Saudi Arabia is one of the first countries that has been undertaking programs to lower unemployment within its population by imposing fines on companies that employ more foreign workers compared to native Saudis. This was announced by the Labor Ministry through a statement announced in the SPA, the country’s news agency.
The new policy was implemented starting Nov. 15 includes the requirement that private companies which have on its worker roster of foreign workers to pay a fine of 2,400 riyals or US$640 per year for each foreigner in excess of the local population. The fines would not apply to foreigners having Saudi mothers and citizens of other Gulf Cooperation Council countries. These countries include United Arab Emirates, Kuwait, Oman, Bahrain and Qatar or household help.
The statement said, “The aim of this decision is to increase the competitive advantage of local workers through the reduction of the gap between the cost of expatriate labor and local labor.”
When enforced strictly, the policy would have major repercussions in specific industries and companies. According to the latest statistics, roughly nine of ten employees of private sector firms in Saudi Arabia are expatriates. Many firms prefer hiring foreigners, either from South Asia or Southeast Asia, as they require lower salaries compared to local hires. This phenomenon has boosted the unemployment rate of Saudis to about 10.5 percent which is a social problem that can become a long term political issue. Currently, there are 27 million individuals in Saudi Arabia, where nearly thirty percent are said to be foreigners.
One of the goals of the Ministry of Labor is to change the culture from the private sector of the importation of cheap labor from foreign countries to one of developing national talent required by the economy. This was one of the statements directly issued by Deputy Minister of Labor for Planning and Development Moufarrej Haqbani.
To push the agenda, the government imposed a quota system where the minimum numbers of Saudi employees on companies were dependent on the size and sector. Those companies that fail to comply would result in having difficulty in obtaining visas for their imported employees. According to the Ministry of Labor, this system had helped to create nearly 380,000 jobs in the last ten months. The companies though have criticized the move, as it raised their operational costs and even blamed disruptions of their operations. Other companies criticized the fact that there are not enough Saudi workers available or even qualified to address the demand.
Saudi Labor Minister Adel Fakeih stated the government’s goal last January, saying that the Middle East’s largest economy needs to create three million jobs for locals by 2015 and six million by 2030. The government identified that youth unemployment was blamed to be one of the main reasons for the Arab Spring phenomenon. This though was headed off in Saudi Arabia when King Abdullah announced a US$110 billion package of benefits for its citizens for the coming years.