**1. Introduction**

The oil-rich Gulf Cooperation Council (GCC) countries are high-income countries. They include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). Over the past two decades (2000–2020), Qatar, UAE, and Bahrain had the highest population growth rates of 8.2 percent, 5.9 percent, and 4.8 percent, respectively, followed by Oman, Kuwait, and Saudi Arabia at rates of 4.1 percent, 3.8 percent, and 2.6 percent.1 The corresponding population growth rates for the Arab world, high income countries, and the world total are 2.2 percent, 0.6 percent, and 1.2 percent, respectively.

Despite the high population growth rates of the GCC countries, youth unemployment rates were lower than the rates in other high-income countries. High youth unemployment can constrain long-term growth and reduce economic, social,

<sup>1</sup> Figures are based on the World Bank's World Development Indicators (WDI).

and political stability [1].<sup>2</sup> As **Table 1** shows, the total youth unemployment rate in 2007–2017 averaged 28.5 percent, 12.5 percent, and 11.9 percent in Saudi Arabia, Oman, and Kuwait, respectively.3 In comparison, the rate amounted to 6.9 percent, 5.3 percent, and 1 percent in the UAE, Bahrain, and Qatar, respectively.4

Compared to other high-income countries, the total youth unemployment rate in the GCC countries is lower. In 2007–2017, the total youth unemployment rate amounted on average to 11 percent in the GCC countries compared to 18 percent in a sample of 44 high-income countries.5 The difference is even larger for the male youth rate: The male youth unemployment rate is 8.5 percent in the GCC countries compared to 18.1 percent in the other high-income countries. The GCC countries therefore fared well relative to other high-income countries with respect to the total and male youth unemployment rates.

Female youth unemployment is a serious issue in the GCC countries, however.6 The female youth unemployment rate is 20.6 percent compared to 8.5 percent for the male youth unemployment rate, resulting in a ratio of female-to-male youth unemployment rate of 4.5.7,8 In the sample of 44 other high-income countries, the male and female youth unemployment rates are almost equal (18.1 percent).

In addition, the GCC countries experience female youth unemployment rate heterogeneity. The female youth unemployment rate is higher in Saudi Arabia (53 percent), Oman (24.6 percent) and Kuwait (16.7 percent) compared to Bahrain (12.8 percent), UAE (11.2 percent), and Qatar (5.5 percent). This is perhaps not unusual given the pattern of the total youth unemployment rate in the two groups of countries.

However, the ratio of female-to-male youth unemployment rate is highly pronounced in Qatar and Bahrain. Despite enjoying low total youth unemployment rate, Qatar and Bahrain have the highest female-to-male youth unemployment rate

<sup>4</sup> The GCC countries can be therefore perceived as two heterogenous groups with respect to the total youth unemployment rate.

<sup>5</sup> The sample of high-income countries include Australia, Austria, Barbados, Belgium, Brunei Darussalam, Canada, Chile, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Norway, Panama, Poland, Portugal, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Trinidad and Tobago, UK, US, and Uruguay.

<sup>6</sup> Another useful metric of an active (female) labor force is the (female) labor force participation rate. This metric accounts for ages 15 and above and is not restricted to (female) youth. It is calculated as the sum of all (female) workers who are employed or actively seeking employment divided by the total noninstitutionalized, civilian (female) working-age population.

<sup>7</sup> Based on WDI data, the period average female labor force participation rate is 39.9 percent, which is less than half the male labor force participation rate (86.9 percent). The period average female labor force participation rate is lowest in Saudi Arabia (20 percent), Oman (28.4 percent), and Bahrain (43.1 percent). See the Appendix for information on the individual GCC countries labor force participation rate for both genders. In the other high-income countries, the period average female labor force participation rate amounts to 53.8 percent. The lowest rates are in Malta (38 percent) and Italy (39 percent).

<sup>8</sup> International Labor Organization data suggests regional female labor participation rate is lower in earlier years [2]. Female labor participation rate for Arab states was 12.8 percent in 2000 and dropped to 9.5 percent in 2011. The Arab states include Bahrain, Iraq, Jordan, Kuwait, Lebanon, Occupied Palestinian Territory, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, United Arab Emirates, and Yemen.

<sup>2</sup> Youth unemployment refers to the labor force ages 15–24 without work but is available for and seeking employment. Youth unemployment rate measures the extent of youth unemployment. The youth unemployment rate is measured as the number of youth unemployed relative to the total labor force between ages 15–24.

<sup>3</sup> This rate includes both male and female youth unemployment.


#### *Youth Unemployment and Productivity-Pay in the GCC Countries DOI: http://dx.doi.org/10.5772/intechopen.99975*

**Table 1.**

*Youth unemployment rates in the GCC countries (2007–2017; period average).*

ratio of nearly 14 and 5, respectively. The average female youth unemployment rate is nearly 14-fold the male youth unemployment rate in the case of Qatar and fivefold in the case of Bahrain.

The purpose of this chapter is to explain youth unemployment in the GCC countries. I start by discussing the reasons for the gender bias in female youth unemployment (Section 2). The presence of generous existing social contract for GCC nationals as well as cultural factors are offered as explanations for the gender bias. The social contract is key to understanding the dual nature of GCC labor markets. To be able to reduce the youth unemployment rate, it is important to understand the degree of labor market efficiency. I discuss GCC labor markets efficiency and posit that it reflects more the foreign labor segment (Section 3). I conjecture that having a strong pay-productivity link in *both* the national and foreign labor segments can reduce the female and consequently the total youth unemployment rate (Section 4). This conjecture is based on a graphical analysis of the relationship between youth unemployment and the pay-productivity link in 124 non-GCC countries as well as in the six GCC countries. To explain youth unemployment empirically, I specify and estimate an empirical model (Section 5). The empirical results show that linking pay to productivity reduces the female and total youth unemployment rates (Section 6). I conclude with a policy recommendation (Section 7).
