Saudi Labor Reforms


Saudi Labor Reforms

Saudi Arabia has been going through labor reforms in an attempt to move more Saudis into the private sector and out of the public sector.

Why the reforms are needed:

Authorities launched labour reforms in 2011 after the Arab Spring uprisings to head off political unrest by reducing unemployment. They also want to lower the cost to the economy of Saudis’ dependence on comfortable but expensive state jobs.

So the socialist welfare system despite all the money from the sale of oil is a drain on the economy and the society. The people have become less productive, and become disillusioned. The the society as a whole has started agitating for change to address this disillusionment.

What’s the government doing to curb this development:

Reforms in the past three years have focused on pressing firms to employ more Saudis, by making it harder and more costly to hire foreign staff.

What has been the result of these reforms:

The reforms so far have slowed the economy and slashed profits at some firms, interfering with other policy goals such as diversifying the economy beyond oil. They boosted the number of Saudis in the private sector, but many workers have not been effective or only stayed in their jobs for a few weeks.

Not satisfied with the progress so far, the government is now trying something else:

The draft law on working hours aims to make private companies more attractive by limiting the working week to 40 hours, down from 48 in many firms, and increasing the weekend to two days from one. State workers have a 35-hour work week plus generous pensions and health benefits.

It is quite interesting to note how the government is dealing with this lazy attitude of the people.  Instead of blostering their productivity, it actually came up with the brilliant idea of lowering standards of the other competitive organizations! Talk about being crazy. In doing so it not only takes away the private right of the business owners to make their own decisions, but also ends up making them less competitive in the world markets. By shortening the distance to be run so that those who are fat can finish the race doesn’t mean the fat have become better runners.

But Fawwaz Al-Khodari, chief executive of major construction firm Abdullah A. M. Al-Khodari Sons, said all contractors were having “a serious battle trying to get those that they hire to actually do anything”. He said many Saudis were not willing to work in projects such as city cleaning or at remote sites, making hiring a large number of Saudis in non-administrative jobs a major challenge. “By forcing the contracting sector to hire nationals that are neither available in the numbers needed, nor with interest in the sector, we are encouraging unproductive dependency,” Khodari said in an April interview with Reuters.


So what have we learned from all this wonderful experimentation by a government that is supposedly ultra rich and excessively controlling? We have learned that independent of the size of the kitty, the socialist policies of public ownership ultimately end up causing severe economic and social problems. To avoid these problems a we need to avoid public ownership. That means a market with free competition among businesses is called for. We can only have free market when there is respect for private property. With private property laws in place and their enforcement, the business owners become responsible for their own good or bad decisions. With their assets on the line and for their own self-interests these owners can make innovative and risk taking decisions that can be transformative. And it is these transformative decisions that end up improving the lot of their customers and fellow human beings. This in essence is the philosophy of freedom, of liberty, and ultimately of progress.

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