Mark. C. Thompson, King Fahd University of Petroleum and Minerals

*This memo is part of POMEPS Studies 31, Social Policy in the Middle East and North Africa. Download the full PDF here.

Around 60 percent of Saudis are under the age of 30. Finding jobs and housing for this youthful population is placing great strain on the existing social contract based on government use of oil revenues to provide social welfare. In early 2017, one IMF official pointed out that unemployment among Saudi nationals was already high at around 12.8 percent, with the young population still growing.[1] The employment crisis could be exacerbated by the expanding level of formal education among young Saudis. As Hertog observes, advanced education has allowed a temporary “parking” of young people, many of whom would otherwise be unemployed, but who will soon be entering the labor force.[2] In particular, the lack of affordable housing is a major cause for concern. In May 2017, approximately 1.6 million Saudis were on waiting lists for government housing programs.[3]

As part of a broader package of reforms, and in response to the 2014 oil price decrease, the Saudi government, led by Crown Prince Mohammed bin Salman, introduced Saudi Vision 2030, which aims to diversify the oil-reliant economy and impose fiscal restraint. However, for Saudis accustomed to government largesse, such changes may be challenging. Analysis of the impact of falling revenues on the social contract has focused predominantly on elite level perceptions. Very little is known about the layman’s perspective, in particular the views of young Saudis, on the critical issues of employment and affordable housing. This paper, based on qualitative research conducted across Saudi Arabia in 2016 to 2018 in the form of approximately 45 focus groups with hundreds of young Saudi men, discusses young Saudi male attitudes. It finds a complex mix of attitudes that will shape the political reception of any new Saudi social policy initiatives.

Employment

Saudi commentators frequently warn that the high rate of youth unemployment constitutes a pressing matter.[4] Many young men question how widespread unemployment is even possible in a wealthy country such as theirs.[5] In 2016 to 2017, it frequently took six months to a year to find a job—if the young man was lucky—although for students with low grade point averages (GPA) the process was often longer.[6] For instance, one civil engineering graduate said that in his field many engineers and architects have been unable to find jobs as construction was downsized by 30 percent in 2016.[7] A King Saud University (KSU) finance graduate remarked that while jobs are available, competition for positions has increased significantly.[8] However, a young university lecturer in al-Ahsa maintained that the real issue is not competition, but rather that young Saudis have not been educated to accept new socio-economic realities.[9] The challenge of finding a decent job is also exacerbated by a nepotistic hierarchy, or wasta, that privileges connections over qualifications. Indeed, there is general agreement that the low oil-price and subsequent economic downturn has aggravated wasta in all regions of Saudi Arabia.[10]

Nonetheless, unemployment is not uniform across the kingdom. Many who live in peripheral regions such as Asir, Qassim, and Najran Provinces complain that there are few job opportunities due to a lack of industry, companies and job creation schemes away from the main urban centers of Riyadh, Jeddah, and the Dammam-Khobar-Dhahran conurbation.[11] Therefore, many young men are obliged to leave their hometowns to find work in the large cities. Moreover, a focus group in Qassim told me that the government needs to create more, better paid regional jobs, because, for the time being, salaries remain low in their provincial hometowns.[12] However, applying for a position in one of the main cities can also prove problematic. A young man from Abha claimed that job applicants from his hometown are often contacted by the human resources manager of a company in the late afternoon and informed that an interview is scheduled for early the next morning in Riyadh. Naturally, it is extremely difficult to get to the capital at such short notice, but this young man claims this “happens all the time and is a way of ‘blocking’ people they do not want from the provinces.”[13] Paradoxically, for residents of the principal cities, jobs and housing shortages are exacerbated by large-scale migration of jobseekers from the provinces.

