Saudi Jobs for Saudis Is Crown Prince’s Generational Challenge

(Bloomberg) --

After months without steady work, Saudi computer specialist Abdullateef Al Jarfan donned the red graduation gown from his U.S. master’s degree and began selling homemade tea by the roadside.

The 32-year-old hoped his gimmick would attract customers but, within hours, a video of him on social media had gone viral, making Jarfan the face of unemployment in Saudi Arabia.

“I was applying to jobs and waiting for a breakthrough, but I couldn’t just sit at home,” he said. “I needed to do something.”

Job creation is the biggest domestic challenge facing Saudi Crown Prince Mohammed bin Salman as he reshapes an economy long dependent on exported oil and imported labor. Unemployment hit a record 15% last year, when Covid-19 set back the de facto ruler’s ambitious Vision 2030 plan to transform the conservative Islamic kingdom into a regional business and tourism hub.

High unemployment risks impoverishing a middle class previously cushioned by state spending. Without fundamental change, the problem is set to worsen as a demographic bulge of youth pours onto the labor market, raising the prospect of social instability as frustrations grow.

Yet while the pandemic’s magnified the challenge, it’s also galvanized officials and accelerated a shift in mindset among younger Saudis, who are increasingly taking blue-collar jobs they once shunned.

Saudi workers are now visible everywhere, delivering packages, serving espresso and moving oil rigs. Multiple firms with foreign employees trapped abroad by Covid-related border closures said they’d accelerated plans to hire locals. In the third quarter, when the economy shrank 4.6%, the number of Saudis employed in the private sector rose by more than 80,000.

“Whoever had their doubts that Saudis don’t want to work, they had to put them to the test, they had to expedite their training programs,” said Noaf Alturki, vice president of corporate affairs at Rawabi Holding, a Saudi oilfield services and construction conglomerate that’s increasingly hiring local technicians. “To be honest, they rose to the challenge.”

Indeed, Jarfan’s stint as a street vendor paid off. He landed a job in his field. Six months on, he’s preparing to launch an app called Country Food that he hopes will pay it forward — connecting hungry customers to informal home kitchens around the kingdom.

“We’re trying to support those who don’t have jobs or want to earn extra income,” he said.

While many countries are struggling with joblessness due to Covid-19, Saudi Arabia’s problem dates back decades, to when the first influx of expatriates arrived to develop a nascent oil industry.

Foreigners now comprise a third of the 34 million-strong population. The government is the main employer of Saudis -- a model it can’t afford to sustain -- while the rest of the economy relies on cheap labor from Asian and other Arab countries. Three-quarters of private sector workers are foreigners, often toiling longer for less, making it difficult for Saudis to compete.

Authorities have long enforced quotas and incentives to channel more citizens into the private sector, a process dubbed “Saudization,” but the results haven’t matched population growth. Joblessness was already increasing when Prince Mohammed became heir to the throne in 2017. It started falling in 2019 as economic growth rose. Then came the pandemic.

As the worst effects of the crisis fade, Saudi Arabia is at an inflection point. It must find a way to get Saudis hired without slowing growth or deterring foreign investors who are crucial to Prince Mohammed’s overhaul, but often view Saudization as a tax.

“It’s a dilemma,” said Eman Alhussein, a Saudi non-resident fellow at the Arab Gulf States Institute in Washington. “I don’t think there’s going to be a solution anytime soon.”

To keep unemployment steady, the kingdom must create 150,000 jobs per year over the next decade, according to Bloomberg Economics. Halving citizen unemployment to 7% by 2030 — the crown prince’s goal — requires significantly more.

SAUDI INSIGHT: The 150,000-Jobs Challenge Facing Government

The jobs estimate also doesn’t account for a rapid rise in women seeking work as social restrictions loosen. That’s a success for Prince Mohammed, who scrapped a ban on women driving and eased gender-mixing rules, but also a challenge, because he’ll have to create more jobs.

So far, the overall labor market is shrinking as various policies push foreigners out faster than Saudis are hired.

Tariq Alturkestani, co-founder of Saudi courier company Saee, is struggling to adapt to a new requirement to Saudize gig economy jobs within six months. About 70% of his freelance delivery “captains” are foreigners. Replacing them with Saudis means raising commissions -- and prices.

“We’re put in a corner,” he said. Big companies can manage, but “for a startup, it’s very difficult to compete.”

Many Saudis argue Saudization won’t work without radically changing immigration policy. The drip-drip of new regulations spawns new workarounds, as companies hire just enough locals on minimum wage to meet regulations. In a Muslim society where marriage is an imperative, that makes it hard to settle down.

“If your life passes you by, you can’t get it back,” said Fawaz Eayid, 30, a dentist who spent three years jobless. He was finally hired in October, but his clinic pays him under $1,200 a month, not enough for a family.

As of this week, non-Saudis will be able to change jobs without their work sponsor’s approval. Economists say that should raise foreigners’ wages and make it easier for them to leave bad jobs, cutting at employers’ grumbles that Saudis are harder to retain. It doesn’t resolve the mismatch between educated Saudi jobseekers and the largely low-skill jobs available.

“We continue to study reforms and initiatives to reduce the gap between Saudis and foreigners,” the human resources ministry said in a statement to Bloomberg. It’s also looking into reducing statutory working hours and how to guide the labor market toward “higher skill and productivity.”

Anecdotal evidence suggests the job market has improved since the third quarter, the latest data available.

After graduating in August, 23-year-old Hamad Alrasheed applied for all sorts of jobs — including barista, which he wouldn’t have considered a few years ago. Like Jarfan, he even sold tea on the street. In February, he finally landed a bank teller position for 8,500 riyals ($2,270) per month.

“I feel like the path in front of me is good,” Alrasheed said in an interview inside a Riyadh co-working space filled with Saudis. “A few weeks ago, there wasn’t even a path.”

©2021 Bloomberg L.P.