Chapter (3) Unemployment Rates, its Risks, and Causes
The geographical location with its natural resources such as oil, the religious destinations for all Muslims around the world, all are elements that make Saudi Arabia a decent wealthy country. These factors are supposed to be a major reason for the country to be fertile ground for job creation for the citizens. Yet the unemployment rates are increasing over the years. Following is the unemployment rates for the year (1999) to (2015)1:
The number of unemployed Saudis (over 15 years old)
Source: The General Authority for Statistics
The following chart shows the percentage of the unemployment rates among Saudis compared to the population of the same year:
Source: The General Authority for Statistics
These graphics show some alarming levels of increasing rates of unemployment. Despite the governmental policies to ensure healthy employment rate and the fact that the government is in continues efforts to increase employments opportunities, is still a problem. The latest rate of unemployment stood at 11.8 % in 2014 and increased to 12.1 % in Q3 of 2016.
the General Organization for Social Insurance (GOSI)2 recently revealed that by the end of the second quarter of 2017 the number of total workers registered at GOSI is 9.98 million, 17% of them are Saudi nationals while the percentage of registered expats reaches 83% (Argaam, 2017)3 and according to the General Authority of Statistics the number of nationals searching for jobs at the same quarter was (1,075,933) out of nearly (32) million of total population.
The high unemployment rate is a problem in itself, but it does not stop at this point. The rise in this percentage may be linked to other political, economic and security problems. Chester L. Britt (1994)4 in his study on the relationship between the crime rate and unemployment among the youth in the United States, has reported that the crime rate is associated with the unemployment rate. He also reported that the changes of the annual rate of unemployment affects the levels of crimes.
It is no secret that Saudi Arabia has been and continues to suffer from terrorism, trying in various ways to resist it and in an interesting report by the World Bank on social and economic justice and its role in preventing violent extremism, some results were unexpected: poverty and low education are not key determinants of the transition to terrorism. Unemployment, on the other hand, is an important element in the youth’s shift towards terrorism. The World Bank report relied on data on information of (3,803) members of ISIS (Islamic State in Iraq and Syria). These data, covers the period from early 2013 to late 2014, provide accurate information about the members, their nationalities, social status, skills, educational levels, combat experience, and their knowledge of Shari’a (Islamic Law)5.
The report found that the unemployment or the absence of “economic containment”, is more important than poverty and poor education in pushing foreigners to join ISIS. “Given the measures of economic inclusion, there is a strong correlation between the unemployment rate among males in a country and its tendency to export foreign recruits to ISIS,” the report concludes. The World Bank report advises that “policies that encourage job creation … not only benefit young people seeking jobs, but can also help to prevent the spread of violent extremism”.6
The events in other Arab countries which led to revolutions, Tunisia for example, as a result of unemployment, poverty, indicate the dangerous role played by these variables in the stability of societies and the urgent need to maximize economic and social well-being.7 Unemployment and poverty are time bombs. It is therefore the duty of the Government to give this problem the maximum attention. It is fair to say that the Saudi Government is constantly trying to reduce unemployment rates by imposing government policies, but the rates are still alarming, in this research we will try to find the reason why these policies are not successfully meeting their goals.
Causes of Unemployment:
Our suffering with unemployment is not the result of today, and millions of expats have not landed on the Saudi market at once, and have not penetrated some of them in important positions in the institutions of the private sector between the day and night. The reason why is the society, and for decades, have been able to ignore the importance of work, and our neglect to create a favorable environment that encourages the involvement of the young men and women in the private sector. 8
It is difficult to say that unemployment is a result for specific factors, but yet some factors have major affect than the others, and they were built and bulking over the years. For the purpose of this research we will minimize these causes to (5), The fast-growing population rate, inadequate education outcomes with the labor market, the domination of expats over the private sector, the resistance of employing citizens as the mindset of private sector and the government imposed policies.
The population of Saudi Arabia has grown at rate 1.8 % from the year 2002 to 2012, and the youth population stood at 2.6 % for the same period. The total of Saudi population increased from 22.3 million to 26.1 million for that same period. 9 With these rates the government face a challenging task to absorb the increase of the population into the labor market and to generate jobs. And with the quality of the education that does not meet with the requirements of the market the challenge is even more difficult.
On the other hand, we can see that the expats, and for long time dominating the private sector. The private sector in the GCC countries was able to successfully generate (7) million jobs, however, nearly 88 % of these jobs were filled by expats, leaving a very minimum share for the nationals. Saudi Arabia ranks highest among the unemployed nationals, unlike its other neighbors in the GCC, where the unemployment rate among expatriates and locals is similar. 10
Nationality Breakdown of the Unemployment 11
Saudi Arabia has one of the highest percentage of expat workforce. The reason for this as reported by Al-Omran (2010) that at the time of oil discovery there was a huge shortage in the workforce which led to bring foreign labor as a temporary solution, however, in reality they did not leave the country, and what once was a temporary solution has grown over the time to dominate the majority of the market. 12
What helped the domination is the fact that the expats working in Saudi Arabia are low-skilled labor, with monthly wage does not exceed (2000) Saudi Riyals, approximately (540) US dollars, and higher working hours. These very low wages and working hours are tempting factors for companies to prefer to hire foreign workers over Saudis who are not enticed by these wages13, which with the time became as a mindset for the private sector which in its turn resists any attempt for change because it will lead to lower their profits. The following chart shows the percentage of the number of expats in the Saudi market compared to other countries:
The percentage of the number of expats in the Saudi market compared to other countries
Source: please see note 14
It is important to highlight the fact that the government of Saudi Arabia initiated different programs and policies to encounter the increasing percentage of the unemployment. One of the main procedures the country has adopted was to legalize and organize the employment relationship in the private sector through the Saudi Labour Law, and to create labour courts to solve any disputes may arise. The Law itself, emerged in 1969 and witnessed changes throughout the years, and in 2005 the new Labour Law came into enforcement and went through couple of amendments, the last amendment in 2015 is facing accusations of being the reason of the termination of massive numbers of Saudi nationals in the private sector (AlShuraimi, A. 2016)15.
