Saudi labor reforms add 600,000 private sector jobs

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Saudi Arabia’s attempts to reform its expatriate-heavy labor market have put more than 600,000 locals into jobs at private companies, a senior official said on Tuesday, a sharp increase over previous rates.

Unemployment among men last year dropped to 6.1 percent, the lowest figure since 2000, deputy Labor Minister Mofrajal-Haqbani told Reuters after a press conference in Riyadh.

“It is the lowest since 13 years ago... I think next year,God willing, we will see better results,” he said.

The Middle East’s largest economy grew by 6.8 percent last year, but private companies have traditionally been reluctant to employ Saudi workers, who are paid more than foreigners and enjoy more job protection.

Employment statistics are also skewed by the low level of women in work due to religious restrictions on gender mixing.
The world’s top oil exporter sees low employment among nationals as a long-term strategic challenge, a view given added impetus after joblessness in nearby countries contributed to the Arab spring uprisings.

Central bank figures from 2011 showed around nine in 10 Saudis in work were employed by the state, while more than 6million foreign workers held roughly the same proportion of jobs at private companies.

The Labor Ministry has aggressively pushed reforms, overhauling an existing system of quotas for Saudi and foreign employment in the private sector and fining companies that employ more expatriate than local workers.

The changes have provoked anger among some Saudi companies, which say they cannot find Saudis willing to do jobs seen as menial, such as in the labor-heavy construction sector.

The quota system, called “Nitaqat,” categorizes companies by sector and size to determine what proportion of foreign employees they should have. Firms that miss their targets are penalized with fines and hiring restrictions. It was started in late 2011.

Economists have said it is too early to assess the wider impact of the labor reforms on the kingdom's job market and private sector.

In November, the Labor Ministry also announced a new policy of charging companies a fee of 2,400 riyals ($640) for each foreign worker they employ over the number of Saudi staff. The fee was introduced immediately and must be paid when an expatriate’s work permit comes up for renewal.

“We employed more than 600,000 since Nitaqat was launched,” said Haqbani, adding that previously 50,000-80,000 Saudis joined the private sector workforce each year.

In a sign of the government's push to raise female employment, women represented a third of the new private sector employees, Haqbani said.

“In history (before Nitaqat) we only employed about 70,000,” he said.

Labor Minister Adel al-Fakeih was quoted in al-Eqtisadiah newspaper on Tuesday as saying the number of women employed by private companies in Saudi Arabia had doubled from a year ago.

He also said the ministry was working on 100 initiatives to improve Saudis’ employment prospects with private firms, including a system of monitoring wages to prevent companies cheating existing requirements.

Haqbani said he did not know how much money the SR 2,400levy on foreign workers would raise for the government, and he also did not know how much an unemployment benefit of SR 2,000 a month, payable for up to one year, had cost the country.

More than 1 million people are on the unemployment benefit, known as Hafez, he said, and around 86 percent of them are women. He said most of the people who had found new jobs had been on the Hafez program.

The government last year introduced new rules making some retail jobs, such as for lingerie and cosmetics, women only.

It has also sent tens of thousands of women abroad on scholarship programs, alongside men, aimed at improving their job prospects.

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