Of late things have not been smooth around the Gulf region economically. The majority of gulf countries highly dependent on hydrocarbon revenues, but since 2014 the oil pries dived sharply, and now that has resulted in the entire Gulf embarking on economic reform. There is fear if the suggestions to go for wage cutbacks and subsidy may not aid the situation and may lead to political unrest.
Youth unemployment remains a great challenge in the Gulf, and the effort to persuade the private sector to absorb new entrants to their market is not bearing any fruit. Therefore, the governments are looking for new initiatives that may alleviate the situations as the focus on a long-term plan to avoid economic fluctuation when oil prices are affected.
Oil Dependency & Government Spending
It is not the first time the Arab Gulf States have tried to deviate away from oil dependence on oil and natural gas, but without success. These states take in between 80 to 90 percent of oil sales that account for government revenues. But slight changes in prices the government coffers are mostly affected since that is the only major source of income for these states.
This has been the lifestyle of these Gulf states, and a couple of years back, the price of a barrel was $100 around mid-2014. Things changed suddenly to half of that price later in 2016, affecting all the states economies. For instance, Saudi Arabia is said to have recorded a $98 billion shortfall in 2015 and one of the worst ever recorded. Today the price per barrel has risen but not anything close to the 2014 price.
Youth Unemployment as the Wild Card
It is a big issue for the Gulf States trying to deal with youth unemployment, which is a serious threat that could create unrest. Since the year 2012, the World Bank has painted a disturbing picture of the youth situation in the Gulf States. Here are and some of the statistics: Oman, 20%; Saudi Arabia, 27%; the United Arab Emirates, 11%; Kuwait, 9%; Bahrain, 27%. Over the years, these statistics have grown, and the situation is dire for the youth and worrying for the Arab governments, not sure what may happen if the situation is not dealt with immediately.
Some of the problems with youth unemployment in the Gulf has a connection to social plus economic reasons. The society in the Arab world has been shaped to prefer working in the public sector. According to them, such a preference of the public sector provides them with job security, the amount of prestige, pensions, and health care. Also, most public sector jobs are not demanding, and civil servants who are in the low category may moonlight by taking an extra job to earn more income to support their families.
The government has a challenge with resources, and it’s causing a huge drain since the public sector is bloated, and the room for continuous hiring of young graduates is no longer practical. The moment there is a new job opening, competition is very high, and most of the time, only those with influence acquire those positions.
The private sector currently is peaking due to Gulf state intervention to focus on other opportunities away from oil dependence and the public sector. However, it is still weak, which is due to heavy reliance on one sector. Therefore only very few jobs are available and cannot fully deal with the current problem of youth unemployment. Also, some private businesses have preferred to go for foreign manual labor as the majority of Gulf nationals consider them below them. The recent changes where gulf states are working with the private sector and encouraging them to hire their nationals will only be observed for now to see whether it is effective in undoing the current issue of youth unemployment.