Unemployment is a costly phenomenon; it results in disadvantages and economic losses for the unemployed individuals, the society and the country’s economy in general. Unemployment can be defined as a situation where average individuals are unable to find jobs regardless of their desire to work. This paper discusses the impact of unemployment on the economy of a country and explores the rates of unemployment and GDP growth in Saudi Arabia.
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First of all, when unemployment occurs, it directly affects the government as it has to pay unemployment benefits to the jobless population. At the same time, the revenues of the government become less because of the inability of the unemployed individuals to pay taxes. Domestic production rates go down as well. As a result, the country’s economy starts to suffer from loss of income and faces the need to borrow money from other countries.
Another important impact of unemployment on society is the decrease in individuals’ spending power. The citizens who are insecure about their future income or have no income at all start to reduce their expenses. As a result, the average spending power in the country drops drastically. In other words, when unemployment occurs, the individuals stop to contribute to the country’s economy and instead start to suck money out of the government (Hudson, 2013).
Currently, Saudi Arabia is one of the most frequently discussed countries when it comes to high rates of unemployment, and the situation has been this way for several years already. According to the most recent unemployment rates survey, about 6% of the country’s population is unemployed in total (Quarterly Unemployment Rate, 2014). The rates of unemployment among women exceed those of men dramatically, 21-21 % of jobless females versus about 3 % of jobless males.
This phenomenon occurs due to religious beliefs. According to fundamentalist interpretations of Islam, men and women who are unrelated by blood should not engage in daily interactions. As a result, women’s involvement in regular labor becomes rather complicated. Moreover, the survey also compares the unemployment rates among Saudi and non-Saudi populations, and it turns out that while the unemployed Saudis compose about 11%, their non-Saudi peers have much lower rates – around 0.5 % only (Quarterly Unemployment Rate, 2014).
It is worth mentioning that about two-thirds of the country’s population is represented by the youth – the individuals who are younger than 30 years (Hoetjes, 2013). At the same time, the production in Saudi Arabia has increased affected by the growth of prices for oil, which generally peaked in 2011 and then have been maintaining their level with occasional ups and downs.
Gross Domestic Product (GDP) has been experiencing annual growth in Saudi Arabia. In 2010, before the increase of prices for oil Saudi Arabian GDP estimated 4.8 % annually, whereas in 2011 it jumped as high as 10 %, and in 2012, 2013 and 2014 the growth was slower, yet still significant, 5.4, 2.7, and 3.5 % accordingly (GDP growth (annual %), 2015).
Logically, production is directly connected to job creation, which is supposed to provide employment for the jobless population and reduce the rates of unemployment. Yet, in the case of Saudi Arabia, different dynamics are observed. The native population generally remains unemployed because most of the newly created jobs are given to foreign workers. For example, in 2013, the International Monetary Fund noted that in Saudi Arabia, out of two million newly created jobs, one and a half million were obtained by non-Saudi representatives (Hoetjes, 2013). As a result, about 30% of Saudi youth remain without employment.
This phenomenon occurs due to several reasons. First of all, the companies operating on the territory of the country prefer to hire foreign workers because, legally, they can be paid lower wages. Secondly, foreign employees are not as protected when it comes to employment. Besides, most Saudis prefer public sector jobs to those of the private sector due to the higher salaries paid by public employers and generally better workplace conditions.
Education in Saudi Arabia has been experiencing significant growth over the last several years, which means that these days the number of young graduates is large. As a result, more and more job seekers hit the Saudi Arabian labor market every year, but the government fails to provide them with decent employment opportunities. Some of the most common factors affected by high rates of unemployment are poverty, cost of living, life expectancy and health costs, income per person. Besides, high rates of unemployment affect the overall stability in the country, causing public dissatisfaction with their standard of living and even the growth of criminal activity.
In conclusion, Saudi Arabia was positively affected by the increase in oil prices and experienced the improvement of production and active growth of GDP over the last several years. At the same time, the rates of unemployment in the country remain high and affect the native population more than non-Saudis and females more than males, and youth represents the most vulnerable segment.
GDP growth (annual %). (2015). TheWorldBank. Web.
Hoetjes, G. (2013). Unemployment in Saudi Arabia: a Ticking Time Bomb? . Web.
Hudson, P. (2013). How Unemployment Rates Affect The Economy. Web.
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Quarterly Unemployment Rate. (2014). Central Department of Statistics and Information. Web.