Middle East: Effects of Oil Slump on Workers across the Middle East and Africa


Oil companies are eliminating more jobs citing continued challenging market conditions for deep-water developments. Although some of the most recent cuts reported are from operations based in both the United States and Angola, it is the Saudi Arabian migrant workers who are most adversely affected by the oil price slump in the Middle East. The impact is felt across the Middle East and South Asia, from which many of these migrant workers originate. The United Nations Department of Economic and Social Affairs has reported that Saudi Arabia depends more heavily on migrant labor than any other large country, except the United Arab Emirates.

The oil boom encouraged a dramatic influx of migrants mostly from poorer countries in the Middle East and South and Southeast Asia. Saudi Arabia saw the number of migrant residents nearly double from 5.3 million in 2000 to 10.2 million in 2015. Saudi Arabia hosts more migrants than many other countries around the globe only trailing the United States (47 million), Germany (12 million) and Russia (12 million). The migrant populations consist of 32% of the resident population (up from 25% in 2000) and are 39% of the Male population in the country. These migrant workers send and estimated $36 billion back to their families in India, Indonesia, Pakistan, Bangladesh, Egypt, Syria and Yemen. With a smaller yet significant portion of these workers earnings going to Afghanistan, Sudan, Nepal, Myanmar, Jordan, Ethiopia and Lebanon from migrants in Saudi Arabia. These poorer economies benefit greatly from the additional funds however Saudi Arabia in now close to recession as the government budget has cut deep into the red and the slump in oil prices continues to hamper oil producer’s efforts around the world.

Intensified efforts at ‘Saudisation’ (the promotion of hiring Saudi Arabian locals) of the workforce are a centerpiece of the government’s program for adjusting to lower oil prices and creating more private sector employment as Saudi Arabia combats an unemployment rate of over 10% nationally. The need to generate jobs for nationals has become urgent and job growth in the past few years has seen the majority of positions being filled by expatriates. As Saudisation efforts increase, many migrants are uncertain about their continued employment and residency in Saudi Arabia. To maintain both social and political stability as well as conserve funds amid the prolonged drop in oil prices and revenue Saudi Arabia is looking at cutting payments to migrant workers and possibly eliminating migrant jobs as a source of savings.

The same pressure to reduce the number of migrants is likely to play out across the other oil-dependent economies around the Gulf. In addition to the 10.1 million migrants in Saudi Arabia, there are 8.1 million in the United Arab Emirates, 2.9 million in Kuwait, 1.8 million in Oman, 1.7 million in Qatar, and 700,000 in Bahrain. According to the United Nations, migrants make up an even larger portion of the local population in most of these countries than in Saudi Arabia. Gulf economies absorbed a lot of young, mostly male, workers from some of the poorest countries in the world, so the implications stretch well beyond purely the economic impact to include the effects on social stability.

Oil prices continue to suffer despite the recent rebound, still down 61% in April 2016 from the pre-crash rate in June 2014. For most oil and gas operators, they have reached a level of financial crisis where profitability and cash flow are unsustainable. As a result, oil production firms have implemented strategies this year that include halting investments in exploration, cutting back on development activity, and putting pressure on the service industry to lower prices. This pressure has created an equally difficult situation for the services sector. Moreover, both oil production and service related organizations have experienced a high number of job cuts over the past 18-24 months.

As workers leave Saudi Arabia to seek employment elsewhere in the Middle East, this puts pressure on the workforces of neighboring markets such as the UAE and Israel. Employers stand to have a larger labor pool to draw from with the variety of skills and experience levels making for an employer’s market in the oil and gas production organization, as well as the service industry, as it relates to oil and gas production throughout the region. Israel’s labor pool is currently being tapped for information technology professionals throughout the Middle East. As far as contingent labor is concerned, Israel will boast one of the best markets in which to source talent through the end of 2016. In 2015, Israel ranked first for ‘Availability’ on ManpowerGroup’s Contingent Workforce Index (CWI). Availability being a relative comparison of the current skilled contingent workforce in each country included in the CWI and the likeliness of sustainability of that workforce based on emerging and aging workforce trends.

Israel’s workforce boasts some of the highest ratios of English proficiency, professional skill levels and educational attainment. With the largest improvement in overall CWI rankings in 2015, moving from 15th to 5th, with its primary limitation being simply the size of the overall workforce, Israel is poised to climb even higher on the CWI rankings for 2016. An extended work week and nine hour work days plus investment in infrastructure make Israel a favorable market for both contingent workforce employers and migrant workers. The current growth rate of the Arab population in Israel is 2.1%, only slightly higher than the annual population growth rate across all groups of 2.0% in 2015. However, the Arab population makes up over 20% of the total population in this market and stands to grow with more migrant workers from the Middle East seeking employment in countries neighboring Saudi Arabia. The apparent decrease in demand for talent across the Middle Eastern oil and gas industry ultimately creates more talent sourcing opportunities for employers in other industries throughout the region with an influx of experienced and skilled workers who are both migrants returning to their home markets and migrants seeking work outside of their current country of residence.