Promoting the employment of nationals within the private sector is on the agenda of every GCC country's government. The measures introduced to date include the application of sector focused quotas, reserved roles and restrictions on visas for non-nationals. However, the GCC represents a unique demographic and, the long term success of these measures is dependent on a complex interplay of social, cultural and economic factors.
With the oil boom in the 70's and 80's local GCC populations have increased dramatically. The generation which grew up in austerity in the 50's and 60's have had children who have grown up with substantial benefits and material possessions. This has lead to unrealistic expectations on the part of young people who are now entering the workforce. A recent survey in the UAE directed at Emiratis in their 20's reported that respondents expected to have a starting salary of AED 25,000 (the average being AED 10,000) and retire aged 45. In many instances, the head of a household, typically a man in his 50s is supporting up to 10 people, including children who are well into their 20s.
As a result of being state run oil based economies, the GCC has the highest rate of public sector employment in the world. Public sector jobs attract higher benefits, shorter working hours and higher remuneration than the private sector. However, between 2010 and 2015, 4.5 million GCC nationals will enter the workforce. Whilst many would prefer to wait until a coveted government job becomes available, it is increasingly unsustainable to do so (75% of GCC populations being under 25, with youth unemployment ranging from 20 to 30%) and nationals are looking to the private sector for employment. The low participation of women in the workforce is concerning, with the numbers of women in tertiary education largely outnumbering men but dropping to only 10% of those in active employment in the GCC.
The scale of the economic imperative to encourage private sector employment for nationals varies across the GCC. In Qatar, there is said to be 11 jobs for every Qatari national, whilst in the UAE, nationals make up 2 million of the 7 million population. It is in Bahrain, Oman and KSA where the need is more immediate and the government's response has been more forthright.
In KSA since August 2011, the Nitiquat system has spearheaded a systematic mechanism for the ministry of labor to address key private sector labor force issues. Under the system every employer is classified into a band indicative of its compliance with the requirement to employ nationals and adherence to the labor laws. In addition, the Hafiz system has provided a framework for all vacancies to be advertised to nationals through the Human Resources Development Fund before an application to employ a foreign worker is permitted. A key challenge is to turn unemployed youth into active job seekers responding to job advertisements and postings, rather than relying on age old networks and social connections. In a recent HR survey, many respondents in their 20s stated that they had never applied for a job and had never had part time or full time work; such a situation is in no small part due to circumstances and a lack of appropriate public channels to search for and secure work.
There is also a structural issue within GCC economies, as the private sector has focused on the employment of low waged workers from South East Asia making the employment of nationals unattractive. The introduction of minimum wages for nationals is designed to address this issue but unless minimum wages become uniform and applicable regardless of nationality, this measure is unlikely to have a wide impact. The extent of the issue was shown in KSA when the government ruled only women (nationals) should be employed to serve women in lingerie shops. Private sector employers lobbied hard against the measure stating that it would increase their labor costs disproportionately.
Bringing nationals into the private sector will be further complicated by GCC youth coming into the workforce falling within 'Generation Z.' A generation said to be born between 1990 and the early years of the millennium, characterized by being highly connected, technology driven and empowered. KSA is the world's top user of youtube and social media has become an important outlet for self expression.
The question for employers is how to harness the skills of this generation? Many employers have responded with risk management steps such as training in social media use covering permitted dos and don'ts. Incorporating social media into recruitment processes, ongoing training and day to day communications (for example office communicator). Generation Z expects to be consulted and to input into management time, with direct access to line management and authority. Many do not expect a job for life, placing importance on leisure and personal goals.
It may be that this generation's skills are better harnessed through being engaged as freelancers or self employed contractors. The GCC governments' encouragement of SMEs and promotion of self employment is an attempt to harness these skills and foster entrepreneurship.
Finally, a key factor is education and the promotion of technical skills and training. On average only 10% of the GCC workforce enters technical or vocational training courses, whilst the OECD average is 45%. A workforce geared to public sector employment is characterized by graduates in social sciences subjects who facilitate public administration skills and bureaucracy, not commercial private sector employment.
In the coming years, further labor law reform is expected designed to close the gap between public and private sector employment; witness the proposed 80 amendments of the KSA labor law; as well as mechanisms for fostering a work ethic (one proposal being the use of blacklisting of individuals who have bad employment records from national employment programs and benefits). What the GCC governments seek to achieve is a mindset change in private sector employers from 'importing the employee the business needs' to 'develop the talent locally that the business needs.' How successfully this change can be introduced remains to be seen and in large part it requires a cultural change where an individual's job is as important if not more important than the social network or family he or she belongs to.
Sara Khoja is partner at Clyde & Co's Middle East and North Africa employment practice. She provides advice on all aspects of employment law, including recruitment, termination, terms and conditions of employment (benefits, bonuses, and remuneration), and the application of quotas for the employment of nationals in various AGCC countries.
© Zawya 2013
