Macroeconomic factors refer to large-scale aspects of the economy that provide insight into countries’ performance as economic actors while also having implications for tourism. Being related to the portion of the workforce that is not in paid employment, unemployment joins the ranks of determinants of macroeconomic trends. In Saudi Arabia, unemployment causes increased investment in education and moderate effects on the gross domestic product, which could affect the unused workforce’s participation in outbound tourism.
Unemployment and Saudi Arabia’s General Economy and Tourism
For any country, the younger generation’s success in finding satisfactory job opportunities and starting careers reveals its economic health, and Saudi Arabia is not an exception. Figure 1 demonstrates that unemployment rates among young people or citizens aged between 15 and 24 in the Middle East and North Africa (MEA) region have been greater than 20% for the past 15 years. Interestingly, the employment trend statistics of multiple Saudi Arabia’s neighbors’ are less concerning than its own, creating a region-level picture that is not overly pessimistic. Concerning country-level tendencies, in 2020, Saudi Arabia’s individual youth unemployment rate reached 28.8%, making it the fourteenth country in the region in terms of employment-related success (The World Bank, 2022). The trend is illustrative of large-scale challenges pertaining to insufficient demand for an average Saudi graduate’s skills.
Young citizens’ inability to find stable jobs has economic implications for non-public businesses and education. Saudi Arabia’s government recognizes that alarming trends pertaining to the percentage of unemployed young citizens constitute an economic concern that might curb the non-oil private sector’s active development (Mintel, 2014a). Insufficient youth employment is caused by the mismatch between Saudi youth’s de facto skills and the country’s ambitions related to private sector growth (Mintel, 2014a). This situation necessitates investment in programs to send students to study abroad. Saudi Arabia’s well-developed tourism market, especially foreign agencies such as Destinia, should seek incredible talents with world-class training to address the wealthier clientele’s standards (Mintel, 2014b). In 2022, to meet the tourism sector’s needs, the government has invested in training 100,000 young citizens, including recent graduates without jobs, in leading foreign schools (Ministry of Tourism of Saudi Arabia, 2022). As the need for more foreign-taught employees is recognized, the government basically acknowledges the internal educational infrastructure’s imperfections in terms of promoting stable economic growth by raising competitive specialists.
Impacting the kingdom’s general economy, Saudi Arabia’s unemployment rates for those in their mid-20s and younger can have reverberations on outbound tourism. Prior research focusing on a variety of European economies has demonstrated unemployment’s inverse relationship to outbound tourism participation to be a universal tendency (Alegre et al., 2019). The effect occurs in scenarios with unemployment rates exceeding 10%, which is almost 2,9 times smaller than Saudi Arabia’s most recently reported rate pertaining to youth (Alegre et al., 2019; The World Bank, 2022). Saudi youth represents a considerable portion of the nation’s outbound tourists (Mintel, 2014b). Considering this tendency, Saudi Arabia’s level of unemployment among youth is unlikely to go unnoticed for this group’s activity as travelers.
Unemployment statistics peculiar to the younger portion of Saudi Arabia’s workforce cover citizens, many of which may be capable of requesting assistance from parents or caregivers, which is not the case for older Saudis. As opposed to youth-specific employment trends, the rates for the country’s total population of working age are more optimistic in numerical terms; as of 2021, the rate did not exceed 7.4% (Statista, 2022). Nevertheless, as Figure 2 illustrates, Saudi Arabia’s situation is somewhat concerning from the perspective of change size. Between 1999 and 2020, the rate has seen a 1,7 times increase, reaching its highest value for the past 20 years. At the same time, between 2020 and 2021, total unemployment has seen a 0,09% decrease (Statista, 2022). The tendency might suggest the emerging economic stabilization following a decline in COVID-19 incidence and its effects on the national job market’s health and increases in the oil sector’s outputs (Islam et al., 2021). The downward trend in unemployment indicates this macroeconomic factor’s decreasing negative effect on the state’s economic performance.
Paradoxically, even slight increases in the country’s joblessness rates do not cause immediate reductions in its gross domestic product. Saudi Arabia is among a few countries in which unemployment is relatively harmless (Islam et al., 2021). Islam et al. (2021) conducted a time series analysis of Saudi Arabia’s economic health indicators reported between the early 1990s and 2019. Their findings suggest that the growth in total joblessness in the period did not cause proportionate decreases in the gross domestic product’s growth rate (Islam et al., 2021). Such trends may exist as a result of Saudi Arabia’s prompt and adequate economic responses to the issue. These incorporate strategies to pay unemployment benefits and replace the unused workforce with cheaper foreign labor from less wealthy countries (Islam et al., 2021). Thus, in spite of impacting tourism by limiting jobless citizens’ opportunity to invest in traveling abroad, the current unemployment rates do not undermine Saudi Arabia’s general economy in terms of size and overall performance.
To sum up, the selected destination’s joblessness situation exerts an influence on its general economy, including the gross domestic product, unemployment benefits, and public education investment. Unemployment reveals workforce demand-supply mismatches in various areas, including tourism. Job search challenges affect younger Saudi nationals disproportionately, creating the need for youth-specific assistance strategies. By promoting reductions in the unused workforce’s personal funds, growing joblessness limits the freedom of choice in outbound trip decisions.
Alegre, J., Pou, L., & Sard, M. (2019). High unemployment and tourism participation. Current Issues in Tourism, 22(10), 1138-1149. Web.
Islam, M. M., Alharthi, M., & Murad, M. W. (2021). The effects of carbon emissions, rainfall, temperature, inflation, population, and unemployment on economic growth in Saudi Arabia: An ARDL investigation. Plos One, 16(4), 1-21. Web.
Ministry of Tourism of Saudi Arabia. (2022). Saudi Arabia launches one of the world’s biggest investments in next generation of tourism professionals. Web.
Mintel. (2014a). Saudi Arabia outbound – October 2014. Market drivers. Mintel Group Ltd.
Mintel. (2014b). Saudi Arabia outbound – October 2014. Tour operators and travel agencies. Mintel Group Ltd.
Organization for Economic Cooperation and Development. (2022). Youth at the centre of government action: A review of the Middle East and North Africa. OECD Publishing. Web.
Statista. (2022). Saudi Arabia: Unemployment rate from 1999 to 2021.Web.
The World Bank. (2022). Unemployment, youth total (% of total labor force ages 15-24) (modeled ILO estimate) – Middle East & North Africa, Sub-Saharan Africa, South Asia, Latin America & Caribbean, Europe & Central Asia, East Asia & Pacific. Web.