Regardless of regional differences, employment is a key way that many young men judge the government, particularly those who believe that it is the government’s duty to provide everyone with a job.[14] Accordingly, discussing employment prospects is one of the “hottest topics” in young men’s social circles especially as the labor market is being flooded with large numbers of domestic graduates as well as those returning home from the King Abdullah Scholarship Programme, which sponsors young Saudis to study abroad, primarily at US, Canadian, UK and Australian universities.[15]

Additionally, according to multiple focus groups, most young men are looking for a “job for life” that is a position in the public-sector (or with a major corporation) whereby the individual is guaranteed a lifelong salary plus accompanying benefits such as healthcare for himself and his family.[16] While this may have been the norm in their fathers’ generation, holding out for such a nonexistent job may prompt them to pass by other forms of employment. Young Saudi men also worry about employment, because their futures and making a good marriage depend on finding a reasonably well-paid job for life, usually in the public-sector. Indeed, there is widespread consensus that a secure, well-paid job is important for a young man’s marriage prospects, as it guarantees a stable future.[17] For many, a career is not the main goal, but rather a means to family security.[18] Even though an individual might get a first job in the private sector, subsequently he will try to move into the public sector or to a company such as Aramco, as this will increase his chances of a good marriage.[19] Consequently, the importance of being able to make a good marriage cannot be underestimated, highlighting as it does the necessity of understanding the Saudi socio-cultural context.

Because the low price of oil has reduced “job for life” opportunities, the government must address youth concerns by providing wider employment opportunities in particular in the private-sector as well as weaning young men away from desiring a job for life.[20] Nevertheless, although job opportunities do exist for young Saudis, employers in the private sector frequently offer unattractive salaries and long working hours.[21] One young man I spoke with said that young Saudis are willing to work hard, but not for a pittance.[22] In the eyes of many young men, it is the government’s responsibility to encourage young Saudis to enter the private sector by guaranteeing job security and decreased working hours.[23] Greater acceptance of private sector employment will only occur if there is a clear political will from the government to increase public trust in it.

Yet changing the public mentality is problematic, because many young men prioritize income level over motivation or career aspirations.[24] According to several focus group, this mentality will have to be “rethought”—young Saudis have been protected for too long[25]—and without viable educational reform the current socio-cultural mentality will continue.[26] Jones, Punshi and Gupta highlight this lack of urgency among the jobless, illustrating how many young men are prepared to wait for several years for the “ideal job,” and prefer to remain at home, rather than accept an entry-level position.[27] Additionally, Ramady observes that for social reasons many young Saudis do not consider themselves “unemployed” while looking for work and remaining dependent on their families.[28]

In 2011 the Ministry of Labor (MoL) launched the Nitaqat (“Ranges”) initiative to replace the existing Saudization program.[29] The initiative aims to increase the mandatory employment ratio of Saudi nationals to expatriate employees in the local workforce, particularly in the private sector. Whereas the former Saudization program required all employment sectors to enforce a blanket quota of 30 percent nationals, Nitaqat has more flexible rules that are dependent on the size of the company.[30] The then Labour Minister Adel Fakeih (and former Minister of Economy and Planning) claimed the new system was more dynamic than its predecessor because it derives its nationalization quotas from actual business performance. However, Fakeih acknowledged that the size of the Kingdom’s youthful population was exerting pressure on the labor market due to the increased numbers of young Saudis trying to enter the workforce.[31] Still, many young men do not think that Saudization/Nitaqat has been implemented “in the right way.”[32] If the program had been realized correctly, from their perspective, then unemployment might have been brought under control, but now Saudi companies only hire to meet percentages and may fail to train their Saudi employees adequately.[33] For example, a 2016 engineering graduate with a high GPA recalls how he was offered a job with a drilling company, but he could have earned a better salary working as a supermarket cashier. He believes the only reason the drilling company wanted to hire him was to have a Saudi on their books to comply with Saudization.[34] Moreover, others believe they are also at a disadvantage under the scheme, as MoL encourages companies to hire more women because “a Saudi woman counts for two Saudi men in Saudization terms.”[35] As greater numbers of Saudi women enter the workforce, young men are increasingly competing with them for jobs. Unsurprisingly, this has come as something of a shock.

