Unemployment in Saudi Arabia - Case Study Example

Unemployment in Saudi Arabia Name: Student Number: Course Code: Word Count: Date of Submission: 1.0 INTRODUCTION 1.1 Aim In the realm of post modernity, every individual desires to acquire a profession or at least have some kind of work compensated by payment. Work, herein, refers to the service that an individual provides to another for purposes of generating income for themselves. Workers and professionals work for their interests, that of the society and the government at large. Unemployment in Saudi Arabia has attracted the attention of the globe and even described as an economical time bomb by the country’s Prince. This paper, therefore, seeks to discuss the nature of work in terms of unemployment in Saudi Arabia. The report aims at providing necessary details about the unemployment rate in Saudi Arabia. The research done in this can be a complementary tool to scholars and practitioners as well as the general public in terms of availing information. 1.2 Background Money, as the most valuable modern currency of exchange in trades, is the secret to living a good life. Without secure employment, one may not have enough money to stabilize their live and that of their family or society. The rate of unemployment in a country has various economic impacts to that nation. For this particular reason, the governmental authorities have no choice but to establish ways of curbing the current problem. Surprisingly according to an Arab News article published by Aluwaisheg (2013), the country’s economy has continued to grow with more jobs availed by the rate of unemployment has taken the opposite direction. This shows that there other factors that determine the unemployment levels of a nations other than just economic strength and availability of jobs. 1.3 Scope Researches and study have been conducted in relation to the unemployment status and rates in Saudi Arabia. These researches have taken different directions to address different issues and with different purposes definitely. In this case, this report will be limited to the current rate of unemployment in Saudi Arabia and causes of unemployment with respect to the defining determinants. For the purpose of this report, figure and representative diagrams will be used from referenced sources to give a perspective on the unemployment rates in Saudi Arabia. 1.4 Method The investigations in this report will research and heavily rely on online materials and journals as existing reports and statistic; this is secondary research. The main reason for this is that online resources are more updated and also easily accessible. A discussion under such a topic can be very expansive and involves a lot of factors and aspects, some of which may be beyond the scope of this report. For the purposes of precision, specificity and realistic research, this report focuses on the determinants or cause, rates and status of unemployment in Saudi Arabia. 2.0 SAUDI ARABIAN UNEMPLOYMENT RATES AND STATUS The Saudi Arabian government has its own analysis of the subject and has defined systems or methodologies of handling the area under discussion. Most popular is the Saudization programme which is implemented to secure employment and encourage more Arabians into stable employments. The government’s perspective can be viewed as a legal stand. Viewing the policies developed and implemented by the government is complementary to the purpose of this report. As mentioned earlier, the Saudi Prince has his view and terms the current unemployment status as an economic time bomb. This is an informal description but understood by any ordinary Saudi Arabian. The Prince’s opinion of a remedy is replacement of expatriate workers with unemployed Saudis. Necessarily for this report, this shows an appreciable concern of the country’s leadership over this matter. Generally, leadership in Arab nations is influenced by the regions religion. Their leadership theories influencing practice by suggesting new ways of perceiving events or situations, different from conventional ways (Zen-Ruffinen & Kaynar 2011). According to a study by the Saudi Central Department of Statistics and Information, the unemployment rate in the country was approximately at 12 per cent in the year 2012 with a number slightly above half a million of Saudis unemployed. Other researches indicate that this number has grown heavily heading for the two million mark. This is a worrying situation considering that close to 80 per cent of the 5 million Saudi Arabia populations are men. These men represent the greatest percentage of Saudi labour force and so for most families, fathers are the bread winners and them being unemployed makes the situation even worse compared to unemployment of women. 1Source: http://www.indexmundi.com/g/g.aspx?c=sa&v=74 Unemployment is possibly the biggest problem or issue that faces the Saudi government currently. This unemployment may be due to particular reason that will be covered in the following part of this report. It worth noting that the Saudi government has responded in various ways including the Saudization programme mentioned earlier. Saudization is a programme or policy by the Saudi government imposed on private companies to employ more Saudi workers. It aims at decreasing the number of expats which are approximately 5 million. Just as mentioned above as a factor in the leadership in Arab countries, this programme borrows from the Emiratization programme which has succeeded in solving unemployment in United Arab Emirates (Duening & Click 2005). 