Student Publications

Nedal Al Obidan
Title: Economics of the Labor Market
Available for Download: Yes
View More Student Publications Click here

Sharing knowledge is a vital component in the growth and advancement of our society in a sustainable and responsible way. Through Open Access, AIU and other leading institutions through out the world are tearing down the barriers to access and use research literature. Our organization is interested in the dissemination of advances in scientific research fundamental to the proper operation of a modern society, in terms of community awareness, empowerment, health and wellness, sustainable development, economic advancement, and optimal functioning of health, education and other vital services. AIU’s mission and vision is consistent with the vision expressed in the Budapest Open Access Initiative and Berlin Declaration on Open Access to Knowledge in the Sciences and Humanities. Do you have something you would like to share, or just a question or comment for the author? If so we would be happy to hear from you, please use the contact form below.

For more information on the AIU's Open Access Initiative, click here.

In this essay we will briefly discuss the definitions of the Economics, the concept of the Opportunity Cost , the Supply and Demand, and will focus on one of the most important issue in the Saudi Labor Market which is the Nationalization (Saudization).
Economics: - the study of the allocation and use of scarce resources to satisfy unlimited human wants. The Opportunity Cost:- the forgone alternative of the choice made or what you would have done had you not done what you did. Modeling Opportunity Cost using a Production Possibilities Frontier before we go farther, there are some terms we need to define the meaning for them: ·
Production Possibilities Frontier: -
a graph which relates the amounts of different goods that can be produced in a fully employed society. · Model:- a simplification of the real world that we can manipulate to explain the real world.
Simplifying Assumption:- an assumption that may, on its face, be silly but
allows for a clearer explanation.
Scarce:- not freely available and infinite.
Resources:- anything we either consume directly or use to make things that
we will ultimately consume.

Increasing and Constant Opportunity Cost. Increasing opportunity cost exists when the additional resources required to produces an additional unit grows as more output is produced. Likely to occur when people are different in their skills. constant opportunity cost exists when the additional resources required to produce an additional unit remains the same as more output is produced. Likely to occur when people are identical in their skills.
Supply and Demand
The definition of the Demand and Supply:
Demand is the relationship between price and quantity demanded, ceteris
Supply is the relationship between price and quantity supplied, ceteris
The law of Demand is the relationship between price and quantity demanded
is a negative or inverse one, but the law of Supply is the statement that there
is a positive relationship between price and quantity supplied.

Determinants of Demand
The Determinants of Supply
· Taste
· Price of Inputs
· Income
· Technology
· Price of Other Goods
· Price of other potential output
· Population of Potential Buyers
· Number of Sellers
· Expected Price
· Expected Future Price

In this essay I wil discuss the Nationalization or what we call it in Saudi Arabia the
Saudization, why we need it? What is the effect of not have it and, where we can
apply it?.
1. Strong Economy and productive Manpower :
The main topic of this essay is not only the employment of Saudis, but
creating a strong and prosperous economy supported by appropriate
productive elements, including labor. Such a vital economy is able to create
jobs in accordance with market mechanisms that place the right person in the
right place, and identify the most productive element for producing particular
goods or service. There are people who find that employment of manpower
instead of machines is the most suitable element according to market facts
such as cost, revenues and profits. There are people who find it more
appropriate to expand the use of machinery and equipment instead of
manpower. Some other may find that it is more appropriate to intensify the
use of technology or other elements of production and materials used in the
production process.
We, as economists, believe that the relative advantages available to a
country often determine the productive elements used in production, product
quality, and the way the product is produced. India, for example, is a country
that has tremendous surplus of manpower, and thus is expected to focus in
the production of goods that depend on intensive production techniques to
use manpower. This is cheaper in terms of cost which would enable them to
sell their products at low prices and enter into competition with others. It is
often said that India has comparative advantage in production of goods that
rely on manpower element. A country like the United States or some
European Union countries which have the capital but not enjoying the same
degree of surplus of manpower available to India or some developing
countries, their relative advantage is not in the production of goods of
intensive techniques to use manpower but rather in those products, which
depend on capital, machinery and equipment

The subject matter in this book is then: how can we build for a strong and
productive Saudi economy, based on sound and solid foundation which
grants that economy the ability to grow accumulatively in the context of its
comparative advantages? and not according to provisional facts governed
by conditions that may change at any moment, such as recruiting
temporary manpower we suppose through its presence with us we can
produce the same way that India, Bangladesh, Sri Lanka or other
countries can produce by substantial surplus of labor, then wake up one
day of a tragic fact that we were living on the production of others and
imagining that we were the producers, and we invested in others who
excelled us and returned to their countries with the experience they have
acquired from us; while the doors been closed in the faces of our young
men on pretext that they do not have expertise.
How such experience can be acquired while we open our doors to bring in
cheaper labors from any labor market over the world that offers us
"appropriate labor wages"? as if the fate of our young men is to compete
with all the world's workers to secure jobs within our national economy.
How can our economy accrue experience and create local industrial
traditions if the labor employed is immigrant and unstable and soon return
to their countries even after a while?
The existence of cheaper foreign manpower distorts the market
mechanisms and the production decisions would be away from local
reality with its facts. Such manpower does not reflect the abundance,
scarcity or distribution of productive resources of the country but rather
creates false reality that has nothing to do with map of the local economy.
Hence a distorted economy linked to foreign labor markets would emerge.
We can realize through a fake caricature when imaging the social panic
over looming on Saudi homes whenever Indonesia or the Philippines
announce, for example, restrictions on our recruitment of drivers and
domestic workers from these two countries. What happens to us if those
countries which export labors decided suddenly for one reason or another,
to stop sending their labor to work in our factories, farms, bakeries,
markets and construction projects, etc.? Certainly our life will discontinue
entirely if such event occurs.

The first step to establish a strong and healthy economy is to care of our
national workforce. Even in the countries adopting methods of production of
intensive capital, attention to labor force is becoming significant because
large machinery and capital equipment do not operate if not heralded
regardless of the number of manpower. For that reason, most countries pay
significant attention to development of their manpower and raising worker's
productivity as a way to create strong economy capable to produce with
maximum efficiency, and thus creating a competitive economy outside the
borders as well as capable to compete with imported goods in the areas in
which the country has relative advantages.
For these reasons I repeat saying that the topic of this essay is not
Saudization itself, but to discuss how to evaluate the Saudi economy on
solid and sustainable bases derive its strength and durability of the nature
of productive resources in our country first, and foremost of which is the
National Manpower.
The idea which this book revolves around is that; since recruitment of
foreign labor is widely open, our national economy will continue to suffer
from structural imbalance and no hope of treatment but only to return to the
root of the problem which is recruitment of foreign workforce. All other
solutions are palliative solutions which deepen the problem than resolving it
because it takes us eventually to a condition of addiction of these palliative
The strong economy is based only on a strong private sector. The private
sector, not the government bureaucracy, is aware of the meaning of
production and understands the market language. All countries which
imagined one day that the public sector can not be a substitute for the
private sector, have realized the devastating failure to meet the needs of
consumers and ultimately forced disposal of the public sector projects
through privatization, which shifted the ownership of these institutions to the
private sector. On the other hand, private sector can't work but only in

with the rules of economic competition determined by official regulations and
such must be logical. We, for example, can't ask private companies to employ
Saudis while can employ foreign labor for wages lower than those paid to
Saudis. If any company has to employ Saudis the cost of its production and
services would be higher than the costs of its competitors. Thus, its prices will
be higher than their prices and it will not find consumers to buy its products
and hence will eventually suffer from bankruptcy and failure.
Remedy of such imbalance does not come through blaming private
enterprises often prefer foreign labor to local workers, but through structural
reform of the Saudi market through limiting the foreign workforce inflow and
upgrading Saudi workmen skills through training and rehabilitation which will
allow our market interacts with the reality normally. Of course, Saudization
will initially be painful after perpetuating foreign labor. It will be painful for the
businessman who has been accustomed to the way foreign labor works and
has built his economic calculations on the basis of such employment when
first thought of launching his business. Saudization is also painful for Saudi
consumers who may find that that labor had achieved some advantages
including lower costs of service. But, the cost of living and consequently the
rate of inflation in the economy might rise. However, all these will disappear
or decrease in the medium and long runs because the economy will
eventually familiarize as the case is always.
The call for Saudiization of Saudi market is a call to rationalize the Saudi
economy and shift it from blurred reality, if I am not false, to reflect the true
reality of our economic situation which could be an excellent, if proper actions
were to be taken for the private sector to operate according to competition
and transparency of this situation and customize its decisions and projects
This call for the Saudiization is not against anyone. We appreciate the
contributions of others, and fraternity brothers from the Arab and Islamic
countries, because they came to us at the invitation and common desire in
the exchange of benefits between us. When foreign manpower became
unneeded and when unemployment amongst our young men has emerged
with its negative destructive effects, therefore, it has become necessary to
impose restrictions on recruitment from abroad bearing in mind that we are
not the first country to invent resettlement of posts. Even our Arab and
Muslim brothers have faced such circumstances, but have imposed laws
protecting their local labor markets.
In brief, the call for Saudiization is a call for the advancement of Saudi
economy based on the national potentials that were not given the opportunity
to interact naturally with its surrounding as the case is in any other country. 10

