Saudi unemployment benefit may hinder Nitaqat scheme

Plans to introduce a monthly unemployment allowance for more than 700,000 men and women in Saudi Arabia could hinder the Kingdom’s ability to implement its new Nitaqat programme, experts have said.

The benefits, which top $530 (SR2,000) per month, could deter employers from hiring nationals in favour of low cost expats, or discourage Saudi citizens from finding jobs, analysts said.

“There is a concern that the new Hafiz unemployment benefit, combined with the Nitaqat labour quota system introduced this year, poses upside wage-push inflation risks,” said Robert Powell, an economist from the London-based Economist Intelligence Unit.

“In particular, businesses are deeply concerned about the amount being offered, which is some way above the amount many employers are paying their foreign workers. It will certainly discourage businesses from hiring Saudis.”

The payment plan could also encourage Saudi citizens to stay at home rather than look for work, experts said.

“There is risk that [the new scheme] will discourage nationals from taking jobs that pay less than or a little more than the unemployment benefit,” said Paul Gamble, head of research at Jadwa Investment.

“On the plus side it will help the government match job opportunities with the suitable unemployed candidates, in addition to giving support for poor families.”

Saudi’s Human Resource Development Fund (HRDF) announced Monday that more than 700,000 Saudi young men and women had qualified to receive the monthly unemployment allowance, with 145,000 applications denied.

The scheme, which is running for the first time, aims to help those who are currently in the labour force but who are looking for a job.

Initially benefits will run for a year, with the first amount to be deposited in beneficiaries’ accounts on December 31, officials said.

Recent figures estimate that 500,000 Saudi nationals remain unemployed in the Kingdom, despite frequent government efforts to boost local employment in the private sector.

The Nitaqat programme launched in November this year was the latest attempt to ‘Saudise’ the private workforce, instructing firms to employ a proportion of national citizens over expatriates.

Saudi Arabia is among several Arab countries trying to create more opportunities for locals, in a bid to curb the number of expatriates who have long monopolized non-government jobs and sparked an increase in remittances to other countries.

The recent social unrest across the Arab world, which only amplified the problem, pushed the government to act quickly.

But analysts fear the impact of Nitaqat could be lessened with the new unemployment benefits scheme, in spite of its ability to boost spending power.

About 80 percent of applicants who qualified for the allowance were women, according to the director of the fund.

“The dominance of women receiving unemployment benefit probably reflects more of them entering the labor force,” said Gamble.

“However, the proportion of women participating in the labor force is still exceptionally low at 12 percent, compared with the global average of 41 percent.”