Despite being the world’s main oil producer, Saudi Arabia has difficulties providing enough jobs for its young population.
The Kingdom’s unemployment problem is a consequence of fundamental and systematic shortcomings, such as a lack of proper education, the difficulty in a religiously conservative society with integrating women into the workforce, and a stagnant private sector dependent on foreign workers.
In a country where more than two-thirds of the population is younger than 30 and about 100,000 graduates enter the job market each year, tough measures should be taken. These include lessening the stifling grip of the Saudi government on the private sector, increasing vocational training in higher education and easing cultural restrictions that impede integration of Saudi women into the workforce. Unless implemented, the country’s unemployment problem risks transforming into a ticking time bomb that undermines stability.
High oil prices and increased production have provided a big boost to the Saudi economy. Over the last four years, the country has recorded an annual, average growth of 6.25%. Yet, in terms of jobs, Saudis have only modestly profited from this boom, with most new jobs going to foreign workers.
According to figures from the International Monetary Fund (IMF) released in July 2013, 1.5 million of the 2 million new jobs created in the last four years went to non-Saudis. Meanwhile, the IMF indicates that the unemployment rate among Saudi nationals has reached 12%. The youth (30%) and females (35%) are particularly affected by the country’s unemployment problem.
Only a small number of Saudis are employed in the private sector. According to statistics for 2011 from the Saudi Ministry of Labor, released by the Saudi Arabian Monetary Agency, Saudi workers represented only 10.9% of the total number of workers in the private sector.
Companies have traditionally been reluctant to employ Saudis, who are paid more than foreigners and enjoy more job protection. In addition, many Saudis prefer to work in the public sector, since private employers offer comparatively lower salaries, unattractive benefits packages, and demand longer working hours.
There is also a mismatch between the skills of young Saudis and the needs of private sector employers. With Saudi institutions of higher education focusing on theoretical rather than vocational aspects of education, graduates do not meet the requirements of companies searching for technical and vocational specialists.
On top of this, because of fundamentalist interpretations of Islam in Saudi Arabia, it is seen as a violation of God’s will for unrelated men and women to mingle. Consequently, there are many restrictions on women’s ability to work. With more women graduating from Saudi universities than ever before, the government faces a huge challenge integrating them into the workforce.
To increase women’s employment, the Saudi government has tried to create more job opportunities. Employers have been urged to establish gender-segregated work areas and plans have been announced to lift a ban on female lawyers arguing cases in courtrooms. In an interview with the Washington Post in November 2012, the Saudi Labor Minister Adel Fakeih said his department was trying to create jobs that allow women to work from home.
In addition, the Saudi government has taken steps to increase the number of Saudi nationals working in the private sector. In June 2011, the Saudi Ministry of Labor introduced a new system called ‘Nitaqat’. Through the Nitaqat-system, the Saudi government hopes to gradually replace expatriate workers with Saudi workers. Under the new policy, companies are incentivized to increase their percentage of Saudi employees; businesses with a low percentage of Saudi employees are penalized by having work visas for their non-Saudi workers denied.
The Saudi government has also introduced the Hafiz-program, which provides Saudi jobseekers a monthly allowance for a maximum period of one year, conditional upon their participation in job searches and training activities.
Despite these measures, there are still signs of distress within Saudi society. One of the most active conversations currently taking place on Twitter, loosely translated as “Salaries are not enough” is almost entirely fueled by Saudi users.
The discussion has gone viral with hundreds of tweets per second and millions of tweets per week on the topic. With the hashtag #salaryisnotenough, Twitter users are urging the Saudi government to take action against poor job prospects, low wages, and the rapidly rising cost of living.
While the Nitaqat-system aims to increase the number of Saudis working in the private sector, it does not actually change its structure which is primarily based on low-cost foreign labor and the Kingdom’s comparative advantage in energy-intensive industries. Dr. Steffen Hertog, an expert on political economy in Saudi Arabia based at the London School of Economics, noted in a recent article for the Carnegie Endowment for International Peace that less than 400,000 of the 4 million expatriate-held jobs in the private sector commanded a salary of more than 3,000 Saudi Riyals ($800) a month in 2011.
This means there are only a few positions in the private sector for which Saudis would even consider applying. The private sector in the Kingdom is mainly dominated by big business conglomerates which are the main beneficiaries of government contracts because of their close ties to the regime. Starting entrepreneurs, therefore, find it difficult to develop their businesses with ‘government red tape’ fuelling patronage, ultimately resulting in a stagnant private sector that lacks innovation and sense of entrepreneurship. This is a big obstacle to the development of a more diversified economy that would increase the number of suitable, high-paying jobs available to the Saudi youth.
The measures taken by the Saudi government with regard to employment have also stopped short of fully addressing women’s employment. Lifting these restrictions has the potential, however, of triggering confrontation between the regime and the conservative religious establishment.
Tensions between the Saudi government and the religious establishment recently came to the fore when King Abdullah sacked his hard-line adviser Sheikh Abdelmohsen al-Obeikan, after the sheikh criticized the king’s decision to relax gender segregation.
Because quick fixes are unavailable, the unemployment problem in Saudi Arabia will remain a headache for the Saudi regime for years to come. But remaining idle in the face of persistent unemployment entails the most risk. With so many young Saudis entering the labor market in the coming years, a time bomb is waiting to explode.