their own diagnosis based on new information provided by the AI predictions. They thus need better training or system design to help integrate AI assistance into their diagnostic process so that they can fully leverage AI’s potential for diagnostic accuracy. To capitalize on the advancements of evolving technologies like AI, regulations governing occupations must be dynamic. Such regulations, including licenses, must evolve to reflect the changing nature of work brought about by technology, ensuring that professionals remain competent in an increasingly automated environment. For current professions, this means updating regulatory frameworks to allow for the integration of new tech-enabled responsibilities. As AI becomes more prevalent in healthcare, regulations should enable doctors to incorporate AI diagnostics into their practice, enhancing their ability to provide care. In the legal field, lawyers could be allowed to use AI for document review and case prediction, streamlining their workflow. As technology evolves, lower-level occupations might also be able to take on new responsibilities now reserved for higher-level occupations. AI is also expected to create entirely new occupations. As AI technologies advance, new roles will focus on their development, oversight, and integration into the workplace and society. The emergence of AI ethicists and policy advisors will be critical to ensure that AI applications adhere to ethical standards and regulatory requirements. And AI trainers will become increasingly important, as they will be responsible for teaching AI systems to interpret and respond to tasks with a nuanced understanding that mimics human cognition. New professions will evolve to complement the capabilities of sophisticated AI systems (Susskind and Susskind 2015). These examples show that the evolution of AI is not merely about automating existing jobs but also about forging new paths for human creativity and enterprise. To fully benefit from AI, workers must acquire relevant skills and be mobile enough to shift across occupations and locations. They need to focus on abilities beyond AI’s scope, such as creative problem- solving, interpersonal communication, and strategic decision-making. While AI excels at data processing, human analysts remain essential for interpreting patterns and making strategic decisions. So, social, emotional, and advanced cognitive skills will become increasingly valuable as AI transforms industries (Bessen 2019). Lifelong learning and adaptability are also crucial for workers to complement AI and continue adding value. And educational curricula and training programs must evolve to include AI literacy and foster mobility across sectors and locations (Deranty and Corbin 2022; Rodrik and Sabel 2019). 2.2.6  More mobile and flexible forms of work Technological advances have facilitated remote and online work, enabling individuals to work from home or any location with internet access and companies to outsource business processes. This trend has amplified the demand for remote work, leading to the outsourcing of business processes such as call centers and other service-oriented functions. By 2030, the number of these global digital jobs that can be performed remotely from anywhere is expected to rise by roughly 25 percent to around 92 million (WEF 2024). Global Megatrends and Human Development in the MENA region 42 Preparing for Demographic, Climate and Technological Change The rise of the gig economy, underpinned by technological progress, provides new avenues for employment. Women, youth, and individuals with disabilities—particularly those in secondary cities—seem to benefit more from these new forms of work. In countries where data are available, the demographic profile of online gig workers skews younger than that of their counterparts in the traditional services sector and the informal sector. While men constitute the majority of online gig workers, in some regions women are participating in the online gig economy at higher rates than in the general labor market, the services sector, or the informal sector (Datta et al. 2023). This inclusivity allows these groups to engage more actively and flexibly in the workforce, leveraging remote and online work opportunities. The shift to home-based work following the COVID-19 pandemic has also reshaped traditional household roles, with increased involvement of fathers in childcare and household responsibilities than before the pandemic (Barroso 2021). This shift fosters a more equitable distribution of domestic duties, enhancing family well-being and dynamics (Wu et al. 2022). Labor regulations need to be flexible enough to allow for these new forms of work to flourish while providing adequate labor and social protection. As the new forms of work emerge, governments need to adjust regulations to allow for new, nonstandard forms of employment, but in a way that gives employers and workers the desired flexibility without segmenting labor markets. Finding the right level of social protection— such as pensions and access to health care—is crucial for these new forms of work. 2.3  Managing the risks of the megatrends The three megatrends can be shaped and opportunities will arise, undoubtedly, but the risks for people in MENA will also increase. Three risks are of particular concern. First is an increased risk that the skills people have acquired during their early years and while working will, at some point, become less relevant or even obsolete, because of technological progress. Second is the increased risk of spending more time in dependency, especially toward the end of life, because of increased longevity. Third is the increased frequency and severity of shocks that will lead to the destruction of assets, livelihoods, and sustained income loss for people. 2.3.1  Obsolete skills The evolving demographic landscape, characterized by higher life expectancy and extended work lives, is reshaping the skills landscape. As the workforce ages, individuals face heightened risks of skills becoming obsolete. With individuals expected to work longer to sustain their livelihoods, coupled with rapid technological change, there is a pressing need to continually adapt to shifting career demands. The extension of work lives requires more frequent transitions between jobs and industries, so people have to remain agile and responsive to new opportunities. This dynamic environment underscores lifelong learning and reskilling to ensure that they remain competitive in the labor market. The global transitioning to a green economy is driving demand for new skills, particularly in sectors such as renewable energy, sustainable agriculture, and environmental management. As industries adapt to more sustainable practices, individuals must acquire new competencies to capitalize on emerging job opportunities. But climate change is also hitting sectors like agriculture, where extreme weather events and shifting climate patterns are reducing crop yields and threatening livelihoods. This dual pressure underscores the urgency for workers to develop green skills to adapt to the challenges posed by climate change and the opportunities offered by a sustainable economy. The rapid pace of technological change, particularly the rise of automation and artificial intelligence, is fundamentally altering the demand for skills. Workers in routine and manual occupations face an increased risk of displacement as automation streamlines processes and reduces reliance on human labor. This technological shift demands a recalibration of skills toward digital literacy and technical proficiency. But unequal access to technology and training exacerbates the digital divide, leaving some individuals 43 disadvantaged and widening social disparities. As mentioned, 45 percent of jobs in MENA could be automated by 2030 (Aus dem Moore et al.2018). This estimate is based on the link between the potential for job automation and the low-to-medium levels of education and experience among workers, with nearly 57 percent of the workforce in those countries having only a high school education or less (Aus dem Moore et al. 2018). 2.3.2  More time spent in dependency As life expectancy in the MENA region continues to rise, people are confronted with the dual challenges of extended longevity and increased dependency. While increased life expectancy is a testament to advances in healthcare and living standards, it also presents new challenges. Longer lifespans mean that individuals may face prolonged periods of retirement and potential dependency, particularly in the absence of robust healthcare and social support systems. This underscores the need for comprehensive strategies to promote healthy aging and financial security throughout life, as dependency can strain family resources and exacerbate financial and emotional stress for both the elderly and their caregivers. The financial implications of living longer without extending working lives pose significant challenges to old-age poverty prevention systems. Individuals risk outliving their savings, leading to increased financial dependency on others. Ensuring the sustainability of pension systems and promoting financial literacy can safeguard the economic well-being of individuals as they age. Public pension systems in MENA are already grappling with financial challenges, even without factoring in the aging population (Arab Monetary Fund and World Bank 2017). Even if the current demographic structures remain unchanged, these systems would face difficulties due to the misalignment between sustainable and actual implicit rates of return on contributions, which population aging will only exacerbate. Due to low coverage rates in the region, the currently favorable old-age dependency ratios do not necessarily lead to favorable pension system dependency ratios in the future; and an open question remains about financial support as the currently uncovered population ages. 2.3.3  More frequent and more severe shocks The MENA region is acutely vulnerable to the impacts of climate change, already evident in more frequent and severe environmental shocks. Climate change is expected to intensify the frequency and severity of extreme weather events, such as heatwaves, floods, and storms. These events pose significant health risks, increasing illness and disability rates and placing additional demands on healthcare systems. The economic impacts of these shocks can be devastating, disrupting livelihoods, destroying assets and income sources, and exacerbating poverty and inequality. Catastrophic events—whether sudden events like floods and storms or slower moving events like rising sea levels—will displace communities and necessitate costly reconstruction efforts. Individuals may be forced to relocate and transition to new industries, underscoring adaptive strategies to build resilience against climate impacts. In 2023, the catastrophic flooding in Libya caused damages and losses estimated at US$1.65 billion, or 3.6 percent of Libya’s GDP in 2022 (World Bank 2023). Moreover, the inability to secure insurance coverage for climate-related damages can lead to financial insecurity and require difficult decisions about relocation and adaptation. The inability to secure against such risks might be driven by market failures, which, in principle could be addressed by policy interventions aiming at developing insurance markets. But as the frequency and severity of adverse events increase, certain risks might become uninsurable, such as insurance to protect housing assets in coastal areas. These require entirely different policy interventions that are not aimed at replacing lost assets and livelihoods in safer areas. 