2. A dilemma Called Foreign Labor
Germany, which opened its doors after the Second World War to receive
migrant workers from Turkey, Greece and the Balkan countries and provided
them with material incentives for stability, including granting of German
nationality, and offered encouraging aids to increase the incentive to have
children who later wil become part of the labor force, is the same Germany
which is now trying to get rid of foreigners. Moreover, there are German
organizations, parties and trends who openly call for expulsion of foreigners
and get rid of them. The reason is not only the cultural and social factors, but
also economic. Germany, like many countries of the world, suffers from high
unemployment. Many Germans think that the presence of foreign migrants in
their country is one of the main reasons for this unemployment. Not only do
America and the countries of Western Europe, even third world countries
suffer from the presence of foreign labor and immigrant citizens compete for
jobs. Some of these countries are labor-exporting countries, but they
themselves are not spared the advent of immigrant labor. In Egypt, for
example, arose some time ago controversy in the Egyptian press on foreign
labor, which compete Egyptians in some areas of work. This issue was taken
up by a member of the Egyptian People's Assembly, Attorney Haidar
Baghdadi, who stated that the number of foreign labor in Egypt amounted to
about 2 mil ion workers, are mostly from African and Asian countries, and
also with other nationalities from the Balkans, Eastern Europe and elsewhere.
One Egyptian writer has commented on the discussions in the Commission of
Manpower in the Egyptian People's Assembly, saying that "discussions have
shown that the unlawful foreign employment that has taken Egypt as
almshouse and shelter has been fiercely competing Egyptian workers. They
benefit from our country but chase us in their countries, and raise their heads
as experts while our young men run away from pursuing police force in their
streets, they in our country receive thousands of dol ars and depriving our
children of the few employment opportunities with the limited salary.
In Jordan, there is also talk about the competition of foreign labor for
Jordanian labor, and the need to address the foreign workers, denying
Jordanian citizen the opportunity to obtain work within his country. Mahmoud
Khatib, a member of the Executive Office of the General Federation of
Jordanian Trade Unions, spoke on the Jordanian experience with foreign
labor in Jordan says "government intervention in the local labor market was to
stop the discrepancy in the equation of supply and demand as it acts for
foreign labor favor, resulting in a growing and persistent unemployment rates
in the local manpower. Foreign labor influx in the light of the slowdown in
economic growth has become the main factor in the persistence of
unemployment among local labor rows, the existence of 250-300 thousand
workers in the local labor market, and offset almost the same number of local
manpower are looking for jobs is a significant issue deserves but requires
government intervention. Such duplication in the local labor market should be
corrected in the interest of national labor first.

3. When Foreign Manpower becomes the origin and the notional
is the exception
Through the history of the Arab Peninsula, there were many migrations
towards the outside searching for a better life. Even to the immediate
past, the sons of the Arabian Peninsula used to travel by ships to India
and Abyssinia in search of a living. The "camel riders" in their turn were
shaking Backpacker to Palestine and the Levant, Egypt and acting trade
between these regions.
The only exception is in such small numbers that come for one reason or
another to the land of the Arabian Peninsula and work in professions and
trades that the island's people do not accept to work in, or those who
come for pilgrimage and then prefer to stay near the Two Holy Mosques
and become with the passage of time as other citizens.
With the formation of the modern Saudi State (third) and the stability of
the political and social conditions, the country is witnessing the advent of
limited numbers of entrants who have contributed to laying the
foundations of the governmental bodies. The view of King Abdul-Aziz,
God's mercy be upon him, that the country needed competencies and
expertise in management, education, politics and engineering, medicine
and other areas whereas he attracted some famous names that have
become significant in the development of the first building blocks in certain
areas of the nascent State.
After the discovery of oil in 1938 the country witnessed more foreign
manpower, but, nevertheless, remained limited in a narrow range of
activities associated with the exploration of oil fields and extraction of oil
and the services associated with it. When oil production increased and
financial revenues have risen from oil exportation, and the country had a
budget with semi-stable financial income and organized expenditure, the
State sought to establish modern economy side by side with provision of
health, educational and social services for its citizens. To achieve this, the
State had to bring in foreign labor to manage the governmental facilities
and institutions to meet the gross deficit of national cadres, which were
still at the beginning of its formation.

The state brought teachers, doctors, engineers, administrators and government
officials from Egypt, Syria and other Arab and Muslim countries. Thus foreign labor
began to record increasing presence in both government and private sectors. The
presence of foreign manpower was not limited to cities only, but also extended to the
vil ages, countryside and rural areas which changed the features of the economic,
cultural and social life in the country generally after many centuries of almost
complete isolation.
Nevertheless, the real increase of foreign man force in the country has started since
the 1970s of the last century, when the State began the development plans
and realized the need for foreign manpower to fill incoming gap between
supply and demand in the labor market. In 1970 the non-Saudi labor force
was representing 15.86% of the total work force, while Saudis constitute
84.14%. But by 1975 with end of the first five-year plan, the proportion of
foreign labor has reached 28.28% of the total labor force in the Saudi
economy. This percentage increased to reach 50.65% by the end of the
second development plan in 1980 after then leapt to 59.83% in 1985. By
1995 the proportion of foreign labor has reached 66% of the total labor force
in the Kingdom. At present (2005) the number of foreign labor is estimated
more than six million workers in addition to about 2 million of their families
members. Estimates by the General Secretariat of the Manpower Council,
according to some scenarios, that expatriate workers will reach 17 million
after 10 years from now, if the rate continued to increase like the previous
historic pace.
The country was bringing foreign labor at the outset because of the deficit in
the local employment. At present the unemployment rate hit 9.66%, according
to the estimates of the General Statistics Department in 2002. Therefore, the
situation seems strange. If things continue in this way would lead the country
to real disaster because unemployment itself and in the Normal
circumstances, is considered as one of the most social ills that threatens the
stability of societies. How would be the situation when this unemployment is
accompanied by millions of people of foreign labor competing citizens for job

The experience of some GCC countries tell us that the expansion in bringing
in foreign labor may lead to change the population structure of the country in
a way makes citizens are a minority in their homeland. Reports indicate that
foreign labor in the United Arab Emirates, for example, amounted to 90% of
the total manpower in the country, and 75% of the State's population are
foreigners and were representing only 38% of the labor force in the United
Arab Emirates in 1968. Meanwhile, Emirate citizens becoming only 7.5%,
according to Mr. Matar Jumaa, Head of Statistics Unit of the Department of
Planning in Dubai. Mohammed Al-Mazrouee, Secretary General of Federal
National Council believes that the situation requires a solution to the problem
before proportion of Emirate citizens becomes 1% of the State's population.
This picture is repeated in more than one Gulf State, in Kuwait, Qatar and
Bahrain there are enormous numbers of foreign workers which affected the
population structure of those countries. It may not be the situation in the
Kingdom as we see in some other GCC countries with less population
density. However, the increasing of foreign manpower, especially during the
past three decades, has left its effects on the population structure in the
Kingdom. It is noted that some quarters and some markets in our Saudi cities
have become dominated by non-Saudi because of the intensity of foreign
labor presence. For example, the markets deployed in the "Batha'a" in the
heart of Saudi capital are almost exclusively limited to foreigners, which was
once one of the most important markets in Saudi Arabia. It is no exaggeration
to describe Batha'a markets as apiece of Bombay or Karachi or Manila,
especially on the weekends where labor accrue massively, and is very rare to
find one Saudi among them.
The GCC countries realized the disorder which struck the population structure
in the region, and have initiated a population strategy for the GCC countries
to restore balance in population. However, this strategy is still ink on paper
and has not been implemented so far in spite of the perception of the officials
of the GCC that the situation population has reached a critical stage requiring
practical steps to reduce the rate of deterioration of the local population rate
to the number of foreigners.

