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Getting labor policy to work in the Gulf

For GCC states, liberalizing the labor market and developing the local workforce are the keys to moving beyond a reliance on foreign workers.

FEBRUARY 2007 • Gassan Al-Kibsi, Claus Benkert, and Jörg Schubert

gulf labor policy article, gcc private sector jobs, foreign labor, labor market reform, gcc national workforce, gulf labor force, labor market liberalization, gcc labor reform, gulf labor market, gulf foreign labor, Economic Studies

Exhibit 1: The private sector is dominated by foreign workers.
Exhibit 2: Projections suggest three challenges for the region—unemployment, underemployment, and declining wages.
Exhibit 3: Over the next decade, the GCC could face an unprecedented employment challenge with its national labor force almost doubling.

Bahrain’s economy is growing at more than 5 percent a year, and per capita income averages about $15,000. However, such statistics make little difference to Jafar Ahmed Ali, a 30-year-old Bahraini citizen who works more than 12 hours a day, seven days a week, for a construction company. Like many Bahraini nationals, Jafar faces stiff competition from foreigners willing to work for less than half the minimum—$500 a month—that he needs to support his family. Even after four years with the same employer, Jafar can’t beat the system.

In Bahrain and the five other states that make up the Gulf Cooperation Council (GCC)—Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—foreign workers hold the majority of private-sector jobs. At the extreme, in the UAE, foreigners account for 99 percent of the private-sector workforce (Exhibit 1). This situation has led to high unemployment among GCC nationals, declining productivity, and a growing social malaise (caused in part by weak job prospects and poor working conditions) that could threaten the region’s economic prospects.

An estimated 42 percent of the GCC’s local population is currently under the age of 15 and will soon be in search of work. Yet the public sector—where...