The Labor Market in Saudi Arabia: Highlights from an EPoD Research Symposium

The Labor Market in Saudi Arabia: Highlights from an EPoD Research Symposium

By: Neha Deshpande

Dr. Alessandra González from University of Chicago presented her research regarding Saudi youth labor force participation. 

Researchers from a range of international institutions presented new findings on the Saudi Labor market at a symposium in Riyadh on May 2. Topics ranged from policies to raise employment among women and youth, to technical innovations for research and skills-building. 

The symposium was cohosted by Evidence for Policy Design (EPoD) and the Human Resources Development Fund (HRDF) of Saudi Arabia as part of their multi-year policy research collaboration. The audience included policymakers from HRDF and other agencies directly responsible for implementing programs to optimize the Saudi labor market – a central goal of Vision 2030.  The following is a rundown of the research projects that were presented.

Early Retirement in the Saudi Private Sector
Dr. Nada Eissa, Associate Professor of Public Policy and Economics from Georgetown University, opened the presentations with key findings from her research on public pension schemes. Her project seeks to develop an understanding of motivations for early retirement in Saudi Arabia through the evaluation of incentives in the kingdom’s pension system, pension expectations, and analysis of retirement patterns. Dr. Eissa presented initial findings showing that those who retire early tend to be both more educated and earn higher wages than workers who retire at or after the normal retirement-age of 58. This means that early retirees receive higher benefits for longer periods of time than lower-earning retirees. Dr. Eissa’s research also suggests Saudi workers retiring early would do better financially to continue working and “essentially leave money on the table.” The caveat to this finding is currently there is no information on their activities after receiving benefits. It is possible that beneficiaries engage in other economic activities that generate income. Dr. Eissa’s explained next steps in this line of research: collection to assess workers’ understanding of the current pension system and their plans post retirement, and an evaluation of the potential to design voluntary savings programs that would enable reform of the system.

This figure from Dr. Nada Eissa's analysis shows how lifetime benefits are maximized at age 55 for the average worker who enters the private sector at the age of 20. 

How do the costs of commute affect women’s employment?
EPoD Senior Program Manager Jawaher Al-Sudairy presented on commute costs and its impact on female employment. Her project, conducted with fellow researchers Prof. Erica Field, Professor of Economics at Duke University and Dr. Kate Vyborny, Research Associate at Duke University, aims to identify alternative forms of transport for women to increase access to the job market. The team is currently analyzing spatial and economic data, as well as commuter surveys, of employed and job-seeking women in Riyadh. Ms. Sudairy’s presentation, with her Research Fellow Chaza Abou Daher, highlighted how high costs of transportation destabilizes employment opportunities in Saudi Arabia, particularly in the case for women. Through employer interviews, they have identified a relationship between commute costs and the retention of female employees, and are currently analyzing how this relationship impacts both benefits offered by employers and expectations of job seekers. Later this year, Ms. Sudairy and her team will launch a randomized controlled trial to measure the response of female job seekers and employees to more affordable and socially acceptable commute services. They aim to use these results to examine the impact of affordable commute on female employment retention rates, productivity and performance, and job search patterns.

“High cost of transportation destabilizes employment opportunities in Saudi, especially for women.”
– Jawaher Al Sudairy

Creating a laboratory model of the labor market
Prof. Faiyaz Doctor and Dr. Diogo Alvez, both from the University of Essex,  discussed a computational model they are creating to represent the current labor market and account for its incentive structures. To develop this artificial environment, they analyzed various patterns in worker and firm data, and transformed the data into panel formats showing paths of individual firms and workers across the data time span. This analysis has allowed the research team to identify patterns of mobility of workers in Saudi Arabia, with preliminary results noting significant “push and pull factors” in various geographical regions and labor sectors. One such preliminary finding is in the provinces of Riyadh and Medina, where there is potentially a high pull factor, drawing highly qualified Saudi women to work in specific sectors, while the province of Qassim may have a high push factor for the same group, meaning workers in specific sectors are more likely to leave the province. Moving forward, the team will obtain data from other sources, including government administrative data, to review and refine the simulation model. Ultimately, the model will be used to create an environment to evaluate and test Saudi labor market policies.

Prof. Faiyaz Doctor and Dr. Diogo Alvez presented their preliminary analysis on worker mobility patterns in Saudi Arabia.

Innovations to build both hard and soft skills 
Dr. Jamal Ibrahim Haidar of the Harvard Kennedy School Center for International Development discussed two current pilot projects with EPoD Co-Director and Harvard Kennedy School Prof. Asim I. Khwaja. The first project seeks to identify how to enhance the personalized skill acquisition process for users of Doroob, the e-learning platform of the Saudi Ministry of Labor. The team is currently analyzing course choice decisions on the platform in order to map subscriber behavior. Their next steps for the project include a randomized controlled trial to examine how real-time applications of information could influence behavior on the platform. Specifically, the team aims to ensure that subscribers choose courses that can help them in job-related outcomes. To do so, they will exploit an Assessment Tool as well as provide informational, behavioral, and dynamic interventions using the online platform.

Dr. Haidar and Prof. Khwaja’s second project aims to identify how various programs and voluntary work activities can build non-cognitive values, such as tolerance and co-existence, to create a more effective, responsible, and productive workforce. In collaboration with the King Abdulaziz Center for National Dialogue, the research team analyzed existing data to understand co-existence correlations between various factors, including cities, individual characteristics, employment type, value-related attitudes, and behaviors. The team is currently designing a pilot intervention to assess if programs have an impact on tolerance and co-existence through pre- and post-program surveys using treatment and control groups, and identifying partner intuitions to test their pilot interventions.

Identifying barriers to youth employment
To close the presentations, Dr. Alessandra González, Senior Research Associate at the University of Chicago, presented her full research project looking at misaligned goals between job seekers and employers that impede Saudi-youth labor force participation. In order to identify ways of improving low recruitment and retention rates in the private sector, she will compare male and female job seekers’ expectations with employer definitions of “suitable workplaces”, including wages, responsibilities, and hours worked. She will also compare firms’ expectations regarding employee performance, such as skills and work ethic, and the value placed on these attributes by job seekers. To achieve this, Dr. González is conducting interviews and launching longitudinal and retrospective surveys to analyze the perspectives of students, college graduates, and employers. Through the assessment of both the supply and demand perspectives, Dr. González seeks to analyze how to improve job placement of graduates, worker recruitment and retention, and labor market matching of students and employers in Saudi Arabia.

“One way the private sector can be more useful is to reduce the costs of employment search processes for job seekers.”
– Dr. Alessandra González

The audience included policy makers from the HRDF and the Ministry of Labor and Social Development, as well as academics from Saudi Institutions such as King Abdulaziz University and the Islamic Development Bank. All were highly engaged in the presentations, with nuanced discussions following each to analyze the implications of the research findings. EPoD and HRDF would like to thank the researchers for their engaging presentations and valuable insights. The research promises to create rigorous and meaningful policy analysis in Saudi Arabia, and we look forward to learning of the development of this research in the future.