published Nov 22nd 2016, 1:42 pm, by Vivian Nereim

(Bloomberg) —
Saudi engineering graduate Marwan turned down a job from General Electric to hold out for a better salary. It’s a decision he now regrets.

The 24-year-old native of the port city of Jeddah has been applying to jobs for a year with no luck. As the kingdom grapples with low oil prices, he worries whether he’ll still be employable when the economy recovers. “Will companies hire the new graduates, or us, the forgotten generation?” he said, declining to use his full name to share his experience.

More Saudis who watched their parents reap the benefits of the oil boom are struggling to find work as the government trims its bloated payroll and businesses reel under a slowing economy. Creating jobs for them is one of the toughest challenges facing Deputy Crown Prince Mohammed bin Salman, who is pushing efforts to end the economy’s addiction to oil. In April, he unveiled a plan that dangles the promise of long-term prosperity if Saudis like Marwan can endure the initial pain of austerity.

The powerful prince is pledging to transform the expatriate-dependent economy in little over a decade, just in time to defuse a demographic time-bomb. Nearly half of Saudis are younger than 25, and this bulge could almost double the size of the labor market by 2030, according to a study by the McKinsey
Global Institutes.

Failure is “unthinkable,” said Ihsan Bu-Hulaiga, a Saudi economist and former member of the Shura Council, a consultative body. “We cannot continue like this, we cannot afford it. When it comes to unemployment, it’s just unsustainable.”

A quarter of all Saudis under 30 are unemployed, while foreigners are more than half of the labor force. To absorb new job seekers, the kingdom would have to create almost three times as many opportunities for citizens as it did during the oil boom years of 2003-2013, the McKinsey study found.
But an austerity drive to repair public finances, which includes scaling back state largess, has pushed companies to fire, not hire. Unemployment among all Saudis rose to 12.1 percent in the third quarter, the highest since 2012.

As Saudi Austerity Starts to Bite, a Testing Time for Its Prince

Among the unemployed is Anas, a 26-year-old chemistry graduate who has been applying for jobs “in any field” for a year and a half. To cover his expenses, he works seasonal gigs during the Hajj pilgrimage and drives his car as an unregistered taxi. 

When police stop him, he tells them to look at his diploma and job application file and pleads for leniency because he needs the money.

“Studying chemistry was a joke,” he said, asking to withhold his last name. “When I applied to university they told us it’s a field that has a bright future and that we’ll find many jobs when we graduate.”

Replacing foreign workers with Saudis has been a national policy objective for decades, with little success. The majority of graduates opted for government jobs that offer fewer hours and stable benefits. Others had little incentive to work at all, relying instead on generous unemployment benefits and family support.

Efforts picked up in 2011, when the government launched a quota program called Nitaqat. The plan uses a combination of carrots and sticks to encourage hiring Saudis. Entire job categories have been nationalized, including lingerie and makeup sales.

Creating jobs for Saudi women in retail is “probably the big success story,” said James Reeve, the London-based deputy chief economist at Samba Financial Group. Saudization overall, however, will be a slow process that will face “a lot of bumps in the road,” he said.

A spokesman for the Ministry of Labor did not respond to a request for comment.

More than 1,000 mobile phone shops closed nationwide this year after the Labor Ministry gave them six months to convert to a Saudi workforce and they couldn’t find enough workers at the salaries offered.
Others had better luck finding young Saudis who saw this as an opportunity they couldn’t afford to pass up.

At a complex of mobile phone shops in Riyadh’s Al Mursalat neighborhood, Saudi clerks do a brisk business as local women sell homemade food on the sidewalk outside. For Masdoos Al Mansouri, 27, the experience has been a life-changer. “They opened the way for youth,” he said. “For about a year I was looking for a job, and I didn’t find anything.”

He works long hours, sometimes staying close to midnight, but is happy with the pay — 5,000 riyals ($1,333) a month. “I’m thinking of opening my own shop,” he said.

Despite these small successes, some of the longstanding challenges that hampered the Saudization program persist.

Schools churn out graduates lacking the advanced English, math and sciences. Low-skilled Saudis compete with foreigners who work longer hours for less money, making them more attractive to employers.
Gender segregation has been another obstacle, as San Francisco-based Uber found out when it entered the kingdom.

Women are barred from driving in Saudi Arabia and they make up more than 80 percent of Uber’s customers. Many are used to the foreign drivers who predominate, but uncomfortable getting in a car with a male Saudi stranger. Others worry that police or relatives could hassle them for gender mixing.
Uber driver Faisal Ibrahim recalls a woman who booked his car and canceled — seven times in a row.
“I think the only reason is I’m Saudi,” Ibrahim, 25, said. While many customers don’t mind a Saudi driver, with others “you can feel the awkwardness,” he said.

Uber expects the cancellations to stop as people get used to Saudi drivers, said Shaden Abdellatif, Uber’s Middle East and North Africa communications manager. The company has about 5,000 Saudi drivers in its 15,000-strong fleet in the kingdom, and wants to reach 100,000 Saudi drivers in five years, said Zeid Hreish, its general manager in the country.

While that may be a comfort to some, others are less optimistic and are thinking of leaving the country. Nearby Gulf nations have been a magnet, including for women trying to escape the constraints of Saudi working life.

Tameem Alyahya, a 23-year-old industrial engineering student, said he’d consider a job in Qatar if he doesn’t find the right one at home.

Some of his friends are looking into immigrating to Canada.
“They don’t know what’s going to happen in the future,” he said. “You’re saying something, but we’re seeing something else.”

–With assistance from Balquees Basalom and Taghreed Almadani.To contact the reporter on this story: Vivian Nereim in Riyadh at vnereim@bloomberg.net To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net Amy Teibel, Rodney Jefferson
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