During the past few weeks the public’s attention has been focused on the labor market, and much has been said about providing jobs for Saudis. There is no doubt that jobs have been created in the past few years, but some figures announced in the media are exaggerated.
According to a survey from Saudi Arabia’s Central Department of Statistics, a total number of 699,199 jobs were created between 2011 and 2013 for both Saudis and non-Saudis at an average growth of 6.6 percent. The fact that Saudis are entering the labor market at a faster rate than the total number of jobs being generated is a positive sign – the rate of job growth for Saudis in particular increased by 10.5 percent, according to the figures.
However, of the 699,199 jobs that were created between 2011 and 2013, 488,046 of them went to Saudis – but 43 percent of those jobs were in the Saudi public sector! The fact that almost half of the Saudi workforce went to work in the public sector is a very negative sign for reasons I have mentioned repeatedly in this weekly column. And as I have said before, it is the duty of the private sector to employ more Saudis. Public sector employment has exceeded maximum limits. Consider that during the same period (2011-2013), a total of 211,153 non-Saudis were employed, mostly in the private sector.
Saudi participation rate in the labor force rose from 36 percent in 2009 to 40 percent in 2013, which is still low compared to about 52 percent in Qatar and 47 percent in Bahrain. Despite this low level, the unemployment rate is still at 12 per cent, according to the Saudi Central Department of Statistics. The normal participation rate for an economy the size of the Kingdom of Saudi Arabia is 65 percent.
Another concerning factor is the very low participation of women in the workforce, which was 16 per cent in 2013 – the second-lowest proportion in the Middle East after Yemen (11 percent). The highest percentage is in the United Arab Emirates (48 percent) and then Kuwait (45 percent). As for the Saudi male participation in the labor force, we find that it is the second highest in the region – behind only Kuwait.
Additionally, unemployment rate among young people (between 15 to 24 years old) has not changed since 2011. It remains at 41 percent in 2013, compared to 40.5 per cent in 2007. Of course, unemployment among young people is a problem for both developed and developing countries. If we take Spain and Greece, for example, we find that the unemployment rate among young people is 55 and 58 percent respectively.
In order to develop jobs for Saudis in the coming decades, we must put restructuring higher education first. I invite readers here to read my previous column on this subject, “An Urgent Appeal to Restructure Public and Higher Education.” At the same time it is necessary to reform the private sector so that it is less dependent on government spending. The private sector needs to achieve a growth rate of over 7 percent in a sustainable manner over the next ten years in order to employ new Saudi entrants to the labor force and prevent the unemployment rate from doubling what it is today.
Dr. John Sfakianakis is the Chief Investment Strategist of MASIC, the Riyadh-based investment and asset management company. At MASIC he is responsible for managing the company’s investment portfolios and strategy, across multiple sharia compliant asset classes. He joined in February 2013.
Previously, he held the post of Chief Economic Advisor at the Saudi Ministry of Finance. He also served as Chief Economist for Banque Saudi Fransi (BSF) and also Chief Economist, Middle East North Africa region for Credit Agricole C.I.B, the foreign joint-venture partner of BSF. He served as the Chief Economist of The Saudi British Bank (SABB) in Riyadh, a joint venture with HSBC and also worked for Samba Financial Group as its Chief Regional Economist. He has also worked for the United Nations (UNDP) and the World Bank as an economist in Washington, D.C.
His articles appear frequently in the Financial Times, New York Times, Wall Street Journal and Bloomberg. He holds a Ph.D. in economics from Harvard University.
Editor’s Note: This article originally appeared in Arabic on the Saudi news website Aleqtisadiah. SUSTG.org is pleased to feature this analysis and commentary by Dr. Sfakianakis as translated from his weekly columns.