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Unemployment rises again amid rapid economic growth

Earlier this month, Saudi Arabia published labor market statistics for the period 2011-2012. They show that the unemployment rate has been increasing steadily, reaching a record 12 percent in the second half of 2012, the highest rate ever in modern Saudi history.
What is especially surprising is that unemployment has been climbing despite the rapid economic growth Saudi Arabia has been experiencing, and despite much-publicized efforts made by the Ministry of Labor to increase employment of nationals.
The last time official unemployment figures were published, in 2009, they caused a stir because the unemployment rate was put at 10.5 percent then. The number of unemployed Saudis was put at approximately 450,000 in 2009.
The new figures published this month by the Central Department of Statistics and Information (Ministry of Economy and Planning) show that the unemployment rate jumped to 12 percent in the second half of 2012. The number of unemployed Saudis reached 603,000, a whopping 34 percent increase from 2009.
You would expect that such increases in the unemployment rate and the number of unemployed nationals would be due to a recession or contraction in the overall economic growth. But we know that that is not the case in Saudi Arabia, where recent years have witnessed rapid economic growth. During the same period (2009-2012), the Saudi economy almost doubled. In 2009, Saudi GDP was put at $ 369 billion. In 2012, it reached $ 727 billion, an increase of 97 percent in three years! However, this dramatic increase in economic activity did not trim the unemployment rate or stop it from rising.
During the same period, the Ministry of Labor announced several initiatives to increase employment of nationals. Those efforts too do not seem to have reversed the trend of rising unemployment.
In sum, CDSI’s figures show that despite impressive growth in economic activity from 2009 to 2012, and notwithstanding Saudization efforts, unemployment steadily rose, breaking historical records.
Who are the unemployed according to the recent figures? Here are some highlights I surmised from CDSI data for the second half of 2012.
Unemployment is higher among women: 40 percent of the unemployed are males, while 60 percent are female.
Unemployment is largely a youth problem: 75 percent of the unemployed are young, in the (20-29) age group.
Only one third of Saudis in working age are actually employed. According to CDSI’s figures, employed Saudis constitute only (34 percent) of all Saudis who are in working age, an alarming rate. The percentage is especially low in the case of Saudi women, where only 10 percent of working-age women are employed.
Participation rate of Saudis in the labor market is extremely low by international standards: Less than 39 percent of Saudis in working age are “in the labor force,” meaning that they are either employed or seeking employment. In other words, 61 percent of Saudis in working age are “out of the labor force,” using CDSI’s terminology; almost 8 million Saudis are classified as such.
Employed Saudis are increasingly under strain to care for those who are unemployed or “out of the labor force”: Figures show that there is a considerable burden on employed Saudis to care for those who are not economically active. Out of a total population of 20 million, only 4.4 million are employed, or a mere 22 percent, very low in international comparisons. They have to care for the remaining 15.6 million not economically active, thus reducing the overall welfare and wealth of those who are lucky enough to find jobs.
What happened since 2009? Economists are fond of saying that rising tide lifts all boats. According to this theory, the invisible hand of economics would automatically translate high rates of economic growth into higher employment levels. But we just saw that that we have had the opposite: Higher rates of economic growth coincided with high rates of unemployment.
It seems that the proverbial invisible hand has lost its touch in our case. Many Saudis believe that there are other forces that have prevented it from doing its magical work. First, laissez faire labor policies have ensured that whatever jobs are created are claimed by non-nationals, easily brought in from neighboring countries. Second, universities and technical schools are behind the times in providing the kind of skilled and semi-skilled labor that the new Saudi economy requires. Third, rising expectations have priced Saudis out of the labor market, as employers choose cheaper imported labor. Fourth, many Saudis prefer to work in government jobs and would rather wait for a civil service job than accept low-paying work in the private sector.
It is no wonder, then, that we are facing these tough challenges. There are no easy answers, but it is important to think of the tough choices that we have to make to stem the tide of unemployment.

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