Saudi Arabia's KASP and the Fight Against Youth Unemployment

Introduction: Saudi Arabia's Unemployment Challenge

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 maintain a healthy balance sheet, it has also discouraged investment in other sectors. Other countries in the region have begun to realize that an oil-dependent economy is not sustainable in the long run. Nations with burgeoning populations and limited diversified resources tend toward instability. That lack of sustainability can be seen today in milder forms, such as high youth unemployment, social problems like abuse and deviant behavior, and stunted economic growth.

The facts concerning the Saudi economy reflect deep structural issues. The country has a population of roughly 27 million, a third of whom are non-citizen immigrants. Nearly 50% of the population is under the age of 25, and the median age is 26.4 years. This means 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 needed to make them competitive in the private sector (CIA World Factbook, 2014). This leads to high youth unemployment and associated social problems, and such unemployment creates a drag on the Saudi economy overall.

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 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 close the gap between the needs of Saudi industry and the capabilities of its citizenry. This investment in foreign education is a response to the generally low quality of domestic education. If most Saudi youth lack the skills needed to compete against foreign workers for the better jobs in the economy, and those same youth are unwilling to take labor jobs, a serious drag on the economy results. Foreign educational institutions are seen as a solution to the limitations of the domestic education system.

This paper studies the problem of unemployment in Saudi Arabia from several perspectives. First, it examines the relationship between unemployment and economic performance. Second, it examines some of the major issues in addressing the unemployment problem. Education is examined, including the impact of foreign education on the Saudi economy. Female labor force participation is also examined as a potentially important factor in improving the Saudi economy. Finally, some attention is given to overseas remittances, as Saudis sometimes remain in the countries in which they were educated in order to pursue 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 overall unemployment rate is only around 5.8%, in line with many developed nations. The unemployment rate among Saudis themselves, however, is considerably higher at 12.1%. This can be further subdivided by gender: the unemployment rate among Saudi men is around 7%, while among Saudi women it exceeds 35%. Educated women in particular suffer from extraordinary rates of unemployment, in the range of 70%. From this we can conclude that higher education is paradoxically 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, a figure that drops dramatically as adulthood progresses (Fleischaker, 2013).

The high trend of unemployment among younger Saudis may reflect several different issues. The first is that the economy simply cannot create enough jobs to keep pace with population growth. 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 among those who are of working age if jobs are not created for them. 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 must be understood about the Saudi economy is that there are almost two distinct economies within the Kingdom — the economy for Saudi nationals and that for 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 total job growth declined sharply. In 2009, over 60% of new jobs went to Saudis, but in 2010 that number declined to around 15%. New jobs were being created, but primarily for foreign workers. With large numbers of Saudi youth entering the workforce each year, this led to a measurable 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 qualified for many of the new jobs that the Kingdom creates. The second is that Saudi youth typically do not pursue the low-end labor jobs that drive much of the foreign worker economy. The oil sector remains the largest employment sector, but its positions fall into one of these two categories. If Saudis are unqualified for technical work and unwilling to perform manual labor, they find themselves unemployed. Only when they become older, with families to support, do they begin to find sufficient employment opportunities.

Motivation is difficult to address directly, but ultimately the mismatch between skills and need will drive motivation over time. People need to feel that there are real opportunities to improve their lives in order to generate the desire to pursue them. That is where education becomes critical, and the government has significant control over the education system. A large number of Saudis have only a secondary education, which leads to a situation where many roles requiring higher education are filled by foreigners who hold the necessary bachelor's degree or higher qualification.

The Kingdom has been expanding its education system since its founding. In the first couple of decades of the KSA, there were no tertiary education institutions in the country, making it a necessity for students to study overseas. There has been a strong focus on building out the education system in recent decades. Since the late 1970s, the country has grown from seven universities to 23. Other initiatives have increased the number of teachers' colleges and encouraged the growth of private universities, which now number 33, with more being added regularly. Despite this growth, the tertiary education system still suffers a shortage of qualified instructors, which lowers the quality of education offered. As a result, 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, both to open up more opportunities for Saudis and to keep more students within the country.

The King Abdullah Sponsorship Program (KASP) is the centerpiece of education reform in Saudi Arabia. Since 2005, an estimated $5 billion has been spent on scholarships for Saudis to study either overseas or at private institutions operating within Saudi Arabia (Thomas, 2013). The program was designed to fill the gaps between the Kingdom's education system 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 providing Saudi students with a modern education while bypassing the conservative bureaucracy entrenched in the domestic system.

Gender Issues

Gender is one of the major issues in the gap between education and economic participation 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 attending university, but this has not translated to proportional economic participation. In 1980, it was highly unusual for a Saudi female to receive a tertiary education. Today, the percentage of tertiary education students who are female is around 40%, a rate that ranks above other countries on the Arabian Peninsula and is more in line with North African countries and Malaysia (Fleischaker, 2013). This improvement in female participation in higher education should in theory be a boon to the Saudi economy.

The reality is that educational opportunities for Saudi women are good, but economic opportunities remain poor. While unemployment among Saudi women with a secondary education is around 20%, unemployment among Saudi women with a tertiary education climbs to nearly 80%. This contrasts sharply with the experience of women in developed nations, and even in other Muslim nations such as Kazakhstan, Indonesia, and Turkey, where education unlocks opportunity for women.

The issue of women's economic opportunity is critically important in the context of high overall unemployment. The fact that so many well-educated women are excluded from the workplace means the country has a wasted asset. While it is hard to dispute the value of educating women, there needs to be follow-through in the economic realm. The more educated, capable people are in the workforce, the higher the rates of innovation and productivity will be. The country is creating this economic potential and then allowing it to go to waste. Having more educated people in the workforce does not increase unemployment — it creates jobs, because greater innovation means more businesses are started and existing businesses perform better, enabling them to expand. Both outcomes create jobs.

Overseas education is also shifting cultural norms with respect to women in the workplace. While significant impacts have yet to appear in official statistics, it is worth remembering that changes to education policy are relatively recent and it will take time for these effects to materialize. Anecdotal evidence, however, suggests that attitudes toward women in the workplace are changing. Whereas lesser-educated Saudi women were typically able to find work only in firms run by family members, many Saudis who study overseas are returning home with new cultural norms from their experience abroad. Many Saudi women who study overseas prefer to seek employment upon returning home, and as their numbers grow, it becomes more acceptable within Saudi society — among families and friends alike — to work outside the home and without family supervision.

One of the major drivers of success in shifting cultural norms is that government scholarships under the new plan are being offered to all students based on ability. Even students from middle-class or poor families are being granted the opportunity to become exposed to the wider world. If this trend holds over time, the results will transform many of the key issues that have held back the value of these programs in the past. More Saudi women — and more men from less-privileged classes as well — will not only have the education needed to drive economic growth but will have the opportunities to apply it as society adapts to more global values with respect to bringing young, poor, and female workers into the workforce (McDowall, 2012). The government has assisted in this by encouraging and sometimes funding the development of pathways for women returning with foreign degrees to find work in the Kingdom, such as career portals and career fairs held in the country's major economic centers (Thomas, 2013).