Youth Unemployment and High Rate of Foreign Workers in Saudi Arabia - Statistics Project Example

Youth Unemployment and High Rate of Foreign Workers in Saudi Arabia

INTRODUTION

Saudi Arabia is one of the wealthiest nations in the world; however, most of the Saudi Arabia youths are experiencing unemployment. It draws its wealth from oil; nonetheless, oil is not only the source of income but also Haj and Umrah services. The unemployment rate among the youth remain high due to certain factors, one of these is reliance on foreign workers in both public and private sector.

ISSUE

It is approximated that more than 6 million foreigners are present in the Saudi Arabia labor market. Most of the foreigners are filling the non-skilled jobs in the retail, construction, and other informal sectors. Research has shown that there are different implications for keeping high percentage in the workplace sector. Typically, Saudi Arabia is a rich nation with oil and wealthy personalities.

King Abdulla introduced a scholarship program that enabled Saudi Arabia students to study in the U.S an aspect that has contributed to an increase in students enrolment in the U.S. The students obtain masters, doctorate and undergraduate degrees in addition to medical fellowships because of the program. The Saudi government chooses the field that the beneficiaries should study based on the needs of the economy and the government. Presently, the fields are limited to medical science, medicine and health sciences particularly for the undergraduates. However, master students have more opportunities compared to the undergraduate students. In the recent past, there have been new development in the job market characterized with higher job qualifications and even the graduates are experiencing multiple job interviews and employment tests to assess their qualifications for the advertised positions. This has made the private sector to employ foreigners who meet the job requirements and pass the tests (Fandy, 2001).

CHALLENGES

In the recent past, high percentage has been suffering from low wages and unemployment. The nation can boast of high reserves of oil all over the world; however, it is also the densely populated nation in the Gulf region. The foreign sector has high percentage of foreign workers, with low wages despite the poor working conditions. It has remained challenging for the Saudi Arabia government to substitute the foreigners with Saudi Arabia nationals. The country has relied on foreign wages for a long time and this has led to less competitive wages. Additionally, most of the foreign workers are perceived as temporary workers, and the firms are not putting any effort to change their employment status. In the recent years, Saudi Arabia has experienced high economic growth but the unemployment rates have continued to increase. However, the government has shown a lot of determination in its efforts to address the issue of unemployment in Saudi Arabia (Niblock & Malik, 2007).

Consequently, according to the recent reports, in 2009, the unemployment rates was about 10.5 and more than 28.5% in relation to females (Kostiner, 1993). Additionally, unemployment was accompanied by minimal participation by the nationals in the labor force. Nonetheless, there are unique aspects of the unemployment. One of them is that most of the nationals are unemployed by choice. In most cases, they are able to find jobs but fail to meet the expectations of work and pay conditions. Most of the unemployed are youth who are first time seekers, and it is reported about 39% Saudi Arabia nationals below 25 years of age are unemployed. The first time job seekers are expected to fill the blue collar jobs, which are mainly taken by foreigners (Vassiliev, 2000). Furthermore, the first time job seekers experience stiff competition from abroad, as they do not enjoy any form of protection. In some situations, the government policies favor foreign workers even though unknowingly. The Saudi Arabia population is young with about 48% of its total population being people aged 19 years and below. In the next decade, the workforce is expected to double. Therefore, unless the unemployment rate experienced by this population segment is addressed, the situation is likely to worsen as there are new and ever growing market entrants (Al Sultan, 1998).

It is also important to note that Saudi Arabia is one of the nations in the Gulf Region that has highest rate of foreign employees in the world. The over dependence on foreign labor began in the 1970s when there was oil boom and when various development projects were experiencing shortage in terms of manpower. In order to address the problem, the intention was to allow foreign laborers especially Asians as a solution but a temporary one to finish the various development projects (Al Sultan, 1998). However, after the completion of the projects, the foreigners never left the country, and instead more and more were invited and the number grew yearly. Additionally, the nation permits free flow of foreign labor because it issues work permit easily to the foreigners. This has made any private firm that wants to hire foreign workers to apply for the work visas from the government and obtain a given number based on the size of the business. The situation has persisted since 1970s and this is because foreigner laborers are less costly compared to nationals making the private sector to prefer them (Metz, 1992). The mentioned situation is contrary to the developed nations whereby foreign immigrants do not affect the labor market. However, in Saudi Arabia, the issue of low wages as a result of immigrant workers is so prevalent that make most of the jobs to be unappealing to the Saudi nationals. Kostiner (1993), points out that relying on the foreign labor was not an issue until the country started to experience unemployment particularly among the youths. Despite the promising GDP, unemployment rates in Saudi Arabia started to rise.

