The state still employs two-thirds of Saudi workers, while foreigners account for nearly 80 percent of the private-sector payroll.
Prince Mohammed bin Salman is trying to reform the economy of Saudi Arabia because of the financial crisis caused by cheap oil. The state is bleeding money at a fast rate.
Okay, lets do some math on the Saudi labor market. The third of Saudis who are in the private sector are one fifth of the private sector. The Saudis employed by the state are another two fifths. So we have something like 80:60 ratio of foreigners to Saudis total overall in the Saudi workforce. Is there a viable way to transform this situation into a healthy economy?
It comes down to what the Saudi citizens are willing and able to do in the labor market. If they aren't all that willing or able then what? The government could go with a plan B that, at least in Saudi Arabia, might be viable: import even more workers but of very high skill. Create an economy of foreigners in some portion of the Kingdom that has high earning power and high productivity.
In theory this could be done while still maintaining an overwhelmingly Islamic populace since India has the most Muslims in the world and Saudi Arabia could try to skim the intellectual cream off the top of India, Indonesia, and a few other countries with large Muslim populations.
United Arab Emirates has a largely migrant labor force with natives in government and defense.
In 2013, the UAE had the fifth-largest international migrant stock in the world with 7.8 million migrants (out of a total population of 9.2 million), according to United Nations (UN) estimates.
It is amazing how far the UAE has gone with this strategy. Natives make up only 10-15% of the UAE workforce. The imported labor is overwhelmingly male and so doesn't reproduce much.
To make this sort of situation work you need a ruthless government with natives in the military and police very ready to crack down and do mass deportations of any protesting imported labor. You also need some viable industries that would get staffed by all the imported labor. But I'm not clear how, say, a manufacturing industry with an export focus could do better in Saudi Arabia than competing companies in, say, low labor cost India. How could Saudi Arabia make use of all that imported (and harshly treated) labor in a way that is competitive with companies in other countries producing the same sorts of goods and services?
I think the Saudi government is going to need to lower the living standards of natives because it is not going to find sources of wealth that can replace oil. But disappointments from declining living standards could easily lead to revolution. So can the Saudis maintain political stability over the coming decades?
|Share |||By Randall Parker at 2016 April 22 11:48 AM|