Labor and Employment

Saudi Arabia is facing a growing unemployment necessitating some radical rethinking of its current ‘localisation’ policies, and has introduced the Nitaqat or quota system which classifies local companies in different colour code zones according to the percentage compliance in terms of Saudi nationals employed, with penalties imposed for non-compliance. The government is cognisant that the private sector has to play an important role in job generation, albeit as willing partners, but one in five private companies operating in the Kingdom are a long way from meeting Saudisation targets. The government is also introducing incentives to companies that meet their Nitaqat quotas realising that the private sector’s dependence on foreign cheap labour is causing a dilemma as Saudis are reluctant to replace expatriates at current wage levels for many unskilled and semi-skilled sectors. The paper examines the impact on overall national economic growth and productivity should the government also introduce a minimum wage level of SR 3,000 per month for the private sector equal to that in the public sector, under the so-called Hafiz system.

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