First passed in 2015, Article 77 of the Saudi Labor Law allows companies to fire Saudis with little or no notice and has become another highly contentious issue.[36] A 2017 revision of Article 77, granted employers the right to terminate workers’ contracts for modest compensation, causing a 38 percent drop in Saudization.[37] For instance, in the oil and petro-chemical industries, young Saudi employees have been let go because a policy of “last in, first out.”[38] Significantly, if an individual loses his job, he also loses benefits and allowances related to his family. In fact, this potential loss of benefits and allowances has resulted in many Saudis focusing more on part-time secondary incomes (e.g. small individual or family businesses such as mobile phone shops) rather than their full-time primary positions to ensure a safety net. Additionally, for some, the rising cost of living necessitates supplementing their primary income as they cannot depend on a single income source.[39] Many young men, both employees and students, work as drivers for Careem (a regional ride sharing app similar to Uber) in their free time.[40]

Ramady observes that “due to social values, many young Saudis do not want, although some unemployed Saudis are beginning to accept, seemingly social demeaning jobs” such as supermarket cashiers and gym receptionists.[41] For instance, in 2016, a student told me that “Saudis will not do certain jobs” such as construction work because many young men want “luxury positions” and jobs such as barbering are not considered “manly”.[42] However, Ramady also notes that young Saudis have started to lower their expectations of high salaries and automatic public sector jobs, acknowledging that the low oil price has transformed the socioeconomic environment.[43] In fact, nowadays, some young men have jobs previously considered socially “unacceptable,” because they realize that it is better to earn a salary, even if it is low, than take money from their families.[44] This has resulted in young Saudi men taking part-time jobs as sales assistants in retail outlets and waiters in coffee shops.[45] Nonetheless, old attitudes prevail with an individual from Jizan saying, “companies are begging young Saudi men to start doing manual work, but they refuse because it remains culturally unacceptable.”[46]

Housing

Many young men believe strongly that it is the responsibility of the government to provide housing and/or the funds to purchase a property.[47] Conscious of public expectations and the lack of affordable homes, in July 2016, the Ministry of Housing launched 27,658 housing projects across the kingdom within its sakani (housing) program to allocate and deliver 280,000 housing units in 2017.[48] In December 2017 the government allocated an additional 21 billion riyals for housing and 14 billion riyals for efficient home design and engineering.[49] Due to rapid urbanization, fueled by the influx of rural populations into urban areas, the problem of providing affordable housing to the populace is particularly acute in the large cities.[50] Furthermore, the preference of developers to build luxury housing, has created a serious shortfall of homes for the rapidly expanding low and middle-income populations.[51] Many young men also point out that significant numbers of Saudis do not own their own homes. In 2016, the Ministry of Housing estimated Saudi homeownership at 47 percent,[52] although KSU’s Population Statistic Center records that in small cities and towns such as al-Baha, Jazan, Abha and Jubail, more Saudis tend to own their homes due to higher purchasing power and social traditions.[53] As Opoku and Abdul-Muhmin state, “adequate housing is so much an integral part of the needs of every society that its value for individuals, families, communities, and society at large is hardly questioned.”[54] Many young Saudis wonder why this integral need is not being fulfilled, particularly as Saudi Arabia has abundant land and natural resources.[55]

Property and land prices vary according to region and district, although property prices and rent are generally more expensive in urban centers. Certainly, it is possible to buy a cheaper property in the provinces, but as there are few jobs this is not always seen as a viable option. Needless to say, the cost of buying a house is widely discussed among young Saudi men, who worry about being able to get on the property ladder in much the same way as their Western peers. They note that things were different in the past when their fathers could afford to build houses and then split these into apartments for rent.[56] After getting married, young men want to start families, but it is becoming increasingly difficult and frustrating for the not so well-off to own a home due to rising house and land prices.[57] Some young men therefore, anticipate living with their fathers long into the future.[58] However, after the government introduced annual fees for any dependents in July 2017, many expatriates opted to send their families home rather than pay, resulting in apartments being vacated and cheaper rents for young Saudis.[59]

