A recently released report by Jadwa Investment on the Saudi labor market looks ahead to the potential significant challenges still facing the labor market within Saudi Arabia.
“The Saudi Labor Market has undergone significant and dynamic change over the course of the last decade. The labor market is notably segmented and unique challenges are being encountered with the employment of Saudi nationals into the private sector,” Fahad Alturki wrote in a note to investors.
Key findings of the report include:
• The Saudi unemployment rate fell slightly by 0.1% to 11.6% during the first half of 2015 compared to the second half of 2014.
• Saudi employment growth in the private sector remained healthy during this period but hiring levels in the public sector were slower.
Jadwa Investment examines current and long-term challenges.
• Increased Saudi employment and Saudization levels in the private sector were buoyed by positive growth in labor productivity during 2014. Continuing labor market reforms are playing a notable role in the witnessed improvement.
• Two key structural enablers of employment growth and labor productivity remain enhanced education opportunities and private sector investment. Both areas require a re-focus to meet the changing needs and dynamics of the workplace and economy.
• Combined estimated increase in Saudi working age population by 2025 to17.9 million and with an accompanying rise in Saudi Labor force participation – this will see 226,000 new Saudis per year eligible to enter the employment market over the next decade.
• Public Sector employment forecast for Saudis to grow by 84,000 new jobs per year for the next 10 years.
• However, higher base line of potential workers available to the marketplace in coming years allied to lower future projected public sector employment figures (compared to 2006-14 average) confirms policymakers objectives in directing the private sector to be the “main engine for Saudi job creation” moving forward.
Three potential forecast scenarios for Saudi unemployment rates by 2025 include: 0% underpinned by high Saudi employment growth (corresponding to The Ministry of Economy and Planning long-term strategy), moderate baseline estimate of 6% Saudi unemployment and a “no-action” scenario yielding a 16.9% Saudi unemployment rate.
