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Challenges for Saudi Arabian labour market Case Study


Today many people get surprised that a country that is increasingly getting wealthier in not able to get employment for its own young men and women. In fact, Saudi Arabia is wealthier than normal. This comes at a time when the prices of oil have been high for the last couple of years. The Kingdom finances continue significantly to rely on the oil incomes, and the economy in overall below the intended level.

However, right from the year 1998, the prices of oil have fundamentally accounted to a substantial amount of the government budget for the country’s fiscal year, and the steps being implemented to suppress the deficit from growing dramatically have been undertaken to an extent. The effect has nonetheless passed through to the economy in general; however, the public and private sector have expressed increasing interest (Holdsworth Paul 2).

On analysis of the country’s economic trend with reference to the Gross Domestic Product, in 1998, the country had a 7.5 per cent increase to a GDP of $144 billion nominal GDP, quite proportionate to the Real GDP. The increase resulted from a balanced integration of increased oil prices, escalating government expenditure, and the progression in the non-oil private sector, which contributed about 35% of the GDP, an indication that the country’s government attempts to diversify the economic activity, is on the right trend (Ugo and Rishi 4).

To be precise, the present price is approximately $60 a barrel and the Saudi Kingdom is recording revenues of about $480 million each day. According to the government expenditure, the allocation for education, manpower and health amounts to about 37.5% of the government budget.

To this end, it is quite clear that money cannot solve the unemployment challenge because it still exists. To a worse end, the rate of unemployment is rising at an alarming rate of nine per cent as per the official figure (20% unemployment rate as per the unofficial estimate).

Strengthening investment in Human Capital in KSA

It is clear that the Saudi Kingdom is at a time when a rapidly growing number of young nationals are entering the labour force with degrees in history, geography, Arabic literature and Islamic studies among others. However, the government is no longer able to act as employers of first and second resort.

On the other hand, the non-oil (service) sector of the private industry continues to rely on expatriate labour force to meet its labor requirements in most Gulf Cooperation Council (GCC) countries. The situation presents policy makers with a big challenge of addressing increasing unemployment pressure.

As such, the market requires engineering graduates in the government sector to occupy position taken up by the foreign expats. Therefore, the government should take significant steps to produce more graduates with relevant skills to be used immediately in the government as well as the private sector.

This will account to immediate investment of the human capital as they will take up the unexploited areas. In fact, many employees will also replace the foreign expats. Any government should be able to critically identify its goals, objectives and citizens expectations, and more importantly the measures of correlated initiatives.

This guarantees a significant recognition of the gaps between unemployment and the resources of the workforce skills (human capital). As a response, the Saudi government has initiated fresh process that provides immense opportunities to the public sector. According to Holdsworth (2011), around seventy five thousand posts are currently occupied by expats likely to be replaced with Saudi citizens.

The ministry with the responsibility of ensuring equal employment categorically claimed that presently positions held by expats would be rendered vacant. Further, the Government confirmed that approximately nine hundred and forty thousand positions were filled out on the one million, ninety eight thousand, and ninety eight thousand approved positions.

Most of the positions taken up by expats were among the educational institutions and the healthcare sector. The ministry officials are pushing for the private sector to take up more employees in an attempt to reduce the unemployment rate from 12% (Holdsworth 3).

Adopting latest reforms initiated by the government

Thus, the economic value added can be applied as a performance measure in the measurement of the standards expected by both the citizens, customers and governments themselves. This is because, in spite of the increasing in sales revenues, a corporation may not be meeting the owners (government and citizens) value if the expended costs of capital with the investment are sufficiently high.

From the Saudi Government, Holdsworth puts it that the ministry of finance illustrated their willingness to improve the country’s status quo through the disbursement of billions of riyals in an attempt to implement effective employment strategies.

At the same time, the policy makers endeavour to achieve a balance between upholding a liberal foreign labour policy as well as a rational rate of competitiveness with the non-oil sector of the private markets in the Saudi Kingdom. In this entanglement comes the realisation the country’s population (under 30 years) make up 75% of the whole population.

They are also the largest group facing unemployment. As such, this paper advances to explore the challenges of the Saudi Kingdom labour market in an effort to find and bring out an efficient labour strategy that is geared towards strengthening the investment in human capital. Ultimately, the paper approaches the issue from an institutional reform point of view while promoting the private service industry in the country.