It is difficult to accept that turning the local population into a minority in their
countries because that threatens to change the identity of the country,
besides the economic and security effects. The penetration of the foreign
elements in regions societies is evidenced by the emergence of circulated
foreign dialects mixing the vocabularies of Arabic, English, Persian and Urdu
and other vocabularies used in the languages spoken by the foreign laborers.
Indeed, in some work environments in the region you do not find any one who
speaks Arabic. English language has become a requirement that some
employers insist on that those who want to work with them should know and
speak such a language though the nature of the job may not need to know
English language, and the service is provided to citizens who mostly do not
speak English language. In some cases English language has become
necessary, since most or all employees are non-Arab, because, so English is
the language in which to write the transactions, accounts and the language of
understanding by the staff who hold various nationalities. Thus, the employer
is keen that any Saudi applies for work with his company should know
English in order to be able to communicate with the rest of the staff, rather
than the foreigner staffs learn the Arabic language which is the language of
the country and its people.
It is so interesting what one hears for example of dialects and vocabularies
spoken by taxi drivers that roamed the streets of Saudi cities. Those are
mostly of Indian, Pakistani or Bangladesh nationality or other Asian
nationalities. Saudi citizen is used to talk with them with a blend tone of
"broken" Arabic and foreign vocabularies. As such, also restaurants, hotels,
workshops, shopkeepers and various shops workers.
This massive human creep may lead to deflation of Saudis rate to foreigners.
That is why Saudization has become an urgent national need to spare society
major disaster if the growth in foreign labor ratios continued according to the
previous historical ratios while some Saudi citizens suffer form

4. Policies and Strategies
The increase of foreign labor, as we have observed, as well as the
emergence of the phenomenon of unemployment among Saudis does
not mean that the agencies concerned have not realized the planning of
these aspects. It does not also mean that the executive bodies had not
exercised an important role in the implementation of these plans.
However, the painful truth is that the efforts were not enough to cope
with the influx of foreign labor suffered by the country, for objective
Strategies have been set forth for the growth and development of the
national workforce and Saudization of functions and activities either
through the Manpower Council or the Ministry of Planning. The
executive agencies such as the Ministry of Labor and Social Affairs and
the Ministry of Civil Service and relevant ministries and educational and
training institutions have significant efforts in this area, but simply were
not enough. The real solution to the dilemma we are suffering from is to
reduce effectively the introduction of foreign labor, under firm and
unhesitant administration, and to rehabilitate and train Saudi young
men. Anything but that is merely enabling solutions might help for some
time but did not reach the roots of the problem.
At the level of policies and strategies it is enough to review some of
those included in the "strategy of development of human manpower"
set out by the Secretariat of Manpower Council and approved by the
Manpower Council, in order to realize the interest of planning
institutions and policy-making bodies in this problem. These strategies
cover a period of twenty five years (2000-2025) and included some of
the objectives such as:
Reducing foreign labor and rationalize the same.
Achieve harmonization between the outputs of educational and training
institutions and the needs of the labor market.
Integration in the area of manpower planning and development.
Creation of integrated rules for labor market information
Improve the level of productivity of the national workforce and configure the
same to cope with technical changes.
To reach full use level of the national workforce
Appropriate exploitation of national human resources
Planting and devoting concepts of affiliation and citizenship and work values
in Saudi society

Mechanisms and mentors have been developed for work such as:-
Directing admission policies in universities and rationalize the same in
conformity with the requirements of development and labor market
variables, and development of programs, curricula and university
educational systems accordingly.
Preparing programs for the training and rehabilitation of graduates
whose qualifications do not commensurate with the job opportunities.
Establishment of unified network for manpower information to cover all
regions of the Kingdom.
Review work organization laws and those related to recruitment
regulations and procedures and other relevant regulations.
Development of labor market mechanisms, particularly employment
offices and employment civil offices and reinforce the same to be more
effective in the process of recruiting Saudis and replacing them in
foreign labor positions.
Exert efforts to increase contribution of women in the labor market, in a
way fitting her nature and does not contradict with the Islamic Sharia.
Exert efforts to increase training opportunities for the disabled.
Deepening the religious, social and psychological concept of work and
citizens' trends and their expectations for the work.
Unification of bodies responsible for issuing work visas.
Convergence between social insurance system and civil retirement
Feasibility study and consider way to establish a fund for rehabilitation
and training of national labor in collaboration between the public and
civil sectors.
Compulsory of primary education for boys and girls.
Encourage investments in the productive sectors and to build feasibility
of new projects based on the cost of national labor recruitment and the
use of production methods leading to increase their employment.

The five-year development plans set by the Ministry of Planning included many of
the policies on the development of national workforce and Saudization of posts,
especially since the fourth Five-Year plan (1986-1990), which highlighted the issue
of Saudization specifically, and set out targets sought to achieve during the plan
As for the decisions related to Saudization directly, the Cabinet Council approved
the decision taken by the Manpower Council to replace national labor in foreign labor
positions in the private sector enterprises, and cabinet passed decision No. 50 dated
9/27/1994 , which states " each organization using more than twenty people is
required to increase employment of Saudis of not less than 5% of the total
employment annually". In to contrary to the rumors that this resolution lacks
flexibility, and that it has treated all enterprises the same way regardless of their size
or type of activity or location, the resolution stipulates that "the above referred to ratio
wil be amended according to the availability of national manpower and depending
on the nature and conditions of work and ratio of Saudi labor for any organization or
activity or region". The resolution included also the formation of a committee to
examine all aspects of implementation of the resolution and in particular "considering
amendment of the ratio of Saudi labor which increases annually, and to recommend
their proposed ratio; and such amendment to be issued by the Minister of Labor," as
well as "evaluate the results of the implementation of this resolution every two
years," and so on.
Several resolutions were issued to Saudize some activities, professions and
occupations and made them entirely limited to Saudis or by gradual
replacement of Saudi labor instead of foreign labor; those activities include:
- Real-estate offices
- Cement companies
- Civil private security guards
- Gold and jewelry shops
- Shops selling vegetables and fruit
- Small groceries
- Transport of students and teachers
- Electricity companies
- Private Education
- Hotel activity
- Hospitals and private clinics
- Airlines and their agents and tourism agencies, travel and freight.
- Appliances and household utensils
- Public taxis (Limousine)
- Transport and distribution trucks
- Customs clearance offices
- Hajj and Umrah offices
Used furniture selling

And other activities in addition to the many occupations.
The Minister of Labor and Social Affairs issued on 07/02/2002 a decision to Saudize
a number of functional categories, which included 167 career indefinitely. The
Minister of Labor and Social Affairs then passed another resolution dated
09/24/2003 to Saudize Twenty-five commercial activities including clothes selling
shops, women's and men's cloth selling shops, upholstery shops, telephones and
mobile selling shops, car spare parts shops, and others from January 2004. The
decision stipulated that one Saudi seller should work in these activities in the first
year if the business store has one worker, or, if there is more than one foreign
worker, one Saudi worker should be among them. In the second year 50% of the
total number of employees should be Saudized in commercial shops which employ
more than one seller; and to implement Saudization by 75% in the third year.
In addition to Saudization direct resolutions, other decisions were issued supporting
Saudization such as establishment of Human Resources Development Fund and the
National Organization for Joint Training. The country also witnessed establishment
of more schools, colleges, universities and diverse training centers graduating
hundreds of thousands of Saudis in various disciplines.
What has been accomplished, whether at the level of planning or execution, have
contributed to the Saudization process but this achievement is not enough given the
growing number of foreign labor and the emergence of the phenomenon of
unemployment among Saudis.
It can be argued that the main reason is that there is a gap between the "planning
and execution". Many of the Saudization decisions have not been implemented; not
because they were not realistic, but owing to the insistence of some people that
there is foreign labor with low wages. The existence of such labor aborts any efforts
towards Saudiization. We can not put the blame on the private sector alone. As long
as cheap labor is available it is difficult for a businessman to recruit costly national
labor, because private economic activity based on the principle of profitability. Even
if a businessman has the enthusiasm and employed national labor, he will lose the
competition with colleagues unless everyone complies to hiring Saudis, because
production costs would be higher for that businessman and wil be obliged to get out
from economic activity and leaves his rivals.
Therefore, the real solution is to reduce foreign recruitment significantly, which is
stipulated in the manpower development strategy in its first short-term goals, which
provided for "reduction of foreign labor, rationalize recruitment process and limit
work in some sectors and occupations to national labor only."

