Low-skilled expat workers in Middle East worst hit as hiring drops 50% over coronavirus

Expatriate workers returning from Egypt, Syria, and Lebanon arrive at a Kuwaiti health ministry containment and screening zone for COVID-19 coronavirus disease in Kuwait City on March 15, 2020. (File/AFP)
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Updated 14 July 2020

Low-skilled expat workers in Middle East worst hit as hiring drops 50% over coronavirus

  • In June, job opportunities in the UAE began to slightly increase
  • One million of five million Egyptians working in Arab countries will be terminated by the end of 2020

DUBAI: The labor market in the Middle East has been severely impacted by the coronavirus disease (COVID-19) pandemic, leaving millions of expat workers with no choice but to pack their bags and leave.

Hiring activity has dropped by 50 percent from 2019, a Gulf Talent analyst told Arab News.

In Kuwait, about 1.5 million expat workers are expected to leave the country by the end of 2020 due to the economic downturn after the state forced companies to cut their workforce.

The expats, who “are either illiterate or can merely read and write,” were not the country’s priority, Kuwait’s Assembly Speaker Marzouq Al-Ghanem said.

“While some officials in Kuwait have echoed these sentiments, political gridlock in the country’s parliament has thus far prevented decisive movement on the labor front. However, political momentum for labor market reforms that reduce the number of expatriates in Kuwait seems to be gaining speed,” Dr. Robert Mogielnicki, resident scholar at the Arab Gulf States Institute in Washington, told Arab News.

In Saudi Arabia, 1.2 million expat workers are also expected to leave the Kingdom this year, according to the Jadwa Investment Company’s latest figures.

In Egypt, it is estimated that one million of five million Egyptians working in Arab countries - especially in the GCC - will be terminated by the end of 2020, local daily Egypt Today reported citing the head of Expats Employment Unit at the Chamber of Commerce Hamdi Imam.

He added that Saudi Arabia - which has three million Egyptians working in it - has suspended multiple mega projects. And in Kuwait, he added, many Egyptians do not have contracts as they are irregular workers and carry expired residency permits, causing them to leave the country.

Low-skilled workers in the Gulf region will struggle the most when it comes to securing their jobs. They depend on actions taken by governments to address the socioeconomic concerns of citizens, Mogielnicki said. The higher-skilled employees have deeper socioeconomic networks and more labor market flexibility, he added.

Wages have also dropped significantly, causing applicants to expect much lower salaries than prior to the outbreak. In February 2020, jobseekers anticipated their next job would offer them an average wage of 14 percent more than their previous job but in today’s market, the average salary payment expected is just 2 percent higher, Gulf Talent analyst said.

In June, job opportunities in the UAE began to slightly increase, yet they still remain lower than the levels seen before the closure of schools in March, a report by Gulf Talent said.

Expats in Gulf Cooperation Council countries are struggling to secure their jobs, as Gulf states are calling for an increase in workforce nationalization in government entities as well as market forces impacting private sector employers, Mogielnicki said.

“Although countries around the world may be looking inward these days, it is impossible to ignore the forces of globalization. Both globalization and nationalism will remain pertinent forces shaping the contours of Gulf labor markets for the foreseeable future,” he added.

Foreign employees working in Oman’s health sector institutions have also been at risk since February due to the government’s proposal to hire Omanis in technical positions as part of the Sultanate’s nationalization plan, the local Times of Oman reported.

But in the UAE, medical professionals witnessed an increase in demand compared to the period prior to the COVID-19 outbreak, as 18 percent more interview invitations were received by applicants in April than in February.

When asked about the outlook for the labor market by the end of 2020, the Gulf Talent analyst said the presence of both the pandemic and lower oil prices forecast a recession in the majority of countries in the region, and more job losses would continue to take place.

“At the same time, some hiring activity should pick up as companies restructure, look for new skill sets or lower-cost employees, and to replace people who leave,” the analyst added.

Mogielnicki said he expected the aviation sector to remain affected by the pandemic well into 2021, adding that it was one of the largest employers in the region. “Industries that rely primarily on the transnational flow of people and, to a lesser extent, goods, will continue to suffer for some time. Industries involved in the provision of digital services and other technology-based platforms and applications will fare better,” he added.

Gulf Talent also said it expected the aviation sector to continue to be affected, with the hospitality and commercial real estate sectors added to the list. The analyst said it may take longer for the aviation sector to get back to previous levels, as business travel and work patterns may have changed permanently by the current shift to remote working.

“The Gulf region has a large service sector, and not all of these jobs can be done remotely. EdTech and HealthTech platforms have enabled many educational and healthcare services to function virtually. Other service-related industries that rely on in-person interactions may struggle to manage lower levels of customer demand over the coming months,” Mogielnicki said.

‘Lower for longer’: Fed’s warning on interest rates

Updated 24 September 2020

‘Lower for longer’: Fed’s warning on interest rates

  • The Fed cut rates to near zero in March and took other steps to combat a recession

WASHINGTON: Federal Reserve Vice Chair Richard Clarida said on Wednesday that policymakers “are not even going to begin thinking” about raising interest rates until inflation hits 2 percent, comments aimed at cementing the public’s understanding of the US central bank’s new approach to monetary policy.

“Rates will be at the current level, which is basically zero, until actual observed PCE inflation has reached 2 percent,” Clarida told Bloomberg Television, referring to the Fed’s preferred measure of prices. PCE inflation tends to be somewhat lower than the better-known consumer price index.

“We could actually keep rates at this level beyond that. But we are not even going to begin thinking about lifting off, we expect, until we actually get observed inflation equal to 2 percent. Also we want our labor market indicators to be consistent with maximum employment.”

The Fed cut rates to near zero in March and took other steps to combat a recession that took hold as businesses shut down and consumers stayed home to fight the spread of the coronavirus.

Clarida said that with further government aid from Congress and the steps the Fed has already taken, the US economy could return from the current “deep hole” of joblessness and weak demand in perhaps three years.

To aid that process, the Fed in late August revised its approach to monetary policy to commit to lower rates for longer periods of time, allowing the risk of higher inflation to try to encourage a stronger economic recovery and more job gains for workers. A follow-up policy statement last week gave more specific guidance about future decisions, but questions remain about what the new approach will mean in practice.

Clarida said there should not be any confusion: Rates will not increase until labor markets recover and prices hit the Fed’s target.

“So lower for longer, and we have given some observable metrics,” for judging when a rate hike debate might begin, he said.

Decisions about any possible overshoot of inflation are “academic” at this point, he added, and can be made once the economy rebounds.