Complex Made Simple

Saudi’s Q1’19 unemployment rates tell a story of small victories but little change

While unemployment rates and participation figures are improving incrementally, an underlying problem remains with the preferences of the Kingdom's national workforce.

Overall unemployment in Saudi Arabia fell to 12.5% in Q1 2019, from 12.7% in Q4 2018 Female labor force participation rose to 20.2% in 2018, marking the highest rate in more than two years "The number of citizens employed in the private sector fell 2% over the past year" - Bloomberg

Cutting the Kingdom’s notorious unemployment rates has always been on the agenda for Saudi Arabia. From Vision 2030, to Saudization initiatives and legislation, everything has been in an effort to put more Saudis behind desks.

One quarter into 2019, and it is clear the journey will be quite the long one.

Incremental change 

According to official data revealed last month by the General Authority for Statistics (GaStat) and reported by the Saudi Press Agency (SPA), overall unemployment in Saudi Arabia fell to 12.5%, it slowest since Q4 2016. Unemployment in Q4 of 2018 was 12.7%, marking a 0.2% decrease Q-o-Q (quarter-on-quarter). Similarly, the unemployment rate for the total Saudi and non-Saudi population in the Kingdom stood at 5.7%, compared with 6% during the fourth quarter of 2018.

Unemployment among Saudi men stood at 6.6%, compared with 31.7% among Saudi women during the first quarter of 2019, GaStat’s data showed. 

However, women have been making an effort to take a more active role in society, especially after the ban on them driving was lifted in June of 2018

According to Jadwa Investment, “female labor force participation rose to 20.2% in 2018, marking the highest rate in more than two years, which is up from 19.4% in 2017.” The higher mobility offers women access to career options not necessarily available to them in their previous restricted state. 

“The female labor force participation rate remains well below the MLSD’s (Ministry of Labor’s) National Transformation Program’s (NTP) target of 25% by 2020,” said Jadwa Investment. 

In an effort to put a curb on rampant expat employment, the Kingdom has been authorizing Saudization schemes that tax businesses for employing non-nationals instead of nationals. This has seen expat employee numbers drop drastically, with statistics released by Jadwa Investment revealing that around 1.6 million foreign workers left Saudi Arabia in the past two years, and 1 million left in 2018 alone. According to data compiled by Global Media Insight, the expat population in Saudi Arabia totaled 10.74 million during the 2017-18 period . 

An underlying issue among Saudi employees persists

While GaStat’s data has revealed positive figures, minor may they be, a real issue persists in the Saudi labor market – one propagated by a tendency that’s become hard-wired into some Saudi employees. 

“Although joblessness among Saudis declined to 12.5% in the first quarter, the number of citizens working in the private sector actually fell,” Bloomberg highlighted in an in-depth story investigating employment trends in the Kingdom. “The government, still the main employer for the kingdom’s nationals, has added more than 20,000 jobs for Saudis since the third quarter of last year, when the statistics service started reporting the breakdown by sector.”

The news site continued: “The number of citizens employed in the private sector fell 2% over the past year, a side effect of the economic slump that’s frustrated years of efforts to get companies to hire more Saudi nationals. 

”Known collectively as Saudization, the initiatives have included recent measures that restricted a slew of jobs to citizens. Yet foreigners are leaving their jobs at a faster rate than Saudis can replace them.”

Saudis are known for preferring public sector jobs over private sector jobs, and for good reason.

“Saudi government departments are paying 59% more salaries to employees than the private sector, in addition to bonuses and several other incentives,” the Arabic daily Al-Watan reported last month, quoting statistics issued by GaStat, and cited by the Saudi Gazette.

“The authority said the average salary of a government employee in the first quarter of 2019 was SR11,405, compared to SR4,595 for a private sector employee doing the same work,” the report continued. 

Besides the generous pay, the public sector is known for providing unrivaled job security, with great benefits to boot – both financial and non-financial. 

“While Prince Mohammed’s blueprint for the post-oil era was based on cutting the public payroll, he acknowledged in an interview last October that government hiring could be part of the solution, but said ‘the job creation in the private sector will also grow with time,'” Bloomberg reported. 

Much will now have to be done to entice nationals to help fill the gap being created by expats leaving.