Aug 08 2012
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4.5M entering Gulf workforce
Even as regional economies have shown impressive growth over the past year or so, they have not been able to cut unemployment meaningfully.
Absorbing 4.5-million Gulf nationals will be a tall order. According to the International Monetary Fund, Saudi Arabia will need to post a 7.5% growth to halve unemployment over a five-year period.
Clearly, the private sector will have to step and absorb new job seekers.
"The targets involved in this transformation are unprecedented. In Saudi Arabia, the government's ninth five-year plan foresees the creation of 1.2mn new jobs in 2010-14, of which 92% is expected to go to Saudi nationals," notes Dr Jarmo T. Kotilaine, chief economist at NBC Capital research in a report, adding that some projections suggest some three million job opportunities by 2015 and up to a total of six million by 2030.
"This compared to the current total number of Saudis in paid employment of 3.8-million (2009). The overall national labour force stands at 4.3-million," wrote Dr Kotailaine.
Saudi Arabia, of course, launched the Nitaqat programme which rewards companies for hiring a specific number of Saudi nationals and penalises them for missing their national-hiring targets.
"The Nitaqat program has engendered considerable controversy, including widespread suggestions that it will force large numbers of companies to cease operations as they will likely fail to employ sufficient numbers of nationals," notes NCB Capital.
STRUCTURAL UNEMPLOYMENT ISSUES
High unemployment in the Gulf is a long-term phenomenon. For example, as the UAE basked in a massive boom over the last decade, unemployment among Emiratis remain high at 14%. The UAE was not alone. All the Gulf States found it difficult to recruit nationals in the workforce due to a mismatch of skills that had to be filled by expatriates.
An earlier World Bank report highlighted the following key characteristics of the Gulf job market which highlights the challenges ahead:
The other key issue for companies as they look to recruit nationals is a rise in salary expenditures. Across the Gulf region, national populations typically earn a higher wage than their expatriate colleagues, and while that is slowly changing in some large companies and at C-suite jobs, the gap persists in mid to small business.
NCB Capital research shows that an average wage of a Saudi in the private sector stood at SAR3,476, compared to SAR1,040 for expatriates.
The Saudi bank suggests opening markets, lowering trade barriers and pursuing an active labour market as some ways to broaden employment opportunities in the region. Labour market inflexibility is also a major hurdle for the private sector.
"Companies that anticipate significant cost of money and time in the event of lay-offs are likely to be more cautious about hiring in the first place, sometimes relying on more flexible solutions such as outsourcing, often outside their home jurisdictions," NCB notes.
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