• Type General news
  • Date 2 April 2021

KAPSARC Suggests Polices to Foster the Employment of Nationals in Saudi Arabia

Along with the new rules for foreign workers in Saudi Arabia that allow expatriate workers to transfer between employers upon the expiry of the binding work contract without the employer’s consent, KAPSARC has published a new paper to Suggest Polices of Fostering the Employment of Nationals in Saudi Arabia

The new discussion paper aims to analyze the nationalization policies of the private sector labor force and proposes a labor market model of Saudi Arabia to increase the attractiveness of the private sector for nationals.

The labor market will need to absorb an increase in the working age population of around 1.8% annually. Female labor force participation in Saudi Arabia has more than doubled and is well on track to meet the Saudi Vision 2030 objective of 30%. At the same time, unemployment needs to drop to 7%, from around 12% in 2019, to meet the Vision 2030 objective. Increasing the private employment of the Saudis is essential in this perspective. But how to create the right incentives?

“Policies to Nationalize the Private Sector Labor Force in a Matching Model with Public Jobs and Quotas,” a paper published by research fellow Olivier Durand-Lasserve develops two alternative partial equilibrium models of the labor market to Saudi Arabia.

In the first model wages fully adjust so that in the end labor demanded by the private firms is equal to the labor supplied by the households. The second models is more realistic. It represents how the imperfect process of searching and matching between job candidates and vacancies creates unemployment. It also takes into account how expectations about public sector jobs restrain some job candidates from searching in the private sector.

In order to boost national employment, the study investigates options to subsidies the labor of nationals in the private sector. This policy would correspond to an extension of the employment Subsidy Program (ESP), introduced in 2019, which is a system of in-work cash transfers for nationals employed in the private sector.

The paper explores how the labor subsidy policies interact with pre-existing nationalization of workforce policies such as the Nitaqat Saudization quotas and the expatriate levies. Moreover, the paper investigates various ways of financing the subsidies, in particular through adjustments of the public wage bill, through increased levies on expatriates, or using part of the fiscal proceeds of an energy prices reforms.

KAPSARC successfully moved up the ranks of the think tank index despite the formidable challenges imposed by the pandemic. The Center ranked 12th out of 60 research centers in the Energy and Resource Policy Think Tank category and placed 15th out of 101 amongst MENA research centers according to the University of Pennsylvania Think Tank and Civil Societies Program.


This article originally appeared on Arab News