Steffen Hertog, London School of Economics
In 2020, the number of Saudi civil service employees grew by 10,165 to a total size of 1,273,535 individuals. 13,316 employees – a mere 1.04% of the incumbent stock of civil servants – left the civil
service, mostly due to retirement. Adding up the two figures tells us that a total of 23,481 new civil servants were hired. This compares to a number of about 200,000 Saudi citizens reaching working age every year. The government hiring rate is miniscule not only in absolute terms, but also by the historical standards of Saudi Arabia, where the government for decades absorbed the vast majority of job-seeking citizens. While the historically accumulated stock of Saudis in public employment remains huge, citizens who newly enter the job market nowadays have only a small chance of joining the bureaucracy.
This drastic disjuncture between government employee stocks and flows reflects a reconfiguration of patronage systems that has been underway for a while across the Gulf oil monarchies, especially in Saudi Arabia, Bahrain, and Oman, countries with relatively lower oil rents per capita. It has accelerated in recent years due to low oil prices. The result is the exclusion of a new generations of citizens from the established social contract, of which government jobs are by far the most important component.
Citizens increasingly have to make do on the private labor market, which hitherto has been dominated by migrant workers. Nationals do enjoy relative privileges in this market through national employment quotas and access to citizen-only welfare mechanisms. Yet the sheer volume and very low cost of migrant labor makes it difficult for citizens to effectively compete for private jobs, let alone attain the easy working conditions and high wages available in government.
This paper investigates the political economy of this new labor market divide among GCC citizens. it adds a new layer of analysis to conventional analyses of GCC labor markets, which primarily focus on the divide between privileged citizens and non-citizen outsiders. I argue that GCC labor markets increasingly evince dual segmentation between insider citizens, outsider citizens with only partial privileges, and migrant workers as the ultimate outsiders. I will illustrate the depth of these divides as well as their potential political consequences in terms of cross-class solidarity and competition as well as social discontent.
It is fairly well established that insider-outsider divisions on labor markets are consequential for political interests and mobilization in the wider MENA region (including in papers in this volume, notably Abdelmageed and Lacouture). This note shows that such divisions are becoming politically salient also for the Gulf monarchies, particularly in the relatively less rent-abundant cases Bahrain, Oman and Saudi Arabia. A citizen class that used to be economically fairly homogenous is being divided into privileged public sector workers and struggling outsiders.
Old and new labor market dualisms in the GCC
A growing literature investigates the dualism of labor markets in the Gulf oil monarchies in terms of their historical division into segments for privileged nationals (mostly employed in government) and migrant workers with limited rights (mostly employed in the private sector).
This segmentation is central to the social contract across all GCC cases. Since at least the 1970s, mass co-optation of citizens through provision of low-effort public jobs has been fiscally and socially more important than any other form of welfare, public goods provision, or market regulation. At the same time, the mass import of low-wage foreign workers has kept inflation under control and made a wide range of cheap and convenient personal services available to GCC citizens.
Economic and regulatory segmentation of citizens and migrant workers has led to deep cultural and political divides between them, which have deepened with the expansion of the Gulf oil state apparatuses since the 1970s. A more recent, less well understood phenomenon is the growing – and potentially more politically consequential – economic divide among citizen labor market participants.
Insider-outsider divisions in the GCC
Similar to dual labor markets on the European continent, strains on the old economic model in the GCC have led to a dualization of labor markets in which new generations of citizens are excluded from insider benefits – although insider jobs in the GCC case are permanent government positions, not well-protected private ones as in Europe. Outsider jobs in the private sector are less attractive, moreover, not only due to lower job security this sector, but due to competition with another, lower tier of outsiders that is comparatively less visible in Europe: low-wage foreign workers.
Privately employed citizens do in fact enjoy a number of government-provided privileges, such as national employment quotas, citizen-only subsidies, unemployment and training benefits. Yet they have to compete with an almost unlimited pool of workers whose reservation wages are set in countries of origin like Pakistan, India or the Philippines – a situation that qualitatively distinguishes GCC labor markets from all other labor markets in the world.
As a result, citizen unemployment in the lower-rent Gulf monarchies Bahrain, Oman and Saudi Arabia has been rising, and when citizens are in private employment, they typically work longer hours, enjoy less job security and earn much lower wages than their peers in the public sector. They struggle to obtain the middle-class living standards that the social contract in the region has historically provided to its citizens.
Similar to Europe, insiders have borne very little of the cost of economic adjustment: Fiscal deficits in the GCC have led governments to drastically reduce the intake of new public employees, but there have been no redundancies and existing benefits have by and large been left untouched. As in the European cases, the victims of dualization among GCC citizens are mostly the young, women, and the lower skilled.
Figure 1 below shows that foreign workers continue to dominate private employment while citizens remain predominantly government employed – although the share of citizens in private employment in mid-rent countries has become significant.
Figure 1: Distribution of national and foreign workers by sector
Sources: national authorities, various years
Figure 2 shows the continued growth of citizen jobs in the public sector in the two high-rent countries with available data, Qatar and Kuwait. The trends in Bahrain and Oman are quite different, showing a distinct stagnation in numbers since the mid-2010s despite continued population growth.