03 Human development policies for shaping change, embracing opportunities, and managing risks Global Megatrends and Human Development in the MENA region Preparing for Demographic, Climate and Technological Change 45 HUMAN DEVELOPMENT POLICIES FOR SHAPING CHANGE, EMBRACING OPPORTUNITIES, AND MANAGING RISK The three megatrends of aging, climate change, and technological advance will affect the people of MENA in many ways, but people can shape the coming changes, embrace the opportunities, and manage the risks. The trends are not immutable forces; individuals and societies have the agency to shape their outcomes. By adopting policies that promote healthy aging, environmental sustainability, and technological innovation, the region can harness these trends to its advantage. Embracing the opportunities will require leveraging the experience of an aging population, capitalizing on the potential for a green economy, and integrating new technologies into the workforce. But managing the risks associated will require investments in education, infrastructure, and social safety nets. Shaping change is about empowering people: People do not have to stand on the sidelines, they can influence the three megatrends. The demographic transition, climate change, and technological advance, while challenging to the MENA region, also offer avenues for engagement to shape Photo: © Arne Hoel /World Bank the megatrends. By implementing policies that encourage healthy aging, support families, and help youth to migrate safely, individuals can shape the demographic landscape. Environmental consciousness and investment in green technologies can allow people to steer the course of climate change. And by fostering human capital and regulating technological progress, society can ensure that technological advances benefit the workforce and the economy. Global Megatrends and Human Development in the MENA region 46 Preparing for Demographic, Climate and Technological Change Embracing opportunity is about encouraging people. Not everything will change for the worse, new opportunities will come, but people will have to proactively pursue them. The aging population can contribute to economic activity, debunking the myth of older people being unable to contribute productively to work or hindering youth employment. The transition to a greener economy promises new jobs and demands a workforce skilled in sustainable practices. Technological advances, while disruptive, also offer the potential for higher productivity and wage growth. For the MENA region, these megatrends are a chance to leapfrog into a future of economic prosperity, social inclusion, and environmental sustainability—if there is a commitment to human capital investment and a culture of innovation. Managing risks is about cautioning people: Not everything will change for the better, the risks associated with the three megatrends are substantial and need to be managed proactively. The MENA region must prepare individuals to adapt to the changes, investing in education, skill development, and health. When risks are unavoidable, it is crucial to support those adversely affected through social safety nets, retraining programs, and other financial assistance. By tackling these challenges directly and fostering a supportive environment for adaptation and compensation, the region can build a resilient society that turns potential threats into opportunities for collective growth and development. This note identifies 10 policy areas that emerge as priorities. Distributed across the four main human development policy pillars, the policy areas are: 1 z Long-term care. 2 z Lifelong learning, including skills for the digital, green, and care economy. 3 z Early childhood development and childcare. 4 z Mobility and migration. 5 z Extending work lives and flexible forms of work. 6 z Prevention and management of noncommunicable diseases. 7 z Reproductive, maternal, newborn, child, and adolescent health and nutrition. 8 z Replacing subsidies with means-tested social and investment benefits for households. 9 z Research and development for labor-complementing innovations. z 10 A social dialogue on technology and work (figure 4.1). 47 FIGURE 4.1 Emerging and foundational HD policies for healthy, productive, and secure lives Healthy lives Productive lives Secure lives HD Policies for Shaping, Harnessing, and Managing the Risks of the Megatrends Health and Population Social Policies Education Policies Labor Policies Policies Long-term care Lifelong learning, including for the digital, green, and care economy Early childhood development and childcare Mobility and migration Non-communicable disease Extending work lives and flexible work arrangements Emerging HD prevention and management priotities in response to megatrends Reproductive, Maternal, Replacing subsidies with Research and development Social dialogue on Newborn, Child, Adolescent means-tested social and for labor-complementing technology and work Health and Nutrition investment benefits innovation Resilient HD institutions Foundational Effective coverage of HD policies HD policies Sustainable financing of HD policies Source: Authors. New policies will need to build on existing HD institutions and foundational programs, which in MENA also require reform to become more resilient and adequately financed. Resilient institutions can adapt to changing circumstances and implement policies, ensuring that the framework remains robust in the face of evolving challenges. These institutions are designed to withstand shocks and stress, maintaining their functionality and service delivery even during crises, and to continually expand coverage toward universal health, education, and social protection. Sustainable financing ensures that resources are consistently available to support long-term initiatives, providing the financial stability to implement and maintain the policies. This includes securing funding for family support programs, educational advances, aging initiatives, mobility enhancements, and social safety nets. Global Megatrends and Human Development in the MENA region 48 Preparing for Demographic, Climate and Technological Change 3.1  Long-term care Developing a sustainable long-term care (LTC) system is essential to alleviate the caregiving burden on families and ensure quality care for beneficiaries. A well-structured LTC system can provide formal support to households, by enabling family members to balance work and caregiving responsibilities while ensuring that older adults receive quality care. It can also be an engine to create jobs within and across countries, including for women and young people. Most MENA countries have not yet fully integrated the care economy into their policy frameworks. Despite the growing number of elderly, LTC policies and systems are largely missing. Only a select few—Algeria, Bahrain, Jordan, Saudi Arabia, and West Bank and Gaza—offer state-sponsored LTC systems for the elderly, too often sporadic or limited in scope. Most elder care is provided within households, usually by women. In fact, legislation in 14 MENA countries enforces family responsibility for elder care, disproportionately affecting women, the primary caregivers (ILO 2023). Formal care services are at early stages, including both residential and nonresidential LTC options (UN Women 2023). So, it is essential for governments to start laying the foundations for a strong LTC care system. The system can encompass and regulate a spectrum of services to reduce the caregiving burden on families. Countries that start developing the systems should begin with a thorough assessment of existing regulations and services, and the creation of new policies where gaps exist. Establishing standards for long-term care providers—whether institutional, home-based, or community-driven—can maintain service quality. This requires rigorous licensing and accreditation procedures, regular inspections, and a transparent accountability system. National policies should also define the rights of older individuals in care settings, ensuring protection from neglect, abuse, and inadequate services. Growing care systems require coordination across the health and social sectors. This is essential for increasing the number of long-term care facilities—such as nursing homes, assisted living centers, and day- care programs for older adults who require supervision but not full-time residential care. It is also essential for strengthening home-care services, as many individuals are better taken of when aging in place rather than move into an institution. To reduce the pressure on formal care institutions, investments in home-based care solutions, including professional caregiving services, telemedicine consultations, and assistive technologies, can enhance the quality of life for older adults. All these services need to be under an overall LTC umbrella that coordinates the range of services for beneficiaries between the health and social sectors, different levels of government, and different types of providers, from home to community-based and to institutional. Systems will also need to balance private, public and household provision, commensurate with public resources and the health systems. Very few MENA countries can finance or provide access for everyone to the necessary services through government provision. Decisions will need to be made on which services the public sector can offer, and which other services should be regulated but left to private provision. Strategies should make a minimum package accessible to those in greatest need yet leave ample space for the private sector and household participation in costs. The system should also consider (changing) social norms on the role of the family in caretaking of the elderly. For instance, in several labor-exporting MENA countries remittances can contribute to financing local LTC costs, if systems and providers are in place. Ensuring a well-trained and expanding workforce can meet growing demand. Governments should expand educational programs in nursing, geriatric care, and allied health professions while providing financial incentives, such as scholarships or tuition reimbursements, to attract new workers to the field. Continuing professional development and upskilling opportunities should be offered to existing caregivers to ensure they can meet evolving care needs. Training informal caregivers—such as family members—through community workshops or digital learning platforms can also improve care standards while reducing burnout among unpaid caregivers. 