Joblessness among endogenous Saudis has been an enduring problem for past several decades with no resolution in sight. Although the regime is aware of political, economic and social ramifications of unemployment, but could not provide any plausible panacea. Several studies were commissioned by then the “Ministry of Labor” (and currently by the Ministry of Human Resources) to address the real causes of the unemployment. These studies, however, couldn’t reach conclusive answers due to various reasons- chief among them researchers’ incompetence and prejudice. The ministry usually awards lucrative multi-million contracts to consultancy groups to find out the root causes of unemployment. Most of these “studies” concluded that local laborer’s idleness is “voluntary” due to cultural or social reasons. Hence, policymakers are exonerated of any blame and the problem is left to snowball with no meaningful solutions in sight.
The Saudi labor market is ought to be studied in the context of political economy because the regime is using a mixture of central planning and free-market mechanism to allocate resources and determine prices-including wages. However, policies implemented by the state agencies are by far more important in determining employment and price level. Decision-making process in Saudi Arabia is intrinsically hierarchical and heavily centralized at the hand of a few individuals who are neither elected nor subjugated to public scrutiny. Moreover, some outside observers mistakenly think that high-ranking Saudi bureaucrats (i.e., ministers) have any real power in taking and implementing policies. In fact, the ultimate decisions are left at the desecration of the “governing authority”, who can draft, amend or cancel any policies without even the ministers’ knowledge. The heavy centralization of unchecked power at the hands of limited number of unelected officials created what is known as the “moral hazard” phenomenon that dictates and directs decision-making process.
When individual wellbeing is controlled by an independent entity who bears no consequences of the risky policies taken, this situation is called the moral hazard problem. It’s then obvious to those who investigate unemployment in the Saudi economy to fathom that moral hazard is the main driving force behind the staggering number of unemployed. Prima facia evidence also shows that moral hazard does exist even in democratically elected governments, as in Western countries, where public interests don’t align with politicians’ personal interests. In totalitarian regime (i.e., absolute monarchy) that picture is even bleak: with no separation of powers, no independent judiciary, no elected parlement, no effective civil societies, and no free and independent media. In such a scenario, it’s fair to say the outcome of the decision-making process is suboptimal, not timely, ineffective, and could very well be harmful.
If we try to use moral hazard to interpret high unemployment in Saudi Arabia then we could easily reach the conclusion that the direct cause is politics, neither economic nor cultural factors. The question, however, remains why the regime tolerates high unemployment among “subjects” with no solution in sight except empty rhetorics- the failed “Saudization” program is a case in point. You may find it surprising if someone argues that an authoritarian regime like Saudi Arabia tolerates high unemployment among its people for political gains. High unemployment allows the regime to co-opt nationals via limiting their employment opportunities in public-sector jobs only and allowing private-sector jobs to be occupied by expatriates. Furthermore, low-pay private-sector jobs are reserved for local labor force.
The regime uses employment of foreigners as a leverage to secure political “gains” of foreign governments. Two factors have led novice politicians to be convinced of that false belief: precarious leadership who understand regime fragility and are unwilling to take steps to stabilize it, and lack of knowledge in how international relations work. That may explain why tyrants view their people by disdain, distrust and fear, foreign regimes rely on that advantage to gain tractions. However, some of these regimes are just as precarious and fragile themselves.
Several historical examples illustrate these anecdotes. In mid-1950s, then the Saudi minster of defense confided to his advisers that he will convince follow nationals to chatter their businesses and enlist in the army, which reflects anti-private sector employment sentiments. In the same period, the Saudi regime was infuriated by several labor strikes in the oil sector although the strikers’ demands were apolitical and meant to improve their working conditions and ending flamboyant discrimination and degrading treatments. The Saudi regime response was unequivocal, and the decision was taken to recruit foreign workers to replace local workers, especially in menial jobs.
Before then, most of Saudi laborers hold jobs in the private sectors, such small business owners, shopkeepers, and other menial professions. With the continuous inflex of cheap foreign labors, Saudi lost their employment opportunities gradually until they were completely driven out of the private sector jobs.
From these analyses joblessness among Saudi was due to policy failure first and foremost. Steps taken by government agencies to remedy unemployment failed because the state didn’t take it seriously, and people viewed these “remedies” with lukewarm attention. If the government gives enough attention to the unemployment problem and right policies were executed, unemployment would have been resolved a long time ago.
Several political factors prevent the regime from implementing the right policies to clear lingering distortions in the labor market. Mainly, interest groups comprised of rent seekers who are fighting fiercely to preserve their interests at the expense of national interests. These individuals are well connected to the regime and use their political clouts to skuttle any initiative to employ Saudi nationals in the private sectors. In addition, the Saudi regime continues to appease labor-exporting countries by resolving their unemployment problems at the expense of the local labor force.
At the end, unemployment will remain as a major challenge until distortions in the local labor market are cleared. That, however, requires a full-fledged political reform to enfranchise people into the political process, who ultimately elect their government. That in turn will obliterate moral hazard and bring about a representative government to best serve the people and defend national interests. The status queue, however, continues to produce tyranny and enslaves “constituents.”