The Manpower Council passed its decision at the end of 2002, to put a ceiling
for bringing in foreign manpower and their dependents, and not to exceed
20% of the Saudis population in a maximum period 2011. It is hoped that this
decision, which has some mechanisms, will contribute to reducing the growth
of foreign labor.
There are many people who attribute the failure of Saudization efforts to the
government decisions in this regard which adopted a policy of "imposing and
obligation" to the private sector rather than "stimulation and persuasion."
There are people who see that imposing 5% annually on organizations using
twenty workers or more, did not succeed in achieving Saudization, because it
ignored market mechanisms, and adopted the mandatory instead of providing

5. Economic growth is part of the solution, not all the solution
Some people believe that employment of Saudi nationals must be done
through economic growth as the growth is leading to the creation of more jobs,
which Saudis will work in. They believe that the replacement policy, i.e.
replacement of Saudi in the non-Saudi's Place, is not feasible because we
need non-Saudis expertise, and therefore replacement policy will hamper
economic activities and create a lot of problems and difficulties to the civil
In principle, a person can observe the relationship between economic growth
and employment increase. Economic growth, which reflects the increase in
GDP, is linked to production increasing elements or increasing the productivity
of such elements in the context of artistic composition which economists call
"production function". Among the production elements which achieve growth in
the economy is the work element side by side with equipment, machinery and
capital various replies, as well as technology and natural resources of land,
forests, and others. All these elements combine to produce goods and services
and thus it is subject to certain laws known by economists, engineers and
professionals from different disciplines associated with the production process.
On the other hand, economic growth often leaves a positive impact in the
increasing demand for goods and services within the national economy, and
economic growth leads to increased purchasing power of many of the
categories whom their income increase, and thus paid to buy more goods and
services, which in turn leads economic installations to expansion its work and
activities in order to meet the growing demand for the production of goods and
services. In order for the installations to expand, it may mean the need to
recruit more manpower to produce these goods and services. Thus a series of
action and reaction continue between economic growth and increasing
employment of labor.

This perception, as I indicated earlier, is the initial perception, as the
increase in production of goods and services can be achieved through
increasing the manpower equipment, machinery and technology with
retention of the manpower or a mix of labor and capital elements. And often
happens to increase production and growth achieved without an increase in
employment, but increasing capital and technical, which is, as called by the
economists, the increase of productivity of work element, because the same
previous number of manpower will have a larger number of machines,
machines and modern technology at its disposal, and thus the worker can
produce a greater amount than was previously. The economists call this
situation "the economic growth unaccompanied by creating new jobs" or
(Jobless Growth). We shall give some realistic examples of the experiences
of the countries faced this kind of growth. Before all of this, we must point
out a fundamental issue concerning the reality of the Saudi economy. In the
Saudi economy there is a remarkable phenomenon to the attention of the
economic and non-economic observer, is the massive presence of foreign
labor numbering up to millions of people at a time when growing segments
of the Saudi people are complaining of unemployment.
Therefore, one can not but asks: How can we talk about the need for
economic growth to create new jobs for Saudis, while the jobs are available
but filled by foreign workers? In other words, the question that arises is:
what ensures that the new posts that the economic growth would open will
not go to additional foreign labor? ALSO, What ensures that the new posts
would not lead to bringing more foreign labor? Our economic history shows
that, as I indicated in earlier sections of this book, that economic growth has
contributed to an increase in labor instead of increasing the participation of
the Saudis.
Some people see that some Saudi organizations are not enthusiastic to
recruit Saudis because of the low productivity of individual Saudi, and the
way to increase recruitment and training of Saudis is to teach them new
skills and encourage them to and learn familiarized to positive and
productive work values. By imposition of acceptance of this generality; the
problem may exist either economic growth or not, because what is required
is raising the level of Saudis in the two cases even if economic growth has
been achieved or if new jobs were created Saudis will not be able to benefit
from the available career opportunities because their productivity is low
according to the previous generalized outlook.

In many cases judgments are hasty; when decision of Saudization of gold
and jewelry shops was implemented in the beginning of 2004, the number of
these stores decreased, for example, in Medina from 311 shops to 127 shops
because of their inability to implement the decisions of Saudization, and some
considered that Saudization hampers growth of the private sector thus
depriving the Saudis of career opportunities. This is not the truth, as we will
see in the next chapter that the number of Saudis working in gold and jewelry
shops at Madinah increased from 17 to 804 workers. The reason, of course,
is that the gold and jewelry sector, which was growing rapidly, did not focus,
in the past on employing Saudis, and the sectors' growth translated into
bringing more foreign labor. After Saudization, the number of foreign workers
has dropped from 2005 factor (from 21 nations) to zero.
As to the economic growth accompanied by presence of new jobs, this has
been proved by the experiences of those countries recruiting foreign labor' as
well as the countries importing of such labor, for example, what has
happened in Australia, India, Malaysia and the United States, the Philippines
and some other countries.
In Australia significant economic growth happened during the 1990s of the
last century, but the rate of unemployment remained high. Australia has been
among the countries that have achieved above average rates of economic
growth, among the Group of the OECD during that decade, but it was lower
than average
in creating new jobs. According to economists, the growth in Australia was in
productivity area and in jobs.
India also has achieved significant economic growth during the 1990s,
however, the unemployment rate was high. The Indian economy grew by
6.7% during the period from 1993 to 2000 compared with 5.2% in the last ten
years preceding that period, while the employment rate fell from 2.7% to 1.7%
between the two periods. According to economists, the reason behind that is
the focus of the Indian development strategies to achieve a high rate of
economic growth through the intensification of the use of technology and
capital at the expense of labor recruitment, which led to the recovery of
modern sectors of the economy despite their failure to provide great career
opportunities for staff. In the view of some economists that the deregulation of
Indian economy and its openness to the world economy has made the
essential obsession is to improve competitiveness and increase productivity
of the Indian labor more than creating jobs for the unemployed.

In Malaysia, the focus during the 1990s of last century, was primarily on
economic development, resulting in a higher rate of economic growth, but did
not give enough attention to creating job opportunities. Unemployment rate
rose from 6% in 1962 to 6.8% in 1968, and reached 7.3% in 1970. Malaysia
has recognized the need to review the development strategy and focused
during the second development plan period between 1971 to 1975 on
creating job opportunities for its citizens and achieving fairness in the
distribution of posts.
In the United States, the American economy has been in recession for 2001,
and then recovered after that. However, the recovery did not yield the
creation of more jobs for the American people. Until August 2003 the
American economy has lost 2.7 million jobs compared to the economy in
February 2001. In August alone, American economy lost 93000 jobs after
more than twenty months of the end of deflation. Although the United States
has exceeded the problem of deflation in the American economy and
achieved a growth rate of 8.2% during the third quarter of 2003, the
unemployment rate in December 2003 was 5.7% and the economy did not
provide during that month only thousand jobs, while the number of
unemployed in the United States in December 2004 was 8.4 million people.
These figures show that growth in the United States has note been translated
in the form of new jobs for the millions of unemployed. The reason is that the
American economy has been adopted to intensify technology and capital
raising productivity and offset the need for more workers. The American
companies often favored expand across branches abroad in search of cheap
labor instead of hiring Americans with high wages compared with those
prevailing in many developing countries, China, India and countries of
Eastern Europe.
In the Philippines, Dr. Leonardo Lanzuna, professor of economics at the
University de Manila, Philippines, noted that the annual rate of GDP growth of
the Philippine economy has increased from 3.3% in 1999 to 3.9% in 2000
while the unemployment rate during the same period increased from 9% to
9.5% and then to 11.5% in 2001.

Dr. Lanzuna wondered how the economic growth resulting in the high
unemployment rate? Found that the reason for this growth was the
accompanying increase in employment is the opening of the Philippine
economy to foreign capital by globalization which led to the use of machinery
and equipment and modern techniques instead of hiring workers, and
considered that evidence that the growth in GDP does not necessarily mean
that recruit more hands workforce.
Even when we look at the picture of inclusiveness global perspective, we find
that the reports of the International Labor Organization had proved the
phenomenon of economic growth-associated increase in jobs. The ILO
issued at the end of 2003 report on trends in labor and employment expected
in the world during the year 2004, the organization has noted that the Middle
East and North Africa has been the worst records in the world in the area of
unemployment in 2003, where the unemployment rate was 12.2% This is the
highest in the world .. It also noted that this has not been accompanied by
growth in employment. For this organization urged decision makers in the
world to face a number of challenges including addressing the problem of
economic growth - the accompanying job growth Jobless Growth and
stressed that any country can not bear the increasing rate of unemployment
in the long run because it will lead to lower demand for goods and services
and therefore limiting the prospects for economic growth.
Some may believe that this phenomenon is linked to the extent short time.
But books and literature economic development replete with examples of the
extent to which short, but outpaced the longer term. As we observe the
evolution of the annual rates of change in real GDP in some major industrial
countries for the period 1978-1997 as well as the evolution of the growth
rates of employment, economic growth did not result in any event to further
recruitment. The economy grew industrialized countries during the period at
an average rate of 2.7%, while employment grew in those countries at an
average rate of 1.1%. The United States economic growth rate of 2.7%
compared with 2% for recruitment. Japan's economy grew at a 3.7% rate
compared to the employment capacity of 1%, and Germany's economy grew
by 1.8%, while employment has grown by only 0.4%. While the French
economy grew during the period by 2.1%, the employment growth rate was
negative -0.1% capacity, either Italy, where the economy grew at an average
rate of 2.7% growth, the employment rate was 0.4%, the economy grew
Britain at 2.3% while the growth rate did not exceed 0.1% of employment and
the Canadian economy grew at a rate of 3.2% compared with 2.2% of those
employed during the period from 1978 until 1997.

