The Tunisian Labor Code, enacted in 1966, has undergone over 100 revisions, but still fails to cover a significant portion of the workforce. According to a recent study by the Arab Institute of Business Leaders (IACE), 43.9% of the active population operates outside the code's scope. This is largely due to the growing informal economy, which accounts for 35-40% of the country's GDP.
The IACE study paints a grim picture of Tunisia's labor market. The unemployment rate stands at 15.2%, with a staggering 24.2% among university graduates. The gender gap is also significant, with women's unemployment rates nearly double that of men. Women make up 57.4% of university graduates but only 33.6% of the active population. Tunisia ranks 152nd out of 190 countries in the World Bank's "Women, Business, and the Law" report.
The social security system is also facing a deep crisis. The pension fund deficit exceeds 1.1 billion dinars, while the social security deficit reaches 1.4 billion dinars. The active-to-retiree ratio has dropped to 2.7:1, compared to 5-6:1 in the 1970s and 1980s. The IACE study identifies six key areas of consensus among experts, including the adoption of a new Labor Code, regulation of telework and platforms, and strengthening the link between labor law and social security.
The IACE study draws on international comparisons to support its findings. Countries like Denmark and Germany have implemented successful labor market reforms, reducing unemployment rates significantly. In contrast, Tunisia's 2025 revision of the Labor Code has been criticized for being rushed and lacking consensus. The study highlights the importance of social dialogue in achieving meaningful reforms.
The economic implications of reforming the Labor Code are significant. Integrating informal workers into the formal economy could generate an additional 325-400 million dinars per year in social security contributions. This could help alleviate the financial burden on social security funds. However, Tunisia's attractiveness to investors is hindered by its outdated labor laws, ranking 12th in Africa, behind Morocco and Egypt.
The IACE proposes four possible scenarios for reforming the Labor Code: continuing with piecmeal revisions, adopting a new global code, separating labor and employment into two codes, or undertaking a comprehensive reform of the social system. The institute recommends a combination of immediate measures, institutional reforms, and a participatory process towards a new Labor Code, conditional on genuine social dialogue.
The study's findings have significant implications for Tunisia's economic and social development. With a new Labor Code, the country could improve its business environment, attract more investment, and reduce poverty and inequality. The IACE's recommendations emphasize the need for a collaborative approach to reform, involving government, employers, and workers.
Key points
- The Tunisian Labor Code no longer reflects the reality of the job market, with 43.9% of the active population outside its scope.
- The country's social security system is facing a deep crisis, with significant deficits in pension and social security funds.
- The IACE proposes a combination of immediate measures, institutional reforms, and a participatory process towards a new Labor Code to address these challenges.
