In part, reaching the lowest rate in 27 years was due to the recession that had started in 2008 and should not have been surprising. Nevertheless, it was a cause for concern in itself because it meant that over one third of working-age population in the US was not engaged in gainful activity. That is a considerable loss certainly, but what if that rate was halved?
That is what I would like to address today in the case of Saudi Arabia, where participation rate is estimated to be 32 percent.
Participation rate is not simply the inverse of the unemployment rate, which measures narrowly defined situations at a certain moment. Instead, it is an indicator of long-term trends and as such requires a somewhat different set of tools.
What is a nation to do if its labor force participation rate is half the US rate? Based on data published recently by the Central Statistics and Information Department, Saudi Arabia's participation rate is estimated to be 32 percent. When I first calculated this rate I was hoping that there had been a mistake either in my calculations or in CSID data. But I found this rate has been rather consistent in Saudi Arabia since 1999, the first year such information was systematically collected and published. Such consistency should rule out inadvertent mistakes.
As unemployment rate, narrowly defined, rose to an unprecedented 10.5 percent, participation rates would naturally decline by a few points. But a 32 percent participation rate? If such rate existed, it would be associated with a dysfunctional economy, not a thriving one such as Saudi Arabia's, a country where the economy has been growing by leaps and bounds and doubling every 5 to 7 years.
Data may be consistently faulty, but we need not take chances. It is clear that the Saudi leadership is determined to change this picture. Recent Cabinet changes affecting key economic posts certainly reflect that determination. The program "Hafiz" of employment incentives is another tool that the government hopes to use to change this picture and improve participation rate.
Several decisions to improve women's employment opportunities, in particular, are also meant to raise their participation in the labor force. Spurious objections to such wise decisions reflect lack of appreciation, on the part of a small minority, of how serious the problem is. Saudi women have been the main group affected by limited job opportunities and extremely low participation rates. It is high time they benefited from the unprecedented prosperity their country is enjoying.