49 3.2  Lifelong learning, including skills for the digital, green, and care economy Lifelong reskilling is essential to ensure that people have the capabilities to transition into emerging opportunities in a world where demographic shifts, technological advances, and the transition to a greener economy are rapidly transforming labor markets. As industries evolve, workers must continually update their skills to remain employable, and societies must foster a culture of learning that allows individuals to adapt throughout their careers. Developing foundational skills during childhood and formal education—such as problem-solving, critical thinking, communication, and adaptability—is crucial to enable further learning and upskilling over the rest of life. Skills accumulate over the entire lifecycle, which makes strong foundations so important, starting with early childhood development and continuing with preschool education. When individuals have strong foundational skills, they can more easily transition to new roles and occupations that require understanding and interacting with new technologies. Experienced accountants, for example, can apply their numerical and analytical skills to transition into roles that require expertise in financial technology, such as blockchain- based accounting or digital financial management. And a factory worker accustomed to operating traditional machinery can build on their technical and problem-solving skills to upskill in areas like robotic process automation, precision manufacturing, or maintenance of renewable energy equipment, ensuring that their expertise remains valuable in an increasingly technology-driven and sustainable economy. Recognizing prior learning is an important aspect of reskilling, particularly in a greening economy. As industries shift to more sustainable practices, workers need to adapt. Recognizing the skills that individuals have already acquired allows for a more efficient transition to green jobs. For instance, construction workers with experience in traditional building techniques could have their skills formally recognized and updated to include green construction methods, facilitating a smoother transition to ecofriendly projects. Work-based learning, another important tool that provides a practical approach to reskilling, allows employees to learn while they work and reduces the risk of their skills becoming outdated. This hands-on method ensures that learning is directly applicable to the job. A graphic designer, for example, could receive on-the-job training in the latest AI software, ensuring that their skills remain relevant as technology evolves and learning to work with artificial intelligence. The growing demand for care services presents another opportunity for employment in adjacent fields through reskilling. As populations age, the need for skilled caregivers in long-term care, healthcare, and social services will continue to rise. These roles require both technical skills, such as medical assistance, elderly care, and rehabilitation support—as well as soft skills, such as empathy, communication, and interpersonal relations. Supporting reskilling efforts in the care economy can help jobseekers transition into stable employment. For example, hospitality workers—whose jobs have been disrupted by automation or the growth of digital booking platforms—could be retrained as a long-term care aide, applying their customer service experience to support older adults in residential or home-care settings. To ensure that workers at all stages of their careers can participate in lifelong learning, reskilling programs must be accessible, affordable, and flexible. A clear and efficient way to do this is through the tertiary education system in collaboration with the private sector. Online learning platforms, micro-credentialing, and modular training courses enable individuals to gain new skills without having to leave the workforce. And public-private partnerships can expand access through subsidies, tax incentives, and employer-sponsored training programs. By investing in continual learning, societies can enhance economic resilience, reduce labor market mismatches, and empower individuals to navigate the transitions brought about by demographic change, technological progress, and the shift to a sustainable economy. Supporting lifelong reskilling not only strengthens individual career prospects but also ensures that economies remain dynamic, inclusive, and prepared for the future of work. Global Megatrends and Human Development in the MENA region 50 Preparing for Demographic, Climate and Technological Change 3.3  Early childhood development and childcare Investing in early childhood development (ECD) and expanding childcare services not only ensure strong foundational skills but also support families in achieving their desired family size. Extensive research underscores the long-term benefits of high-quality ECD and childcare, showing that early investments in cognitive and socioemotional development yield significant returns in educational attainment, workforce productivity, and overall well-being. Moreover, accessible and affordable childcare services are essential for enabling parents—especially mothers—to participate in the labor market and reducing gender gaps in employment and earnings (Devercelli and Beaton-Day 2020). By integrating ECD and childcare policies with labor market strategies, countries can enhance both child development outcomes and more equitable economic participation. MENA countries seem, however, to underinvest in ECD. Preprimary enrollment in MENA was only 34 percent in 2020 (World Development Indicators), among the lowest globally. And only about 1.6 percent of education expenditure goes to preprimary education, far lower than the 11.3 percent in Europe and Central Asia, 5.3 percent in East Asia and Pacific, and 3.9 percent in South Asia. Gaps can also be seen in key intermediate indicators. For instance, in the number of children’s books in the average household, MENA countries have fewer (Algeria: 1.0, Iraq 0.3, and West Bank and Gaza 1.4) than comparator countries (World Bank forthcoming). Relative to other regions, MENA experiences higher prevalence of severe physical punishment of young children by caregivers (World Bank forthcoming). Increasing public investment to universalize preprimary education is a critical ingredient for boosting the future-readiness and resilience. Expanding preprimary education needs to focus first on children in households in the bottom income quintile and then continue to close the enrollment gap moving up the quintiles. Given the complex eco-system of ECD provision and the wide variety of actors and services, governments have a role of coordination, stewardship, and quality assurance. Expanding childcare services requires a comprehensive approach that increases the supply of formal childcare facilities, ensures affordability, and enhances the quality of early education programs. Countries adopt different models to achieve these goals—some prioritize public provision by directly investing in childcare centers, while others support private institutions through subsidies, vouchers, and financial incentives to expand access. A well-balanced approach combines both strategies, ensuring that families have diverse, high-quality, and affordable childcare options that meet their needs. In emerging economies, expanding community-based childcare models, employer-supported childcare, and flexible service provision can bridge gaps in access, especially when resources are limited (Devercelli and Beaton-Day 2020). Moreover, ensuring quality training for childcare workers can maintain high standards of care and sustain the sector’s growth. Flexible and inclusive childcare policies can also meet the diverse needs of families. Beyond traditional full-time childcare centers, policies should promote part-time care, home-based childcare networks, and workplace childcare solutions that accommodate different work schedules. Digital innovations, such as app-based childcare matching services and hybrid early learning platforms, can further expand access to high-quality care. And integrating ECD into broader social protection systems—such as paid parental leave, child benefits, and universal pre-kindergarten—ensures that early childhood policies are not only effective in supporting families but also contribute to reducing socioeconomic inequalities from an early age. By prioritizing ECD and childcare, governments can create a foundation for stronger labor markets, more equitable economic participation, and improved long-term development outcomes. 51 3.4  Mobility and migration The three megatrends will change migration patterns within and across borders, necessitating a robust policy framework for safe external migration management that can adapt to these evolving challenges. 3.4.1  Internal mobility Internal migration fosters economic growth through better labor allocation across localities and sectors. The movement of people within countries, particularly from rural to urban areas, presents significant opportunities for human capital. HD policies should focus on ensuring that migrants have access to quality education and healthcare services in their new locations. And as climate change drives more people to migrate internally, policies must include support systems that address the social needs of these migrants, helping them integrate successfully into urban communities. These policies can also focus on vocational training and lifelong learning opportunities that allow internal migrants to adapt to the changing demands of urban labor markets. Redesigning cash benefits to encourage internal migration can smooth the demographic transition. Policies can help balance population distribution and extend the benefits of demographic shifts over a longer period— ensuring that populations are aligned with regions offering better job prospects, education, and healthcare, reducing regional disparities and enhancing overall economic stability. 