Propelled by female employment, Saudi jobless rate hits historic milestone

The unemployment rate of Saudi nationals dropped to 8 percent during the last quarter of 2022, a remarkable achievement not seen in decades, bringing the country close to achieving the 7 percent target of Vision 2030.

Jobless figures had been stubbornly high for some time, reaching double digits in 2003, exceeding 14 percent in 2016, and going beyond that during the coronavirus pandemic.

Last year, for the first time since 2003, the rate went back to single digits in the second quarter. In the fourth quarter it went down to 8 percent, a level not seen since 1999.

A labor market survey released last week by Saudi Arabia’s General Authority for Statistics, showed that the drop in the number of people out of work had been propelled mostly by the increased employment of Saudi women, a phenomenon most notable in the new projects associated with Vision 2030.

By removing burdensome restrictions on female employment, the country has moved closer to achieving one of the most important goals of that vision.

The fall in the female unemployment rate has been dramatic. It rose from 15.8 percent in 1999 to more than 28 percent over the following years, before starting to dip gradually with the introduction of Vision 2030 in 2016.

In the last quarter of 2022, it went back to 15.4 percent, about the same level as in 1999. With these dramatic changes, it is clear that reversing female unemployment is one of the key success stories of Vision 2030.

Joblessness in Saudi Arabia is paradoxical. Since 1999, the economy has been growing steadily and at times rapidly, but the unemployment rate of nationals was also rising, an unusual occurrence as gross domestic product growth and unemployment rates usually move in opposite directions.

It now looks likely that Saudi Arabia will reach the 7 percent unemployment target for Saudi nationals ahead of the schedule anticipated in Vision 2030.

Dr. Abdel Aziz Aluwaisheg

The number of jobs created every year exceeded the number of new labor-market entrants of 200,0000 to 250,0000, but Saudi nationals were not able to take advantage of that job growth for a variety reasons.

By improving education and training quality and removing undue barriers to employment, government policy appears to be working in bringing Saudi nationals’ employment and GDP growth rates in sync.

It now looks likely that Saudi Arabia will reach the 7 percent unemployment target for Saudi nationals ahead of the schedule anticipated in Vision 2030.

In 2021, Crown Prince Mohammed bin Salman said when the target was achieved, the government would shift focus to improving job quality and workers’ earnings.

He pointed out that around 50 percent of the jobs Saudis were employed in were “bad jobs.” While wages earned in these jobs covered basic needs of food and shelter, workers could not save, grow their wealth, improve the quality of their lives, or spend much on entertainment.

The government intended to raise the share of good jobs to 80 percent or higher, enabling workers to improve their living standards and invest more.

According to the labor market survey, just over 30 percent of Saudis in the labor market in the fourth quarter of 2022 were university graduates, with approximately 3 percent having post-graduate degrees.

These rates are comparable to those of industrialized countries, as in the Organization for Economic Cooperation and Development region for example, but Saudi tertiary education has not been able to cope with Vision 2030’s requirements, creating the need to send tens of thousands of Saudi students abroad, a very expensive endeavor, making it imperative to improve education and supplement it with appropriate training programs.

Improving education and training programs is key to the government’s policy of both reducing joblessness and increasing the share of good jobs, but so is adjusting labor market policies including easing women’s access to those good jobs.

Research has shown that having more education, knowledge, and skills increases the chance of finding employment, of improving skills while on the job, and of realizing higher earnings over a lifetime.

Employment prospects depend largely on whether individuals’ skills meet the requirements of the labor market. In a segmented and managed labor market such as Saudi Arabia, those prospects also depend on social and institutional factors.

What people know and what they can do with what they know has a major impact on labor market outcomes.

A healthy labor market absorbs a range of skills at different levels, and to varying degrees, and will minimize the mismatching of skills, which happens when the skill level of the workers or their qualifications are higher or lower than what is required for their job.

In an increasingly knowledge-based global economy, people with high-level skills are in greater demand, while those with lower-level skills are more likely to be at risk of being unemployed.

Besides high-level skills typically associated with tertiary education, a well-skilled labor force also requires mid-level trade, technical, and professional skills, often delivered through vocational programs.

Research has shown that the skills more highly in demand nowadays – particularly, information-processing skills – are learnable. Thus, it is important that both formal and alternative schooling be tuned to the evolving needs of the marketplace so that students of today are better prepared for the jobs of tomorrow.

As growth in Saudi Arabia is largely driven by government policy, it should not be difficult to anticipate what those needs are going to be at a given time.

Career guidance at schools, colleges, and labor offices can play an important role informing young people about current and emerging opportunities and in the process facilitating better matches between supply and demand.

Social and institutional impediments to employment are more difficult to identify and tackle, but they are no less important. Surveys on the root causes of unemployment among women, for example, have revealed that access to transportation plays a key role in their labor market decisions, making it important to accelerate public transport project implementation. While legal restrictions on female employment are removed, social restrictions will take a longer time.

The historical level of Saudi female unemployment achieved in the last quarter (15.4 percent) is still high compared to that of Saudi men (4.2 percent). It is also too high compared to the abundant number of jobs created by the rapidly growing economy.

One key indicator of lingering social limits to female employment is their labor force participation rate, which the labor market survey put at 36 percent in the last quarter, nearly half the average of industrialized countries. In 2022, participation rates for women averaged 66 percent in OECD countries.

Saudi Arabia is coming close to achieving its unemployment rate target ahead of schedule, which will trigger shifting the focus from this important quantitative goal to the more qualitative good job priority.

Female unemployment has dropped dramatically from 28 percent to around 15 percent in the last quarter, and hopes are high that this progress will continue. Equally important, but more difficult to change, is their low participation rate, which needs both government and societal efforts.

• Dr. Abdel Aziz Aluwaisheg is the Gulf Cooperation Council assistant secretary-general for political affairs and negotiation, and a columnist for Arab News. The views expressed in this piece are personal and do not necessarily represent GCC views. Twitter: @abuhamad1