Executive Summary
Youth unemployment, especially for women and university graduates, is one of Saudi Arabia’s most important challenges. The purpose of this study is threefold. First, we estimate the economic cost of unemployment in Saudi Arabia. Using a very conservative empirical methodology, we find that the cost of unemployment (for 2 million unemployed), in terms of lost output, is 851.5 billion SAR annually ($227.09 billion or 29.97% of GDP). We stress that there are additional social and psychological costs associated with unemployment that we did not include in our estimates. Therefore, the overall annual cost of unemployment in Saudi Arabia is much higher than 851.5 billion SAR. Second, we propose a Job Guarantee (JG) policy framework that would ensure employment for anyone who is ready, willing, and able to work. Our proposal outlines the benefits of the JG program and its non-inflationary nature, and suggests two alternative financing mechanisms to implement the program in Saudi Arabia. We estimate that the total cost of the JG program (employing 2 million Saudis, with a salary of 5,000 SAR plus health and retirement benefits, and accounting for the program’s material costs) would not exceed 151.8 billion SAR ($40.9 billion or 5.4% of GDP). Third, the study recommends focusing JG employment in a number of strategic areas that will increase diversification of the Saudi economy, capitalize on the skills and aspirations of Saudi youth, and enhance overall quality of life for all members of society. Of particular importance are: technical education and vocational training, strategic School-to-Work programs in green construction and solar industry, public health & wellness, cultural heritage preservation, and media and new technologies. The study ends with a number of policy recommendations regarding labor market reforms to increase female labor market participation and improve the overall Saudization rate in the private sector.