3.4.2  Safe external migration Migration management requires a comprehensive policy framework that balances the needs of both migrants and host communities, ensuring that migration contributes to sustainable economic development while safeguarding social cohesion and the rights of migrants. Anchoring the policy framework in HD strategies should prioritize enhancing human capital, protecting migrant rights, and integrating migrants into social and economic systems, ensuring that migration contributes to both individual and societal well- being. Facilitating youth migration to seek opportunities abroad can help alleviate the pressures of the youth bulge and support smoother demographic transitions. Encouraging migration to aging countries also slows their demographic shifts by addressing labor shortages, fostering economic stability, and meeting workforce demands. A well-managed migration program matches economic migrants and skilled refugees with labor market needs at destination. Stronger matches between the skills of migrants and the demands at destination provide greater economic and social benefits. Conversely, weaker matches—such as distressed or irregular migrants—require policies focused on reducing unnecessary movements and ensuring humane absorption or return. The key challenge lies in ensuring that migration is safe, orderly, and well-managed through structured bilateral agreements. This entails investments from destination countries in the education systems of sending countries, ensuring a sufficient supply of skills while minimizing brain drain. Integration in host countries is also crucial, with a focus on access to social services and portability of social benefits (Avato, Koettl, and Sabates-Wheeler 2010). The MENA region offers additional opportunities for migration, such as to GCC countries, where regional labor mobility can foster economic growth and shared prosperity. This strategic approach to migration ensures sustainability and equitable outcomes by balancing opportunities at the destination with the needs and motivations of migrants, whether driven by economic aspirations or fear and instability in their home countries. Global skills partnerships, another critical component of safe migration management, facilitate the movement of youth from MENA countries to aging nations where labor shortages prevail. By providing targeted skills training in collaboration with destination countries, these programs not only create opportunities for young workers but also address labor market needs in host countries. This mutually beneficial arrangement supports the economic vitality of both sending and receiving countries, while also alleviating demographic pressures Global Megatrends and Human Development in the MENA region 52 Preparing for Demographic, Climate and Technological Change in MENA nations. Global skill partnerships enable destination countries to address critical labor shortages while simultaneously fostering economic development in origin countries by turning potential brain drain into brain gain through targeted investments in training and education (Clemens 2018). 3.5  Extending work lives and flexible forms of work Extending working lives and promoting flexible forms of work can maintain the economic participation of older adults in aging societies. While aging can lead to declines in certain cognitive functions, those other skills—such as verbal communication, strategic decision-making, and complex problem-solving—often improve with experience (Cabeza 2016). By leveraging these strengths, policymakers can design strategies that support older workers’ continuing participation in the labor force, ensuring both economic stability and intergenerational knowledge transfers. Extending work lives is closely linked with pension reform. Raising retirement ages gradually and discouraging early retirement can help reduce the fiscal burden associated with aging populations. It can retain experienced professionals who contribute to productivity and innovation but also secure adequate income during old age. That might require new forms of savings for retirement, like voluntary of mandatory savings programs, especially for new forms of flexible work, like platform work, or a renewed focus on noncontributory but targeted pensions (Demarco, Koettl, Abels, and Petrelli 2024). Workplace adaptations can also enable older workers to extend their careers. For instance, BMW’s Dingolfing plant successfully addressed an aging workforce by implementing ergonomic improvements, including wooden floors to reduce joint strain, adjustable worktables, and specialized tools to minimize physical exertion (Loch et al. 2010). These changes improved comfort and increased productivity, showing that age-related declines in physical capacity can be managed through targeted workplace interventions. Similar strategies—such as flexible workstations, improved lighting, and task redistribution—can ensure that older workers across industries remain active in the labor market. Flexible work arrangements further support longer careers by allowing older workers to adapt their schedules and responsibilities based on their needs and capacities. Part-time work, phased retirement programs, remote work, and job sharing enable older employees to continue contributing while balancing personal well-being. These policies benefit both workers and employers by ensuring continuity of expertise, reducing turnover costs and fostering inclusive workplaces. 3.6  Prevention and management of noncommunicable diseases As populations age and lifestyles evolve, the rising burden of noncommunicable diseases (NCDs) puts more pressure on healthcare systems and economies, making prevention and management essential for ensuring healthier lives. Technological advancements and climate change further complicate this challenge— pollution worsens respiratory conditions, while changes in work patterns and urbanization contribute to more sedentary behaviors. Addressing NCDs can promote healthier aging but also sustain workforce productivity and lower long-term healthcare costs. Healthier lifestyles can be promoted through preventive healthcare. Integrating NCD screening into primary care and expanding access to community-based interventions, such as lifestyle coaching and chronic disease management programs, can improve long-term health outcomes. Taxing sugar-sweetened beverages and subsidizing nutritious foods can encourage healthier eating habits. And urban planning initiatives that prioritize walkability, green spaces, and active transportation counter sedentary lifestyles. 53 Across the MENA region, rates of diabetes and cardiovascular diseases are considerably higher than in many other regions, driven by factors such as dietary habits and low physical activity. These conditions not only reduce quality of life but also increase the need for continuing medical support and caregiving, placing additional strain on healthcare systems and families. The demand for long-term care is projected to rise by 0.3 to 0.9 percent of the population by 2030 across all the region (Khan et al., forthcoming). So policies aimed at reducing NCD risk factors—such as promoting healthier lifestyles, improving early diagnosis, and expanding access to chronic disease management—will be essential. Strengthening these preventive measures can curb the rise in chronic illnesses and ease the growing burden on long-term care systems, making them more sustainable in the face of demographic shifts. 3.7  Reproductive, maternal, newborn, child, and adolescent health and nutrition (RMNCA) Ensuring access to high-quality RMNCA health and nutrition services is critical, particularly as demographic transitions, climate change, and technological advances alter health risks and service delivery needs. Declining fertility rates in many regions highlight reproductive health services, while climate-related environmental stressors increase risks such as maternal and newborn complications. But technological innovations, such as telemedicine and digital health records, provide new opportunities to expand access to essential healthcare services, especially in underserved areas RMNCA indicators lag behind in several of the MENA countries. In Djibouti, Yemen, and Iraq, maternal mortality stands at 234, 183, and 76 per 100,000 live births respectively (WHO 2023) and infant mortality rates are 44, 33, and 20 per 1,000 live births (UN IGME 2022). These high mortality rates can be out of line with the overall economic status of the countries. In Yemen, decades of conflict have collapsed the health system and infrastructure, resulting in a brain drain and lack of service delivery. In Djibouti, the prevalence gender-based violence and social norms with inadequate protections for adolescent girls and women put women’s lives at risk and constrain service delivery. RMNCA policies should focus on strengthening healthcare systems to provide comprehensive, integrated, and equitable services. Expanding access to family planning and reproductive health services ensures that individuals can make informed choices about fertility and childbearing, while improving prenatal and postnatal care reduces maternal and infant mortality. Investments in skilled birth attendants, emergency obstetric care, and neonatal health interventions can improve survival rates and long-term health outcomes. School- based programs and community health initiatives that provide adolescent reproductive health education can prevent early pregnancies and support informed health decisions. Ensuring financial protection and reducing barriers to RMNCA services is crucial, particularly for vulnerable populations. Governments can subsidize maternal and child health services and cash transfer programs to improve access for low-income families. Digital health solutions, including mobile health applications and remote consultations, can enhance service delivery in rural and underserved areas, ensuring timely care and follow-up. Addressing social determinants of health—such as education, nutrition, and access to clean water and sanitation—further strengthens RMNCA outcomes. Global Megatrends and Human Development in the MENA region 54 Preparing for Demographic, Climate and Technological Change 3.8  Replacing subsidies with means-tested social and investment benefits for households Reforming subsidies that incentivize high greenhouse gas emissions is essential for steering climate policy towards reducing carbon-intensive consumption. These subsidies distort energy markets and contribute to resource misallocation, undermining global climate change efforts and obstructing the shift to a sustainable low-carbon economy. Policy actions start with the gradual elimination of fossil fuel subsidies, a critical step that must be executed with care to prevent economic turmoil, allowing for market adaptation and signaling to investors the future direction of energy policy. Many nations channel funds into renewable energy subsidies and incentives for green consumption and energy efficiency, with the goal of accelerating the move to more sustainable practices. This involves recalibrating subsidies to support more ecofriendly alternatives—such as financial support for electric vehicles and public transportation, investments in solar panel installations, and enhancements in home insulation to reduce heating demands. The released funds can also help develop the green economy by providing incentives for workers to enter green jobs, such as wage supplements and in- work benefits, and by creating programs that offer temporary income support while workers gain green skills, along with employment services to help them find new opportunities where these skills are in high demand. To cushion the social impact, subsidies can be replaced with targeted social benefits that compensate for the price increases caused by the removal of subsidies, but progressively. That is, households are assessed based on their available means, and more vulnerable households receive higher benefits than middle-class households—and higher quintile households may not receive benefits at all. Implementing such an approach requires capacities to correctly identify households, estimate their means based on available income and assets, and calculate benefits accordingly. Saudi Arabia has recently successfully implemented reforms along these lines (Koettl, Ortakaya, and Alkharashi 2022). New policy approaches are necessary to design subsidy programs for household green investments. The programs must not only offer higher subsidies to low-income households but also evaluate the suitability of different types of investments for varying incomes. Subsidizing large-scale solar panel installations might be impractical for the poorest due to cost, so offering subsidies for switching to green energy providers could be a more feasible option. But intricate program planning and robust implementation capabilities are needed to match investment types and subsidy amounts with household incomes. 