JEDDAH, 20 December 2004 — Almost all Saudi “able-workers” look upon unemployment as an evil. They would like to avoid it provided the sacrifice is not much. They choose between employment and unemployment in the same way in which they proceed in all other actions and choices: They weigh the pros and cons. If they choose unemployment this unemployment is a market phenomenon whose nature is not different from other market phenomena as they appear in our changing economy.
Firmly committed to the principles of interventionism, our government try to solve unemployment by resorting to those measures that hamper the free-market economy: “Saudization”, public works by means of lavish public spending, inflation and credit expansion. All these remedies are worse than the evil they are designed to remove.
The so-called Saudization program implies that employers must provide a job for every person holding a Saudi passport, regardless of this person’s abilities, skills, or productivity.
The fact is that the so-called “Saudization of the work force” is discrimination in its purest form. It is not only based on religion, ideology, race or color, worse yet, it is based on the color of a person’s passport. It is an extension of a “fabricated-culture” that has been feeding us with the ultimate illusion that we, Saudis, have priority over any other nationality in everything we do on planet earth. That faked-superiority-attitude is the main cause of our youngsters’ misery in which we the parents are wholly responsible. Have we not been raised with the baked opinions that a Pakistani is a driver, an Indian is a gardener, a Sudanese is a doorman, an Indonesian is a maid, an Egyptian is a bookkeeper, a Yemeni is a plumber etc.... little we learned that all of them come from countries that are rich in history, achievements, and above all productivity. The mere fact that they work outside their respective countries is a testimony of their qualifications, flexibility and mobility which is lacking in our society. Moreso, have we not exploited most of them by paying them miserable wages which are less than a weekly pocket money given to our own children.
Government spending, including spending designed to stimulate employment, may be derived from three sources. The first source of funds is government borrowing, but this borrowing increases the price of lendable funds, which reduces the amount of investment in the private sector. Consequently, fewer new factories, projects and homes will be built. Not only does this decrease in private investment slow economic growth, it results in additional unemployment in these industries. The second source of funds is the government’s central bank, which can create new money. However, this monetary inflation results in price inflation by eroding the purchasing power of the Saudi riyal.
This decrease in purchasing power will eventually increase unemployment as well. The third source is indirect taxation from imports, subsidies, fuel etc... It is unfortunate that well over 75 percent of our GDP is derived from monopolistic industries such as oil drilling, electricity, air transport, telecommunications and banking.
Unemployment in our country is always voluntary. There will always be lower paying jobs available or positions in other parts of the country which an individual could accept if he were willing to do so. Do we see our Saudi youngsters working in restaurants, fast food chains, supermarkets, or in various manual jobs? The answer must be in the negative. It is a fact that there are plenty of jobs available for those who accept the type of work at the prevailing wages rate.
To say that every person has the right to a job is to imply that someone else has an obligation to give him one. Here in Saudi Arabia, we recognize a person’s right to seek employment, so long as there is someone willing to employ him. But to insist that someone (or everyone) provide him with a job, denies the fight of the employer to do as he chooses with his own business. Once again, by establishing a false “fight,” the government actually have taken away a basic human right: The right to use your earnings as you choose.
Current government policies cause widespread and persistent unemployment by its Saudization program and labor laws that unfairly overprotect Saudi laborers and discriminate against their foreign counterparts. Labor laws significantly increase labor costs and hence discourage businesses from hiring Saudi workers.
If a person does find himself unemployed, two messages the market is sending him/her is that his personal resources — his talents and skills and experience — are not in demand. He would do well to heed that warning and look for employment in a field of endeavor better suited to his particular qualifications, two, he must accept the prevailing wages rate.
A person in such a situation has two choices: (1) accept the status quo and rely upon the government to provide a solution, or (2) be determined to use the time available to create new opportunities for himself. Job retraining, more education, or relocation to another city may offer someone greater growth than he might ever have enjoyed. Over a lifetime, unemployment may actually result in his achieving greater wealth than he might otherwise have enjoyed.
If our government is truly interested in reducing unemployment, it can best do so by eliminating the restrictions that currently govern hiring and firing; by repealing laws that prevent people who want to work from doing so; by doing away with regulations and paperwork that encumber employers and employees.
Like poverty, unemployment always will be with us. Some people will not want to work at the prevailing wages rate. Others value free time more than additional money and will work only long enough to pay expenses before voluntarily becoming jobless once again. A certain group of people will live with unemployment until they are able to obtain the kind of position they feel most appropriate for them, whether that is defined in terms of prestige, salary, or skills demanded. Others might endure unemployment because certain jobs are “beneath” them; accepting short-term employment elsewhere might prevent them from obtaining a more suitable long-term job closer to home.
To deal with such unemployment, government need only to allow employers and employees the freedom to decide for themselves which arrangements best suit their own particular needs. The benefits will follow in due course. However, unemployment resulting from changes caused by governmental interference can throw up roadblocks to success few individuals can overcome by themselves.
Relying on government to create jobs retards economic progress. When government tries to create jobs, it interferes with cooperation between workers, employers, and consumers. Productive jobs are created when people have the freedom to choose jobs and cooperate through markets.
As William J. Brennan Jr. once said : “It is difficult to understand precisely what the state hopes to achieve by promoting and perpetuation of a subclass of illiterates within our boundaries, surely adding to the problems and costs of unemployment, welfare and crime”.
(Abdelmenem Jamil Addas ([email protected]) is a professor of financial markets, at the College of Business Administration. He is based in Jeddah.)