Gulf youngsters face up to jobs dilemma

Many young people in the Gulf are apprehensive about their chances of finding employment, even questioning whether it is worth applying for jobs in the first place Published in MEED, 22 June 2014

According to the World Economic Forum, the global adult unemployment rate is 4.5 per cent; for young people, it is almost three times higher, at 12.6 per cent. In the Middle East and North Africa region, the situation is worse than anywhere else. Youth unemployment in the Middle East is running at 26.5 per cent and in North Africa it stands at an even worse 27.9 per cent.

That makes for fairly grim reading if you are a young man or woman in the Arab world. So it is not surprising that the two biggest concerns cited by the region’s young in a recent survey were the rising cost of living and unemployment. The study, by polling firm Penn Schoen Berland (PSB), part of the London-based WPP advertising group, found that 63 per cent of people aged 18-24 are “very concerned” about the rising cost of living and 49 per cent feel the same way about unemployment.

Pressing concerns

Across 16 countries, 3,500 people were interviewed for the survey and the results vary slightly from place to place. While the GCC’s young people were just as worried about the cost of living as their peers elsewhere in the Middle East, they were slightly less worried about finding a job. According to the survey, the results of which were published in April, 39 per cent of GCC youth say they are “very concerned” about unemployment, compared with 55 per cent in other parts of the region.

Resolving these problems requires progress to be made on many fronts at once. Overall, economic growth rates are important, but so are reforms to education systems, encouraging a sense of entrepreneurialism and, perhaps most important of all, changing the attitudes of young people to public versus private sector employment.

“I don’t think that solving the unemployment problem in [the GCC] is a problem of growth,” said Mohamed Lahouel, chief economist at the Department of Economic Development in Dubai, at a conference in the emirate on 6 May. “If you can create millions of jobs for foreigners … how come you cannot create enough jobs for your own people? I think it’s not really an issue of growth. You need to think in terms of reforming the labour market, more specifically the incentive system, to incentivise the youth to go to work in the private sector as opposed to the public sector. This is really the crux of the matter.”

These issues have long been recognised and there seems to have been some progress made on this last point at least in the past few years. The PSB survey found that 31 per cent of young people in the Gulf now look favourably on the idea of a private sector job, up from 24 per cent in 2013 and 19 per cent in 2012. At the same time, the proportion saying they would prefer to work for the government has fallen from a clear majority of 64 per cent in 2012 to 50 per cent in 2013 and 43 per cent in 2014.

This will be music to the ears of Christine Lagarde, managing director of the Washington-based IMF. In a speech in early May in Morocco, she highlighted the overly dominant position of the public sector in the jobs market as one of the critical problems facing the region.

“The state is still seen as the employer of first resort; college graduates hold out for opportunities there because these jobs have good pay, good benefits and good job security,” she told the Economic, Social & Environmental Council in Rabat. “Global experience tells us that this is not the road to economic dynamism; it is not the road to fairness and inclusion.”

Whether they want to or not, more young people will have to get jobs with private companies because the state simply cannot create enough work for everyone. More than 15 million people will enter the jobs market in just four countries – Saudi Arabia, Qatar, the UAE and Egypt – in the next 10 years, according to international consultancy firm EY.

Yet there are many young people in the region who do not seem to think it is important to find a job. A survey of 1,000 young GCC nationals published by EY in March found that 24 per cent of respondents thought it ‘not so important’ to find a job once they had left the education system. The worst offenders were Oman, the UAE and Saudi Arabia, where between 38 and 45 per cent thought it rather unimportant. In contrast, in Bahrain and Qatar, 99 per cent thought it important, and in Kuwait the figure was 92 per cent.

Confidence factor

There is little obvious reason for such large disparities between countries, but it may have something to do with how confident youngsters are in finding a job. The least confident were the Omanis, with just 15 per cent describing themselves as confident they would be able to find a suitable job. The rates in Saudi Arabia and the UAE were 24 and 33 per cent respectively. Among the other GCC countries, they ranged from 33 per cent in Bahrain to 44 per cent in Kuwait and 53 per cent in Qatar.

It is striking how much young people in these countries rely on parents and other family connections when looking for work. Some 72 per cent cited relatives as an important source of information on jobs, compared with 51 per cent pointing to government jobs portals, 32 per cent naming jobs fairs and exhibitions, and 27 per cent saying company websites.

The most important criteria that young people weigh up when choosing a job is salary and benefits, cited by 74 per cent of respondents in the EY poll. That helps to explain the preference for public sector employment, as does the next most important factor: job security.

The alternative to working for either the public or private sector is, of course, starting a business. But entrepreneurialism appears to be weak in most parts of the region. According to EY, there are a number of barriers: most young people believe setting up their own business will not be sufficiently rewarding; they think their families will not be supportive; and they find the systems for establishing a company confusing.

Business mentality

According to the survey, entrepreneurialism is weakest in Qatar, where just 16 per cent have a positive attitude to setting up their own business, followed by Saudi Arabia (20 per cent), Kuwait (23 per cent), Oman (29 per cent) and the UAE (35 per cent). Only in Bahrain is there a clear majority in favour, with 70 per cent saying they think positively about it.

Another major issue that is only slowly being tackled is female unemployment. Across the Middle East, women are far less likely than men to be in the workforce. Among the GCC countries, labour force participation rates for women range from just 5.6 per cent in Saudi Arabia to 18.4 per cent in Kuwait. For men, by comparison, it ranges from 21 per cent in Saudi Arabia to almost 40 per cent in Qatar and the UAE.

Among those in the labour market, women are far more likely to be jobless. The rate of female unemployment ranges from 2.2 per cent in Kuwait to almost 20 per cent in Bahrain, and in all cases the rate is worse than for men. When it comes to female youth unemployment the rates are even higher, ranging from 4.3 per cent in Qatar to 54 per cent in Saudi Arabia. Of the six GCC countries, only Kuwait has a lower unemployment rate for young women than young men, at 10.6 per cent and 12.6 per cent respectively.

The situation is gradually improving and the Saudi government has been making some notable changes to the jobs market there, insisting that for some positions only women can be employed, for example. “The involvement of women in the economy is much greater than it was 10 years ago,” says one banking executive in Riyadh. “I see more of it in the banks than in industry, but even in industry it is starting to change.”

High price

However, there is clearly far more to be done. As long as women stay out of the workforce, the countries in the region are paying a high price, according to the IMF.

“Across the entire Middle East and North Africa region, the gap between male and female participation in the labour force over the past decade was almost triple the average gap for the emerging markets and developing economies,” said Lagarde in her speech in May. “If it had been only double instead of triple, the economic gains would have been enormous: almost $1 trillion in extra output, amounting to annual gains of about 6 per cent of GDP. So it is imperative to let women contribute, by removing outdated obstacles and introducing enabling polices.”

It remains to be seen if governments are willing or able to tackle such issues, but the region’s youth are not all that sure they will be able to manage. Across the region, 68 per cent of young people say they are ‘very’ or ‘somewhat’ confident that their government will be able to deal with rising unemployment and 66 per cent say the same about the state’s ability to enhance living standards, according to the PSB survey. That still leaves about a third of the population who are more pessimistic. At the same time, 58 per cent of the region’s young are ‘not very’ or ‘not at all’ confident in their government’s ability to address wealth creation.