3.9  Research and development for labor-complementing innovations As technological advances reshape labor markets, universities, technical institutions, and industries can develop new technologies that augment human capabilities rather than replace them. By integrating research, education, and innovation policy, countries can foster inclusive and sustainable economic development while ensuring that workers are prepared to engage with emerging technologies. R&D partnerships of tertiary institutions, industries, and government bodies should be encouraged to develop technologies that complement labor. University-led research initiatives can focus on designing automation, artificial intelligence, and digital tools that integrate human expertise rather than displace workers. For example, collaborative robotics (cobots) in manufacturing can assist workers with repetitive or physically demanding tasks, reducing workplace injuries while improving efficiency (Javaid et al. 2022). AI-driven decision-support systems in healthcare can enhance medical professionals’ diagnostic capabilities while preserving the need for human judgment and patient care (Alowais et al. 2023). The crucial role of tertiary education systems as centers of innovation cannot be overstated. Governments will need to play a proactive role in creating the enabling environment 55 for innovation clusters to flourish by providing local infrastructure, increasing the expenditure on research and development, connecting universities with high-quality researchers and private sector innovation, and easing rigid labor market regulations. Regulatory frameworks can support labor-complementing innovation by establishing standards for ethical AI, worker protections, and funding mechanisms for applied research. Policymakers can incentivize collaboration between universities and industries through targeted grants, tax incentives for research in worker-friendly technology, and support for knowledge transfer programs. And embedding lifelong learning and technical skills training within tertiary education ensures that graduates and current workers can effectively use and adapt to new technologies. By fostering stronger links between education, research, and regulation, governments can drive innovation that leads to more inclusive labor markets, higher productivity, and sustainable employment outcomes in the face of rapid economic and technological transformations. 3.10  Social dialogue on the use of technology in the world of work MENA’s exposure to AI and automation is lower than in advanced economies, and its preparedness for digital transformation lags behind (Cazzaniga et al. 2024). So policy frameworks should help shape the region’s technological transition in a way that is socially fair. Social dialogue—the structured engagement between all the labor market stakeholders including governments, employers, and workers—can ensure that technological transitions align with economic and social objectives. It can mitigate risks such as job displacement, skill shortages, wage polarization, and declining labor protection. And it allows for a balanced approach to consider both economic efficiency and labor rights. The European Social Partners Framework Agreement on Digitalization offers a structured approach for guiding digital transformation in workplaces while ensuring worker protections and economic sustainability (European Trade Union Confederation 2020). Social dialogue can also help develop adaptive labor market regulations, such as regulating gig work and flexible employment and addressing emerging ethical and regulatory concerns related to AI and algorithmic decision-making. Constructive social dialogue can influence technology development and adoption in ways that enhance workers’ roles rather than displace them. In U.S. coal firms, unionized workplaces tended to shape the implementation of automation by ensuring that new technologies complemented rather than replaced workers (Link and Segel 2002). And in the U.S. auto industry, the United Auto Workers (UAW) union negotiated improved conditions, shaping technological investments to balance productivity with worker interests (Milkman 1997). Beyond protecting jobs, social dialogue facilitates workforce adaptation by prioritizing skill development. Given that AI and automation are reshaping skill demands, the engagement of governments, employers, and unions is essential in designing training and reskilling programs to help workers transition into emerging roles. Countries that successfully managed previous industrial transitions did so by aligning education and labor policies with employer needs, ensuring that displaced workers had pathways to meaningful re-employment. A regional example of structured social dialogue in skill planning and technological adaptation is Saudi Arabia’s Sectoral Skills Councils, established by the Ministry of Human Resources and Social Development in 2023. These 12 councils, covering key industries such as digital technology, logistics, healthcare, and manufacturing, align workforce skills with emerging labor market needs. They are a collaboration between government, employers, and training institutions, ensuring that technological change does not outpace workforce development. By identifying skill gaps and setting sector-specific training standards, they provide a structured approach to reskilling and upskilling in response to automation and AI (MHRSD 2023). They show how governments can institutionalize social dialogue to mitigate the risks of technological disruption while enhancing labor market adaptability. Global Megatrends and Human Development in the MENA region 56 Preparing for Demographic, Climate and Technological Change 06 Annexes Global Megatrends and Human Development in the MENA region Preparing for Demographic, Climate and Technological Change 57 ANNEX 1: The demography of MENA As countries develop, so do their people and demographics. The last centuries have been marked by nearly constant population growth, but the acceleration in the last decades has been unprecedented. Driven by progress in health systems and technologies, life expectancy has expanded significantly. Fertility initially remained high, leading to high population growth, but, eventually, fertility started to decline. In some European countries, like France, population ageing already started 200 years ago, but in most developing countries this is a recent phenomenon (Lee, 2008). While the MENA region is still relatively young and at the early stages of the demographic transition, its ageing rate is the fastest globally. Gradually, the region’s demography is converging in life expectancy and fertility rates towards those observed in high-income countries (HIC). Life expectancy at birth in MENA countries has witnessed a remarkable upward trajectory from 1970 through 2020 (figure A1.1), with projections suggesting that this trend will continue until 2050. Importantly, the region is not only adding years of life spent in sickness and dependency, but also healthy years of life (figure A1.2). At the same time, fertility in the MENA region has dropped significantly in a short period of time, aligning more closely with global patterns. The total fertility rate (TFR), which estimates the number of children a woman would bear over her lifetime, has notably declined in all MENA countries since 1970 and is projected to decline further until 2050 (see figure A1.2). The speed of adjustment is breathtaking: While in most MENA countries, TFR was above 6 in 1970, it is below 4—in many countries even below 3—by now. This transition is happening much faster than in other countries and regions, especially when compared to the historic fertility transition of the HICs, indicating a rapid cultural shift towards smaller families. For example, in France, it took over 150 years—from about 1750 to 1900—for fertility to drop from 4.5 to 3. Some countries in MENA have already entered the demographic transition, and many more will soon follow. The demographic transition is defined as the period in which the share of the population at or above 65 years of age increases from 7 percent to 14 percent. Some countries are already navigating the complexities of an aging population and the associated middle-age bulge, while others still enjoy the economic and social benefits of a youthful demographic profile. For instance, Lebanon, Iran, and Tunisia are at the forefront of aging within MENA, facing the challenges and opportunities that come with an older population (figure A1.3). In contrast, nations such as Algeria, Libya and Jordan are on the cusp of this shift, with projections indicating that they will enter this phase within the next decade. Meanwhile, countries like Iraq, Yemen, and West Bank and Gaza continue to exhibit high fertility and population growth rates, with the onset of the demographic transition anticipated to be beyond 2050. 