He notes that many countries of the world during the era tended 1960s to
pursue a policy of development based on manufacturing, which led to the
growth of industrial production rates impressive. However, the growth rate of
employment in the industrial sectors in these countries was low as evidenced
by the statistics Between 193-1969. In Ethiopia, the growth rate of production
of the industrial sector 12.8% compared with a growth rate of 6.4%
employment, and in Nigeria compared to a rate of 14.1% 5.3%, 11.2% and in
Egypt compared to a 0.7% in Kenya 6.4% compared to a rate of 4.3%. In
Asia, we find that the growth rate of production of the industrial sector in
Pakistan during that period was 12.3% while the rate of growth of
employment in the industrial sector 2.6%, and Thailand 10.7% compared to a
negative rate of -12%. In the Latin American continent production grew by
6.5% while employment 1.1%, and in Colombia by 5.9% compared with 2.8%
in Costa Rica at 8.9% compared to 2.8%. The other rates that show the
difference between the rate of growth of production and the growth rate of
employment in the industrial sector, which was suspended by the developing
countries during the period of high hopes 1960s of the last century.
In earlier times was the services sector is the sector which reliable to absorb
surplus manpower which washed industry and the growing proportion of the
contribution remain the services sector in world economies over the past
inaction. This belief was based on the premise that the services sector is one
of the activities that used techniques productive labor intensive element
unlike industry using production techniques of intensive capital and machines.
However, signs industrial transformation predicts the contrary. Says
researcher Jeremy Rivkin author of the book "end of the reign of function"
(The decline of the global labor force and the emergence of the post-slavery
"for the time being which exclude workers in the industrial sector of the
economic process, is still among many economists and selected officials
hope to be able the services sector and the administrative sector jobs to
absorb the millions of unemployed persons who are seeking career
opportunity, but more likely to shatter their hopes. Valaatmmeh (intensify the
use of machinery) and the restructuring already SOLVE replace human labor
force. That aide machines able to perform many tasks mental handled by
humans now, but at a faster rate is Andersen Consulting, one of the great
institutions of corporate restructuring, believes that the restructuring in the
industry and one of the industries of the service sector (banks) means the
loss of 30% to 40% of jobs over the past the next seven, and this translates
to 700 thousand numbers and function are irreplaceable. these radical
transformations that prompted the French Socialist minister Jacques Attali
said, "The machinery is working class-proletariat-new.

These examples show that economic growth may not lead to increased
recruitment of manpower, because production can be achieved through a
work, but also through other productive elements such as machinery and
technical and others. Hence, the bet that economic growth alone was able to
recruit Saudis and stop the policy of bringing Saudis replace arrivals may not
achieve the desired result. This does not mean to minimize the importance of
economic growth, to create more employment opportunities for the increasing
numbers of Saudi job seekers. It means that we have to take advantage of
the career opportunities available at the present time, and filled by imported
labor rather than waiting for job opportunities, has achieved has not achieved
economic growth, or it may already be gone but, as usual, to non-Saudis
arguing that the low productivity of the Saudis and they non-qualified to fill
these posts.
Of course, that does not contradict with each work consistently and diligently
to push forward the development process forward, and take all actions that
create an environment suitable for local action to encourage domestic
investment and attract foreign capital. Saudi Arabia, as well as funds held
abroad to invest in the Kingdom according to the comparative advantages of
the country and which opens wide to recruit Saudis. Because economic
activity will then be based on logical grounds as economic concept right.

6. Between the necessary conditions and sufficient conditions
The recurring idea in this book is that excessive recruitment of foreign
labor has contributed substantially to a significant imbalance in the
labor Saudi market. We have many reasons to some very logical, which
made this recruitment absolute necessity, especially in the early times
of the experience of foreign recruitment in spite of all the negatives that
accompanied the experiment. We also mentioned that the reform of
this deep imbalance in the Saudi labor market will not be achieved
without diving into the roots of the problem: Foreign Recruitment.
This does not mean in any way that rationalization of recruitment only
will end the imbalance in the labor market. What we are saying here, is
like what mathematics people are saying when differentiating between
"sufficient condition" and the "necessary but not sufficient condition" to
reach mathematical result. The necessary condition can not be reached
without any result achieved. However, if such a condition has been
achieved this does not mean that we get to the desired result because
other governing conditions may be absent, but the existence of the
sufficient condition is enough to reach a result.
Recruitment rationalization is then necessary but not sufficient to eliminate
the imbalance in the Saudi labor market. Al other solutions proposed in
symposia, conferences, meetings and studies to overcome the problems of
the labor market will not be sufficient in the absence of the necessary
condition which is recruitment rationalization.
Some of the proposed solutions in most occasions
Discussing unemployment, Saudization, and labor market concerns, are as
- Matching the outputs of educational and training institutions and the needs of
the labor market, including reform of the educational and training system.
- Reform of work regulation, especially as regards the capability of employers
to terminate employee who the employer finds as not competent.

- Devote ethics of productive work in the part of producer Saudi employee, most
importantly the ethics of discipline and respect for time.
- Create a minimum wage scale.
- Determine working hours for private enterprises.
- Stimulate private enterprises to recruit Saudis through financial support and
granting of preferences to the organizations that achieve high proportions of
- Creating new opportunities for employment of women.
Any of these solutions can be detailed to endless partial solutions. If we
take for example the solution considered under the title of "matching
between the output of educational and training institutions and the
needs of the labor market", we will find that there are hundreds of
detailed solutions, but all of these detailed solutions will be unbeneficial
in the absence of a policy rationalizing foreign recruitment. Then, what
is the feasibility of the training and education of a Saudi citizen who
finds a lookout foreign competitor, where the citizen could not accept
the second in the low pay that does not meet his living needs in a
community that differs radically from the society which the foreign
worker came from? The foreign worker who comes from a State of the
Third World countries to work as a driver in a public transport institution
"limousine", is often not suited to lead some types of existing modern
cars and does not know neither the geography of the town, streets,
roads nor the language of the country folks. I.e. he lacks any kind of
experience or training, while the Saudi citizen knows all these things
and does not need to be trained. Moreover, if the citizen needs
something from this training it would be much less than that needed by
the foreign worker. However, most of these institutions prefer to employ
foreign worker for reasons unrelated to training and experience. When
we turn to the other professional levels, we find that this is repeated
with the holders of bachelors and diplomas in application scientific
areas such as engineering, computer and others.

In any event, some of the same previous solutions are the subject of vast
controversy between those who see such solutions correct and the opposites.
For example, there is also controversy about the importance of establishment
of minimum wage scale, which is received by the Saudi national. In the
moment such a wage is imposed, the Saudi citizen will be less attractive than
foreign worker, in the case of equality between the Saudi and the foreign
worker to obtain this benefit, when we know that the foreign worker drops
many things that the Saudi would not accept to drop as explained previously.
Further, we could imagine, in that case, the volume of remittances by foreign
workers because of their inflated wages after granting them the minimum
wage advantage. If minimum wage had been decided in favor of the Saudi
citizen only, and not the foreign worker, this decision would put us in a
quagmire with international organizations because in this case we will be
accused of discrimination between people according to their nationalities.
This is the last thing we need. Therefore, we may be obliged to decide the
sectors, activities and professions limited for the Saudis as the only sectors to
grant its workers the minimum wage advantage. Here we place ourselves in
long mazes with the institutions which will be more exposed to such limitation;
and thus to the high wage bill comparable with other institutions, which will
benefit from two advantages of not limiting work to the Saudis and not to
impose a minimum wage for workers.
In Conclusion, all of these solutions, although some controversial, will not
help much away from "the necessary solution," which is rationalization of
foreign recruitment. However, rationalization of foreign recruitment may not
need us to take some of the previous resolutions because market
mechanisms would create logical solutions to us through the interaction of
supply and demand and the resulting individual initiatives on the supply side
and demand side. The role of government is to regulate the labor market as
prohibiting practices that reduce the transparency of the economic process or
the practices that impede competitiveness amongst different economic units
on the sides of the supply curve and demand curve in the labor market map;
as well as training of Saudis in various ways, whether through training
institutions or governmental training institutions in the private sector.

