On Tuesday, Saudi Arabia unveiled a plan to ensure jobs for its citizens over foreigners living in the country -- by legally forcing firms to have 100% Saudi employees within six months. The first target of this "Saudization" scheme is the mobile phone industry, but other sectors will feel the pinch too.
Faced with low oil prices, which make up 90% of government revenue, Riyadh has been compelled to cut subsidies and limit spending. In fact, the government’s deficit reached nearly $100 billion last year, and it is seeking a 5-year international bank loan of $6-8 billion for the first time in over a decade. With the oil boom years over, and the government (which employs 70% of Saudis) no longer hiring, the specter of rising unemployment is upon the country.
Saudis under 30 (who make up 70% of the population) feel this pinch the most, since their parents had a much easier time with better job options. Unemployment among Saudis aged 15-25 is already at nearly 30%, and an estimated 250,000 young Saudis enter the job market every year.
For decades the country lavished its vast oil wealth on public spending including free education and healthcare, generous energy subsidies, and many cushy jobs, all while charging no taxes. However, according to the New York Times, the rise in higher education attendance did not “create a large professional class or inculcate a culture of hard work. Most of the country’s engineers and health care workers are foreign, and many government employees vacate their offices midafternoon, or earlier.”
But this Saudization plan has three main problems. First off, Saudi citizens get paid much higher than foreigners for the same positions -- $1,460 per month for Saudi employees at McDonalds, compared to $320 for foreigners -- and state subsidies to help make up the difference will not save Riyadh any money. Secondly, Saudi workers may not be as qualified as the foreigners they will replace, particularly in skilled professions. As a result, FDI might fall as international firms think twice about having to hire inexperienced or less capable Saudis. Lastly, what will happen to all of the foreign workers who will lose their jobs? Foreigners make up one third of the country’s 30 million inhabitants, and they comprise the vast majority of jobs in Saudi Arabia’s retail and services sectors. Will they be deported, or become even more of an exploited poverty-stricken underclass?
Still, from Riyadh’s perspective, going into debt and backhanding foreigners is far preferable to having its young nationals disgruntled and unemployed. Then it would only be a matter of time before anger gets directed at the government, and the monarchy values its own political stability above all else.