Information about Middle East Oriente Medio
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Appendix. Illustrative Labor Market Scenarios in GCC Countries, 1995-2010

Author(s):
International Monetary Fund
Published Date:
November 1997
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Supply of Labor

The supply for labor is projected on the basis of the World Bank estimates of working age population (World Development Indicators CD-ROM, 1997) and staff estimates of labor participation rates by gender. Relative to the working age population, participation rates are assumed to remain constant for males, but increase slightly for females (see table below).

Formally,

Labor supply = (working age population) × (participation rate of the working population)

1996-20002001-20052006-2010
Participation rate (male)92.092.192.1
Participation rate (female)22.322.723.0

Labor Demand

The labor demand is projected separately for the oil and non-oil sectors based on sectoral real GDP growth (see table below) and output per worker. On the basis of 1995 data on employment in the oil and non-oil sectors, the base year output per worker is calculated. It is assumed that output per worker grows by 0.5 percent a year in the oil sector and by 0.7 percent a year in the non-oil sector during the projection period. The total demand for labor is the sum of labor demand in the oil and non-oil sectors. Formally,

Labor demand by sector = (real GDP) / (real output per worker)

1996-20002001-20052006-2010
Real oil GDP growth1.10.80.7
Real non-oil GDP growth3.03.53.4

Employment Gap

The employment gap is defined as the difference between labor supply and labor demand divided by labor supply.

Demand for Foreign Labor

The demand for foreign labor is the residual between the total demand for labor (described above) and the supply of national labor, thus assuming that all new national entrants to the labor force find employment first. Using the 1995 data as a base, the projected increase in the national labor force reflects the increase in the total labor supply (described above) adjusted for net migration.

References

    Al-Qudsi, Sulayman,1997, “Labor Market Policies and Development in the GCC: Does Internal Policy Consistency Matter?,” in Gulf Economies: Strategies for Growth in the 21st Century,ed. by JuliaDevlin,Center for Contemporary Arab Studies (Washington: Georgetown University).

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    Al-Qudsi, Sulayman,1996, “Labor Markets in the Future of Arab Economies: The Imperatives and Implications of Economic Restructuring,” Research in Human Capital and Development, Vol. 9.

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    Economic and Social Commission for Western Asia, 1995, “Employment Trends in the ESCWA Region.”

    El-Erian, Mohamed A., and CyrusSassanpour,1997, “GCC’s Macroeconomic Strategies: Toward the 21st Century,” in Gulf Economies: Strategies for Growth in the 21st Century,ed. byJuliaDevlin,Center for Contemporary Arab Studies (Washington: Georgetown University).

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    Feiler, Gil,1991, “Migration and Recession: Arab Labor Mobility in the Middle East, 1982–1989,” Population and Development Review 17, No. 1.

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    International Monetary Fund, 1996, Building on Progress: Reform and Growth in the Middle East and North Africa (Washington).

    Nur, Uthman, 1995, “The Labor Force in GCC Countries: Present and Future,” Secretariat-General of the Arab Gulf Cooperation Council.

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    Sassanpour, Cyrus,1996, Policy Challenges in the Gulf Cooperation Council Countries (Washington: International Monetary Fund).

    Shafik, Nemat,1996, “Has Labor Migration Promoted Economic Integration in the Middle East?,” Research in Human Capital and Development, Vol. 9.

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    World Bank, 1995, Claiming the Future. Choosing Prosperity in the Middle East and North Africa (Washington).

1

Sassanpour (1996) reviews the different phases in economic development in the GCC countries since the early 1980s.

2

Issues and challenges in economic integration between the MENA countries are discussed in Section V. See also Shafik (1996).

3

No firm data are available on the geographical origin of the foreign labor force. Workers from the labor-surplus countries in the MENA region (i.e., Egypt, Jordan, Lebanon, Morocco, the Syrian Arab Republic, Sudan, and the Republic of Yemen) and Palestinians initially dominated the GCC foreign labor force, but over the years, and particularly since the early 1990s, the number of Asian workers (mostly from the Indian subcontinent and the Philippines) has increased significantly.

4

A1-Qudsi (1997) argues that in earlier periods, the demand for labor was related more closely to investment activities (e.g., building infrastructure), but recently, consumption activities (e.g., household services) appear to be contributing more to labor demand.

5

Feiler (1991) and Al-Qudsi (1997) also stress the same point.

6

The GCC has a total population of some 27 million, ranging from 0.6 million in Qatar to about 19 million in Saudi Arabia. On average, nonnationals comprise about one-half of the population. With the exception of Oman, the GCC population is highly concentrated in urban centers.

7

With the exception of Bahrain, enrollment in technical schools is insignificant (2-6 percent of total enrollment in secondary education), compared with 20 percent in some other MENA countries (e.g., Egypt and Jordan).

8

In Oman, there are legal minimum monthly salaries for Omani workers at different skill levels.

9

According to the Economic and Social Commission for Western Asia (1995), 38 percent of graduates from universities in the GCC countries completed studies related to social and Islamic studies, 34 percent in education (mostly women), but only 11 percent in business administration, and 18 percent in technical fields where private sector requirements are greatest.

10

In Kuwait, government estimates suggest a net flow of about 10,000 of job applicants a year during the next five years. The number of young Bahrainis entering the workforce in the coming years is officially estimated in the range of 4,500-6,500 a year. In Oman, the number of graduates seeking employment is officially projected at 17,400 a year during 1991-2000. Saudi Arabia’s Sixth Development Plan estimates the total number of young Saudis entering the labor market at some 660,000 over 1995-2000.

11

E1-Erian and Sassanpour (1997) discuss the evolving nature of macroeconomic challenges and strategies in the GCC countries.

12

The pension system in Bahrain provides similar benefits to nationals working in the public and private sectors.

13

Among the countries in the MENA region, Egypt and Morocco have had favorable experiences with vocational training programs that are providing a viable alternative to higher education and are meeting the economies’ demand for technical workers. In Morocco, a payroll tax on employers is financing vocational training. See World Bank (1995).

14

The other countries in the MENA region accounted on average for 2-3 percent of total GCC merchandise trade during the period 1991-94. Moreover, only a few countries in the MENA region accounted for a significant share of trade with the GCC. See Sassanpour (1996).

15

This issue is articulated by Shafik (1996).

16

During 1992-95, workers’ remittance averaged 13 percent of GDP in Egypt, 18 percent in Jordan, and 23 percent in the Republic of Yemen. In relation to total external current receipts, the shares were 24 percent in Egypt, 26 percent in Jordan, and 40 percent in the Republic of Yemen.

17

See IMF (1996) for a discussion of issues related to economic integration between the countries in the MENA region.

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