As such, it will increase the educational levels and diversification into engineering and other relevant courses rather than education and Arts which account to over 80% of the graduates. In this effect, other than the support to the economically underprivileged, the initiative is driven to equip the unemployed with professional skills that will see them enter the labour market in the private sector.

Further, more than one hundred educational institutions in the country, together with businesspeople and activist have come up in support of governance reform that will assume a constitutional system other than the present monarchy.

Promoting vibrant service sector of the private industry in KSA

Of the recent past, the private sector in the Kingdom of Saudi Arabia has contributed significantly to the progress of the economy of the country. Administrative measures have to be undertaken to a wider perspective to meticulously develop the skills, rather than normal learning, of the country workforce. In this endeavour, the Saudi Kingdom ought to undertake market based strategies. For example, enlightening and training through education in accordance with the service sector requirements.

The country should, therefore, undertake to intensify its endeavours to bring down the niche between the productions of the local educational systems qualifications for the industry as well as bring down the level of repetition and dropout of the regular number of years capitalized for the graduation of scholars with highly required skills.

Again, more effort to equate the perceived desirability of public and private employment by increasing the superannuation benefits as well as other attached allowances to all citizens independently is substantial in this endeavour (Ugo and Rishi 17). Again, the promotion of self-employment through offering partnerships with established companies in the private sector will substantially increase the number of national labour force out of the unemployed sector.

This strategy is significant as it advances not to incline in one side of the country’s assets, the tangible assets, but rather, on the issues that will quantify the usual accounting techniques. Previous research has proved that 25% of the value that the public sector figures in their reports is only 25%, related to the tangible assets and already quantified assets. On the other hand, on average 75% if the sources of value within the government corporations do not factor in their periodic reports.

Reforms to improve employment

Various strategies are available in this endeavour to reduce the level of unemployment in the Kingdom of Saudi Arabia. An efficient strategy for the country will involve different approaches in an effort to diversify getting the solution.

Improving the comparative attractiveness of working in the service industry by bringing down the salaries and wages in differential levels among the public, private sector as well as rational of the expats is significant. As such, the social benefits accessible to all working citizens enable each one to explore the opportunities. Notwithstanding, the private sector and public sector under employment are under strict limit for expats (Ugo and Rishi 24).

Another strategy is to bring down the gap in the labour mobility by developing a level playing field for hiring, recruiting, or firing the employed workers not performing and replacing them with expatriate workers. In this effect, the level of performance will go up, increasing competitiveness, and innovation for better survival in the market.

Encouraging proficiency and skill acquirement among the unemployed is critical in this endeavour. This does not focus on the educational perspective but rather on experience to a level of enabling the individual to partake self-employment. Nevertheless, the improvement of the educational and vocational preparation by enhancing the specific time incentives, for instance, appropriations to private companies for training and scholarship will advance to encourage self-employment rather than reliance on government employment.

Ultimately, the call to facilitate the enhancement of production and investment in the capital outsourcing the states products and services is substantial in creating new job opportunities for the unemployed. In the same line, extending the opportunities of many foreign ownership in the country is significantly undertaken.

Adopting the price and market bases as opposed to the quantity based market involvement is critical in improving the replacement of the country human resource for expatriate workers and to preserve labour market flexibility (see appendix, figure 1). This is fundamental in the development of the non-oil growth services as well as improving the competitiveness. The final effect of quantity-based market involvement on unemployed generation is for country’s to have the best opportunities for them which is at best ambiguous.

Works Cited

Holdsworth Paul. . Web.

Ugo Fasano and Rishi Goyal. , International Monetary Fund. Web.


Figure 1

Contribution of the public and private sectors to employment growth.
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"Challenges for Saudi Arabian labour market." IvyPanda, 27 Jan. 2020, ivypanda.com/essays/challenges-for-saudi-arabian-labour-market-case-study/.

1. IvyPanda. "Challenges for Saudi Arabian labour market." January 27, 2020. https://ivypanda.com/essays/challenges-for-saudi-arabian-labour-market-case-study/.


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IvyPanda. 2020. "Challenges for Saudi Arabian labour market." January 27, 2020. https://ivypanda.com/essays/challenges-for-saudi-arabian-labour-market-case-study/.


IvyPanda. (2020) 'Challenges for Saudi Arabian labour market'. 27 January.

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