Management
Conventionally the debate on eco-political condition in the Arabic Gulf emphasized on its geostrategic significance including certain factors or players having the capability to destroy its oil flow, the length of dependency on oil posed on past governments in deriving ‘rent’ and the manner in which this ‘rent’ was spent (the ratio of investment and consumption). However recent events have shifted to include the national demographic profile of the countries in the Arabian Gulf in which significant focus is on the idiosyncrasies related to the labour market. This is especially with respect to the “structural employment” and “emerging strains” which has resulted as a consequence of high dependence on expatriate manpower and the job provision provided by government for Arab citizens. Other related issues impacting the Arab labour market are associated activities in reference to the levels of vocational and educational skills of national and expatriate manpower, the benefits of nationalizing labour policies in practice and theory and the socio-cultural influence on choices related to occupation (Forstenlechner & Rutledge, 25).
Thus the labour market in the countries in the Arabic Gulf is increasingly becoming tighter with the youth facing a pertinent problem of unemployment in these nations. The past ten years have experienced high rate of growth and increased participation of females in the labour market in the GCC countries thereby increasing the supply of the citizens of these nations to look for employment opportunities. Until now, pressures of unemployment among the nations had been subdued as most of them were engaged in the public sector. However this strategy has resulted in an inflated wage bill to support the needs for the youth to be engaged in the public sector. However engaging the youths of these nations in the private sector also poses certain challenges due to the labour policy which has permitted the private non-oil industries to mainly depend on flexible, excellently trained and less expensive expatriates to support its activities. The direct outcome is less elasticity of substitution among expatriates and nationals and a segmented labour market (Forstenlechner & Rutledge, 39).
An overview of the labour market in GCC countries
One of the distinguishing characteristics of the labour market in the Arabic Gulf nations is over dependence on expatriate workforce. Expatriates in these countries are subject to flexible framework for labour. Foreign workers are hired on contractual basis and their employment is usually based on sponsor programmes. This process eases the dismissal and recruitment system by the firm which hires them to work for a particular GCC nation on contract basis.
On the other hand, these countries have less female employment and most males are engaged in higher and tertiary education which entails altogether low labour market participation by nationals. One of the pertinent characteristics of the labour market in GCC nations is the gender bias towards the fairer sex by providing them low rates. Women in these nations get a lower pay as compared with their male colleagues and most of them withdraw from employment due to child bearing, raising and nursing. However the labour market rates for individuals aged between 25 – 45 years is comparative high at 97 percent. The below table details the participation rate of males in the GCC nations.
Source: International Labour Organization
The table further depicts that the sharpest decrease has been registered in Saudi Arabia and Bahrain. In the year 2000, Bahrain had a male labour participation of 84.8 percent which sharply declined to 74.5 in the year 2010. On the other hand, Saudi Arabia registered a labour force participation for males at 54.4 in the year 2000 which dropped to 46.9 in 2010.
Conventionally the low participation of females in these nations was mainly due to cultural norms, high rates of fertility and low rate of education. But the labour market is changing with educated females thereby increasing marriageable age and decreasing fertility. This significant change is also pushing these countries to seek manner in which the employment for nationals may increase.
Another characteristic of the labour market of GCC nations is the wage differential between private and public sector jobs. The year 2011 had a minimum wage rate of SR 3000 for individuals hired in the public sector in Saudi Arabia as compared to SR 1500 for individuals working with the private sector. This wage differential can be witnessed in the wage rate of AED 4250 for a public servant in UAE as compared with AED 1500 for those hired in the private sector. In Oman the minimum wage rate has been recently augmented to above 72 percent than the wage garnered by Oman nationals in the private sector (Soto, 20).
There is a marked concentration of nationals in Saudi Arabia and Kuwait with 86 and 84 percent of jobs being taken by national in the public sector by these two nations respectively.
Creating employment in the GCC nations
One of the significant challenges faced by these nations is the creation of increased employment opportunities for the youth. Saudi Arabia has announced the need to create 3 million employment opportunities by the year 2015 to prevent escalation of current rates of unemployment and also add new entrants. By the year 2020, the nation needs to create another 1.3 million employment opportunities.
The private sector in the GCC countries has created 93 percent employment opportunities from the years 2005 to 2010. Moreover, maximum jobs have been created in Oman and Bahrain with 78% and 86% respectively. Sadly, most of the jobs have been filled by foreign nationals and expatriates rather than national labour (GIC Monthly Economic Review, 21).
The demographic modification in the national population in the GCC countries has primarily constituted to the imbalance in the labour market. This imbalance is highly profound in Qatar and the United Arab Emirates. The citizens of these two nations constitute a small workforce and most of them do not possess the required level of skill sets. This is one of the main reasons for the high number of expatriates in the GCC nations. The below table makes a comparison of between the citizens and non nationals in terms of population and workforce.
