Dr. Mohamed A. Ramady
Publication Date: 
Mon, 2008-01-28 03:00

As others have so eloquently argued, the issue of current and rising unemployment levels in the Gulf needs to be addressed, given the underlying and potentially explosive issue it involves. Official unemployment data, woefully incomplete and out of date, paints a picture of rising unemployment. Not a week passes by without yet one more ministerial order, to either spur local job growth or to threaten punishment for companies that do not meet their “national” job quotas. Programs to enhance Saudi and Gulf job entrant’s skills are announced, but nothing is then released on how effective these programs turned out in reality to reduce unemployment. The time has now come to get clean with the numbers first, if there is to be a meaningful debate on the causes of unemployment and to propose appropriate remedial action. Nothing is yet lost, as the Gulf states are blessed with oil revenue surpluses which can be used for initiating long term unemployment alleviation, and job generation measures, before the fortunes of the oil market reverses.

The first issue is to define who are truly unemployed, and not just those that register for unemployment. Official published Saudi Arabian Monetary Agency data stated that some 470,000 Saudis were registered jobless in 2005. This represented 9.1 percent for Saudi males and 26.3 percent for Saudi females who have registered for jobs. Are these job seekers the only ones in society, or are there “hidden jobless” figures not captured in the official data? Why the disparity in male and female jobless figures? Is it because Saudi females are more eager than Saudi males to find a meaningful job, and thus register as unemployed, while males do not bother? Official unemployment figures in all societies fail to account for those that “opt out” of the welfare system altogether, by not registering for unemployment benefits. In Saudi Arabia and the Gulf, the extended family system acts as a shock absorber for the young unemployed, in the absence of an established welfare payment program, as well as the social stigma of being seen to apply for such benefits.

What is of more interest from the released government data is that the period 1995-2005 has seen a growing proportion of registered jobs seekers in the higher educational levels. In 1995, those with bachelors, higher diplomas or above, accounted for 1.65 percent out of 24,232 registered unemployed, but the figure had risen to 4.69 percent out of 155,579 in 2005. The 2005 figures included 29 with Masters and Ph.D. degrees. Something is inherently wrong in an economic system that is demanding a more specialist labor force to implement the proposed mega cities and other infrastructure being planned, and yet around 5 percent of the registered higher educated job seekers cannot find jobs.

A lot has been written about the mismatch between Saudi labor requirements and graduate output. It is not fair to put all the blame on the Saudi graduates for choosing their particular “non-market” related subjects, as they had little choice, given both the number of government universities and places available for “market” related subjects.

The choice facing Gulf youth was simple — either enter a university — irrespective of a degree subject choice — and hope for the best, or do not enter and minimize one’s social standing and chances for marriage and social mobility. This situation is now being addressed with the emergence of more first class private sector universities in the Kingdom and the Gulf, that seem to be more in line with the needs of the private sector job market. Of more importance, these private educational establishments seem to have a transparent and open dialogue with industry to ensure that they are competitive in graduating students which industry needs. This has been noticed across the world — when students (or their parents) have to pay for their education, they will insist that their degree has an intrinsic “job value”, whether it is in the sciences or the arts. What is more worrying though, is that when one delves behind the official released figures for job seekers, one immediately notices that the overwhelming number of unemployed are in the younger age groups. Some 88 percent are between 15-30 years, and of these, 51 percent are in the 21-25 age groups. This can be devastating for any society grappling with social problems and alienation. Governments in the Gulf, none more so than Saudi Arabia, have emphasized their resolve to fight youth unemployment. A combination of realistic pay expectations, long term training commitments by Saudi companies and a closer dialogue between universities and the private sector will work, but this takes time. Reducing the Kingdom’s seeming unending addiction on foreign labor by banning local firms who do not meet “Saudization” quotas might do the trick in the short term. In the long term though, in the era of globalization and free movement of capital and enterprise, some firms might decide to pack up and go to more business friendly environments, such as Dubai, as so many Saudi companies seem to have done. In the end, if this company exit continues to happen, the Kingdom will lose on both employment and value added synergies in the local economy.

What needs to done, is to publicly name and shame those national companies that have agreed to take government training and employment subsidies, only to register “ghost” employees on their staff payroll and carry out little, if any, employee’s training, thus perpetrating the cycle of youth cynicism about the government’s employment generation effort.

There are no easy solutions for tackling unemployment, whether in the Gulf or in more advanced economies. What is different however is that in most economically advanced societies, there is an insistence that the full picture is released on the true state of unemployment and job seekers, in order to enable a realistic plan to be implemented. This avoids surprises and panicky actions and reactions later on when the numbers are released. Let’s start from now.

— Dr. Mohamed Ramady is visiting associate professor, finance and economics at King Fahd University of Petroleum and Minerals.

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