7. The effect of not applying the Nationalization (Saudization)
Unemployment rate rose in the Kingdom during recent years from 8.1% in
1999 to 8.14% in 2000, then to 8.34% in 2001, up to 9.66% in 2002,
according to official estimates of General Statistics Department, the latest
statistics is 15% as of 2007. There is no doubt that the presence of low-cost
foreign labor has heightened unemployment rate meanwhile population
growth rates are increasing in the Kingdom, where growth in Saudis
population who are able to work is estimated of 4.69% per annum during the
period of the seventh development plan from 1999 to 2004.
Unemployment is one of the worst social ills that faces any society.
Unemployment does not mean only that the unemployed does not have a
source of income to feed himself and his family, but also a feeling that the
unemployed person is marginal and has no value in his society.
Unemployment inherits a deep sense of non-feasibility, insult and lack of
dignity. When an unemployed individual finds that those who are around him
are working and adding value to their community while he hangs about at
home or wandering in the streets and cafes, he will feel of spiritual and moral
vacuum and his confidence in himself and his society would shaken.
At the beginning the unemployed person will feel angry, and then this anger
turns, by the passage of time, into such a negative attitude mixed with
frustration and aggressiveness towards others. Thus, the problems of the
unemployed person would increase with his family members, the near
surroundings, and then with his community in general. The unemployed
person would then deviate into destructive behaviors.
Many studies have shown correlation between unemployment and
psychological diseases. social scientist Dr. William Avison Says that the loss
of a job leads to a sense of moral decline by the unemployed person and the
inability to control his feelings, which casts him in the midst of psychological
diseases. To be sure, some psychiatric disorders destroy the patient if
causes have not been cured. In the case of long unemployment, the
destruction sometimes may be constant and so would be difficult for a person
to restore his vitality. Hence, offering a job to this person becomes almost
impossible because his ability to cope with the work requirements diminishes
with the passage of time.

The interruption source of income for the unemployed person, and the
psychological his suffering because of the social pressures and personal
embarrassment he faces continuously, may push some people to fall deeper
in crime. In the study conducted by the Manpower Council in conjunction with
the Interior Ministry, it has been shown that 83.92% of crime committers are
unemployed persons in the study sample; given that unemployment is the
main reason for their commission of the crime. The study attributed this result
to the negative effects of the phenomenon of unemployment on the
individuals economically, socially which increases their frustration and in the
accumulation of dislike and hatred feelings in themselves, which may push
them to the delinquency towards crime.
The study found that the previous crimes committed by the unemployed
persons had increased during the previous period covered by the study
(1989-1995) by 319.53% at an annual average rate of 15.42%. The study
showed that the majority of the unemployed persons who committed crimes
have made efforts to get to work but were unable to do so.
Also, the study had found that the age of the perpetrators of unemployed are
concentrated in the slot, ranging from 20-30 years old. The study indicated
that in this phase of age the person is often bear the stamp of bullish and
physical strength, away from wisdom and deliberation, eager to achieve
ambitions in the shortest and easiest ways, and eager for appropriate work
opportunity that achieves his aspirations and secures him stable life.
Unemployment estimates issued by the General Statistics Department in
2001, showed that unemployment rates are concentrated in different age
groups as follows:

15 to less than 20 years, equal to 48.51%

20 to less than 25 years equal to 29.07%

25 to less than 30 years, equal to 10.77%

Unemployment rate in the rest ages is equivalent to 11.02%.

Another study conducted in 2002H on the social characteristics of
unemployed persons of the crime committers, showed that those under the
age of 30 of the study sample constitute 64.07% of the volume of that
category. The study found also that 46.08% of the surveyed unemployed
persons, had committed crimes because of the need of money, 21.5% had
committed crime because of vacuum.
It is clear form the foregoing that the small age groups or lesser ages are
critical categories that could be spoiled significantly of unemployment and
threaten the society. Jeremy Rivkin, author of the book "end of the reign of
the career" observed horrible images of violence of unemployed youth and
adolescents in the European and American cities. In New York City,
Washington and Los Angeles and some European cities there are gangs of
unemployed adolescents sowing terror in residential areas that were safe in
the past. Incidents like robberies, break into houses, shooting from moving
vehicles, drug trafficking and riots increased as a result of unemployment.
However, the other age groups are also threatened by unemployment and
loss of jobs they used to handle. Mr. Jeremy conveys of Dr. Thomas Cottle,
researcher specialized in psychology and clinical sociology, that some of
those who lose their jobs are exposed to sick symptoms similar to symptoms
that appear on people who are dying because work has been linked in their
minds over life. The researcher gives an example for the purposes of his
research, where he conducted interview with 47 years old man named
George Wilkinson who lost his job as a manager of small company. Wilkinson
says, "there are only two worlds, either to work every day in normal working
conditions and obtain vacation, or die, and that there is no compromise
solution". Working is just like breathing, a thing you don't think of but you
practice it only to keep you alive, and when you quit it you die. After a year of
this interview George Wilkinson committed suicide by shooting himself.

Available literatures on the social and economic impacts of unemployment
indicate that, unemployment leads to many devastating effects including:

Waste of deactivated human resources.

Feelings of alienation and weak sense of belonging and loyalty to the

Psychiatric disorders


Abuse of alcohol and drugs

Prevalence extremist ideas.

Divorce and family disintegration

Theft and assault on others properties.

Killing and Sexual assaulting

Unemployment among Saudis is only a part of the many negatives of the
consequences of the presence of foreign labor overly exceeds the needs of
the economy and society in Saudi Arabia. Unemployment despite its gravity
as an economic and stressing social problem comes in the context of larger
number of negatives and numerous problems created by the phenomenon of
the surplus foreign labor.
The negative effects of the foreign labor on Saudi individual begin since his
birth and childhood. He arises under the confines of foreign maid who often
becomes nurturer and not just working at home for cooking and washing
service. The Saudi child spends long hours with the foreign maid far from his
mother who works outside the home or devoted to her own affairs even if she
were not working. Saudi houses are full of large numbers of workers beyond
the family's needs in some cases, because some consider the existence of
more than one maid from the perspective of social relevance. Saudi families
have become dependent almost entirely on the maid servants where a
reprehensible type of severe dependency has resulted to the extent that the
Saudi child is not doing any role in serving himself even in the simplest
things. Even if he needs a cup of water he asks the maid to bring it for him.
Because of this a feeling of relying "unconsciously" on others has been
created with Saudi citizen as to performance of any act, and this partly
explains the reluctance of some young Saudis to do many works and their
inability cope with the work requirements in the private

sector because he used to see another person doing the work on his behalf
since he was a young child.
Some people are surprised by the behavior of some Saudi young people and
teenagers at the present time and that many of them lack the minimum of
seriousness and weak dependence on them for the performance of any act,
and tyranny of selfish.
But what can we expect from a person who has emerged since was a small
child seeing that there is someone who performs on his behalf all his personal
affairs, and not having any role in the home and is dependent on the maid
and driver, and that no one asks him to perform any useful action even for
training and familiarity.
Some of the negative impacts that face Saudi individual since childhood, are
the cultural influences where he picks up the daily speech vocabularies from
the foreign maid perhaps before he picks it up from his father and mother. He
also picks up from the maid a lot values that form his psychological
personality and leave their marks on his behaviors over life. In many cases
the child is affected by the maid to the extent that when she travels to her
country after completing her work, leaves deep psychological crisis in the part
of the child.
Indeed, the cultural influences of foreign labor are not caused by the foreign
house workers only, but by most categories of foreign labor of all kinds,
especially by those coming from the Arab countries. When one goes to buy
supplies from the market, obtain service from a trade business, rents a car,
go to the hospital or anywhere he hears a lot of languages and dialects..
There is no doubt that this leaves negative impact on the Arabic language,
especially given that some work environments are becoming exclusively
foreign and their work language is foreign and not Arabic. It is noticeable that
some hybrid vocabularies marched to the Arabic and Saudi citizen have used
such vocabularies even when talking with another Saudi citizen.

