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Labor Income And Oil Wealth: A Broader Sustainability Framework For Saudi Arabia

Author

Listed:
  • HEND AL SHEIKH

    (Institute of Public Administration (IPA), Riyadh, Saudi Arabia)

  • S. NURI ERBAŞ

Abstract

Actuarial sustainability of income from exhaustible resources requires that present and future generations get equal shares of income. Significant omission is labor market conditions. This paper proposes a broader framework for sustainability assessment that incorporates labor market conditions. Theoretical analysis indicates that current generations' income level is not sustainable for future generations with declining wages, even if oil income is sustainable into the foreseeable future in the actuarial sense. Saudi worker income has not been sustained as private-sector wages declined sharply in recent decades, while government-sector worker income increased. The paper reviews Saudi Arabia's labor market conditions with recent supporting data to explain the causes of persistent unemployment and declining wages. A major cause is labor market distortions resulting from government-sector wage policies. Empirical findings substantiate the theoretical arguments. Discussion of salient policy issues concludes the paper.

Suggested Citation

  • Hend Al Sheikh & S. Nuri Erbaş, 2013. "Labor Income And Oil Wealth: A Broader Sustainability Framework For Saudi Arabia," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1-31.
    • Handle: RePEc:wsi:medjxx:v:05:y:2013:i:02:n:s1793812013500132
    DOI: 10.1142/S1793812013500132
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    References listed on IDEAS

    as
    1. Hend Al-Sheikh & S. Nuri Erbas, 2012. "The Oil Curse and Labor Markets: The Case of Saudi Arabia," Working Papers 697, Economic Research Forum, revised 2012.
    2. M. A. Ramady, 2005. "The Saudi Arabian Economy," Springer Books, Springer, number 978-0-387-24935-3, September.
    3. Mr. Ugo Fasano-Filho & Rishi Goyal, 2004. "Emerging Strains in GCC Labor Markets," IMF Working Papers 2004/071, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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