Among the many challenges Saudi Arabia faces, a jobs shortage should be at or near the top of the list. The Kingdom has one of the youngest populations in the world: two-thirds of all Saudis are under the age of 30 and more than one-third are under the age of 14. By some estimates, Saudi Arabia will need to create nearly 2 million jobs over the next decade to meet the demands of its young population.
With youth unemployment in the Kingdom hovering near 30%, the creation of jobs represents a policy challenge of the highest order. On October 12, the Saudi Cabinet approved the creation of a new federal body aimed at tackling this challenge – the Commission for Job Generation and Anti-Unemployment. This is a long overdue initiative.
Notably, the Commission will be linked organizationally with the Council on Economic and Development Affairs (CEDA), another new federal body launched in January 2015 and tasked with streamlining government decision-making on economic development issues, which have often been mired in bureaucracy or competing ministerial agendas.
Underperforming in its economic potential
Today’s Saudi population – especially its young – are the most wired, most connected, and best-educated population in Saudi history.Afshin Molavi
On a regular basis, ministers responsible for economy and development issues meet to discuss coordinated strategies. The establishment of the new Jobs Commission likely emerged from CEDA. After all, in any Saudi public policy economy discussion, it does not take long before the jobs issues rises to the center of debate.
At the end of the day, Saudi Arabia – not unlike other emerging economies -- is underperforming its economic potential. True, the Kingdom has made great strides from just a few decades ago when things like mass education, mass literacy, and country-wide healthcare were just the stuff of reformer dreams, but Saudi Arabia is not the only country in the world that has made strides in building roads, schools, universities, hospitals, and the like. Today, to compete in the 21st century, the Kingdom will need a 21st century economic vision of growth and 21st century productivity from its citizens.
That’s where the Jobs Commission comes in – or at least should come in. A young population that is significantly unemployed or under-employed represents not only a drag on the economy, but also a drag on society. There is nothing more tragic than witnessing the squandered potential of unemployed and under-employed youth anywhere in the world. Saudi Arabia’s demographics can be either a burden or a gift. If channeled properly, young populations can drive growth and job creation as they did across East Asia in the 1980s with similar demographic portfolios.
Saudi Arabia is not alone in facing a jobs challenge for its youth. In a recently launched report by the International Labor Organization, the Geneva-based body reported a total of 73.3 million unemployed youth worldwide. The report, entitled “Global Employment Trends for Youth 2015” and launched last week, noted that while some regions improved their youth employment prospects, the large emerging market regions of East Asia, Southeast Asia, and the Middle East and North Africa saw an increase in youth unemployment between 2012-14.
But is the answer another federal agency? It all depends on what the new commission chooses to focus on. Michael Klein, the former chief economist of the World Bank’s private sector development arm, the International Finance Corporation, rightly notes that the basics such as savings, investment, education, resources, and new technology are “fairly easy to obtain.” On the other hand, he also rightly notes that “what is hard to obtain are the institutions that allow these factors of production to be combined and translated into productive job creation.”
The key factor, Klein argues, is the growth and competition of companies that are “key vehicles that spread best practices and productive jobs.” Thus, “it is necessary that new firms can enter markets, that substandard firms are allowed to fail, and that good firms face few barriers to growth. This is the definition of competition, and competition is what selects good firms and thus drives the spread of best practice and productive jobs. Governments need to provide the framework in which capable firms can emerge.”