Gulf Monitor

Tomorrow’s workforce: Boosting employment of Saudi nationals

A central problem for Saudi Arabia’s economic diversification plans is that, in an oil-dependent economy, the machine-oriented petrochemical industry does not create many job opportunities.[1]Vision 2030 places great emphasis on the private sector as a major source of future employment for Saudi youth,[2] yet empirical research highlights that a large percentage of young nationals still prefer public sector employment, especially “jobs for life,” over private sector work. In laying the groundwork for robust and sustainable growth in the future, the government faces a conundrum: how to wean young nationals away from seeking public sector employment while simultaneously increasing confidence and trust in private sector opportunities.


Gulf Monitor | Mark C.Thompson | Employment Saudi Arabia


 A great deal of recent international media attention has focused on social change in Saudi Arabia, the rapid expansion of the entertainment sector being one example. However, this “bread and circuses” aspect of recent Vision 2030 developments cannot mask the kingdom’s most pressing structural problem: providing viable employment for Saudi nationals. After all, these new “entertainment opportunities” are often too expensive for unemployed young Saudis.

Indeed, empirical research conducted with young Saudi nationals affirms that they identify (un)employment as the kingdom’s most pressing issue.[3]Hence, one of the primary goals of Vision 2030 is to reduce the unemployment ratio of its citizens from the 2016 figure of 11.6% to 7% in 2030.

But this could prove problematic, as the unemployment rate has remained stubbornly around 12% since 2012. If we take 2019 as an example: the unemployment rate nudged downwards from 12.5% in the first quarter, to 12.3% in the second, and 12% in the third.[4]The data, provided by the General Authority for Statistics,[5]found that the number of Saudi nationals working in both the public and private sectors had increased, while the unemployment rate for both men and women – especially young women – had dropped. Nonetheless, there remained a large discrepancy between proportion of Saudi men in work compared to women during 2019. Saudi female unemployment stood at 30.8% while the male unemployment rate was just 5.8%.[6]

Another concern for the government, given Vision 2030’s promotion of the private sector, is the rate at which the sector is losing jobs on an annual basis. Not only were 2.8% fewer Saudis employed by private firms at the end of 2019 compared to the previous year, but the number of foreign workers was also down 8.5%.[7]This was due to the increase in expat visa dependent fees as well as increased Saudization quotas in certain sectors resulting in many expatriate workers being phased out, for example in the mobile phone industry.

In fact, despite Vision 2030’s emphasis of the private sector, the public sector continues to account for about two-thirds of all employment of nationals – a dramatically higher share than the 10-20% in most other countries.

 

Public sector employment still wins out over private

Although there are job opportunities available for Saudis in the private sector, a large percentage of nationals continue to think that private sector employers offer unattractive salaries and longer working hours.[8]

Extensive empirical research on this topic found that the majority of young Saudis surveyed who preferred a public sector job to private employment cited higher job security as the main determinant, as there was a “guarantee” of not getting fired or losing a job for unspecified reasons. This fear is compounded by the contentious Article 77 of the Labor Law, as many private sector companies are perceived to have misused this article to fire Saudi employees arbitrarily, i.e.without giving valid reasons.[9]

In fact, some young nationals consider job security as more important than salary (even if it is relatively low). Additionally, young Saudis sometimes shy away from working far from their families or hometowns, hence, the favourable location of public sector employment is also deemed an important factor when finding a job.[10]

 

Changing mentalities key 

The problem of unemployment among nationals can only be addressed effectively if there is a transformation in the mentality of young people.

Historically, many Saudis have felt entitled to the higher salaries and more favourable conditions offered by permanent public sector employment. Despite the economic constraints caused by fluctuations in hydrocarbon revenues in recent years, nationals continue to believe that the state should provide an exceptional standard of living through subsidies and lifelong public sector employment, i.e. “jobs for life. ” But in doing so, the state has damaged the bond between productive employment and socio-economic rewards.

