INSIGHT PAPER Analysis of GASTAT Labour Force Survey Q1 2018 TA KA MOL A D VISORY U N IT 2018
2018 INSIGHT PAPER Analysis of GASTAT Labour Force Survey Q1 2018 February 2017
INSIGHT PAPER Fiscal and Economic Factors The Saudi economy is expected to grow by 2.2% in 2018 which is to an extent due to the improvement of the price of oil according to Jadwa Investment s Macroeconomic Report 2018. Saudi Arabia is likely to compensate for the deficit in the oil market due to expected US sanctions on Iran as well as oil outages in other OPEC member states. Non-oil GDP is predicted to grow to 1.4%. Due to the rise in oil prices to $75 per barrel as of Q2 2018, Saudi Arabia s fiscal deficit is expected to decline to SAR 111 billion as opposed to the previous SAR 195 billion mentioned in Kingdom s budget statement of 2018. In terms of expenditure, Q1 of 2018 saw total government expenses rise by 18 percent year-on-year, to a total of SAR 201 billion. While the 2018 budget expands to all sectors, the priority sectors (similar to recent years) are; military, security services, education, healthcare and economic resources comprising of 77 percent of total budget allocations. Due to higher yearly expenditure, the fiscal deficit increased by 31 to SAR 34 billion. As stated in the Q1 2018 budget report, the deficit was financed by external (SAR22.5 billion) and domestic (SR 18 billion) borrowing. Whilst expenditure has increased, a significant share of this increase is due to the Social Benefits related to the Citizen s Account that helped cushion the effects of VAT and energy price rises for Saudi households since January 2018. By April 2018, a total of SAR10.8 billion had been spent through the Citizen s Account programme since its inception in February 2017. These benefits witnessed rises in Q1 2018, up almost 200 percent to SAR18 billion. According to the annual fiscal budget, around SAR2.5 billion per month (SAR30 billion per year) was allocated to the Citizen s Account programme in 2018. Consequently, around SAR6.5 billion was distributed during Q1 2018, with around 3.5 million households directly benefitting. Expenditures on Goods and Services have been declining year-on-year falling substantially by 39 percent in Q1 2018. On average, prices have risen by 2.7% due to VAT and the increase of energy costs. At the same time food and beverages prices increased by 5.2%. The General Authority of Statistics (GASTAT) recent release of inflation rates for April displays since the start of the year, prices have risen by an average of 2.8 percent due to the introduction of VAT. According to Jadwa Investment s inflation report, Inflation is expected to pick up intensely in 2018 to reach 3.1% due to expected higher imported inflation, and higher costs borne by local food and agriculture companies. Additionally, the combined effects from the implementation of VAT, and energy price reform will directly impact inflation. Rises in electricity tariffs have already been announced, with a rise in tariffs for residential, commercial, agricultural, healthcare, private education, and charitable institutions, taking effect from 1st January 2018. Expenses Q1 2017 Q1 2018 Compensation of Employees Goods & Services Financing Expenses Subsidies Grants Social Benefits Other Expenses Non-Financial Assets 94,085 16,712 1,258 46 571 6,607 21,992 29,006 112,922 10,240 4,145 2,993 The Privatisation Programme under the Vision 2030 Visual Realisation Programme highlights three groups of metrics that will be monitored. These are 1) Macroeconomic metrics, 2) Programme metrics and 3) Game changers: o NTP 2020 Targets include 10-12 thousand jobs as well as contribution to local content which is targeted at SAR 8.3 billion. o 5 main privatization projects by 2020: Privatise a segment of the Saline Water Conversion Corporation (SWCC) Ras Al Khair station 100% Privatisation of four flour mills. Privatization of Saudi Sports clubs. Privatisation of the Saudi Post Service (and/or PPP) 30 18,782 25,521 25,959 Privatisation of a number of transport projects. Change (%) 20-39 -95 16-11 Total 170,287 200,592 18 Also included are the corporatisation of a few initiatives by transforming assets into government or non-profit corporates. These include Saudi Ports, King Faisal Hospital and Research Centre and a few transport projects. Among the above-mentioned initiatives, game-changers have been highlighted which include the ports corporatisation as well as the partial SWCC privatization. An additional metric to be considered is the percentage of services privatised and or/ppp in each sector. For the purpose of the labour market, the restructuring is also expected to create new jobs in the medium term between 2022-2030 due to the growth of profits which will require more workers to meet the demand and remain competitive. It is also predicted to create worker re-distribution as well as offer more training opportunities. Privatisation of the health sector might result in significant job opportunities for Saudis by 2020. The Ministry of Civil Service recently stated that around 30% of the public health workers are foreigners. 1
