**3. Labor market efficiency: Pay and productivity**

The World Economic Forum's Global Competitiveness Index (GCI) assesses labor market flexibility and efficiency. The assessments are based on executive opinion survey. Businesses included in the survey represent the sectors they operate in. These comprise agriculture, manufacturing industry, non-manufacturing industry, and services. The number of businesses surveyed depends on the contribution of the sector to GDP.12 Surveyed businesses are in principle not necessarily large corporations. They may be small or medium in size.

Linking pay to productivity, performance-based pay, or performance-pay for short, is a labor market efficiency indicator. Given the segmented nature of the GCC labor markets and the significant presence of foreign workers in the GCC countries, the indicator tends to reflect the strength of the relationship between productivity and pay in the foreign labor segment.13 Although the pay-productivity link is perceived as strong relative to the other high-income countries, labor is nonunionized and collective bargaining is absent. This may partially explain the link strength.14

**Table 2** presents the 2007–2017 period average of the linking pay to productivity indicator for each of the GCC countries. A score of 1 indicates that the two are completely unrelated, while a score of 7 indicates they are strongly related. The table shows that Qatar and the UAE have the highest average scores, while Kuwait has the lowest. It also shows that the GCC countries, as a group, have a higher average than other high-income countries.

<sup>9</sup> The average annual growth rates for Bahrain is 3.77 percent (1981–2020), Kuwait 4.57 percent (1993–2019), Oman 8.38 percent (1966–2019), Qatar 8.43 percent (2001–2020), Saudi Arabia 4.86 percent (1969–2020), and UAE 4.86 percent (1976–2019). The rates are mathematical averages of annual growth rates obtained from the World Bank's World Development Indicators (WDI) over the specified periods.

<sup>10</sup> If they decide accordingly not to search for jobs, they should not be considered as part of the labor force. In cases of divorce, females may start searching for jobs, however.

<sup>11</sup> This is based on the WDI 2017 literacy rate gender parity index for youth for Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia and the 2015 index for the UAE.

<sup>12</sup> Non-manufacturing industry includes mining and quarrying, electricity, gas and water supply, and construction.

<sup>13</sup> There is no collective bargaining in the GCC labor markets though.

<sup>14</sup> The strength of the link may depend on business professional management in case of large businesses.

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


#### **Table 2.**

*The pay-productivity link (2007–2017; period average).*