To remedy this, there needs to be a seismic shift in social perceptions towards the value of work and skills attainment. This will require addressing the exceptional welfare subsidies on offer with a focus on reducing public sector employment opportunities and dismantling the traditional social contract.

Moreover, in order to rebalance the labour market towards a private-sector-driven knowledge economy, young nationals need to recognize the work-reward nexus. Of course, employability also needs to be understood in terms of both employees and employers. Private sector employers also need to enhance their ability to recruit by making the working environment attractive to prospective employees.

This is particularly relevant as the Saudi economy transforms into a knowledge-based one. In a Saudized labour market, knowledge rather than costs needs to be a main source of competitiveness: companies seeing Saudi nationals only as replacement for foreign labour are unlikely to survive in such a market (and many manual jobs currently held by expat workers may be replaced by automation anyway).[11] Nonetheless, the transition to a scenario in which the majority of Saudi employees work in the private sector will not be easy: abandoning the government job guarantee historically provided to citizens, especially men, is going to be politically challenging.[12]

 

Mark Thompson is a political-sociologist and Senior Associate Fellow at King Faisal Center for Research and Islamic Studies (KFCRIS) in Riyadh. His principal research areas are Saudi socio-economic development, societal transformation and youth issues. Mark has published extensively on Saudi Arabia and makes numerous presentations at international conferences, workshops and seminars every year. Mark’s most recent book is “Being Young Male and Saudi: Identity and Politics in a Globalized Kingdom”, Cambridge University Press.


Sources:
[1] Makio Yamada, “Can Saudi Arabia Move beyond ‘Production with Rentier Characteristics’? Human Capital Development in the Transitional Oil Economy” Middle East Journal, Volume 72, No. 4 (Autumn 2018): 588.
[2] See: Mark C. Thompson, “Inherent contradictions in the Saudi rentier state: distributive capacity, youth employment preferences, and attitudes to education”, British Journal of Middle Eastern Studies, Volume 47, 2020 – Issue 1: Revisiting Rentierism: The Changing Political Economy of Resource-Dependent States in the Gulf and Arabian Peninsula, pp. 77-95.
[3] See: Chapter 2, Mark C. Thompson, Being Young Male and Saudi: Identity and Politics in a Globalized Kingdom, Cambridge University Press, 2019.
[4]http://english.alarabiya.net/en/business/economy/2019/09/15/Saudi-unemployment-rate-falls-to-12-3-percent-in-Q2-2019.html
[5] www.stats.gov.sa/en
[6] Makio Yamada, “Can We Re-boost the Saudization of the Private Sector Workforce? A Practical Approach”, Dirasat 53, King Faisal Center for Research & Islamic Studies, Riyadh, February 2020. Available at: http://kfcris.com/en/view/post/262
[7] See: Vivian Nereim, “Saudi Unemployment Falls to 3-Year Low While Expat Exodus Slows”, Bloomberg, 15 December 2019. Available at: www.bloomberg.com/news/articles/2019-12-15/saudi-arabia-s-unemployment-falls-to-lowest-in-over-three-years
[8] Khalid Al Seghayer. 2015. Real Face of Saudi Arabia: Critical Insider Perspectives on Educational, Lifestyle, and Social Issues in the Kingdom, Riyadh: Hala Print Co., p. 55.
[9] Ali Al Shreami, “Work environment in the private sector”, Saudi Gazette, 17 January, 2018: http://saudigazette.com.sa/article/526328
[10] Thompson, Inherent contradictions in the Saudi rentier state.
[11] Young Saudis tend to think that automation will affect expat workers in the Kingdom more than local ones (Mark C. Thompson, “How Do Young Saudis View Skills for Future Jobs?,” KFCRIS Special Report, 2019, p. 8).
[12] Steffen Hertog. 2018. “Special Report: Can We Saudize the Labor Market without Damaging the Private Sector?” King Faisal Center for Research and Islamic Studies, Riyadh, p. 18, available at: www.kfcris.com/en/view/post/197

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