Saudi Arabia

Saudi Arabia: Benefits and Risks of depending on Expatriate Workers

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Saudi Arabia: Benefits and Risks of depending on Expatriate Workers

Introduction

The Saudi Arabia labor market is highly dependent on the foreign labor with the private sector being the most dependent on foreign labor. For instance, in 2010, Saudis represented only 7% of the total labor force in the private sector. They also accounted for approximately 47% of the total labor force in the country. Several reasons have led to the disproportionate representation of Saudis in the labor market. The high demand for workers in the oil sector, which is the largest source of government revenues, is one of the major factors that have led to an increase in the proportion of foreigners in the labor force. In addition, Saudi Arabia has several mega-infrastructure projects throughout the country that need temporary labor for the period of the project. Therefore, it is not a source of secure jobs for natives. Cultural reasons have also led to a high proportion of foreign workers. Most Saudis perceive jobs in garbage collection and cleaning in general, plumbing, gardening, and construction as being shameful jobs. Therefore, these jobs are exclusively undertaken by foreigners. This implies that the Saudi Arabia labor market is characterized by two unique labor markets with one market being for Saudis and the other for foreigners.

Benefits of Dependence on Large Numbers of Expatriate Workers

Expatriate workers enable Saudi Arabia to fill a gap in the labor force in certain sectors. These include jobs such as construction, cleaning, and maintenance, which most Saudis are unwilling to do. In addition, Saudi Arabia does not have enough manpower in several vital sectors such as medicine, accounting, and pharmacy. Therefore, the expatriate workers help in meeting this need (Al-Ghamdi, 2018).

Expatriate workers also have a better work ethic and culture that Saudis. The 1970s oil boom and the riches that followed had a significant impact on the work ethic and culture of Saudis. It led to the rise of a generation that had a negative attitude towards work. Managers of Saudi firms in the private sector also claim that Saudi employees have a negative attitude towards following written or verbal orders from their superiors. Using expatriates helps ensuring firms in various sectors continue thriving. In essence, the expatriate workers support the growth of Saudi firms and the economy in general. Ultimately, Saudis would have to change their work ethic and culture. However, before they do so, expatriate workers would continue providing a significant proportion of the labor force required in the country (Odrowąż-Coates, 2015).

Risks of Dependence on Large Numbers of Expatriate Workers

Dependence on large numbers of expatriate workers has led to the poor work ethic and culture among Saudis. It has created a situation where most Saudi youth are unwilling to look for employment since they live a comfortable life even without jobs. Instead of looking for jobs, most youth spend their time cruising in cars bought by their parents or in coffee shops socializing (Al-Mulhim, 2013). This is highlighted by the fact that even after hundreds of thousands of expatriate workers left the country in 2008 due to the implementation of measures to reduce dependence on expatriate workers, the unemployment rate among Saudis increased instead of decreasing. This shows that the Saudis did not take up the jobs vacated by the expatriates (Al Omran, 2018).

Currently, the government provides various benefits to Saudis. Education is free up to the university level. In addition, healthcare is free. These allowances are provided by the oil revenues. However, it is a fact that oil will not last forever. Therefore, it is vital for Saudis to seek employment opportunities, which are usually readily available to them (Al-Mulhim, 2013). Failure to do so exposes the country to significant risks especially if oil runs out and most Saudis do not work to make an active contribution towards economic growth.

Exclusion or Inclusion of Labor mobility in Future Free Trade Agreements

Labor mobility in international trade refers to the movement of natural persons from one country to another. It also involves the movement of workers from one sector of employment to another. It may involve temporary movement of workers or permanent movement of workers. The shortage of highly skilled labor in certain sectors warrants Saudi Arabia to seek to include labor mobility in the sectors in future regional trade agreements. The skilled workers would perform their work in Saudi firms as they transfer their skills to Saudis who would ultimately take over these jobs. Failure to have access to the highly skilled workers would limit the economic growth of Saudi Arabia. It would make it difficult for the country to have workers with skills that can help in the diversification of the economy away from oil. This is one of the main reasons as to why Saudi Arabia started offering a new residency scheme to skilled workers. It offers the skilled workers permanent residency or residency that is renewed annually. The aim of the policy is to attract investors and entrepreneurs who would help in driving the growth of the private sector into the country (Al Omran, 2019).

Implications of Vision 2030 on Labor Mobility

Improving labor mobility is one of the aims of Saudi Vision 2030. Improving labor mobility would enable highly skilled workers to shift from one employer to another. This would ensure the highly skilled workers gain knowledge while they are working with a certain firm can shift to another firm or sector within the Saudi economy. In so doing, they would remain the country instead of transferring their knowledge to other countries. This would increase the ability of the highly skilled workers to transfer their skills to Saudi citizens. The Saudi citizens can consequently perform the jobs that were undertaken by the highly skilled employees due to the knowledge and skills transfer. This would ultimately help in securing the careers of millions of Saudis who are currently unemployed. Saudization, which refers to the integration of more Saudis into the labor market, is one of the key aims of Vision 2030. Therefore, increasing the skills of the workers through diversification of the economy would facilitate the achievement of this goal. However, it is vital to acknowledge the fact that Saudi Arabia cannot simply implement measures that would lead to the integration of Saudis into the workforce and mass relocation of expatriates. This process should be gradual. Otherwise, it will harm the economic prospects of Saudi Arabia. It is vital to note that expatriates also play a major role in the economic development of Saudi Arabia since they educate and serve the population. Without them, Saudi Arabia would be more isolated from the rest of the world.

Conclusion

Saudi Arabia should restructure its labor force. This requires the company to implement policies that encourage Saudization. However, it is vital for Saudi Arabia to ensure that it does use polices that would prevent it from benefiting from the skills of expatriates. The country should also ensure it implements policies that would facilitate the change in the work ethic and culture of Saudis. This would limit the risks that Saudi Arabia is exposed to due to the dependence in a large number of expatriate workers and ensures its young people are in the workforce instead of depending on expatriate workers. This would guarantee the future economic prosperity of the country even after the depletion of oil, which is currently the major source of government revenues.

References

Al Omran, A. (2019, May 15). Saudi Arabia woos foreign workers with new residency scheme. Financial Times. Retrieved from: https://www.ft.com/content/266c9940-772c-11e9-bbad-7c18c0ea0201Al-Ghamdi, A. (2018, January 31). Can we dispense with expat workers?. Saudi Gazzette. Retrieved from: http://saudigazette.com.sa/article/527273

Al-Mulhim, A. (2013). Saudi youth, the issue of unemployment and work ethic. Arab News. Retrieved from: https://www.arabnews.com/columns/saudi-youth-issue-unemployment-and-work-ethic

Al-Omran, A. (2018, July 10). Record numbers of foreign workers leave Saudi Arabia. Financial Times. Retrieved from: https://www.ft.com/content/c710cf30-8441-11e8-a29d-73e3d454535dOdrowąż-Coates, A. (2015). Cultural conditioning of the labour market in Saudi Arabia. Politeja-Pismo Wydziału Studiów Międzynarodowych i Politycznych Uniwersytetu Jagiellońskiego, 12(31/2), 185-198.