Some young men accept that buying a small apartment might be the first (and only) option as purchasing a house might not be a realistic goal until they reach middle age.[60] As it could take upwards of a decade to save enough money to buy or build a house,[61] the government could benefit from prioritizing the provision of small properties.[62] Other individuals remark how they watched friends and relatives work for over twenty years to purchase a house, but having spent so much time, effort, and money some men find that by that time their children are all married the parents end up living in an empty house.[63] Other young men acknowledge that to purchase a property they will probably have to take out a large bank loan. In fact, “nowadays banks are always advertising housing loans” although some young men joke that this is so they will be saddled with a loan forever.[64] However, they also see value in taking out a mortgage (the first Saudi mortgage law was introduced in 2012)[65] for an apartment over a 10 to 15 year period rather than paying rent. Nonetheless, due to the current economic situation, some young men are having second thoughts about getting a mortgage, because they are worried about losing their jobs and keep up with repayments.[66]

Concluding remark

Due to the desirability of a job for life, the majority of young men would still prefer to work in the public sector, as they believe there is little job-security in the private.[67] There remains a widespread perception that an individual can be fired at any time even though one young man believes this is a misconception that has become a “stereotype of public fears.”[68] Undoubtedly, there is a great need to encourage private-sector employment, but simultaneously job security must be assured as it is commonplace to hear individuals in the private sector hoping to transfer into the public sector at the earliest opportunity.[69] One young man echoed the comments of many of his peers when he said he took a job in the private sector because it was offered, but he would have no hesitation transferring to the public sector if (or when) a position becomes available.[70]

Providing jobs and affordable housing for young Saudis is critical for Crown Prince Mohammed bin Salman. Although he has reduced the power of the kingdom’s clerics and loosened social restrictions, by assuming control over all aspects of Saudi life the crown prince has become more reliant on popular support than past rulers.[71] Despite increasing entertainment opportunities for Saudis such as the opening of cinemas in 2018, support for crown prince could be seriously undermined if the government fails to prioritize employment and housing over “vanity projects” or “bread and circuses” social policies that do little to benefit society in the long-term. Failure to do so will place enormous strain on the social contract, pushing young Saudi men to the margins of society and undermining any efforts to implement Saudi Vision 2030.

 


Notes

[1] Cronin, S., “Youth unemployment one of toughest challenges for Saudi Arabia, IMF official says”, The National, 17 January, 2017, available at: https://www.thenational.ae/business/youth-unemployment-one-of-toughest-challenges-for-saudi-arabia-imf-official-says-1.61693

[2] Hertog, S., “Back to the Seventies? Saudi youth and the Kingdom’s political economy after the Arab uprisings”, in Selvik, K. and Utvik, B.O. (eds.) Oil States in the New Middle East: Uprisings and Stability, Routledge, Abingdon, 2016, p. 85.

[3] Paul, K. and Rashad, M., “Saudi Arabia says close to major deals in $100 billion housing scheme”, Reuters, 03 May, 2017, available at: www.reuters.com/article/us-saudi-housing/saudi-arabia-says-close-to-major-deals-in-100-billion-housing-scheme-idUSKBN17Z1MG

[4] Al Seghayer, K., Real Face of Saudi Arabia: Critical Insider Perspectives on Educational, Lifestyle, and Social Issues in the Kingdom, Hala Print Co., Riyadh, 2015, p. 71.

[5] Hofuf focus group, December 2016.

[6] I know chemical engineering graduates who were out of work for up to two years.

[7] Riyadh focus group, February 2017.

