The Rate of Unemployment in Saudi Arabia, Essay Example

The rate of unemployment in each country depends on the totality of factors that have both direct and indirect implications on it. The situation can be due the structural, historical or temporary reasons. In any case, it is specific to each country. The purpose of this paper is to explore the unemployment in Saudi Arabia in terms of its structure, reasons, potential ways of resolution and governmental initiatives targeting it.

Looking at the situation of the unemployment rate in the country, it has to be explored at least within the trends of the last twenty years. In this regard, the average unemployment across the country was around 4.5 percent in 1995. The highest rate was in 2006, when the rate estimated 6.3 percent, but it has gradually stabilized and was around 5.7 percent in the last three years (Ramady 68). Currently, the unemployment rate is around 5.9-6 percent depending on the estimates models applied (Callen et al. 2 9).

Thus, at a first glance it may seem that the country does not have problems with th unemployment rate since it is not above normal 6 percent. On the other hand, when the structure of unemployment is analyzed the problem can be distinguished. While on average the unemployment rate is satisfactory, among Saudi population it reaches the rate of 12-13 percent. In this regard, the there is a tremendous difference between employment of foreign workers that are willing to work for smaller wages and worse social packages and Saudi people that are entitled for higher wages and full social benefits. While for the private sector it is beneficial to hire foreign workers, Saudi nationals remain unemployed (Ramady 67).

The situation is even worse for young adults and university graduates, the unemployment rate for which is around 30 percent. The unemployment rate for women is even worse – around 35 percent. In this regard, the particular tendency is that while other segments of unemployment are gradually being addressed by government and have slow but successful improvements, in the case of women the situation proved to deteriorate in the timeframe 2009-2012. In this regard, the unemployment rate among women increased from 28 percent in 2009 to 36 percent in 2012 (Callen et al. 44).

The cause of the disparity in unemployment structure and its type are largely due to the existing economic system in the Saudi Arabia. First of all, the historical orientation of the country on a single oil industry made the economy more vulnerable to changes in the oil market prices and consequent impacts on the economy and employment rates. Secondly, the Saudi society is traditional in various aspects, and the most prestigious jobs are considered to be in the public sector, where 97 percent of jobs are taken by Saudis. Consequently, while the system of education targets this type of jobs and prepares public sector oriented graduates, the actual availability of vacancies is far from the number of students graduating each year (Callen et al. 41).

Thirdly, another reason is that the private sector where jobs are available is characterized by the lower prices, less favorable social packages and career development opportunities. On the other hand, from the point of the private sector employers, they are more likely to hire foreign candidates because their skills set and qualifications are often more suitable and targeted at the private sector jobs than Saudi graduates. Finally, in the case of female unemployment it is mainly due to the inconsistency between socio-religious perception of working women and the actual governmental encouragement of female employment. Thus, these reasons demonstrate that for the improvement of the employment situation crucial structural changes should be made in the country. In terms of unemployment typology, this is a structural unemployment.

It should be mentioned that the government of the Saudi Arabia has already realized the complexity of the situation and took certain actions. In this regard, the government has developed policy named “Nitaqat.”  The essence of this policy is to impose certain quotas of Saudi workers that private companies have to fulfill in order not to lose their foreign employees. In this regard, if the number of Saudi employees is dissatisfactory, then the government will refuse visas and working permits to the foreign employees the target company wants to employ (Ramady 64).

Although this approach might seem functional, it has an impact only on the numeric representation of the problem but not its actual resolution. In other words, without structural and fundamental reforms encouraging more employment of Saudi people in the private sector the problem simply cannot be resolved. Regarding the situation of women, the problem can be resolved if more vacancies were carted specifically for women through the gender segregation of the working areas and encouragement of toleration of female employment in the society (Callen et al. 35).

The situation of the Saudi Arabia is quite different from the Western countries with average unemployment in the EU being 9.6 percent (the highest rate in France – 10.5 percent and the lowest in Germany 4.7 percent). Although it can be argued that the average unemployment rate in Saudi Arabia is lower in Europe, the rate of Saudi unemployed population at the level of 12 percent is far more disturbing and demonstrates unhealthy trends within the national economy (Callen et al. 37).

Regarding the countries of the Gulf Cooperation Council, they share the same problems of the structure of unemployment as Saudi Arabia. This is once again due to the common historical features of development, the necessity of structural changes and cheaper foreign labor force (Ramady 56). In this regard, the situation is far worse in UAE where the rate of unemployment for nationals is above 14 percent, while the youth is around 21 percent and is predicted to rise even higher in the next 5 years.

On the other hand, while Qatar is considered to be a smaller economy, their disparity in the unemployment rate among their nationals is less disastrous than in the case of UAE and Saudi Arabia. For all of the countries of GCC, the necessity of fundamental reformations of the economy from oil-oriented to multi-dimensional is suggested. Moreover, stimulation of the national non-oil sector could boost internal employment and stabilize the dependence of the countries on the global oil prices (Ramady 58). Regarding the position of women in the GCC countries and their representation in the labor force, the situations vary depending on how tolerant a certain society is. However, in those countries were women are allowed to work at certain positions; their representation is highly disproportionate to the male group.

Overall, it can be concluded that the situation with the Saudi Arabian unemployment rate is due to the structure of economic and its consequent improvement requires fundamental reforms targeting not only economic sector bit also socio-cultural as well. In this regard, it is not only the private sector should be reformed but also the system of education and socio-cultural perception of jobs and their evaluation of prestige. Another aspect is the necessity of reorienting the economy from the oil sector to non-oil spheres that can stabilize the economy and create more working places.

Works Cited

Callen, T., Cherif, R. and Hasanov, F. Economic Diversification in the GCC: Past, Present and Future. Washington, DC: International Monetary Fund. 2014. Print.

Ramady, M. The Saudi Arabian Economy: Policies, Achievements and Challenges. New York, NY: Springer. 2010. Print.