Quantifying Saudi firms’ appetite To hire Citizens?
Tracking labor demand for Saudi workers through online job Ads
The nationalization or Saudization rate in the private sector is frequently monitored and discussed in Saudi Arabia as a lagging economic indicator. The Ministry of Human Resources and Social Development (MHRSD), the government entity responsible for encouraging citizens to join the private sector, recently issued a report evaluating its progress with employment nationalization targets for 2022, with a measurement lag of around 4 months. In this article, however, I propose using a leading monthly indicator for the nationalization rate where I track firm’s appetite to recruit citizens in the private sector. (i.e., labor demand in economic jargon).[1]
Tracking the monthly share of online job ads exclusively recruiting Saudi workers is a useful supplemental measure to the actual nationalization rates. Specifically, the actual nationalization rate tells policymakers whether the Saudization employment quotas set by the MHRSD have been achieved while the proposed measure here can inform policymakers why the nationalization targets have not been accomplished? To construct this indicator, I calculate the number of all employment ads that mention that they are recruiting Saudis for jobs that may be otherwise suitable for foreign workers as well.[2] For instance, I exclude employment opportunities where having a Saudi citizenship is required for security purposes.[3]
On average, the share of jobs that stated a preference to exclusively hire citizens was around 16.7%, with highest being in March 2023 at 20.2%. This is substantial as it implies that one in every five jobs posted online in Saudi Arabia was exclusively and explicitly recruiting citizens. I further believe this indicator is valuable for policymakers not only because it provides them with real-time information about the job market but also because it can be then compared against actual nationalization rates. For instance, one may explore if the estimated 20.2% nationalization rate for March 2023 was below or higher than the real employment data amongst citizens. If the actual nationalization rate is lower than the monthly average of 20.2%, then this enables policymakers to further investigate why firms could not find enough citizens. This might be because 1) the imposed nationalization rates are unfeasible to satisfy (i.e., due to an insufficient number of Saudis wanting specific occupations), or 2) the wages offered by such jobs are too low.
Graph 1. The monthly share of jobs exclusively recruiting citizens between Feb-April 2023[4]
I next explore how the share of online job ads exclusively recruiting citizens varies by city.[5] The following graph presents the data at a higher frequency and granularity than that published by both the 1) Saudi Statistics Agency and the 2) Saudi National Labor Observatory, which are published on quarterly-basis and at the regional level only. In graph 2, I further restrict my data to the cities responsible for 93% of all online job posts between Feb and April 2023. Mecca Almukarramah and AlMadina had the highest share of online jobs looking to employ Saudis at around 29% of total job ads. This is likely driven by the job growth and the size of sectors such as tourism in those cities, which as a sector is attractive to citizens, and particularly females.
Keep reading with a 7-day free trial
Subscribe to Saudi Labor Pulse to keep reading this post and get 7 days of free access to the full post archives.