[8] Riyadh focus group, April 2017.

[9] Al-Ahsa focus group, June 2017.

[10] Views expressed by multiple Eastern Province focus groups, 2016-18.

[11] Al-Qassim focus group, January 2017.

[12] Al-Mithnab focus group, January 2017.

[13] Abha focus group, November 2016.

[14] Al-Khobar focus group, November 2016.

[15] Riyadh focus group, February 2017.

[16] Views expressed by multiple focus groups across Saudi Arabia, 2016-2018.

[17] Dhahran focus group, November 2016.

[18] Views expressed by multiple focus groups across Saudi Arabia, 2016-2018.

[19] Ibid.

[20] Dhahran focus group, November 2016.

[21] Al Seghayer, K., Real Face of Saudi Arabia: Critical Insider Perspectives on Educational, Lifestyle, and Social Issues in the Kingdom, Hala Print Co., Riyadh, 2015, p. 55.

[22] Al-Ahsa focus group, June 2017.

[23] Views expressed by multiple focus groups across Saudi Arabia, 2016-2018. “In the private-sector the working hours are 30 per cent higher than in the public-sector, if not more”.

[24] Dhahran focus group, November 2016.

[25] Ibid.

[26] Qatif focus group, October 2016.

[27] Jones, D., Punshi, R. and Gupta, G. “Youth Employability and its Cultural and Institutional Context: Do Current Institutions and Policies Promote or Prevent Greater Productivity and Positivity Within Local Labour Markets Towards the Knowledge-Based Economies of the Future”, in Thompson, M. and Quilliam, N. (eds.) Policy Making in the GCC: State, Citizens and Institutions, I.B. Tauris, London, 2017, p. 178.

[28] Ramady, M., The Saudi Arabian Economy: Policies, Achievements and Challenges, 2nd Edition, Springer, New York, 2010, p. 378.

[29] See: The Nitaqat Program, The Ministry of Labor, Kingdom of Saudi Arabia, Dr. Amre Massoud, Nitaqat Program Manager, available at: file:///C:/Users/HP/Downloads/WSIS%20application_11.%20ICT_e-employment_MoL_Nitaqat.Nov2013%20(1).pdf

[30] See, for example, Anon, “Saudi Arabia revises Nitaqat system and introduces mandatory Saifi program as part of its Saudization drive”, Ernest & Young, August 2017, available at: www.ey.com/gl/en/services/people-advisory-services/hc-alert–saudi-arabia-revises-nitaqat-system-and-introduces-mandatory-saifi-program-as-part-of-its-saudization-drive

[31] Jabarti, S., “Nitaqat is fair to all: Fakeih”, Arab News, 13 August, 2011. Available at: www.arabnews.com/node/387500

[32] Hofuf focus group, December 2016.

[33] Ibid.

[34] Interview with Mohammed, Dhahran, March 2017.

[35] Qatif focus group, October 2016.

[36] See, for example: “MOL’s Article 77 is designed to humiliate Saudi workers!”, Saudi Gazette, 05 December, 2015, available at: http://saudigazette.com.sa/article/143859/MOLs-Article-77-is-designed-to-humiliate-Saudi-workers!

[37] Aldosari, H., “Saudi Arabia’s Post-Oil Future”, Arab Gulf States Institute in Washington, 15 May, 2017, available at: http://www.agsiw.org/saudi-arabias-post-oil-future/#more-14121

[38] Views expressed by multiple Eastern Province focus groups.

[39] Author’s online survey response: إذا توفرت لك الفرصة، هل تفضل البدأ بمشروع عمل خاص بك؟ لم\لم لا؟

[40] See, www.careem.com/en-ae/cities/riyadh/

[41] Ramady, M., ‘Gulf unemployment and government policies: prospects for the Saudi labour quota or Nitaqat system’, International Journal Economics and Business Research, Vol. X. No. Y. 2013, pp. 476–498.