Figure 2: Number of citizens employed in public sector
Source: national authorities
While there are no coherent time series data for Saudi Arabia, we know that civil service numbers have been almost flat since 2017. Figure 3, moreover, shows that middle-aged Saudis are strongly over-represented in the civil service, while young citizens are largely excluded from it.
Figure 3: Age breakdown of Saudi civil servants (blue, left axis) and general citizen population (orange, right axis)
Sources: Labor Force Survey bulletin, Q4-2020; GASTAT population estimates
Saudi Ministry of Civil Service data also show that there is practically no turnover in public employment: insiders never leave. Of the 13,316 whose service ended in 2020, the vast majority took either regular or early retirement; 719 died on the job and only 618 resigned.
Exclusion from public employment is materially consequential: While the data are scattered, available numbers consistently show that citizens earn more in the public sector than in private employment (see also Tamirisa and Duenwald 2017). Deep differences between insiders and outsiders are also reflected in the age structure of wages, which is particularly unequal as more recent entrants predominantly obtain lower-paid private sector jobs (see Figure 4 for Saudi data).
Figure 4: Average monthly wages by age bracket, Saudi Arabia (SAR, 2020)
Source: Labor force survey bulletin, Q4-2020
While outsider citizens are losing out on substantial benefits, they remain privileged relative to migrant workers who earn considerably less even and usually work under harsher conditions. Governments have tried to increase citizen employment in the private market through a range of quota rules and by reserving particular occupations to nationals. Bahrain and Oman have set citizen-only minimum wages of $660 and $840 respectively. GCC governments have also created new unemployment insurance and assistance systems, temporary wage subsidies, and training and job placement mechanisms for citizens.
That nationals enjoy relative privileges in the private labor market does not mean that they are well off. All three mid-rent countries have seen the emergence of working poor among their citizens. The above-mentioned minimum wages barely afford a comfortable life, yet many privately employed nationals earn just above these thresholds.
In sum, new citizen entrants on GCC labor markets are at a particularly large disadvantage relative to older incumbents in the public sector, whose privileges are particularly deep and stable. While the labor conditions of citizens in the private sector are not comparable with those of low-wage migrants, they face wage competition on a scale that does not exist in other economies.
Political tensions created by double segmentation
Outsider citizens constitute a growing and politically consequential social stratum which is excluded from core patronage mechanisms yet harbors insider expectations on lifestyle and employment. A wide range of surveys indicates continued preference for government employment. According to the 2019 Arab Youth Survey, 82% of young respondents in the GCC agreed that it was the government’s responsibility to provide jobs for all citizens.
The relatively rare instances of public protest across the region since 2010 often involved citizen outsiders and their material interests. Protesters during the Omani unrest in 2011 demanded that unemployment and low wages be addressed and, critically, called for an end to favoritism in public sector hiring. Leading Shiite opposition groups in Bahrain prominently complained about the exclusion of Shiites from public sector hiring; informal organizations of unemployed citizens were important constituents of the Bahraini political opposition. Demonstrations of unemployed graduates were among the very few public protests that Saudi Arabia witnessed in 2011.
Outsider mobilization peaked in 2011 and has been under control since then. Yet the new double segmentation of Gulf labor markets creates potential challenges for authoritarian stability in the region. At a minimum, the GCC faces the gradual emergence of more conventional class structures among citizens – albeit still accompanied by a large class of precarious non-citizen outsiders. Herb has pointed out that privately employed citizens in principle have a stronger interest in a thriving private sector. They are also, however, more autonomous from state patronage while potentially frustrated by their exclusion from it.
Unemployed and underemployed youth were at the core of protests across the whole Arab world in 2010/11. While the GCC monarchies have stronger infrastructural power than other Arab countries, their socio-economic structures are becoming more similar to those of the wider region. Like in the wider region, a larger share of citizens is active on the private labor market and, closely related, labor markets for citizens have become more unequal, structured by insider-outsider divides. At the same time, traditional cross-class ideological frames like political Islam or liberalism are losing their ability to structure and to divide dissident activity. This makes future mobilization around newly emerging material divides more plausible.
The failure to integrate new labor market entrants is particularly striking for the Saudi regime under Crown Prince Mohammad bin Salman, who has identified young Saudis as his core social constituency. So far, he has successfully catered to them through a fast-paced social opening – but he has not managed to fundamentally reshape the inherited social contract benefiting insiders, perhaps because labor market reforms are a more complex and boring topic than the giga-projects that the crown prince has been drawn to. The failure to create good jobs for a new generation of citizens creates a point of weakness for his otherwise impregnable leadership.
Potential for labor solidarity
A key question for the future of class politics in the region is how a genuine class of citizens active on the private labor market will relate to foreign workers, who are likely to constitute a large share of the private sector labor in decades to come.
There are at least three constraining factors that are likely to hold back broad-based labor solidarity: the limited space for collective action in most GCC countries; the large cultural distance and sometimes xenophobia dividing citizens and expats; and the fact that the structural labor policy interests of nationals and foreigners overlap only partially. In this final section, I briefly discuss these structural interests, which are likely to become more pronounced as the number of privately employed nationals increases.