If the language is a key element in the equation of culture, culture is broadly
defined to include many social and ethical elements. These cultural values
certainly been significantly influenced by the excessive presence of the
foreign labor. We do not say that all the components of our local culture are
positive values but the sweeping of foreign values to our culture due to the
imbalance of population which made the foreign labor rate up to a third of the
population structure, poses a real threat to the cultural fabric of the Saudi
society, especially that the majority of foreign labor is simple and illiteracy
labor came from small rural villages.
The imbalance in the Kingdom's population structure by the presence of
excessive foreign labor has left negative impact on the community through
the proportion of crimes committed by the foreigners. The ratio of expatriates
to the total population is 32%, while the proportion of crimes committed by the
expatriates of 75.59% of the crimes of bribery, 75.05% of forgery crimes and
67.54% of swindling and fraud offenses, 48.28% of the thefts and 47.49% of
ethical crimes, 43.6% of composed crimes and 40.72% of identity theft crimes
and 31.66% of criminal offenses for cars, and 28.39% of the crimes of assault
and beat, and 27.77% of intentional murder, and 26.55% of the alcohol
crimes, and 26.29% of drug offenses.
Dr. Abdullah Bin Hussein Al Khalifa, found in a field study, that "foreigners
commit crime, in pattern and size, to the extent and pattern of crime occurring
in the communities they have come from, this means that the foreigners
coming to Saudi society from communities infested of criminal behaviors are
more inclined than others to be involved in the same behaviors, and vice
versa. In his review of the literature on this subject in the Arab Gulf states,
says Dr. Khalifa: "a number of studies discuss the impact of foreign labor in
the volume of crime, and a number of these studies pointed out that foreign
labor commit crimes in ratios greater than such lobar actual size in the
society, some of those studies also revealed the emergence of new patterns
of criminal behavior were not known locally before the advent of foreign labor.

It is known that communities generally subject to constant change, as social
change is the basic recipe in any society as it may seem stagnant at first
glance. We could imagine the impact of foreign labor in identifying the change
aspects that will occur on our society and contribute to its strucrure over the
upcoming stage. Back to the many literatures available on "social change",
we could say that any immigration or foreign presence must leave their deep
impacts on the community. Such effects may be negative or positive. Some
of the positive effects left by the early foreign presence in the eastern region
of Saudi Arabia in the early entry of oil companies are the behavior of
discipline and respect for work values. But we note how different the impacts
of foreign labor which came later to the region during the era of so-called
"boom" and thereafter.
These negative effects have been exacerbated by the presence of surplus
large numbers of foreign labor which often created a kind of friction between
the citizen and foreign worker. The nature of the existing circumstances has
isolated foreign labor community from the periphery of society in which they
live, is the Saudi society. Hence, there is "another community" within Saudi
society and only small numbers of Saudis know such society. Therefore, the
daily deal between the Saud citizen and foreign labor carries some pictures of
friction because of the social and cultural gap that separates the two sides.
The reasons for this friction is that the foreign worker believes sometimes that
the relationship with the Saudi is unequal authoritarian relationship in favor of
Saudi, which may create some feelings of hatred and perhaps revenge in any
form. The Saudi sometimes looks at the foreign worker suspiciously because
of the differences in customs and traditions and may misunderstand the
foreign worker and imagines that he wants to use or even stolen him. Given
that the majority of foreign labor with which Saudi citizens directly deal is
simple labor, some Saudis look at such labor generally in a superstructure
way wounding the feelings of the foreign labor in general. If we add to this the
conflicts that occur on the financial benefits of foreign workers and quality of
service provided to them, we understand the bitterness resulted from such
bitterness, which may be translated into bad practices. Because of this, the
Kingdom sometimes faces criticisms from foreign governments and global
labor organizations and human rights associations. There is no doubt that
such criticisms damage the country's reputation and the reputation of the
Saudi citizen.

From an economic perspective we could see the positive contributions of the
foreign labor. However, these positive effects must be compared to the
negative effects of surplus foreign labor. Perhaps the most obvious negative
effects are the creation of economic structure lacks in its ingredients the
essential elements which ensure continuity of some businesses and
economic organizations which had no real economic justification for its
creation but cheaper foreign labor. This has led to distortion of market forces
and mechanisms, where organizations of no real relative advantage have
been created in the area of its work. Those institutions have devoted quick
profit concept, and also became stumbling block in the saudization road
because they cant saudize their posts then they will lose the most important
element in equalized profitability which is the existence of cheaper foreign
labor. Some existing institutions, which appear at first glance as they belong
to Saudi individuals, are in fact, exclusively owned by foreign labor covered
by Saudi persons who receive commission or lump sum for sponsoring such
foreign labor and give them legal coverage. Of course, this cover has led to
competing Saudis who have installations in the market, or who want to enter
the market, especially in the area of small enterprises that could attract large
numbers of small investors.
Due to the presence of such huge numbers of surplus foreign labor that
exceed the real need, the abroad financial remittances by those workers have
become constant drain on the Saudi payments balance. The total remittances
were about sixty billion Riyals in 2002. A study, issued by the General
Secretariat of GCC countries, estimates the volume of remittances of foreign
labor from the Kingdom during the period from 1975 to 2002 of 260 billion
dollars, i.e. about 975 billion Riyals. It is certain that these enormous funds
would have revived the Saudi economy if stayed at home and invested to
establish economic projects to provide income and employment for Saudi

As regards Saudi human resources, we can say that the presence of surplus
foreign labor, but not the essential labor, had contributed to the reduction of
Saudi human resources growth. As the presence of surplus foreign labor of
specialties needed by the country in the field of medicine, nursing and
university education and the like have contributed to the development of
Saudi manpower; the surplus labor has created a cheaper ready alternative.
Thus, some employers did not find motivation to train the Saudi and grant him
the opportunity to learn and master the profession, but the employer always
compares the Saudi worker with the foreigner although is not objective
From the foregoing it can be said that the intense of foreign labor surplus to
requirements will be devastating if continues at its previous historic velocity.
The issue is not a question of specific number of foreign labor working in the
key areas that are difficult to provide national manpower to run, but beyond
that to turn this foreign labor into in addiction, to the degree to which
unemployment started to appear among foreign labor itself in addition to
unemployment among Saudis.
Many countries have encouraged attracting foreign labor to meet their
existing needs in certain historical and economic conditions. But the matter
did not reach the degree to imbalance the local population structure, as is the
case in the Kingdom and the rest of the GCC countries. The GCC Council
General Secretariat estimated the expected number of foreign manpower of
17 million foreign worker by 2012 if recruitment continues in the same
previous historical pace according to some scenarios.
For these reasons we say that our country, Saudi Arabia, is facing two
options: either Saudization or Deluge. It is certainly true that the real option is
the first option which maintains a productive community that keeps on with
the rest communities in terms of export and import and benefit from others'
technology and resources and meanwhile make others benefit from our
products and munificence, and doesn't isolate itself from the exchange of
globalization movement but also don't build upon fragile structure fully
dependent on others, but on the sons of the homeland bearing in mind that
should not prevent us benefit from the foreign experiences according to the
real need of the country.

General Analysis
In the part of this essay I will cover the relation between the Economics and
the Gender.
why Women make less then Men?
Loss of time in the field and intermittent absence can put women at a
economic disadvantage. (Many times this difference in treatment is
against the law.)
Stay-at-home Moms
98% of stay-at-home parents are women leaving them out of the job
market for extended periods of time.
Time out of the labor market causes women to lose the period of rapid
economic advancement.
Different Professions
Teachers (83%) Nurses (93%) Social Workers (69%) Day Care workers
(97%) Secretaries (99%) Vs Mechanics(4%), Construction Workers (2%),
Truck Drivers(5%)
Flexible Employment
Women, more than men, tend to choose jobs that allow them to deal with her
children's activities and il nesses.
Why Competition would Eliminate Discriminatory pay
Businesses that hired only men at the higher wage would have higher costs
than businesses that did not discriminate.
Businesses that did not discriminate could lower their prices and take the
market share of those firms that did discriminate.
As this happened firms would see that discrimination was not consistent with
maximizing profits and would stop discriminating.

Why Competition Would Not Necessarily Eliminate Discrimination
In industries where there is economic profit, firm owners may continue to
discriminate and consider it a price they are willing to pay so as to not employ
In industries in which the customer chooses which business to patronize
based on gender, firms may be willing to discriminate because their profit
maximizing interest and discrimination are consistent.