In any case, the Ministry of Labour has not stopped its attempts to find solutions to the problem of unemployment, namely the huge program “Nitaqat”16 or “domains”. This program was launched in 2011 to encourage companies and establishments to hire Saudis. The source of the program’s data is directly linked with the employees (Saudis and expats) registered in the data base of the General Organization of Social Insurance (GOSI).
As said before, the program encourages localizing jobs and hiring Saudis. The main idea is to classify the entities into domains (red- yellow- green- platinum) based on the percentage of localized jobs (or what so called Saudization) in each entity. Entities in green and platinum domains have higher Saudization percentages and therefore receive better governmental facilitations and services. On the other hand, the yellow and red domains are with the lower percentage and may be blocked from any governmental services resulting in complete paralysis in the company’s activities.17 Though the description of the program sounds logic yet on the ground it faces real challenges and critiques which will be discussed in detail in the following chapters.
To sum up this chapter, we have shown the alarming rates of the unemployment in Saudi Arabia. We, further, explored the link between the unemployment and the possible risk that it may cause such as increasing the levels of crime and the link between the unemployment and the transition of the unemployed in terrorist activities. We advised that governments should pay attention to the unemployment problem to solve the issues of violence, crime and terrorism.
In that context, I explored some of the main causes of unemployment is Saudi which we will be discussing in the following chapters. In the discussion of each cause, we will try to find out the solutions provided by the government and we will try to understand how successful these solutions are.
1 The statistic is extracted from the official website of the General Authority for Statistics, is a governmental body with an independent legal personality, which is the official and only organization on the statistical sector as a statistical authority in the Kingdom of Saudi Arabia. www.stats.gov.sa
2 GOSI is a semi government body providing an insurance that covers mainly the workers in the private sector in Saudi Arabia. It also provides the contributors and their families with a decent life after leaving work due to retirement, disability or death; medical care for contributors afflicted with work injuries or occupational diseases; and necessary compensation in the event of occupational disability or death.
All workers (Saudis and non-Saudis) in the private sector are obliged by the law to register in GOSI. GOSI database became the main information source for the number of workers with all related information such as wages, ages, nationalities, etc. For more information visit: www.gosi.gov.sa
3 Insurance: 9.98 million subscribers in the private sector by the end of the second quarter 2017. 45% of Saudis salaries do not exceed 3 thousand riyals, Argaam online Available at: http://bit.ly/2yCFlel (Accessed at: 21 October 2017).
4 Chester L. Britt, ” Crime and Unemployment Among Youths in the United States, 1958-1990″, (1994) The American Journal for Economics and Sociology.
5 Khalid Al-Ghali, “Unemployment and Terrorism, What Do the Studies Say?”, (2016) online Available at: www.irfaasawtak.com (Accessed at: 10 Jan 2018).
6 See previous note.
7 Raja Al-Marzouqi, ” Poverty and unemployment are time bombs”, (2011) Al-Eqtisadiyah) online Available at: http://www.aleqt.com/2011/01/17/article_492494.html (Accessed at: 10 Jan 2018).
8 Fahad Al-Deghaither, ” Saudi Arabia in the face of unemployment”, (2017) Al-Arabiya, online Available at: http://ara.tv/bq6nh (Accessed at: 10 Jan 2018).
9 The United States Census Bureau.
10 A report by Alkhabeer Capital Company, “Analysis of Saudi Unemployment”, (2014) , online Available at: http:// www.alkhabeer.com (Accessed at: 10 Jan 2018).
11 See previous note.
12 Abdulaziz Al-Omran, “Unemployment in Saudi Arabia: A serious issue for the Saudi Youth.” (2010) London Business School 5-33.
13 See previous note.
14 Abdulaziz Al-Omran, “Unemployment in Saudi Arabia: A serious issue for the Saudi Youth.” (2010) London Business School 5-33.
15 Ali Alshuraimi, “Article 77 and the increasing rates of Saudi Employees’ Termination”, (2016), Al Watan online Available at: http://www.alwatan.com.sa/Articles/Detail.aspx?ArticleID=32735 (Accessed at: 21 October 2017).
16 Nitiqat Guideline (1438H), edition 2.2, online Available at: http://nitaqat.mol.gov.sa/Guide/index.html (Accessed at: 22 October 2017).
17 For more information visit: http://nitaqat.mol.gov.sa