Can We Re-boost the Saudization of the Private Sector Workforce? A Practical Approach
Over the last decade, around a million Saudis, half of whom are women, joined the private sector. As of the third quarter of 2019, the private sector employed 1.67 million Saudis. The Nitaqat quotas introduced in 2011 especially boosted Saudization, doubling the number of Saudis in the private sector in three years to 1.4 million. Compared to this early boost, the speed of Saudization over the following years was slower as many relatively well-paid jobs had already been localized. The remaining jobs held by expats appear less attractive to Saudi citizens as suggested by the large—over SR 4,000—average monthly wage gap between Saudi and expat employees in the private sector.
Meanwhile, around 5 million young Saudis are expected to graduate from school between now and 2030, and many more women are expected to enter the workforce. Given that the government desires to minimize a further increase in the size of the public sector, around 3 million private sector jobs need to be created for Saudis over the next decade in order to keep the unemployment rate at a modest level. This means that the private sector has to absorb Saudi workers three times faster in the 2020s than it did in the 2010s.
Can we re-boost Saudization in a short period of time, for instance, over the next two years? This paper proposes two policies for that purpose that may be worth considering: (i) harnessing the potential of internal migration, and (ii) facilitating young Saudis’ transition from education to work. The merit of these policies is that they will not require time-consuming governance reform, as they can be implemented largely through existing institutions. If they are enacted effectively, the number of Saudi employees in the private sector could surpass 2 million in two years, achieving, on the annual average basis, at least half the above target of creating 3 million jobs in a decade.