Unemployment Trends The Saudi unemployment rate since last quarter (Q4 2017) has risen by 0.1% to 12.9% despite the employment rate increasing by over 110,000 Saudis and decreasing by over half a million expats within the last year. This presents a 0.2 increase from the same time last year which saw unemployment reach 12.7%. Overall unemployment numbers have also risen within the last year since Q1 2017 from 722,910 to 778,937 by 7% with the increase in the number of unemployed males being 1.5% higher at 5,308 more males unemployed, compared to 411 more females unemployed (0.09% increase). The Saudi economic participation rate on the other hand has increased since Q1 2017 by almost 2% from 40.3% to 41.9%. The male participation rate increased by 1.6% whereas a larger increase can be seen among females with 2.1% standing at 19.5% participation Despite the positive rise in female economic participation, the rate is still significantly less than MLSD s NTP 2020 target to increase participation to 28%. Between Q4 2016 and Q1 2018, there has been a positive shift in terms of employed female expat nationals versus employed female Saudi nationals with a decrease of 38, 500 expat nationals and an increase of around 63,000 Saudi nationals in the labour force. According to the recent labour force survey released for GASTAT, 29.2% of Saudis reported that low wages caused them to leave their jobs, a 9% increase from a year ago, followed by a 29.1% of Saudis who left their jobs due to being discharged by their employers. Respectively, these figures are higher for females where 31% of females reported low wages and 28% of females said they were discharged as reasons for leaving their jobs, which represents an increase of 10.8% and 6.3% respectively since Q1 2017. There has also been a decrease in the number of jobseekers since Q4 2017 by 1.4% with a decrease of 1.4% of male jobseekers and 1.3% of female job seekers. In terms of Saudi national average monthly wage, both wages for males and females has seen a slight increase since Q4 2017 from 8,995 SAR to 9,230 SAR for females and 10,160 SAR to 10, 289 SAR for males. While Saudi male wage has increased from Q1 2017 by just over 200 SAR per month, the Saudi female wage was slightly higher at 9,240 SAR per month. 12.9 12.8 12.7 Unemployment Rate 7.6 7.5 7.2 30.9 Total Male Female Q1 2017 Q4 2017 Q1 2018 31 33 Sectoral Trends It is important to note the drop in expat workers in the labour market, particularly across non-construction sectors. A total of 273,000 expats left the private sector across post and telecommunications, retail and trade, mining, manufacturing, electricity, gas and water, agriculture and fishing and financial, insurance, real estate and business. Q1 2018 witnessed the initiation of the expat levies which increased costs on hiring expats as well as the increase of dependent fees two-fold (from 100 to 200 SAR). It is assumed that this is a major factor contributing to the sudden increase of expat workers leaving the Kingdom. Some of the most noticeable decreases are in the retail and trade sector which saw a drop in 163,070 expat workers while the financial, insurance, real estate and business sector decreased by 31,000. The significant movement within the retail and trade sector is unsurprising given that MLSD announced a new Saudisation quota at the beginning of 2018 that initially mandated 12 retail sectors to be 100% Saudised, however recent guides released by MLSD suggest that the quota may be reduced to 70%. This is yet to be confirmed. At the same time, there has been an increase of around 111,000 Saudi nationals in the private sector within the above-mentioned sectors, notably within retail and trade, other collective social services and financial, insurance, real estate and business sectors. The pace at which expat workers are leaving the labour market appears to be disproportionate to the number of Saudi nationals replacing these jobs. Since last quarter, over 50,000 expat workers left the wholesale and retail sector, while only 2,500 Saudi nationals were employed within that sector. Given the above sectoral trends, it is important to analyse within what types of positions within which Saudi employment increased since Q1 2017. Among the 111,000 increases of Saudi Nationals in the private sector, the largest rise can be seen in the occupations of clerical at 32,504 more Saudi nationals followed by Specialists in Professional, Technical and Humanitarian fields with almost 20,000 more Saudi nationals as well as an increase of almost 13,000 Saudi nationals in occupations of lawmakers, directors and managers. Within these sectors, females increased more than males in occupations of clerical whereas more males acquired roles in managerial positions (8,000 versus, 4300 females). However, there is disparity of trends in the occupations of Technicians in Professional, Technical and Humanitarian fields. Despite around 44,282 expats leaving these jobs, their replacement only saw in increase of around 4,300 Saudis. It would be interesting to analyse deeper as to what happened to the 40,000 remaining jobs that expats vacated. Perhaps this could be correlated to the sectoral analysis above which displays the largest decreases of expats was seen in the trade and financial, insurance, real estate and business sectors. When analysing the trends in occupations of services (which includes a wide range of sectors including education, health, agriculture, social services, transport and communication according to GASTAT s definition), the number of expats occupying these positions decreased by almost 230,000 since Q1 2017. At the same time the total number of Saudis decreased by around 200 within these occupations. It is interesting to note that the drop is mainly due to males decreasing by 4,500 while females within these occupations rose by 4,300. A deeper 3