Source: Forstenlechner & Rutledge, 2011
It has been witnessed that there are less foreign nationals residing in these nations as compared with citizens but around 61.7 percent of the foreign nationals are employed leaving only 38.3 percent employment with the nationals. This figure is extremely skewed and a point of severe concern in these nations. This is one of the main reasons for the public sector enterprises not being in a position to absorb most of the youths looking out for an employment opportunity. In a bid to curb protests in Saudi Arabia and Oman, the government in Oman declared around 50000 new employment opportunities and benefits to be extended to unemployed persons. Saudi Arabian government increased the wages of public sector employees, entrenched public sector personnel other than declaring social benefits in the form of cash handouts costing up to $130 billion in the next few months. However, these interventions may help in the short run but would not benefit in the long run as they cause distortions in the labour market and have diverse unintended outcomes. Also sketchy evidences maintain that a sizeable amount of Oman nationals have quit private sector employment in order to benefit from the cash handouts announced by the government.
US labour market information
On a macroeconomic context the labour market has started growing in the year 2013 with an increase in the gross domestic product to 1.8 percent in the first quarter of this year. Despite the positive GDP, the impact on the labour market since the economic downturn in the year 2009 has not altered much. The new jobs created in the United States of America is also not sufficient to take care of the aggregate jobs lost due to economic downturn and added jobs required to keep up with the accelerated labour market growth. According to the International Labour Organization, an estimated nine million employment opportunities have to be created by 2015 so as to restore the US labour market to the levels attained in the year 2007.
Despite new jobs being created, as of June 2013, around 195000 employment opportunities were created. However, this could not counter the unemployment rate which remained at 7.6 percent in June 2013. The participation of labour force is 63.5 percent thereby depicting 0.3 percent decline over the year 2013 (International Labour Organization).
Comparison of US and GCC labour markets
The US and the GCC labour market have both started adding jobs in the private sector. In fact, the GCC nations have registered highest employment opportunities in the private sector. On the other hand, the US labour market has started shedding jobs in the public sector.
One of the pertinent issues faced by the GCC countries is a shortage of skills especially with nationals. A related issue is the lack of educational qualifications of nationals in the GCC nations. These are the main reasons as to why expatriates are hired to work in these nations. On the other hand, there is no pronounced skill shortage and lack of academic qualifications with US citizens. However, the shortage of employment opportunities in the US labour market may also be attributed to increased offshoring and outsourcing non-core functions to countries having cheap labour. Both the GCC nations as well as the United States of America are facing issues with youth unemployment. Around a quarter of youths aging from 16 -19 years have not been able to find employment in the United States of America.
The GCC nations have witnessed the highest rates of unemployment especially with educated males and females. Around 43 percent of individuals having tertiary education in the Saudi Arabia are unemployed and 14 percent in the United Arab Emirates. On the other hand, the condition is worse with female unemployment in these nations. This suggests that the education system in these nations have not aided in solving the issue of unemployment. The United States of America has experienced the highest unemployment rate with the youths and the ethnic minority population. This has impacted the Hispanics and the African-Americans the most with 9.1 percent and 13.7 percent respectively as compared with Asians and whites at 5 percent and 6.6 percent respectively.
Conclusion
The above figures maintain that the GCC nations and the United States of America are reeling with unemployment issues. However, America is facing this issue due to the economic depression of 2009 whereas the GCC nations are facing this due to excessive encroachment of foreign nationals in the labour market as compared with nationals. There is a pronounced need for job creation and especially in the GCC nations, the private sector job creation should facilitate employment opportunities for nationals as compared with foreign nationals. The wage differential is also tremendously high in the GCC countries and this has led to added woes and the distortion of the labour market. Such issues need to be solved in both nations on a long term perspective. Announcing short terms plans of providing unemployment benefits is a drain on the government exchequer and will lead to serious unintended consequences.
Works cited
Beidas-Strom, S. Rasmussen, T. & Robinson, D.O. Gulf Cooperation Council Countries: enhancing economic outcomes in an uncertain global economy. International Monetary Fund. 2011. Web. 01 December 2013.
Forstenlechner, I. & Rutledge, E.J. “The GCC’s “demographic imbalance”: perceptions, realities and policy options”. Middle East Policy, 18.4(2011): 25 – 43. Print.
Forstenlechner, I. & Rutledge, E.J. “Unemployment in the Gulf: time to update the “social contract””. Middle East Policy, 17.2(2010): 38 – 51. Print.
GIC Monthly Economic Review. Employment and unemployment in the GCC. GICMER Special Issue, 2012. Web. 01 December 2013.
International Labour Organization. Recent US labor market data: economic and labor market snapshot – June 2013. International Labour Organization, 2013. Web. 01 December 2013.
Soto, R. Labor market structures in Arab countries: what role for minimum wages? Dubai Economic Council, n.d. Web. 01 December 2013.