High percentage of foreign workers in Saudi Arabia has led to two different labor markets. One of the markets is highly dominated by the Saudi nationals, particular white collar jobs in the government sector or other regulated industries such financial services, oil and gas sectors. The second market is one that is characterized by low-skilled jobs like carpentry and masonry among other, which are also held by foreigners. The foreigners mostly work under bad conditions. However, the increasing levels of unemployment particularly among the Saudi youths have led to them to opt for unskilled jobs (Kostiner, 1993). Presently, the Saudi are forced to compete for the unskilled foreign labor, consequently accepting the poor working conditions and low wages which are less compared to that of other nations. As earlier stated, most instances of unemployment in Saudi Arabia are because of personal choice, and the reason given by many is that the pay is not worth their effort. It can be argued that the transition from the two mentioned job markets have different work conditions and wage levels to a more uniform job market. However, the mentioned would need a policy intervention for a smooth transition. It is important to note that increasing pressure particularly on the unemployed is forcing the Saudi Arabia nations to accept not only low wages but also poor working conditions.

SOLUTION

As earlier highlighted, unemployment among the Saudi youths are because of low wages and not lack of employment opportunities. To tackle this, it is important to improve the productivity levels and subsequently the wages. This will make the available jobs to be appealing to the Saudis. The low income workers earn minimal wages. This should be increased before replacing the foreign workers with Saudi nationals. If the foreign workers continue to earn less, businessmen would continue to hire them because they would be sustainable to their business (Kostiner, 1993).

Additionally, lack of capital investments for most of the businesses is due to the same reason. It is argued that business owners are not incentivized to invest in efficiency and capital because the cost of labor has remained low over the years; therefore, it important for the Saudi economy to allow wages to increase in order to enable businesses to adopt practices that are more capital incentive. Consequently, the Saudi companies lack sufficient capital for investment purposes an aspect that results into businesses that fail to match the available resources in the country. This is likely to contribute to the bad effects on the economy of the country for several years (Metz, 1992).

Another good example is introducing the Saudization program. This is a policy adapted by the Saudi government to ensure that the private firms employ more Saudi nationals than foreigners. Currently, the number of experts is Saudi Arabia is high, and this can only be minimized if the policy is adapted. For example, a program known as Emiratization has been successful in UAE in solving the unemployment rates among the youths (Looney, 1992). According to the Statistics Centre Abu Dhabi, approximately 73% of the population is below 30 years of age, and high percentage is close to graduating from secondary and university levels. This has encouraged the Saudi Arabia government to set aside certain percentage of jobs for the nationals only (Kostiner, 1993).

STRATEGIES

One of the best strategies to curb high influx rates of foreigners into Saudi Arabia job market is to stop issuance of work permits and visas. The ministry of labor introduced the policy between 2004 and 2007. During the same period, the issuance of work permits to the foreigners reduced by approximately 31% (Winckler, 2010). There were different reactions towards the policy. For example, the business sector tried to introduce strategies that would result suspension or ending the policy. For example, the business community lobbied with the regulators and threatened to close down their businesses and relocate to the neighboring nations. They also employed outcry campaigns and media fights. However, due to inflation, the policy was later loosened, but according to Ashton (1986), this is the best strategy for reducing the rate of unemployment among the Saudi Arabia nationals.

The authorities should also consider limiting the job mobility. This can be successfully realized by increasing the wages paid to the workers. However, Fandy (2001) points out that there are challenges associated with limiting the issuance of work visas or permits. One of them is that it can lead to inefficiencies, preventing flexibility that could allow the existing market forces to adjust. Foreign employees were prevented from shifting or changing jobs without seeking consent from their current employers. This prevented them from being fully productive because they were forced to work for the same employer even if they had the opportunity to find work somewhere else. However, this is a good strategy in ensuring that the foreigners do not take up jobs allocated for the Saudi nationals (Metz, 1992).

It is well understood that most of the foreign workers would opt for low wages compared to what the Saudis would demand for. Therefore, it is important for the government to ensure that there is a uniform job market, and wages should be equal across all employers. The government should capture the existing wage differences in form of residency fees, and not by using business owners. Additionally, the government should ensure that all businesses that survive on the low wages paid to the foreign workers are not incentivized. This is because such businesses are causing stiff competition in the Saudi Arabia labor market. The existing wide gap between the Asian and Saudi Arabia nations, whereby most foreign born workers are from, create an imbalance (CIA).

In order to encourage Saudization, the government has put in place certain measures to ensure that certain occupations are meant for the Saudi nations only. This strategy was first implemented on Airport taxi drivers, HR managers, the banking sector, and Gold Shops among other sectors. Implementation of such directives in phases would result into positive outcomes on employment of the Saudi Arabia nationals, hence reducing the unemployment rates among the youths. Kostiner (1993) argues that enforcing such directives is likely to be challenging because there is high percentage of untrained Saudis to undertake skilled jobs held by the foreigners.

Lastly, the government should adapt policies that would seek to increase the cost of labor, particularly for unskilled labor and also subsidize the associated costs of skilled labor. The government can realize this by enhancing the amount of residency fees obtained from the foreign-born workers.

CONCLUSION

In conclusion, it is evident that the unemployment rate in Saudi Arabia particularly among the youths is not only due to influx of foreigners but also other factors such poor pay, lack of necessary skills, and voluntary basis. Therefore, for the Saudi Arabia Kingdom to address these problems different parameters need to be examined and holistic strategies adapted. For example, the government should invest in the education sector to ensure that it trains its nationals and prepare them to take over the jobs that are held by mostly foreigners.