Kuwaiti Public and Private Sector Job Market

Kuwait labor market is one of the major components of the country's economy and has played a significant role in current economic problems in the country. Since the beginning of the oil era in Kuwait, the country has increasingly relied on a growing workforce (labor market) across all sectors of the economy. Given the role of the labor market in the nation's economic growth and development, understanding the major issues facing Kuwait workforce is crucial towards addressing the current economic problems and promoting growth and development. It is increasingly important to deal with Kuwait's labor market issues because of the decrease in oil prices, which has numerous impacts on government spending and budget deficit. Additionally, addressing these issues will help in promoting the nation's economic growth and development.

As previously indicated, one of the major components of Kuwait's economy is the labor market, which is directly linked to the current economic problems/issues in the country. While the Kuwaiti government recognizes the significance of restoring balance in its labor market and strengthening local workforce, there have been futile attempts to achieve this. The government has failed to develop and enact policies that enhance Kuwaitis' level of contribution in the labor market or workforce. This problem has been compounded by the fact that 80% of the total local workforce in Kuwait is concentrated in the public sector, particularly government departments despite the significant benefits to those working in the private sector. Kuwaitis working in the private sector, which accounts for 20% of the total local workforce, are supported through bonuses that are obtained from 2.5% taxation on net profits of listed companies in the Kuwait Stock Exchange (Alhayat, 2013). Despite these benefits, Kuwait's local workforce is concentrated in the public sector and governmental departments, which creates distortions and imbalance in the country's labor market (Alhayat, 2013).

The second major issue in Kuwait labor market is increased wage allocations in the public budget to an extent that they account for a high portion of the country's budget. These increased allocations emerge from the financial burden brought by government and public sector employment of Kuwaiti nationals. Third, this labor market is characterized by incompatibility between employment requirements and the professional capabilities of locals. This incompatibility is evident in the significantly low contribution of local workforce to the private sector and Kuwaitis' reluctance to hold private sector jobs. Kuwaiti nationals are increasingly employed by the government without consideration of their professional capabilities and economic implications. This trend increases the incompatibility between job-related requirements and professional abilities of Kuwaiti nationals.

There is a strong link between Kuwaiti labor market and government expenditures because of the increased accumulation of locals into the public sector. Kuwaiti government continues to spend more in the labor market because 80% of the nation's workforce is in the public or government sector. The local government continues to absorb more people into the public sector, which in turn increases government expenditure on the labor market. The high portion of the labor market in governmental departments implies that much of the government's budget is channeled towards labor. While the government has attempted to address this through providing incentives like bonuses to the private sector labor market, Kuwaiti nationals continue to prefer governmental or public sector jobs. This preference and influx into the public in turn increases the financial burden and forces the government to spend a significant portion of its budget on labor. For instance, as of June 2013, there was a total of 245,666 and 91,505 Kuwaiti and non-Kuwaiti nationals employed by the government respectively (Central Statistical Bureau, 2013). With oil prices going down, financial experts and specialists have argued that the Kuwait government will either run a budget deficit through introducing major cuts in governmental expenditures or increases in revenue.

In light of the major issues in Kuwait labor market and their impacts on government expenditures, there is need to find suitable solutions to this problem, especially those that will encourage locals to work in the private rather than public sector. One of the possible solutions to this problem is the establishment of a new employment philosophy and policy by the Kuwaiti government. The new philosophy should be based on economic and technical standards instead of political standards. Political standards have been used as the premise of current employment practices in the Kuwaiti public sector. These standards have primarily focused on securing governmental or public sector employment for Kuwaiti nationals with little or no regard of the actual employment requirements and individual professional capabilities. A new employment philosophy should be adopted and focus on hiring Kuwaiti nationals based on their capabilities and economic considerations.

Secondly, this issue can be resolved through reforming the educational system in order to train local employees to secure jobs in the private sector. The current education system does not adequately prepare Kuwaitis to fill blue-collar positions. As a result, Kuwaitis have increasingly preferred clerical and administrative jobs available in the public sector. The third potential solution is eliminating the disparities in salaries/wages in the public and private sector. Governmental jobs are preferred because of increases in the cadres of employees across various sectors and professions are recently adopted by the National Assembly and government. This has in turn created pay disparities and discouraged accumulation of Kuwaitis in the private sector. The final potential solution is increased investments in technology by the private sector, which has lagged behind in technology use. The adoption of technology in the private sector will encourage Kuwaitis to work in the private sector through lessening the sector's dependence on expat workers.

Demographic transition and migration have had considerable impacts on the development of Kuwaiti economy and the labor market. When oil fields were discovered in Kuwait in the 1930s, the country embarked on an initiative to employ labor immigrants in order to promote infrastructural and economic growth (De Bel-Air, 2013). As the country development process relied on oil, the employment of labor immigrants contributed to the influx of foreigners to the country who soon outnumbered Kuwaiti nationals by 1960. Most of the country's initial labor immigrants originated from Asia, Europe, and North America. However, these labor immigrants were hired as contract workers despite their role in the country's economic development during this period. While the country later embarked on initiatives to hire more locals, the record oil price increase since 2003 made the government to resume hiring huge numbers of foreign workers. In 2012, non-Kuwaitis accounted for 69% of the country's total population, which implies that Kuwaitis are minorities in their own country and contributed to a demographic imbalance that has developed to become a major issue in the country.

Based on the government's five-year development plan that was launched in 2009, the concept of Kuwaitization of the market was introduced in 2012. Kuwaiti government announced plans to lessen the usage of Kefala system, which provided the premise for hiring labor immigrants and substitute it with Kuwaitization. Kuwaitization is defined as a policy that seeks to increase hiring of Kuwait nationals into the labor market while reducing the influx of labor immigrants or foreign manpower into the country's workforce (Salvini, 2014). While the policy seeks to address one of the major issues in Kuwait labor market, it is characterized by some challenges and structural issues. One of the challenges facing this policy is the low proportion of Kuwaiti workforce in critical job areas, especially technical and scientific jobs. Secondly, the country's education system lacks suitable standards and vocational training that will adequately prepare Kuwaiti nationals to take private sector jobs. The third challenge facing this policy is lack of suitable policies and legislation to encourage Kuwaitis to work in the private sector. Currently, there is lack of effective policies that will strengthen the role of the local workforce or those that focus on enhancing Kuwaitis contribution to the national workforce, which is currently at 16% (Alhayat, 2013). The final challenge is the lack of policies that promote and support the growth of small-medium enterprises in the country.

Despite the issues facing Kuwaitization policy, foreign workers are a barrier of entry to young Kuwaiti nationals to the country's private sector job market. As of 2013, the number of Kuwaiti citizens in the private sector job market accounted for 5.1% (Alhayat, 2013). This implies that Kuwaiti private sector is dominated by foreign workers who account for 94.9% of the workforce. The high proportion of foreign workers implies that labor immigrants have become barriers of entry to young Kuwaitis in this sector. As a result of this demographic imbalance, young Kuwaiti nationals find it difficult to access job opportunities in the private sector and are seemingly forced to opt for public sector jobs.