Case Study: Implementing the Saudization
in the Gold and Jewelry sector
As a matter of principle; no one is against Saudization, as I mentioned in the
previous chapter, but the problem is always in the details. When going into
details enthusiasm will fade out and another theoretical point of view appears
filled with caution and hesitation. Not because of bad faith, but because
businessmen of every economic activity believe that their activity represents
"special case" and is non-Saudizable.
As an example, when the government wanted to Saudize gold and jewelry
shops, the shop owners expressed fear of lack of preparedness of the sector
for Saudization, and asked concerned bodies repeatedly, to postpone
implementation of Saudization. Although the concerned departments have
positively responded more than once to their requests for postponement, but
the owners of gold and jewelry shops have returned again to ask for
postponement whenever earlier postponement has expired.
Despite that, Saudization of gold and jewelry shops has succeeded at the first
serious attempt.
The story of saudizing gold and jewelry shops begins with the decision of the
Manpower Council in 1421, to limit seller posts in gold and jewelry exhibitions
and shops to Saudis only and not allowing foreign labor to work in such posts.
The owners of these shops were given a full year notice before the deadline
for implementing Saudization in order to arrange their own affairs before the
start of implementing the resolution. Coordination was also made with other
training institutions in the public and civil sectors to provide training courses
on the profession of selling gold and jewelry.
By the time of implementation in 1422, shop owners expressed their inability
to Saudize the shops, and asked to postpone implementation of the
resolution. HRH Prince Nayef bin Abdulaziz, Chairman of the Board of
Manpower responded to their request and issued his decision in 1422 to
gradually implement the resolution accounting for the circumstances of the
owners of gold and jewelry shops, according to specific ratios, starting with
30% of the total employees, and would rise to 50% at the beginning of next
year, and complete and reach 100% at the beginning of next year i.e. by 01-
01-1424 date.

That was accompanied by coordination between the Secretariat General of
Manpower Council and the civil and governmental training bodies. However,
once again, by the specified time the shop owners requested anther
postponement of implementation.
In spite of everything, postponement was approved till the start of next year,
i.e. to 01/01/1425, but _ believe it or not- voices have risen again asking for
further postponement when implementation of resolution fell due.
The argument has always been given is that the gold and jewelry selling
profession needs special skills and personal qualities that are available only
in a few people, therefore, it is difficult to bring Saudi citizen to replace the
foreigner in the short term. But the short term remains to passing endlessly
as whenever a deadline expires and implementation date falls due, owners of
gold and jewelry shops again called for postponement; although training
courses held to train Saudis on such unexceptional profession with the
support of the Human Resources Development Fund and the National
Organization for joint training of the institution of technical education and
vocational training and some other private institutions did not receive the
popularity of the owners of gold and jewelry shops. The shop owners were
expected to send to such training courses the people they want to attract to
their shops through programs supported by the aforesaid Fund during the
training and recruitment beginnings.
The experience of Saudizing gold and jewelry shops in Medina, shows us
how the possibility of implementing Saudization despite fears expressed by
the owners of such shops. This experiment shows also the great benefits that
can be achieved by the process of Saudization despite the presence of the
many obstacles and challenges in the face of Saudi citizens, such as long
working hours and lack of incentives, and so on.
When the Sauization resolution was introduced the number of gold and
jewelry shops in Medina was 331 shops and the number of sellers was 1426
persons belonging to 21 nationals, and there were 17 Saudi only among
them; i.e. Saudization rate was only 1.19%.
After a year of implementation of the resolution, the number of the
rehabilitated persons for the profession of selling gold and jewelry had
reached more than 800 Saudi sellers. In the first month of 1424 Saudization
rate accounted to 100%. As a result of the efforts of Saudization, the shops
that practiced concealment have disappeared and thus decreased the total
number of shops from 311 to 127 shops by the end of 1424, and the number
of Saudis sellers settled at 625 person.

The Saudization Executive Committee in the Principality of the Medina,
conducted a field study in the eleventh month of 1424, before the introduction
of comprehensive Saudization, and came with following results:
Most of the sellers came from outside Medina, this means that the Saudi
citizen has the desire to move where his job exists.
Most sellers are between the ages of twenty and thirty, and then sellers of
less than twenty years, then between forty and fifty years, which means that
this work attracts all groups of age.
Most of the sellers have Intermediate Efficiency Qualification, then primary
and secondary school certificates. This means that such a job does not
require high qualifications and did not affect the ability of the individual to
handle the profession.
95% of the sellers never had access to training courses in sale of gold and
jewelry career and were trained in on the job. This indicates that despite the
importance of training courses generally, training on work can be appropriate
62% of the sellers did not have previous experience in selling gold and
jewelry. As for the 38% who had experience has gained it during the previous
two years of the implementation during the gradual Saudization. This
indicates that the tightening by some of the shop owners about experience
requirement may be excessive in some cases.

There is high demand from Saudis to work in this profession, despite the
obstacles. The study found that there are a number of constraints in this
context such as:

Long working hours and lack of weekly rest, 534 sellers serving morning and
evening periods, the number of hours for some sellers reaches 16 hours a
day. Also, some of them do not obtain leave weekly. There are 32 sellers
serving one period only, but they are students who work in relatives' shops
and some sellers with meager wages who wish to improve their conditions.

Non-subscription in social insurance: all sellers, except for six of them, are
not subscribers in the social insurance system although some expressed his
desire to subscribe.

Work without contracts: 74% of the Saudi sellers work without employment
contracts, despite the fact that Article 83 of the labor law dictates for written
employment contract.
Despite all these constraints, the demand for enrollment in the "gold and
jewelry seller" profession was significant. It is noted that limiting this
profession to the Saudis had launched market mechanisms to fine-tune the
labor market with the new reality as is the nature of markets to adjust to
changes according to supply and demand. For example, figures show that
24% of Saudi sellers in gold and jewelry shops in Medina, paid between 3000
to 5000 riyals, and there are higher wages than that despite the absence of
minimum wage. This indicates, on the other hand, that the imbalance in the
pay structure is due to the intensive presence of foreign labor that exceeds
the local economy requirements.
The study of Medina ironically revealed, that the declining number of gold and
jewelry shops from 311 to 127 shops was accompanied by a rise in the
number of Saudi sellers from 17 to 804 persons. This confirms that many of
the shops had practiced concealment, and that economy did not lose any
thing with such shops disappearance, all the issue is that the share of these
shops in the total volume of sales has turned into shops that employ Saudis,
which shops have continued in the market.

The experience of Medina has been repeated in more than one region in the
kingdom, and has succeeded dramatically both in terms of attracting Saudi
citizens to work in gold and jewelry shops, or in terms of elimination of
concealment, or modification of the structure of wages according to market
mechanism, without interference from the government for the purpose of
minimum wage. These steps were accompanied by an increase in the sales
of the shops which have initiated Saudization functions, as buyers have
turned to these shops from those shops which have had to close down
because of their failure to achieve Saudization.
Experiences in various regions of the Kingdom have proved the possibility of
the success of Saudization whatever seemed at first glance as not promising
process from the point of view of some people, especially the owners of the
unsaudized activities; as market mechanisms and forces begin work and
complete the adjustment process in order to achieve balance in the market.

General Recommendations
With all had been mentioned above I'm suggesting the following:
The Saudization became a most to avoid the negative impact on the society, family
and the individual .
The leaders and mangers become role models of passing knowledge to the young
Saudi employees to make them better employees.
HR Dept. should ensure the implementation of the Saudization .

Conclusion: A New Perspective
As I am the Human Resources of my Company, I will
establish a system that will focus on implementing the
Saudization without impact the business.
Moreover, the HR Dept. encourage the organization to
invest in the young Saudi employees by developing
strong training programs.
HR Dept. should balance between implementing the
Saudization and ethical issues.


Principles of Economics Mark Vandenplas, Dominick Salvatore, Eugene A.

Saudization or Flood Dr. Abdelwahed ALHOMAID, Ph. DFirst Edition, (Arabic
Version) .

More references had mentioned within this essay.


AIU Quick Search

Contact Us Today!

We understand how busy adults do not have time to go back to school. Now, it's possible to earn your degree in the comfort of your own home and still have time for yourself and your family. The Admissions office is here to help you, for additional information or to see if you qualify for admissions please contact us. If you are ready to apply please submit your Online Application and paste your resume and any additional comments/questions in the area provided.

Pioneer Plaza
900 Fort Street Mall 905
Honolulu, HI 96813
800-993-0066 (Toll Free in US)
808-924-9567 (Internationally)
808-947-2488 (Fax)