May 31 2012
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Saudis face double-digit unemployment during double-digit boom
How did we manage to keep unemployment rate in the double digits, during double-digit economic growth? Where did we go wrong? How did we fail to take advantage of this unprecedented period of growth? What happened to labor market theories that assumed that unemployment would go down, or disappear altogether, during sustained economic booms, the likes of which Saudi Arabia has been experiencing over the past several years?
Correctly, the Saudi Arabia's 9th Development Plan, the official document that maps out our growth path in all areas, states that the Saudi economy is planned to generate enough jobs to hire all Saudis who enter the job market during its five years (2010-2014).
The plan expects the Saudi economy to produce 1.22 million jobs during those five years, while the number of job seekers is expected to be around (1.12) million Saudi men and women, or less than the total number of available jobs.
In other words, supply of jobs is greater than the demand, which should be ideal to solve the unemployment problem.
This shows that while most of the rest of the world suffered the ravages of the global financial crisis during the past three to four years, Saudi Arabia has enjoyed one of its most booming periods.
While most economies struggled to stay afloat and keep from shrinking, Saudi Arabia's GDP grew from around $373 billion in 2007, the year before the crisis, to $577 billion last year, a 55% increase in four years.
Is this not what every economy hopes for?
So then, economists would say, where is the problem? Business is booming, government coffers overflowing, and jobs are aplenty. Every Saudi young man and every Saudi young woman should have landed a job by now.
As you know, that did not happen. Unemployment of Saudis in fact rose, which is a miracle really under those circumstances. Unemployment rate in Saudi Arabia stood at 10.5% in mid-2009, the last time official figures were published.
That rate translated into around 450,000 Saudis who were officially designated as unemployed then. However, despite the double-digit growth rates since then, there is convincing evidence that unemployment has significantly increased, not decreased. That was made clear when the employment incentives program "Hafiz" was introduced earlier this year, when millions of job seekers applied for it and around a million of them were accepted.
We can then think of Hafiz enrollees as the new army of the unemployed. By design, enrollment in Hafiz program is temporary, until a job seeker acquires the right skills and lands a job, but not to exceed one year. Will this program succeed in reversing this decade-long trend for Saudis to gradually and steadily be forced out of the labor market? Or is that trend so structurally entrenched that the remarkable growth and prosperity in Saudi economy will just continue to by-pass Saudi youth? Will Saudi women, in particular, ever be able to benefit from this boom, or will they continue to be mere bystanders?
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