A lack of skilled workers in Saudi Arabia

20 December 2011

The kingdom needs to find work for a rising number of unemployed youngsters, but a focus on degree-level education is making the task much harder

Key fact

Almost 450,000 Saudi Arabians – representing about 10.5 per cent of the workforce – are unemployed

Source: MEED

Major investments in infrastructure and economic diversification are creating new job opportunities in Riyadh. Now, more than at any other time in its history, young nationals are under pressure to develop academic, managerial and practical skills to help the country become a knowledge-based economy.

Employers realise very quickly when a degree has failed to confer the necessary skills and the impact of that is huge

US education consultant based in the Gulf

“While the [1970s] Saudi boom was based on general growth and infrastructure needs, the new boom is more systematic,” says Hussam al-Angari, dean of economics and administration at Riyadh’s King Abdulaziz University.

“[The boom is] knowledge-based and requires a new set of skills. [Companies] are seeking highly educated and motivated young people who can quickly develop into a general manager or business leader. Young people are hired at high salaries and the prospects for career advancement are at an all-time high.”

High unemployment in Saudi Arabia

The high level of unemployment among nationals raises questions over whether locals can compete with foreign workers when it comes to key workplace skills. Despite the kingdom’s drive to modernise and develop a broader industrial base, almost 450,000 locals – representing about 10.5 per cent of the workforce – are unemployed.

The problem is particularly acute among young people. An estimated two-fifths of those aged 20-24 are unemployed. Three decades of expanding higher education have failed to reduce high drop-out rates at secondary school and makes students more employable.

According to the 2010 UN Development Programme (UNDP) human development report, just 50.3 per cent of Saudi women and 57.9 per cent of Saudi men have completed their secondary school education.

With a third of the population aged under 14, rising unemployment is a threat to social stability and that threat is being taken seriously now, in the aftermath of the 2011 Arab uprisings.

In January, the Labour Ministry said it needed to create 5 million jobs by 2030 to absorb new school leavers and graduates into the workforce. One of the biggest challenges facing the authorities is the ability of the public sector and government bodies to create work for young nationals.

Historically, the state has been a major employer of nationals, while the private sector has looked overseas to recruit skilled managerial and manual labour. Migrant labour was critical in the 1970s, when the kingdom went through its first economic boom.

Today, private Saudi companies continue to rely heavily on imported labour and the expected skills transfer from foreign to national workers has not taken place. By the 1980s, the government imposed Saudisation quotas in order to absorb citizens into the workforce. Thirty years on, most sectors have yet to meet these recruitment targets.

Following the regional unrest, the government has redoubled its efforts this year. In June, the Labour Ministry launched the Nitaqat system to penalise private firms that employ large numbers of foreign workers. Economists estimate that foreigners make up to 90 per cent of the private sector workforce. Some analysts fear that the system will drive small and medium-sized enterprises out of business.

Saudi talent does not come cheap and employers often struggle to find nationals for vacancies that demand particular technical skills, managerial experience or professional qualifications. Companies also find it difficult to recruit nationals to manual roles. On top of this, foreign workers’ salaries are between a third or 50 per cent lower than those paid to citizens.

Salary expectations

A recent survey of young Saudi nationals by GulfTalent.com found that the average male student expected a starting salary of SR10,000 ($2,667) a month, while females expected lower first salaries of SR 5,000 ($1,333.50) a month.

This reflects two issues. On the one hand, Saudi women face continued legal and cultural barriers in looking for work. On the other, young Saudi men are reluctant to accept low-paid menial work.

Government policy has failed to address this fundamental problem. Jobless nationals collect SR2,000 a month in employment benefit. As a result, employers struggle to recruit locals to junior clerical and retail positions, paying between SR2,500-3,000 a month.

Gulftalent.com’s survey also hints at mutual suspicion between nationals and the private sector’s small-to-medium-sized private companies. When researchers asked students to name their ideal employer, respondents gave clear preference to large parastatal firms, big-name multinationals and government bodies.

Saudi graduates showed a preference for employers able to offer structured training, career progression and prospects.

Moves to expand college and university education have failed to engage or support less academic youngsters.

