Saudi Arabia would need to create at least 1.5 million jobs for nationals over the next 20 years in order to absorb the new labor market entrants while keeping unemployment rate stable, Moody's Investors Service said in a recent report.
In order to halve the unemployment rate amongst nationals to 6.4 percent (currently around 13 percent), the amount of jobs required would rise to 2 million, more than 15 percent of last year's total employment, the report added.
Noting that the GCC governments have historically used the public sector to create jobs for nationals entering the labor market, the report noted, “For most GCC governments there is limited scope to create jobs by displacing expats, as nationals already account for the vast majority of public sector jobs.”
The number of positions currently occupied by expats is not even close to the amount of new national labor market entrants, the report added.
For example, in Saudi Arabia, the amount of jobs required to keep unemployment rates stable over the next 20 years would be 25 times those currently occupied by expats in the public sector.
GCC governments, it continued, could continue to expand public sector employment to accommodate new labor market entrants. However, even this would be challenging.
“Public sector employment would have to increase on average by 37 percent over the next twenty years just to keep the current proportion of nationals employed by the public sector stable, while accommodating the same share of new entrants in the labor force,” Moody’s report said, adding that the largest increases in the public sector jobs would be in Oman (56 percent), followed by the UAE (54 percent) and Kuwait (41 percent).
With the public sector unlikely to be able to absorb the flow of new entrants from the national population, the governments' nationalization plans include measures to incentivize private sector employers to hire nationals, the report maintained.
It said the labor market nationalization challenges are greatest in Saudi Arabia.
“Unemployment is already high, and the gap between the quantity and quality of the jobs that the government is able to vacate, and the expectations and needs of the national workforce is significant,” it maintained.
Overall, Moody’s said, across the GCC countries, rapid population growth in the next two decades implies a risk of rising unemployment with negative implications for social and political stability if it is not met by equally rapid increases in jobs for national citizens.
As a response, the GCC governments are implementing so-called labor market nationalization policies which aim to lower the risk of high and rising joblessness, but which will, at least over the coming years, also likely raise labor costs and hamper diversification, Moody’s concluded.
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