58 FIGURE A1.1 Life expectancy at birth in MENA countries and comparators (1970, 2020, 2050, medium fertility projections) 100 90 Life Expectancy at Birth (Years) 80 70 60 50 40 30 20 10 0 Europe Yemen Algeria Djibouti Oman Morocco Egypt Iran Saudi Arabia Tunisia Libya West Bank and Gaza Jordan UAE Iraq Syria Bahrain Kuwait Qatar Lebanon LIC World HIC 1970 2020 2050 Note: LIC – Low-income countries; HIC - high-income countries. Source: United Nations, 2024 FIGURE A1.2 Healthy life expectancy at age 60 for men and women 19 Healthy Life Expectancy at Age 60 (Years) 18 17 16 15 14 13 12 11 10 9 8 7 Bahrain Qatar Oman Saudi Arabia Djibouti Yemen Syria Iraq UAE Egypt Jordan Morocco Iran Algeria Lebanon Tunisia Libya Kuwait World HIC LIC 2000 2019 Source: WHO, 2024a. Note: Healthy life expectancy is defined as the average number of years in full health a person at 60 can expect to live based on current rates of ill-health and mortality. “HIC”=High Income Countries. “LIC”= Low Income Countries 59 FIGURE A1.3 Start and end year of the demographic transition and MENA and comparator countries and country groups End of transformation (14% of population age 65+) 1990 2010 2030 2050 2070 2090 IND OMN LBN SYR Percentage of population age 65+ PSE KOR IRQ TUN MAR UAE CHN OMN IRN DJI YEM WORLD LIC ZAF BHR MEX DZA TUR JOR QTR LBY SAU KWT EGY 1990 2010 2030 2050 2070 2090 Start of transformation (7% of population age 65+) Note: The demographic transition is defined as the period in which the share of the population at or above 65 years of age increases from 7 percent to 14 percent; LIC – Low-income countries. Source: Adapted by authors from Hussein et al. 2023 using UN data (2024) Figure A1.4 resents the proportion of individuals considering emigration across three age groups: youth (18- 24), adults (25-64), and the elderly (65+). The data reveals that emigration intent has increased across all age categories between the periods 2018-2019 and 2023-2024. Youth exhibit the highest emigration intent, rising from 49.4 percent to 54.6 percent, indicating growing dissatisfaction or aspiration among younger individuals. Adults (25-64) show a more moderate increase, from 29.7 percent to 33.8 percent. Meanwhile, the elderly (65+) display the lowest levels of intent, although their interest has also slightly risen, from 8.5 percent to 10.9 percent. These trends suggest that migration considerations are becoming more widespread, though still predominantly driven by younger demographics, reflecting economic, social, or personal motivations unique to each age group. FIGURE A1.4 Emigration intent by age group (2019–24) 60 Share of Population Considering Emigration 50 40 30 54.6 49.4 20 33.8 29.7 10 8.5 10.9 0 2018-2019 2023-2024 2018-2019 2023-2024 2018-2019 2023-2024 Youth (18-24) Adults (25-64) Elderly (65+) Source: Arab Barometer 60 As for the potential of emigration from MENA, surveys show that over half of MENA’s youth that has considered emigration wants to do so due to economic reasons (figure A1.5). The economy as the main consideration for migration has also become increasingly important, with almost 80 percent of youth citing it as the main motivator for emigration, with education in a second, but much lower place. Politics and security place last as the reasons for migration, both accounting for around 10 percent. FIGURE A1.5 Reasons for considering emigration among the youth (2021–24) 0.8 Mean Importance of Reason 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2021 2022 2024 Economy Politics Education Security Source: Arab Barometer 61 ANNEX 2: The demand for long-term care in MENA The ageing of populations has heightened the need for caregiving, intensified obstacles to quality employment for individuals with care duties, and widened disparities for those receiving care. These issues are expected to sharpen as the elderly population is projected to surpass younger cohorts in size, with old age dependency ratios increasing. The living arrangements and support systems for the elderly, encompassing both formal and informal care, are increasingly becoming focal points of policy deliberation, as a growing number of seniors will require more support and care in their final years or as they become unable to carry out their daily activities independently. In 2015, the global population aged 60 and over was 906 million; by 2030, it is projected to rise to 1.4 billion. Within this group, 292 million are expected to exceed the age of healthy life expectancy at 60, indicating a probable escalation in the demand for LTC services (ILO, 2018a). The demand for long-term care is projected to increase across the MENA region. A deep dive into the care economy prepared for this note suggests that the need for long-term care is diverse across MENA countries (Kanth et al., forthcoming), currently ranging from 2.8 percent of the population in Oman to 18.8 percent in Morocco and projected to increase by an additional 0.3 to 0.9 percent of the population until 2030. The need for long-term care is driven in great part by the demographic transition, with the high prevalence and earlier onset of chronic noncommunicable diseases (NCDs) as an important contributor (figure A2.1). In all countries of the study, the demand is projected to increase by an additional 0.3 to 0.9 percent of the population by 2030. FIGURE A2.1 Prevalence of NCDs in select MENA and comparator countries Prevalence of Diabetes by Age Prevalence of Cardiovascular Diseases by Age 60% 100% 90% 50% 80% 70% 40% 60% 30% 50% 40% 20% 30% 20% 10% 10% 0% 0% 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 Egypt United Kingdom Saudi Arabia Morocco Lebanon Japan Tunisia Germany Source: Kanth et al. (forthcoming). 62 ANNEX 3: The impact of technological advancement on the labor market Technological advancement is difficult to foresee, but a few guiding questions can help to better understand the potential consequences of technological advancement for people. The advent of new scientific findings and the accompanying technological innovations are far more difficult to predict than the other two megatrends. However, three key questions can help to better understand what the potential consequences of technological advancement could be for people, helping to frame the challenges and identify policy priorities. Exploring how these three questions can be answered for past technological innovations from the Industrial Revolution to the introduction of automation as well as the next technological revolution, namely the advent of AI, is illustrative and shows the heterogenous effects of technological advancement. The following three questions can help to better think through the impact of technological innovation on labor markets. Each question is accompanied by an illustration of the potential outcomes. Three guiding questions and their application to the Industrial Revolution The first question relates to the overall net impact of technological advancement on labor demand, namely, what will be the scale of job destruction and creation. In other words, will the introduction of new technology ultimately lead to a greater number of jobs, employing more people, including those who have previously been unemployed or not participating in the labor market at all (figure A3.1)? When the Industrial Revolution first began with introducing elementary technology, the demand for factory workers increased tremendously. At the same time, though, artisanal production of the products that were now produced in factories was declining. With the introduction of new production technologies, some jobs were destroyed, yet, at the same time, many new ones were created. In the case of the Industrial Revolution, the creation of new jobs by far outweighed the destruction of existing ones, leading to an increase in female labor force participation, but also of child labor, a drive for urbanization, and a shift from an agricultural and artisanal economy to an industrial economy (Autor, 2024). FIGURE A3.1 What will be the net impact on jobs? Scenario I Scenario II Number of jobs in the economy Before innovation After innovation Net job creation Net job destruction Source: Authors. Note: Graphs are illustrative and not based on actual data. In Scenario I, technological innovation leads to more job creation than destruction, and hence net job creation. The total number of jobs in the economy increases. In Scenario 2, it is the other way around. 63 The second question is how much the task content of jobs will change and with it, the skills required by the workforce. This is an important question because the answer will determine how difficult or easy it will be for the workforce to adjust to technological advancement. The question is essentially about the ‘distance’ in terms of tasks and skills content between existing and new jobs: The further the distance, the more difficult it will be for workers who are being replaced by new technology to acquire the necessary skills for the jobs using the new technology. A way to analyze this ‘distance’ is by comparing the skills of current jobs seekers with the skills demanded through current vacancies and assessing how far apart supply and demand are (figure A3.2). It is important, though, to keep in mind the complexity of skills. Skills are not only the education level or technical knowledge that job seekers have, or employers are looking for, it also includes a variety of capabilities to perform cognitive and non-cognitive as well as routine and non-routine tasks, socio-emotional skills, interpersonal skills, leadership skills, and so on. Technology affects which of these skills are needed in jobs, so that, for example, highly educated job seekers with tertiary degrees might have to acquire additional skills to perform new jobs—skills that were less in demand prior to technological innovation. FIGURE A3.2 How much does the skills and task content of jobs change Net change of jobs in the economy Current Scenario I Scenario II jobseekers vacancies vacancies Near distance Far distance Few mismatches Many mismatches Low educated Medium educated High educated Routine non-cognitive Non-outine non-cognitive Routine cognitive Non-outine cognitive Note: In Scenario I, skills requirements on open job positions are well aligned with the skills profile of current job seekers. Redundant jobs are relatively near distance to new jobs in terms of skills content, there are few mismatches. In Scenario II, though, there is relatively low demand for the many middle-skilled job seekers with capabilities to do routine tasks and non- routine non-cognitive tasks. The demand is for higher skilled jobs or lower skilled jobs of various kinds, leading to polarization in the labor market. Some middle-skilled workers might be able to adapt to the higher-skilled jobs; but many will have to go into lower-skilled jobs, for which they are overqualified, leading to mismatches. Graphs are illustrative and not based on actual data. Source: Authors If the distance in terms of skills between old and new jobs is far, it creates mismatches in the labor market. Mismatches can go in both directions, underqualified workers ending up in jobs that require relatively high skills, but also overqualified workers ending up in jobs that require relatively little skills. For example, the demand for new workers might require higher education levels and more technical and cognitive, non- routine skills, yet the workers being replaced by the new technology might mostly have mid-level skills and capabilities for routine tasks. Some of these jobseekers might be able acquire at least the bare minimum of skills required for these jobs, but many more might end up in jobs for which they are overqualified. Such a labor market displays many frictions, leading to higher unemployment rates, including higher long-term unemployment rates, and longer periods until vacancies can be filled. During the Industrial Revolution, factories initially required no specialized expertise and made use of low skilled workers, such as