Saudi Arabia Scores Over South Asia in Female Employment

In South Asia, which is a fast growing area, women continue to be left out of the region's economic successes. The female labor force participation rate is only 23.6% while it is 80% for males.

But strangely enough, in Saudi Arabia, where, in popular imagination, women are confined to their homes and not allowed to go out without a male escort, female participation in the labor force has increased dramatically.

In a paper published in www.brookings.edu dated April 21, 2021, Sofia Gomez Tamayo says that Saudi Arabia, which had one of the lowest female labor force participation rates in the world, has changed beyond recognition in a short time.

"As recently as 2018, the share of Saudi women who had a job or were actively looking for one, was 19.7%. But in 2020, it was 33%. In other words, the share of Saudi women in the labor market expanded by an incredible 64% in just two years," she says.

Interestingly, the largest increases (20%) happened among women in the age group 40-54. Middle aged women had stormed into the labor market and not the youth. And among the women, those with secondary education, rather than lower or higher education, were the gainers in the job boom and the gain was comparatively huge (9 to 25%). Middle skilled women have also been more successful in getting jobs than low skilled and highly skilled ones.

The employment rate of Saudi women, or the share of those women in the labor force who actually have a job, had steadily increased from 68 to 76% between 2018 and 2020. And the female unemployment rate has decreased, from 32 to 24 %.

And interestingly, the female labor force is more in the private sector than in the public sector. Between 2019 and 2020, public sector employment of Saudi women increased by only 5% while in the other sectors the increase was more than 10%.

Laws liberating women made this revolutionary change possible, Tamayo points out. Between 2015 and 2020, Saudi Arabia lifted all restrictions on women's employment. It introduced paid paternity leave. Equal pay was mandated for equal work.

A law against domestic violence was introduced. Women were allowed to obtain a driver's license and move about freely. Sexual harassment in employment was banned with penalties under criminal law. Saudi Arabia gave females easier access to credit prohibiting gender-based discrimination. It also began allowing women to be head of a household.

The legal obligation for a married woman to obey her husband was removed. Government removed restrictions on women obtaining a passport and traveling abroad. New amendments equalized a woman's right to choose where to live and to leave the marital home. Dismissal of pregnant workers was prohibited. The retirement age for both men and women was made the same-60.

"Saudi Arabia was, in fact, a top performer in the World Bank's Women, Business and the Law Report 2021," Tamayo points out. Prince Salman's plan to increase female labor participating rate to 30% before 2030 had been achieved ten years ahead of the target.

Writing in the Middle East Institute's website in 2021, Meshal Alkhowaiter notes that while the participation of females in the labor force increased, that of men decreased from 94.6% to 92.9%. Alkhowaiter acknowledges the role of legal changes in increasing females in the labor force, but points out that the tax on foreign workers and their dependents also helped clear the path for women.

In 2017, the government slapped a monthly US$ 26 tax on every dependent sponsored by a foreign worker. In a year, the tax on foreign dependents went up to US$ 53 per month. Additionally, firms employing more foreign workers than nationals were required to pay a monthly tax of US$106 per foreign worker.

By 2020, foreign workers were required to pay approximately US$ 107 for their dependents, while firms were taxed monthly at US$ 213 per worker if their workforce had more expats than nationals. This policy made it more expensive for firms to hire non-Saudis. It increased the cost of hiring a foreign worker by 53.2%.

"Since the introduction of the tax on foreign labor on July 1, 2017, the number of foreign workers in Saudi Arabia's private sector has declined by 1,857,000, according to the Q4 2020 Labor Force Survey (LFS) data from GASTAT. Over the same period, there was an increase of 24,000 Saudi men and 113,500 Saudi women in the workforce.

In other words, approximately 1 Saudi worker joined the workforce for every 20 foreign workers who left the private sector since July 2017," Tamayo points out.

However, the type of foreign workers who left Saudi Arabia's labor force is not randomly distributed across the population of foreign workers. For example, 97.1% of foreign workers who left the country between 2017 and 2020 were in the construction sector and 92% of them were men. But the vacancies were not adequately filled by locals, male or female. "

There are 123,000 fewer Saudi males and 34,000 fewer Saudi females employed in the sector today, compared to when the tax on foreign workers was implemented," Alkhowaiter says.

However, an economic sector where nationals may have gained jobs, due to the exit of foreign labor, is retail/trade. "This sector now employs around 600,700 fewer foreign employees than it did in 2017. At the same time, around 6,000 Saudi men and as many as 27,500 Saudi women have gained employment in the sector."