LABOUR

SME FINANCIAL SUPPORT IN SAUDI GAINING GROUND

Saudi Arabia has seen significant advancement in women's labour force participation, as figures doubled in the past six years

The country’s female workforce has expanded from approximately 17.5% to 35% over the period, even exceeding the targets set in Vision 2030. The employment of Saudi women has surged by 45%, and the unemployment rate for this category decreased from 33% to just under 16%.

The rising involvement of women in the workforce can be attributed to social reforms in Saudi Arabia, including investments in women's education, the removal of formal restrictions in the legal code, implementation of employer incentive schemes, provision of childcare assistance, and extensive training and scholarship opportunities.

The figure aligns more closely with the ambitious target set by the Saudi government in its Vision 2030 initiative, which seeks to achieve a 7% unemployment rate in the kingdom.

INVESTING IN HUMAN CAPITAL

The unexpectedly rapid progress underscores the need for sustained eorts, prompting the establishment of new targets. Additional initiatives are crucial to align female human capital with sectoral and diversification efforts.

“Potential growth gains from increasing female participation to the OECD or G20 average are estimated at 1.6% per annum,” according to the International Monetary Fund. “The launch of the Women Empowerment initiative will support the momentum, notably through the authorities’ gender budgeting programme in the annual budget process.”

The kingdom’s path to economic diversification would require a larger pool of highly skilled labour, encompassing both Saudi nationals and expatriates. To facilitate this, the Human Capital Development Program and the Labor Demand Foresight Unit have been introduced, with the aim to enhance the nation's capacity, reduce the wage premium, and ensure sustainable growth.

Improving the quantity and quality of education at all levels, including vocational training for middle-aged workers, will create a more productive workforce, the IMF recommends. Furthermore, reducing the public-private wage gap will boost employment in the private sector, while addressing the productivity-wage gap will ensure competitive wages.

FALLING UNEMPLOYMENT

The overall unemployment rate in the kingdom for Saudis and non-Saudis reached 4.9% in Q2/2023, a 0.2 percentage points (pp) decline from the previous quarter, and a decrease of 0.9 pp from a year ago, according to the latest GASTAT Labor Force Survey. The unemployment rate for Saudis was recorded at 8.3% in Q2/2023, a decrease of 0.2 pp compared to Q1/2023. The Saudi employment-to-population ratio fell 0.6 pp to reach 47.4% compared to the previous quarter.

Meanwhile, the Saudi labour force participation rate also contracted 0.7 pp to reach 51.7%. As for the annual changes in the main labour market indicators for Saudis, the unemployment rate decreased by 1.4 pp, accompanied by an increase of 0.6 pp in the employment-to-population ratio, and a slight decrease of 0.1 pp in the labour force participation rate.

“Among Saudi core working age population (aged 25-54), Q2/2023 saw a decrease in the unemployment rate by 0.3 pp to 7.5%,” according to GASTAT data. The employment-to-population ratio fell 0.7 pp to 62.8%, while labour force participation rate for Saudis decreased by 0.9 pp, reaching 67.9%.

“The decrease in the unemployment rate for Saudi core working age population (aged 25-54), was mainly driven by both decrease in the unemployment rate for females by 0.7 pp to 15.0% and for male by 0.1 pp to 3.4% in Q2 2023,” GASTAT noted.

The Ministry of Human Resources and Social Development also recently launched 12 sectors skill council in the country to hone the skills of the working age population. The sectors include wholesale and retail trade, culture and entertainment, construction and real estate activities, healthcare, professional services, logistics and transportation services, security services, digital, financial services and insurance, tourism and hospitality, energy and public utilities, and manufacturing.

“The ministry is working to cover 2,000 skills and build and develop standards for 300 sectoral professions and professional paths by the year 2025. Skills development is a strategic priority for the kingdom and a major enabler in achieving the kingdom’s Vision 2030,” according to Dr. Ahmed Al-Zahrani, undersecretary for skills and training at the ministry.