It wouldn’t be an overstatement to say that the most important distortions marring the Kuwaiti economy are those related to the labor market. Ever since the beginning of the oil age, the state has relied on a growing workforce in all sectors. However, despite the widespread awareness of the importance of restoring balance to the labor market and strengthening the role of local workforce, policies to increase the level of contribution of Kuwaitis in the labor market — currently hovering around 16% — have all failed.
Studies estimate that about 80% of the total local workforce is concentrated in government departments and public institutions, as opposed to 20% in the private sector. This is despite the fact that the state granted, years ago, significant benefits to Kuwaitis working in the private sector. Support programs were implemented, giving all Kuwaitis working in private institutions bonuses, in addition to the salaries they receive from the private companies and institutions where they work. These bonuses might sometimes reach $3,500 per month.
Financing the support given to local workers in the private sector relies on a 2.5% tax imposed on net profits of joint stock companies listed on the Kuwait Stock Exchange, as well as on public treasury funds.
According to a study carried out by the assistant undersecretary of the Kuwaiti Central Statistical Bureau, Mona Khalaf Daas, some 1,553,210 people work in the public and private sectors, with the exception of domestic workers. Out of this number, 331,333 people (or 21.3%) work in the public sector, while 1,221,877 people (or 78.7%) work in the private sector. However, civil servants in Kuwait include 240,170 Kuwaiti nationals (72.5%) while the number of Kuwaiti nationals working in the private sector does not exceed 61,860 (5.1%).
Obviously, the accumulation of local workers in the government sector and their low contribution to the private sector represent the most important distortions in the Kuwaiti labor market. Government employment is merely a means to cope with the influx of Kuwaiti nationals into the labor market without taking into account any economic considerations or standards and real job-related requirements.
This employment increases the financial burden on the treasury and raises wage allocations in the public budget, making them one of the most expensive budget items.
The low contribution of local workers to the private sector confirms the incompatibility between employment requirements and the Kuwaitis’ professional capabilities, the high cost of employing them, or their reluctance to hold jobs in the private sector. Overcoming these problems and putting in motion the appropriate economic, social and educational policies is an urgent necessity.
Careful examination of the situation concerning expat workers in Kuwait reveals important facts confirming the structural distortions in the labor market. Expat workers are concentrated in the private sector, with 1,159,987 workers or 92.7% out of the overall number of expats working in the public and private sectors. It is worth mentioning that 91.8% of expat workers in the private sector are men, compared to 8.2% for women. Expat workers are concentrated (75.4% of expats in private sector) in production, sales and services jobs commensurate with their modest educational and professional levels.
One important aspect concerning expat workers is the decline in wages. The data for mid-2012 indicates that about 45% of expat workers are paid a monthly salary ranging between $210-$420, while 14% receive a monthly salary between $420-$630, according to Daas. Undoubtedly, any Kuwaiti employee, regardless of his or her educational qualifications or professional capability, must receive a much higher salary in any government or private institution.
Remedying the current situation in the labor market requires adopting a new employment philosophy based on technical and economic standards far from the political standards that aim at securing jobs for Kuwaitis in government institutions or public sector, regardless of the actual employment requirements.
On the other hand, the educational system must be reformed so as to train Kuwaiti employees to fill jobs and professions available in the private sector. The educational system in the country is inconsistent with the requirements for providing local workers to fill blue-collar positions. This has pushed Kuwaitis towards filling administrative and clerical jobs or enrolling in security institutions, such as the army and police, in the case of those who did not receive higher education.
The disparity in salaries between the public sector and the private sector, despite the support given to workers, is among the key factors that drive [local] workers coming into the labor market to prefer working in the government. This is particularly true following increases in cadres of employees for several jobs and professions adopted by the government and the National Assembly over the past years.
Also, private sector institutions are lagging in advanced technology use, leading them to rely on expat workers with low educational and training levels. This requires significant investment in technology and encourages educated Kuwaitis to work in these institutions.