children and unmarried women. These jobs required no prior education or training and could be filled relatively quickly 64 with unskilled workers. However, also relatively high-skilled artisanal workers who were forced to close their businesses because of new production technologies would ultimately take up these unskilled jobs for which they were overqualified. It was not until about 50 years later, when the technology began to become more sophisticated, that mass production created a demand for a new type of higher skilled workers to handle the emerging technology (Autor, 2024). The third question is how income will change in response to technological advancement. This question is important because the way wages and capital income are evolving has large implications for the wellbeing of people and inequality in society. There are two aspects that need to be considered: First, what is the impact on overall income—is everyone benefiting, or will there be winners and losers? And second, what is the impact on the distribution—will some benefit more than others? Figure A3.3 illustrates and describes four scenarios: Two scenarios in which everyone benefits, but either the low-skilled or the high-skilled benefit more, decreasing or increasing inequality respectively; and two scenarios where either the low-skilled or the high-skilled lose and the respective other group gains. It is important to note that the changes in income are not driven alone by changes in wages, but also by changes in capital income. During the Industrial Revolution, the shift from artisanal to mass production and the use of less-skilled workers initially led to a suppression of wages and poor working conditions while capital income increased tremendously. When the demand for higher skilled workers started to increase 50 years later with the introduction of more sophisticated technology, the increased overall industrial productivity allowed for an increase in wages and ultimately the creation of a new middle class (Autor, 2024). FIGURE A3.3 How will income change? Scenario I: everyone benefits, high skilled more Scenario II: Everyone benefits, low-skilled more Income Income Lowest skilled Highest skilled Lowest skilled Highest skilled After Innovation Before Innovation After Innovation Before Innovation Scenario III: Low skilled lose, high skilled gain Scenario IV: Low skilled win, high skilled lose Note: In Scenario I and II, productivity gains are across the board, leading to an increase income for everyone. The effect on inequality depends on who will benefit the most. In Scenarios III and IV, not everybody gains from technological innovation, there are winners and losers. Graphs are illustrative and not based on actual data. Source: Authors Income Income Lowest skilled Highest skilled Lowest skilled Highest skilled After Innovation Before Innovation After Innovation Before Innovation 65 Lowest skilled Highest skilled Lowest skilled Highest skilled After Innovation Before Innovation After Innovation Before Innovation Scenario III: Low skilled lose, high skilled gain Scenario IV: Low skilled win, high skilled lose Income Income Lowest skilled Highest skilled Lowest skilled Highest skilled After Innovation Before Innovation After Innovation Before Innovation Technology of the last 50 years: Automation Applying this framework to the technological advancement of the last 50 years, which was all about automation of production and information processes, suggests that, with regard to the first question, there was an overall increase in employment, but the impact was uneven. Evidence from local labor markets in the United States shows that the effects of an increase in industrial robot usage between 1990 and 2007 on U.S. local labor markets reduced employment: For every robot added per 1,000 workers, the employment-to- population ratio dropped by 0.18 to 0.34 percentage points. The impact of robots was distinct and only weakly correlated with other types of impacts, such as imports, the decline of routine jobs, offshoring, and other types of changes in capital endowments (Acemoglu and Restrepo, 2020). However, it is important to note that this evidence only refers to local labor markets, suggesting that regions heavily exposed to robots experience significant job declines. Other regions that are less exposed to robots might not have been affected or, to the contrary, when exposed to the production of robots, might actually have experienced an increase in employment. A study of 21 OECD countries surveyed between 2012-2019 found no support for the argument that there was net job destruction on country-level; all countries experienced growth over that decade. However, the study did find that employment growth in jobs at high risk of automation was slower than in jobs at low risk of automation (Georgieff and Milanez, 2021). In the United States, while the employment share in manufacturing declined during the increased labor productivity brought by automation, industries such as cotton, textile, and primary steel and automotive experienced an increased share of employment for a century or more. In this case, the effect of automation was not homogenous across industries and showed that, in the medium run, some industries will experience an inverse U-shape regarding labor share and productivity (Bessen, 2020). In Spain, between 1990 and 2016, robot-adopting manufacturing firms managed to create more jobs in the subsequent years relative to their competitors that did not adopt robots (Koch, Manuylov and Smolka, 2019). These findings suggest that the impact of automation on employment is complex and may differ based on industries and region, highlighting the need for tailored policy responses to technological advancements. Regarding the second question on changes in skills demand, undoubtedly, automation led to a shift in labor markets away from routine tasks towards non-routine cognitive but also non-routine manual, interpersonal, and service tasks. The requirement for mass expertise that had already started during the Industrial Revolution helped medium-skilled workers—and with it, the middle class—to grow. However, their responsibility comprised mostly of routine tasks, which were made increasingly redundant with the advent of automation. Computers and robots were simply able to execute these tasks more efficiently. 66 Those who were protected from automation were those whose professions required decision-making— that is, professional judgement for tasks considered too important to be left to machines and requiring expert judgement. These professionals, typically with four-year college degrees or higher, working in law, medicine, science, management, or engineering, benefited from enhanced decision-making capabilities due to automation of production and information processes. In other words, the information they required to make decisions became more comprehensive and more quickly available, allowing them to make decisions better and faster. At the same time, many low-skilled workers were protected from computers and robots because jobs in service occupations included non-routine tasks that could not be automatized and required interpersonal skills (Autor, 2024). The result was an overall de-routinization of labor markets and in some—but not all—countries a polarization in labor markets, with low and highly skilled segments increasing while the medium segment slowly shrank. Evidence suggest that this skills polarization can be observed in in Germany (Spitz-Oener 2006), in the United Kingdom (Goos and Manning 2007), and the United States (Autor, Katz, and Kearney 2006). In the rest of European countries, on the other hand, skills polarization could not be observed, suggesting that technology does not impact all countries the same way, and that labor market institutions and other policies can shape the way that the technology adoption impacts labor market outcomes (Hoftijzer and Gortazar, 2018). Regarding the final question on how automation impacted the distribution of income, the evidence suggests that it led to an increase in inequality. A study that looked at the impact of robots on labor markets found that one additional robot per thousand workers reduced aggregate wages by 0,42 percent in local labor markets (Acemoglu and Restrepo, 2020). In those countries where a polarization of skills could be observed, redundant middle-class workers who could not compete for higher-skilled jobs increased the competition for low-skilled jobs, depressing wages in that segment of the labor market, while wages of high skilled workers continued to increase (Autor, 2024). In a study on wage polarization in 15 European countries between 1995 and 2007, Naticchioni, Ragusa, and Massari (2014) do not find evidence for wage polarization but rather observe a drop in in wages at the tail end of the distribution. The rise of AI The impact of AI on employment, skills, and income could be quite distinct from the automation of the last 50 years, potentially leading to a reemergence of the middle class. Some scholars argue that the future could hold a promising reemergence of the middle class, largely thanks to AI. While AI might at first look like a threat to human expertise, it could do what automation was unable to do, namely, to complement formal knowledge and rules with tacit knowledge and expertise and through that, enable medium-skilled workers to engage more and better in higher level decision-making that up to now was reserved for experts like doctors, lawyers, manager, and engineers. Advanced algorithms can analyze vast amounts of data and provide insights that were previously the domain of highly specialized professionals, making it accessible for a broader segment of the population to leverage sophisticated tools for tasks ranging from medical diagnoses to financial planning, effectively raising the skill level across the board. As a result, wages at the higher end could be compressed, increased at the medium and lower level, and inequality decreased (Autor, 2024). Several initial studies point towards the potential of AI to increase overall productivity and, importantly, help low-performers more than high-performers within the same occupation, potentially contributing to a decrease in wage inequality. While those who are considered the best in their profession remained at the top, those who were less-skilled, efficient, or novice were able to improve in their productivity and quality, shrinking the gap between the two groups. For example, Peng et al. (2023), find that a GitHub AI program to support software development improved productivity of coders by 55.8 percent, particularly benefiting less experienced developers, older programmers, and those with heavy coding loads. Similarly, a study by Noy, Shakked and Whitney Zhang (July 2023) find that the use of ChatGPT AI software significantly increased productivity in mid-level professional writing tasks, reducing average time by 40 percent and improving output quality by 18 percent, particularly for lower-performing