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Unemployment in Saudi Arabia: Assessment of the Saudization program and the imperatives leading to youth unemployment
Unemployment is one of the biggest challenges facing the Kingdom of Saudi Arabia, especially among youth. The Saudi government embarked on a national plan to increase employment among nationals and decrease the number of foreign labor force. The Saudization program did not yield the expected results...
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AUC Knowledge Fountain
2015
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| Summary: | Unemployment is one of the biggest challenges facing the Kingdom of Saudi Arabia, especially among youth. The Saudi government embarked on a national plan to increase employment among nationals and decrease the number of foreign labor force. The Saudization program did not yield the expected results, and efforts were made to reform the program in 2011 under the “Nitaqat Programâ€Â. Despite enhancements to the Saudization program, the analysis reveals that unemployment levels remained almost stagnant throughout the past decade. The Saudi labor force is increasing by a rate equal to the rate of employment among nationals, thus keeping unemployment rates stagnant. The Saudi labor market suffers from number of distortions; chiefly; the wage differential between nationals and non-nationals in the private sector, the wage differential between nationals in both private and public sectors, and decreased labor productivity in the private sector. Also, the reservation wage among Saudi-nationals is high due to dependency ratio and the introduction of an unemployment benefit that is two-thirds the amount of the national minimum wage. On the other side the cost of foreign labor in the market remains low despite the introduction of measures to increase this cost on private sector employers. In addition, the education system has not catered to the needs of the labor market, which suffers a skill gap in demand and supply. The lack of vocational and technical skills is visible in the market, while a mismatch exists between higher education and labor market needs. The dependence of the Saudization program on quota-based, legal-interventionist methods is proving to be a challenge, further attesting to the need to rely more on a market driven system. Unless the distortions in the labor market are addressed, the Saudization efforts will remain stagnant, since these distortions are creating an imperative for youth unemployment. |
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