Effects of Kasp Research Paper

  • Length: 20 pages
  • Subject: Economics
  • Type: Research Paper
  • Paper: #33578773

Excerpt from Research Paper :


For most of its existence, Saudi Arabia's economy has been driven by revenues from its massive oil fields. While this has allowed the country to have a healthy balance sheet, it has also discouraged investment in other areas. Other countries in the region have begun to realize that having an oil-dependent economy is not sustainable in the long run. Nations with burgeoning populations and limited resources tend to be unsustainable. That lack of sustainability can be seen today in milder forms, such as high unemployment among youth, social problems like abuse and deviant behaviour and stunted economic growth.

The facts concerning the Saudi economy reflect the structural issues in the Saudi economy. The country has a population of roughly 27 million, a third of whom are non-citizen immigrants. Nearly 50% of these are under the age of 25 and the median age is 26.4 years. This means that the country has a very young population, and will need to provide economic opportunities for these young people in the very near future. Saudi youth in general, however, lack the education, training and technical skills to make them useful to the private sector (CIA World Factbook, 2014). This leads to high youth unemployment and social problems. Additionally, such unemployment creates a drag on the Saudi economy. The government has initiated a number of strategies intended to reduce unemployment among Saudi nationals, and to improve the diversity of the Saudi economy. At present, however, it remains heavily dependent on the oil and gas sectors. The official unemployment rate among Saudis is 12.1% (Fleischaker et al., 2013), but unofficial studies indicate that the rate is much higher. Youth unemployment is believed to be in the range of 30% (Ibid). Female unemployment is a critical problem as well, despite rising rates of female enrollment in higher education. Around 70% of university-educated women are unemployed in Saudi Arabia, creating a tremendous gap between the country's actual economic potential and its economic performance.

The government has become active in sending students abroad. This strategy is intended to make up the gap between the needs of Saudi industry and the capabilities of its citizenry. This foreign education is a response to the generally low quality of education at home. If most Saudi youth lack the skills needed to compete against foreign workers for the better jobs in the economy, and the same youth are unwilling to take labour jobs, this creates a drag on the economy. Foreign educational institutions are seen as the solution to the limitations of the domestic education system.

This paper will study the problem of unemployment in Saudi Arabia from a couple of different perspectives. The first is that it will examine the relationship between unemployment and economic performance. The second is that it will examine some of the major issues in addressing the unemployment problem. Education will be examined, including the impact of foreign education on the Saudi economy. Female labour force participation will also be examined as a potentially important factor in improving the Saudi economy. Lastly, some attention will be given to overseas remittances, as Saudis sometimes stay in the country in which they were educated in order to pursue the opportunities there.

Unemployment in the Kingdom

There are a variety of statistics reflecting the unemployment situation in the Kingdom of Saudi Arabia (KSA). The basic unemployment rate is only around 5.8%, in line with many nations of the developed world. The unemployment rate among Saudis, however, is considerably higher at 12.1%. This can be further subdivided by gender, where the unemployment rate among men is around 7% for the total population, but among women it is over 35%. Educated women in particular suffer from extraordinary unemployment, in the range of 70%. From this we can conclude that education is a barrier to employment for many Saudi women. Young Saudis fare especially poorly in the labor market, with unemployment rates around 30% for the 15-29 age cohort. This drops dramatically as adulthood progresses (Fleischaker, 2013).

The trend of unemployment among the younger Saudis may reflect a number of different issues. The first is that the economy simply cannot create enough jobs in order to keep up with the growth in the population. As noted, the median age of the country is 26.4, which is quite young, and half the nation's population is under the age of 24. This creates tremendous dependency for those who are of working age, if jobs are not created for these people. Total Saudi employment as a percentage of population peaked around 2001 at 48%, but has since declined to just over 42% (Fleischaker, et al., 2013).

One of the things that has to be understood about the Saudi economy is that there are almost two distinct economies within the Kingdom -- the Saudi nationals' economy and that of foreigners. The recent drop in employment among Saudi nationals illustrates this phenomenon clearly. In 2010 and 2011, total job creation spiked to over 10%, the strongest job growth in years. However, the number of new jobs for Saudi nationals as a percentage of job growth declined. In 2009, over 60% of new jobs were for Saudis, but in 2010 that number declined to around 15%. New jobs were created, but for foreigners. With the large number of Saudi youth entering the workforce each year, this led to a decline in Saudi employment.

Education and Ennui

There are essentially two issues relating to youth unemployment in Saudi Arabia. The first is that Saudi youth are not considered to be qualified for a lot of the new jobs that the Kingdom creates. The second is that Saudi youth typically do not pursue the low-end labour jobs that drive much of the foreign worker economy. The oil sector remains the largest employment sector, but the positions fit into one of these two categories. If Saudis are unqualified for technical work and unwilling to perform labour, they find themselves unemployed. Only when they become older, with families to take care of, do they begin to find sufficient employment opportunities.

Motivation is tricky to tackle, but ultimately the mismatch between skills and need will drive motivation. People need to feel that there are opportunities for them to improve their lives in order to generate motivation. That is where education comes in, and the government has significant control over education. There are a large number of Saudis who have only a secondary education. This leads to the situation where many roles that require higher education are filled for foreigners, who have the necessary Bachelor's or higher qualification.

The Kingdom has been building out its education system since its inception. In the first couple of decades of the KSA, there were no tertiary education institutions in the country, and it was therefore a necessity that students would study overseas. There has been a strong focus on building out the education system in recent years. Since the late 1970s, the country has gone from seven universities to 23 universities. Other initiatives have increased the number of teachers' colleges, and encouraging the growth of private universities so that they now number 33, which more being added frequently. Despite this growth, the tertiary education system still has a shortage of qualified instructors, which lowers the quality of education offered. Thus, some 70,000 Saudis study overseas, making the KSA the fourth-ranked country in the world for overseas students behind China, India and South Korea. The most important destination countries for Saudi students are the United States, the United Kingdom, Australia and Canada, all English-language nations with large and respected university systems (Alamri, 2011). The Saudi government has also undertaken sponsorship to help students attend private universities at home, in order to both open up more opportunities for Saudis and also to keep more students at home.

The King Abdullah Sponsorship Program (KASP) is the centrepiece of education reform in Saudi Arabia. Since 2005, an estimated $5 billion has been spent on scholarships for Saudis to either study overseas or to study at private institutions operating within Saudi Arabia (Thomas, 2013). The program was designed to fill in the gaps between the education system in the kingdom and the demands of the modern economy. With a domestic education system often criticized for its emphasis on religion over science and economics (McDowall, 2012), sending students overseas was seen as a means of getting Saudi students a modern education, bypassing the conservative bureaucracy entrenched in the domestic education system.

Gender Issues

Gender is one of the major issues in the gap between education and economy in Saudi Arabia. In general, the better-educated a population is, the more that population will be able to drive economic growth. Cultural tradition in Saudi Arabia, however, struggles with the idea of women in the workforce. The country has made tremendous gains in the number of females who attend university, but this has not translated so much to economic participation. In 1980, it was highly unusual for a Saudi female to receive a tertiary education. Today,…

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