Meeting the Employment Challenge in the GCC
IMF Blog, January 19, 2012
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- Authors: Masood Ahmed
- Published: January 19, 2012
Overview
- The economies of the six Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—have abundant oil and gas reserves producing large budget and external surpluses, and growth and social indicators have improved.
- The oil/gas sector employs less than 3 percent of the region’s labor force.
- Diversification has proceeded and the non-oil sector has grown fairly rapidly over the past decade, but questions remain whether it can deliver enough jobs for GCC nationals.
Job creation and composition
- Over the past 10 years, the GCC created about 7 million new jobs.
- Fewer than 2 million—less than one-third—of those new jobs went to nationals.
- The sharp rise in expatriate employment occurred mostly in the private sector, and also in the public sector in Kuwait and Qatar.
- Many positions filled by expatriates were low-skill and low-paying construction jobs; a significant part also went to highly educated professionals where there was a shortage of nationals with the requisite skills.
- Example: In Saudi Arabia, unemployment among nationals has remained above 10 percent for the past several years, concentrated among new entrants to the labor market (young people and, increasingly, university graduates).
Projections and risks
- Overall job creation is estimated at 6 million over the next five years.
- Past labor market trends suggest less than one-third of these future jobs will go to GCC nationals.
- The workforce is growing rapidly, with more than 4½ million nationals potentially entering the labor market during this period (compared to approximately 5 million employed nationals in 2010).
- Barring a change in labor market patterns, an additional 2 to 3 million GCC nationals could thus find themselves without employment.
- Continued strong—or even accelerating—economic growth is unlikely, by itself, to be the solution; the additional growth necessary to meet employment objectives could be quite substantial if labor market dynamics remain unchanged.
Policy options to increase opportunities for nationals
- Promote employment of nationals without imposing undue business costs that would erode competitiveness and reduce growth.
- Examples of initiatives already under way:
- Partial guarantees to ease access to credit for small and medium-sized enterprises.
- Programs to match job seekers with employers, including scaling-up placement programs and training and education schemes.
- Measures to make private-sector work more appealing and to reduce public-sector attraction:
- Scaling back high wages in public-sector employment or cutting some supporting benefits that made it the dominant employer of nationals.
- Better aligning education and equipping prospective job-seekers with the skills demanded by the marketplace, including extending training and placement services already in place.
- Providing incentives for nationals to acquire the skills needed for private-sector employment.
- Evaluating the possibility of a tax on foreign workers (for example, as an extension of plans to increase fees for work permits, as some countries are considering) in a way that minimizes distortions in the local labor market while redressing the effect of the high wage demands of nationals.
- Considering the time frame and scope for offering the private sector financial and other incentives to employ nationals.
- Supplementing the income of nationals through a salary top-up scheme for nationals moving to the private sector, facilitating initial recruitment by employers and reducing the bias toward seeking public-sector jobs.
Originally published on the IMF's blog, مواجهة تحدي العمالة في منطقة الخليج.
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- Gulf Cooperation Council Countries