analysis is required to discover what happened to the 200,000+ jobs that expats left and why there has not been an increase in Saudi employment in these occupations. More specifically, a key area of focus for policy-makers would be that the Saudi female unemployment rate has seen an increase in Madinah by 3.6% and in Jizan by 1% between Q1 and Q4 2017. These remain the top two challenged regions for female jobseekers given that between Q1 2017 and Q4 2017 Saudi female unemployment rates remained over 45%. More regional focus is required. On the other hand, there has been a positive shift in female activity in the labour force. Q1 2018 has seen a decrease to 5% from 18.5% in Q4 2017 of females reporting they left their job due to social conditions. Age Group Trends Given the rates of youth unemployment in the Kingdom, in order to more robustly analyse youth unemployment trends since last year from the Kingdom s General Authority for Statistics Labour Force Survey period Q4 2016 until period Q4 2017, Takamol Advisory Unit have utilised the definition of youth being individuals between the ages of 15-24 years directly taken from the International Labour Organization s glossary. As such, the total Saudi unemployment rate within this age group (15-24) has increased by 6.9 % since Q1 2018, with almost 17,000 more unemployed. At the same time both Saudi male and female unemployment increased by 5.9% and 8.3% respectively. Despite the number of unemployment rising among the 15-24-year-old Saudi nationals, the unemployment rate of 25-29-year-old Saudi females decreased considerably by 5% (around 8,000) while there has been an increase of 4.6% (just over 5,000) unemployed males. In Q1 2017, 15-29-year old represented 70% of the total unemployed number of Saudis. This figure has dropped by 3% to 67% in Q1 2018, whilst there has been a significant increase in unemployment rates among Saudis in the 30-49 age group which represented 29% of total unemployment in 2017 to 33% in 2018 with 42,000 persons unemployed. It is important to note that still to-date the unemployed Bachelor Degree holders remain the highest group amongst all educational levels at 51.7%, a 0.8% increase from Q4 2017 both males and females, an increase of 2.5% since Q1 2017. More still needs to be considered in relation to skills mismatch in the Kingdom. More Employer-led training programmes could be a solution for this matter. Direct subsidies to job creation for new jobs for young graduates will ensure that the risk of NEET (Not in Education, Employment or Training) is reduced. Since Q1 2017 there has been a significant increase in Saudi Female Jobseekers with Bachelor Degrees remains on the rise with a surge in Q1 2018 figures of 519,575 from Q1 2017 reported figures of 386,796. It is important to note that 705,314 unemployed Saudi nationals claimed they have never been employed and 91.4% claimed that they never participated in any training. This suggests that more efforts are required to support graduates and first-time workers in the labour market in addition to an intensified focus on employability skills training as well as other relevant technical training. Regional Trends The number of employed Saudi males in Qassim, Tabuk, Hail, Northern Region, Baha, and Jouf have seen decreases with the highest rate of male unemployment being in Al Jouf at 8.5%. On the other hand, employed Saudi females in Hail, Najran and Al Baha remains generally unchanged with very small decreases since Q1 2017. Riyadh and Asir have shown increases in female unemployment rates since last year while other regions display decreases in unemployment rates. In Asir, female unemployment rate has risen by 9.7% and Riyadh by 2.9%. The most significant decreases in the rate of female unemployment can be seen in Eastern Province at 11.1%, 10.9% in Tabuk and 9.9% in Najran. In Riyadh, the number of employed Saudi persons has increased by 2.9% for males and 7.8% for females, however at the same time, the unemployment rate has also risen, which may suggest more jobseekers entering the labour market. From a regional perspective there should be more regional employment strategies focused on areas such as Northern borders and Jouf. In regards to the Norther borders, the unemployment rate has been increasing since Q1 of 2017 (as shown in the graph below). The female rate improved between Q1 to Q4 of 2017 but suffered a 4.1% drop in Q1 of 2018. The Quality of Life programme highlights the rich soil that exists within the region which suggests that there could be potential in terms of employment in agriculture related occupations. Additionally, the Quality of life programme specifically highlights Arar (in the North Border) as a key city for the development of cinemas, family entertainment centres and exhibitions which also has the potential to create new jobs that could reduce the unemployment rate in the North Border. Al Jouf remains the region with the highest unemployment rate with rates for males increasing from 11.8% to 20.3% between Q1 2017 to Q1 2018 whilst the female rates decreased from 47.7% to 41.5%. While there has been a significant decrease in female unemployment, the female unemployment rate is significantly high overall and still requires increased efforts to improve opportunities for females. According to the Quality of Life programme, investment in the heritage sector in the city of Skaka has the potential to create jobs through public and private museums, festivals and cultural events. Initiatives and programmes like these can help the Saudi Commission for Tourism and National Heritage reach their NTP 2020 target of 1.2 million jobs. More specifically, a key area of focus for policy-makers would be that the Saudi female unemployment rate has seen an increase in Assir by 9.76% between Q1 2017 and Q1 2018. This is currently the greatest challenging region for female jobseekers 50.5 7.3 18.8 Norther Borders Unemployment Rate 45.4 8.4 19 49.5 11.1 Q1 2017 Q4 2017 Q1 2018 Total Male Female 23 5