Table 1 below gives an overview of where the material interests of private employers, citizens in the public sector, privately employed citizens and foreign workers should lie in principle. It distinguishes three key types of labor policies: policies to reduce the supply of migrant labor to the country, policies to improve the labor rights of migrants who are already in the country, and measures to increase the share of nationals in private employment. Where possible, the conjectures in the table are compared to empirical evidence on different groups’ interests from across the region.
Table 1: Structural interests of employers and employees in public and private sectors
|Reduce supply of migrant labor||Improve labor rights of migrants in the country||Nationalization of private employment|
|Citizens in public sector||No||No||Unclear|
|Citizens in private sector||Yes||Yes||Yes|
|Non-citizens in private sector||No||Yes||No|
The material preferences of private employers are straightforward: Like in most countries around the world, they should be interested in unlimited access to migrant labor with limited rights. In the specific context of the GCC, they should also be opposed to rules obliging them to hire nationals. These conjectures are consistent with policy lobbying by employers and business associations across the region: They have systematically resisted policies to reduce the number of foreign workers through quotas or taxes, have fought attempts to improve migrant rights through sponsorship reforms, minimum wages and similar steps, and have resisted nationalization policies, which they perceive as a cost factor.
In purely material terms, citizens employed in the public sector should have an interest in cheap migrant labor with limited rights, as this helps keep consumer prices low and makes a wide range of personal services available to them. They should be indifferent regarding nationalization of private employment. This is consistent with survey evidence from Qatar which shows that Qatari citizens (who mostly depend on government employment) want to maintain the sponsorship system which limits migrant labor rights. In Kuwait, unions which primarily represent state-employed citizens and do not seem to actively lobby on migrant labor rights issues. The parliament, which again primarily represents the interests of government-employed Kuwaitis, has rather worked against migrant labor rights. It deviates from public servants’ material interests only in its attempts to impose quantitative restrictions on migrant workers, a policy that seem to be driven by cultural, not material concerns.
The material interests of citizens active on the private labor market are directly opposed to those of employers and, to a large extent, those of publicly employed citizens. Such outsider citizens should be interested in policies that reduce the supply of migrants who compete for jobs with them, be it through quantitative restrictions or through taxes and fees on migrant labor. For the same reason, outsider citizens should be interested in improved labor rights for migrant workers already in the country: The more labor rights migrants enjoy, the less likely it is that employers will prefer foreign workers, as they will be harder to control or exploit. Finally, nationalization rules for the private labor market like quotas or the reservation of specific professions for nationals are obviously in the interest of outsider citizens.
Bahrain is the GCC country with the longest track record of industrial relations in the private sector (unions are prohibited in the public sector), which largely bears out these predictions: Citizen-dominated private sector unions, historically close to the Shiite opposition, have supported restrictions to the supply of migrants and deportation of illegal workers but have also supported the government’s formal abolition of the sponsorship system for foreign workers. Unions have also advocated for migrant worker rights in terms of safety standards and working hours – all arguably to make sure that low-cost, limited-rights migrant workers do not outcompete Bahrainis (conversely, such reforms have been opposed by both Shiite and Sunni employers as predicted above).
Despite its more mature class and union structures, Bahrain in some ways constitutes a “hard test” of our materialist arguments as it is a country with a uniquely deep sectarian identity cleavage. Yet class interests seemed to have trumped identity politics when it came to labor reforms.
The material interests of non-citizen workers are perhaps the most obvious: They have no interest in policies that would reduce their supply (i.e. their access to the local labor market); they want better labor rights for themselves; and they have no interest in nationalization policies that could lead to them being substituted by nationals. Foreigners’ interests are not systematically articulated through local interest groups or patronage structures, however, so they count for little in the labor policy process.
Two key points emerge from the above discussion: First, the material interests of citizen insiders and outsiders on the labor market diverge substantially – not unlike the disparate interests in dual labor markets in Europe. Secondly, the interests of foreign workers and citizens in the private sector only overlap in one, though potentially significant area: They both have an objective interest in improving the rights of migrants already in the country.
This paper has argued that a new type of labor market dualism has been emerging in the GCC: In addition to the well-known deep division between citizens employed in government and foreign workers in the private sector, a stratum of relatively underprivileged citizens has emerged in the private labor market that is excluded from the traditional GCC social contract.
This double segmentation of markets is unusually deep and rigid. Citizens in the GCC’s relatively less affluent economies are not a unified state-dependent middle class anymore but have divided economic interests. Among other things, public sector insiders have a structural interest in maximizing labor imports and minimizing migrant rights, while citizen outsiders should prefer reduced labor imports and improved migrant labor rights. I have presented some evidence which revealed that preferences and political lobbying have started to align along these lines.
While there can be occasional collaboration, there is limited potential for encompassing solidarity across labor market segments. Instead, the most politically salient factor going forward might be deepening discontent among the citizen outsider middle stratum: a group that has the expectations and formal rights of GCC rentier citizens but is exposed to the vagaries of the private labor market that previously affected only migrant outsiders.
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