Saudi Arabia introduces unemployment insurance

Saudi Arabia will introduce compulsory unemployment insurance this year for all citizens with jobs, the world’s top oil exporter said on Monday.

Saudi Arabia, an absolute monarchy that has no income tax, is trying to push more citizens into work to tackle long-term unemployment that officials see as unsustainable in light of high population growth and uncertainty over future oil revenue.

The introduction of unemployment insurance is designed to make it more attractive for young Saudis to seek jobs in private companies, where the starting salary and other benefits are less generous than in government jobs.

While the official unemployment rate is around 12 per cent, economists say only 30-40 per cent of working age adults participate in the labour force. Most Saudis who do not have jobs are financially supported by a relative.

Most of those who work are employed by the state, but the government cannot support such a large wage bill in the long term, and the International Monetary Fund has warned that the private sector must meet future job demand.

“If there is a guarantee of income, particularly when that is connected to the level of previous earnings, it should make people more comfortable with taking positions in the private sector,” said Paul Gamble, director, sovereign group, Fitch Earnings.

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Saudi Arabia introduces unemployment insurance