A study conducted through the local King Saud University earlier this year suggested that 10 per cent of the kingdom’s university students dropped out before completing their degree. Researcher Ahmed al-Hariri urged Saudi secondary schools to do more to prepare students for university life. In particular, the study found problems with self-discipline and attendance.

Education consultants say the kingdom needs to widen the options available to young nationals. At present, they say schools, parents and the state put too much emphasis on degree-level education. There is also little support available to help less academic students to match their abilities and interests with an alternative career path.

Saudi parents expect their children to progress from school to higher education and there is deep-rooted prejudice against vocation- and skills-based training. The government not only needs to invest in such training, but also tackle the notion that skills-based courses are somehow second best.

Changing approach

There is a growing clamour among economists, education experts and employers for a ground-up approach to employment; one that better prepares youngsters to meet the demands of the workplace.

“There’s too much emphasis on higher education and not enough focus on what happens after school, whether it is education, vocational or technical training,” says a Gulf-based management consultant. “There is limited career guidance. Vocational training has low prestige across the Gulf and schools are doing nothing to challenge that view.”

“That contributes to a mismatch between the number of graduates that leave higher education and the high levels of unemployment. Expanding education has not [achieved] economic development or higher employment. There are issues with quality and employability.”

An International Finance Corporation-backed study, Education for Employment: Realising Arab Youth Potential, shows that employers and students share this view. Published in April, the study interviewed 1,500 Arab employers and 1,500 students. It concluded that young Arabs were less prepared to enter the workplace than graduates in other regions.

Employers reported that two-thirds of young Arabs lacked the skills for entry-level jobs and more than half said they ran extensive training programmes to improve new graduates’ skills. Only a third of the youths said that education had prepared them to enter the jobs market.

Saudi Arabia and its neighbours focus on degree-level education at the expense of transferable skills, say employers. The report noted a lack of soft skills among Saudi graduates, quoting a senior manager who said “severe deficits in … leadership, critical thinking, oral communication and work ethics”.

The region’s obsession with degree-level education is now so well established that education experts have devised a name for it. “We call it the Wizard of Oz Syndrome,” says a Gulf-based US education consultant. “In the film, the scarecrow asks the Wizard of Oz to give him a brain and comes away with a degree certificate.

Shallow thinking

“[The belief is] that once you acquire that degree, you will possess everything that a degree promises. This then carries through to master’s and doctorate level, with the notion that once you acquire these degrees, you will know all that there is to know.

Top 50 employers for Saudi graduates
1Saudi Aramco 
2Sabic
3Schlumberger
4Saudi Airlines
5Procter & Gamble 
6General Electric 
7Mobily 
8Samba
9Saudi Telecom 
10National Commercial Bank 
11National Guard Hospital
12King Faisal Specialist Hospital
13Google
14Sabb
15Al-Rajhi Bank
16Chevron
17Saudi Electricity Company 
18Baker Hughes
19KPMG
20McKinsey
21PetroRabigh 
22Unilever
23Capital Market Authority 
24Halliburton
25Ministry of Education
26Satorp 
27Microsoft
28PWC
29King Abdulaziz University Hospital
30Ernst & Young
31Saudi Binladin Group
32Royal Commission
33Deloitte
34BAE Systems
35Maaden 
36HSBC
37Sasref 
38Interior Ministry
39Nestle
40Siemens
41Sipchem 
42Emaar 
43Marafiq 
44CITC
45Ministry of Health
46Samsung
47King Fahad Armed Forces Hospital
48Savola 
49Olayan 
50Apple 
Source: GulfTalent.com, 2011

“But no one looks at learning outcomes …. Unfortunately, education is a time-intensive, human resource business. It can take decades to identify a bad degree. Yet employers realise very quickly when a degree has failed to confer the necessary skills and the impact of that is huge.”

As Riyadh looks to transition to a knowledge-based economy, the danger is that the current generation of locals will miss out on the opportunities created. Forcing private firms to employ locals through Saudisation levels may push up headline employment figures. But unless those workers make a valuable contribution to the employer other than helping avoid penalties, the initiative will be limited in its impact.

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