The oil curse and labor markets : the case of Saudi Arabia

Abstract EN

Oil income enables generous government sector wage and employment policies in Saudi Arabia.

Combined with availability of low-cost foreign labor and rapidly growing working age population, large disparity between government and private sector salaries skews Saudi worker preferences for government sector employment, increases their reservation wages for private sector employment, and results in high unemployment.

Initiatives under 2011 Royal Decrees for increased government sector employment and compensation may further exacerbate Saudi unemployment in the longer run.

Oil curse in Saudi Arabia is also on persistent and large Saudi unemployment.