3.0 CAUSES OF UNEMPLOYMENT Employment of Expatriates Saudi Arabia is one of the leading producers and exporters of oil which earns huge amounts of income to this nation. Despite of the admirable amounts of revenue that this country collects from sale of oil, it struggles with employment. It is thus more important to establish the reasons and causes of the worrying situation of unemployment in the Gulf Arab state. As hinted earlier, one of the reasons is dependency on expatriates who underwent an archaic system of education. This education system is somehow out of date and the striking characteristic is that the system focussed more on religion than it did on preparation with technical skills for the ever advancing market. Unwilling Private Sector The other reason is about local firms who compose the provide sector. These local firms are reportedly unwilling to invest in training local Saudis and this is mainly because these local firms can easily bring in foreigners who will work for longer hours and accept less pay. So it is either the expatriates or foreigners who secure employment since they accept to work for less pay, hence, cheaper labour for the local firms. Statistically, expatriates and foreigners employed in the private sector are almost nine times higher than Saudis. According to Omran (2010), the average wages within the private sector, which creates the most number of jobs, is among the lowest on a global scale. The low-wage earners are certainly earning less with foreign workers placing downward pressures on wages and productivity of labour. Poor Pay On the other hand, government sector wages from government jobs are set by public administrative institutions and are usually under the influence of political factors and not just the dynamics of the market. For the public sector, the wages paid and the number of people employed also depends on the rate of government revenue collection and other determining factors. Considering that Saudi Arabia is one of the leading exporters of oil, it is right to input that oil prices also determine the wages that the government can pay comfortably. Generally, as higher oil revenues accumulate, the public sector increases wages, especially with high consumption and price inflation seen in recent years. Similarly the number of job openings increases even though this has not been enough to absorb all new job market entrants (Omran 2010). Figure 2 Wages/GDP per capita. Source: Omran (2010). (OECD stats, MOL and Saudi Pension Fund SPF) Working Conditions Working conditions can be measured or analyzed by considering the average number of weekly working hours. In comparison to other countries, Saudi employees work the longest hours in a week but with less pay for most of them who are either foreign workers or are their expatriates. This is evidence to a contractual nature of recruiting employees in which outsourcing is a key component (Rolf 2007). Outsourcing has the benefit of enhancing competitive advantage when the internal capacity of a company is constrained while public demand is in the increase. Additionally, apart from potential savings on various costs, it enables the firm to access skills not available from its own employees. The employees of the contracting firm will also gain experience when working alongside the contracted entity so that they will not have to contract in the future. However, considering the reasons for which local firms in Saudi Arabia outsources human labour, it is basically opportunism. 4.0 CONCLUSION The aim of the paper was to research and report on the unemployment issue in Saudi Arabia as well as giving the probable reasons for this rate of unemployment. Considering the scope of the report paper, the report achieves the objective by referencing materials that give representation of the situation. Evidently, the unemployment rates are worrying, given that the country makes a good income from export of oil. Conclusively, the paper reports that most of the factors found to contributing to the level of unemployment are internal and choices made by the administrators. For instance, most Saudis are not willing to accept the jobs that are available for particular reasons as undeserving less pays. Generally, the jobs available are low-wage jobs. This implies that hiring a Saudi for such is more expensive than hiring an expatriate willing to work for less pay, especially in the private sector. Expert researches indicate that the Saudi government is unable to create jobs in the public sector to reduce unemployment rates. Therefore it must design ways of integrating the unemployed Saudi nationals in the private sector which continues to grow. References Aluwaisheg, A. A. 2013. Unemployment and Gender in Saudi Arabia. Arab News, [online] 12 May. Available at: http://www.arabnews.com/news/451262 [Accessed 15 May 2013]. Duening, T. N. Click, R. L. 2005. Essentials of Business Process Outsourcing, John Wiley and Sons: Hoboken. Omran, A. A. 2010. Unemployment in Saudi Arabia. A Serious Issue for the Saudi Youth. London: London Busines School. Rolf, HP 2007, Home-sourcing: An Evaluation and Future Outlook. Arizona: The University of Arizona. Zen-Ruffinen, B and Kaynar, S. 2011. Business leadership in the Arab World. 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