[42] Al-Aflaj focus group, April 2017.

[43] Ramady, M., The Saudi Arabian Economy: Policies, Achievements and Challenges, Springer, New York, 2010, p. 480.

[44] Al-Ahsa focus group, June 2017.

[45] Qatif focus group, October 2016.

[46] Riyadh focus group, February 2017.

[47] Al Qassim, al-Mithnab focus group – 5 members: 25-28.01.17. “Others disagree and consider this the individual’s responsibility as the government already provides free education and healthcare”.

[48] Taha, S., “Housing Ministry launches 27,658 housing products across Kingdom”, Arab News, 16 July, 2017, available at: http://www.arabnews.com/node/1130141/saudi-arabia

[49] Schatzker, E. and Nereim, V., “Saudi’s $19 Billion Stimulus Will Prioritize Housing and Small Business”, Bloomberg, 14 December, 2017, available at: www.bloomberg.com/news/articles/2017-12-13/saudi-19-billion-stimulus-to-prioritize-housing-small-business?cmpid=socialflow-twitter-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social

[50] Salama, A., “A Life Style Theories Approach for Affordable Housing Research in Saudi Arabia”, Emirates Journal for Engineering Research, 11 (1), 2006, p. 67.

[51] Middle East Business Intelligence, “Housing crisis looms in Saudi Arabia”, MEED, 01 April, 2010, available at: www.meed.com/sectors/construction/real-estate/housing-crisis-looms-in-saudi-arabia/3104147.article

[52] Anon., “Saudi home ownership rate to be boosted, says Hugail”, Argaam, 16 May, 2016, available at : www.argaam.com/en/article/articledetail/id/426746

[53] Al Jassem, D., “52% of Saudis in Riyadh rent houses”, Arab News, 07 February, 2013, available at: www.arabnews.com/saudi-arabia/52-saudis-riyadh-rent-houses

[54] Opoku, R. and Abdul-Muhmin, A., “Housing preferences and attribute importance among low-income

consumers in Saudi Arabia”, in Habitat International 34, Elsevier Ltd., 2010, p. 219.

[55] Riyadh focus group, April 2017.

[56] Views expressed by multiple focus groups across Saudi Arabia, 2016-2018.

[57] Ibid.

[58] Riyadh focus group, April 2017.

[59] Saudi Gazette report, “Expat dependents’ fees reduce apartment rents”, Saudi Gazette, 08 April 2017, available at: http://saudigazette.com.sa/article/514683/SAUDI-ARABIA/Expat-dependents

[60] Views expressed by multiple focus groups across Saudi Arabia, 2016-2018.

[61] Hofuf focus group, December 2016.

[62] Opoku, R. and Abdul-Muhmin, A., “Housing preferences and attribute importance among low-income consumers in Saudi Arabia”, in Habitat International 34, Elsevier Ltd., 2010, p. 225.

[63] Riyadh focus group, February 2017.

[64] Riyadh focus group, April 2017.

[65] Allam, A., “Saudi Arabia approves first mortgage law”, Financial Times, 03 July, 2012, available at: https://www.ft.com/content/327154d6-c461-11e1-9c1e-00144feabdc0

[66] Hofuf focus group, December 2016.

[67] Al-Aflaj focus group, April 2017.

[68] Ibid.

[69] Riyadh focus group, February 2017.

[70] Al-Aflaj focus group, April 2017.

[71] Anon, “Saudi Arabia is pushing out foreigners to create jobs for locals”, The Economist, 28 April 2018, available at: www.economist.com/news/middle-east-and-africa/21741195-new-saudi-hires-are-not-always-up-job-saudi-arabia-pushing-out?fsrc=scn/tw/te/bl/ed/saudiarabiaispushingoutforeignerstocreatejobsforlocalslabourpains

The Saudi ‘Social Contract’ Under Strain: Employment and Housing