writers. A study by Brynjolfsson, Li, and Raymond (2023) on the use of generative AI in customer service shows significantly enhanced productivity and quality of work, particularly for novice and lower-skilled workers in customer service. Furthermore, in cases where the AI tool was unexpectedly disabled, the inexperienced agents in the treatment group still performed somewhat better and more like high-skilled workers, indicating that the AI conversation tool itself 67 not only provided support to these workers, but may have been used as a learning tool to improve overall skills. Also, a study by the OECD on wage inequality and AI in 19 OECD countries finds that greater AI exposure at the occupational level was associated with a lower growth in wage inequality within occupations (Georgieff, 2024). However, the evidence on the arguably more important question of how AI could change the wage distribution between occupations is still scarce. The OECD study mentioned above did not find any relationship between exposure to AI and wage inequality between occupations, meaning that exposure to AI did not seem to influence wage disparities between more exposed and generally high-skilled occupations and less exposed ones. The study, though, did find some evidence that inequality is reduced because of a selection effect, whereas low performers who are unable to adapt to AI tools leave their occupations and shift to another one with lower exposure to AI. Overall, they find that exposure to AI is higher among white collar occupations and lower in manual occupations (Georgieff, 2024). A study by the International Monetary Fund (IMF) points towards the potential of AI to increase overall productivity and with it, an increase in both labor and capital income, but is less optimistic about a decrease in inequality (Cazzaniga et al., 2024). The report uses a conceptual framework to categorize jobs based on their exposure to AI and the potential for AI to complement these jobs (table A3.1). It finds that almost 40 percent of global employment is exposed to AI, with AI estimated to negatively affect half of these jobs while the other half could gain productivity. Women and college-educated individuals are more exposed but also better positioned to benefit, while older workers may struggle to adapt. Furthermore, exposure to AI is spread across the income distribution, but complementarity (shielding) is higher among upper-income earners. Transition of workers between occupations seems to be more beneficial if workers between jobs seem to pay a premium when moving from occupations at high risk of AI displacement to those with high AI complementarity. The findings show that college-educated workers face a higher likelihood of transitioning to roles with high AI complementarity, receiving a high wage premium, while non-college educated workers will more likely transition to low-exposure jobs and are less likely to move to high-complementarity roles. TABLE A3.1 Typology of jobs according to complementarity of and exposure to AI High complementarity, low exposure High complementarity, high exposure Jobs that AI can support and enhance, but have Jobs that AI can support and enhance but not minimal AI applicability. completely replace. Examples: Truck drivers, airline pilots Examples: Surgeons, lawyers, judges. Low complementarity, low exposure Low complementarity, high exposure Jobs that AI cannot support and enhance and Jobs that AI has a higher risk of displacing. have minimal AI applicability. Examples: Dishwashers, dancers Examples: Telemarketers, clerical workers. Source: Cazzaniga et al. (2024) Advanced economies will feel the impacts of AI sooner than emerging markets due to their focus on cognitive-intensive roles, but they are also better prepared. Given the structure of developed economies, the jobs in their labor markets are more concentrated around those with high exposure and hence will be impacted by AI earlier than developed countries. At the same time, the developed countries are also more prepared to take advantage of the benefits of AI, with better digital infrastructure and better human capital, labor market, and regulatory policy environment. Countries of the Arab League seem to have the same level of exposure to AI than other emerging markets but score lower on preparedness (Cazzaniga et al., 2024). 68 ANNEX 4: The role of fragility, conflict, and violence In MENA, the three megatrends will unfold in the context of widespread fragility, conflict, and violence (FCV), which will impact the three megatrends themselves—but the three megatrends will also impact the FCV context in the region. People affected by fragility, conflict, and violence (FCV) face particular development challenges, with high levels of poverty and declining human capital. As a result, extreme poverty is becoming more and more concentrated in FCV contexts. Currently, around 50 percent of the global poor reside in FCV contexts, but by 2030, this proportion will rise to approximately two-thirds, even though only 10 percent of the global population lives in these areas. Countries with persistent FCV status have high poverty rates, often exceeding 40 percent, whereas those that have transitioned out of FCV status have managed to reduce their poverty rates by over 50 percent (World Bank, 2020b). On the other hand, countries transitioning into FCV status have experienced notable increases in poverty rates. In contrast, countries that have never been classified as FCV have generally seen a continuous decline in poverty.12 The megatrends and FCV contexts are interlinked, with the megatrends—especially demography and climate change—influencing fragility. Demography and aging impact fragility through youth bulges and aging populations. As a country’s largest cohorts of children become young adults, they might find limited opportunity in the economy, which in turn can lead to civil unrest and violence. In fact, the median age in the average fragile context was only 19.5 years in 2020, much below that of non-fragile contexts. One study finds that in 43 FCV contexts for which data on the labor market status of the population are available, 66.1 million youth are idle, meaning neither in employment, education nor training (Marley and Desai, 2020). At the same time, as populations age, it will change the characteristics of how people respond to conflict. For example, older people are less mobile, causing more elderly people being left behind and not taking refuge elsewhere during conflicts or crises, as recently observed in Ukraine (Addario and Specia, 2024). Climate change, through increasing temperatures, change precipitation patterns, increase salination and sea levels, and decrease biodiversity, all leading to shifting if not declining natural resources like fresh water or arable land, which in turn increase the potential for conflict over these scarce resources. A 2023 study by the OECD found a close relation between so-called “biodiversity hotspots” and FCV contexts, suggesting that the regions where biodiversity is most threatened are also more conflict-prone (OECD, 2023b). Technological advancement, finally, has arguably a more subtle influence on fragility. However, the emergence of social media and easily accessible communication platforms has made it easier to rapidly spread information and mobilize populations in pursuit of more economic and political participation, increasing the potential for protests, civil unrest, and violence. At the same time, these new forms of media and the associated personalized algorithms that determine the flow of information to users help the creation of “echo chambers” and facilitate the flow of misinformation, undermining social cohesion and increasing the risks of conflict (Lelkes, 2022). At the same time, fragility is also influencing the megatrends. It delays, extends, and changes the nature of the demographic transition through various channels. Increased violence from conflict and war increases mortality and morbidity, resulting in lower life expectancy, including lower healthy life expectancy and hence unhealthy aging. Forced displacement and outmigration slow down population growth and delay the aging of the population and, importantly, risk human capital accumulation (see below). FCV contexts usually also imply low government capacity, including less effective protection against social risks, risks around gender- based violence—both of which are severely limiting the economic opportunities for women. For example, over 300 million women live in FCV contexts that lack legislation on domestic violence (Marley and Desai, 12 Ibid. 69 2020). In addition, the aforementioned study on NEETs in FCV contexts finds that almost three fourths of NEETs are women. This lack of protection and access to economic opportunity is likely to increase fertility, further delaying or extending the demographic transition. With regard to climate change, FCV contexts are characterized by weak governance, therefore diminishing the potential for climate change mitigation (Malpass, 2022). Technological advancement, finally, might be impacted by fragility through the increased demand for high-technology weapons during wartime, diverting research and development capital and hence innovation towards arms development (Strickland, 2023). Box A4.1 summarizes the interlinkages between the megatrends and fragility and how they interact. BOX A4.1 The megatrends are influencing fragility and vice-versa 1 Demography Fragilities Youth bulge Youth demanding Civil unrest, violence political and economic Old and senile stay participation behind during conflict Aging and disasters Old population is less mobile Fragilities Demography Lower LE, unhealthy Increased mortality and aging, delayed morbidity demography transition Forced displacement and Higher outmigration, Civil unrest, outmigration delayed demographic violence transition Less social protection, more GBV, fewer Higher fertility, delay opportunities for women demography transition Source: Authors. 2 Climate Fragilities Changing precipitation Conflict over scarce natural Increasing Increasing sea level resources like temperature water and arable Declining biodiversity land 70 Fragilities Climate opportunities for women demography transition 2 Climate Fragilities Changing precipitation Conflict over scarce natural Increasing Increasing sea level resources like temperature water and arable Declining biodiversity land Fragilities Climate Weak government Less climate change mitigation Capacity for mitigation Civil unrest, violence 3 Technology Fragilities Easier access to Emergence of information and Rapid mobilization social media communiaction for civil unrest and platforms communication Deterioration of platforms Emergence of social cohesion “echo chambers” and misinformation Fragilities Demography Increasing demand R&D capital and for high-technology innovation distorted weaponry towards arms development Conflict 71 REFERENCES Abels, M., Arias Diaz, O. 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