What Saudi Arabias improved global ranking in labor resilience signifies

DUBAI: Job security has been a major source of anxiety throughout the COVID-19 pandemic. Lockdown measures cut into business revenues, forcing many firms to reduce working hours or lay off staff.

In countries with diverse economies, strong digital infrastructure and generous social safety nets, the damage has been somewhat mitigated. For others, the crisis has exposed a serious lack of labor-market resilience.

The 2021 Global Labor Resilience Index (GLRI), compiled by public policy and strategy advisory firm Whiteshield Partners in collaboration with the University of Oxford’s Saïd Business School and the Institute for the Future of Work, revealed the countries best placed to cope with labor-market disruptions or even turn challenges into opportunities.

The index ranks 145 countries and economies based on how resilient their labor markets are to a variety of shocks. Leveraging 102 indicators from a wide range of international sources, the GLRI takes into account both longer-term structural factors — such as demographics, the level of economic development and macroeconomic stability, national capabilities, trade vulnerability and inequality — as well as shorter-term cyclical factors that affect the resilience of a country based on its absorptive, adaptive, transformative and institutional capacity.

The study, which revealed a dramatic improvement in Saudi Arabia’s overall ranking, was published in March, shortly after the first anniversary of the declaration of the COVID-19 pandemic. The timing was apt, given the seismic disruptions to employment caused by the health crisis.

“(The GLRI) is the most comprehensive tool for policymakers to assess labor-market readiness for short-term shocks, such as COVID-19, and long-term stresses, such as technological disruptions and green transitions,” Tom Flynn, a senior manager at Whiteshield Partners, told Arab News.

“Policymakers can use the GLRI to identify and apply policies that resilience leaders use to better maintain and develop quality jobs.

“For example, COVID-19 devastated labor markets and jobs globally but top GLRI performers, such as The Netherlands, whose unemployment rate is now around 3 percent, coped relatively better than others.”

Resilient labor markets are more important than ever as part of efforts to preserve stability and livelihoods against the backdrop of a global pandemic that has caused one of the biggest job crises since the Great Depression.

According to the GLRI, Switzerland continues to be the country with the most resilient labor market in the world, followed by Germany and The Netherlands. This year, a new framework was used to measure resilience to all kinds of shocks, with the result that the US (ranked 14th) and the UK (12th) no longer feature in the top 10. On the 2020 index they ranked third and ninth respectively. In contrast, Germany moved up five places to second place.

In the Middle East and North Africa, the index reveals that a number of countries, including the Kingdom, have made progress in improving the resilience of their labor markets and moved up the rankings in the past five years. However it also shows that during the pandemic many of them failed to hold on to those gains.

The UAE remains the highest-ranked Gulf country, despite dropping from 21st place in 2020 to 35th this year. Its relatively high position reflects the government’s efforts to enhance economic diversification as well as support for innovation.

Oman, which ranks 75th, has improved its position on the list by 19 positions since 2016, but was ranked 53rd in 2020 and, so, dropped 22 places in the past year.

Saudi Arabia, which ranks 62nd on this year’s list, managed to buck this trend. Not only has the Kingdom moved up the rankings by 27 places since 2016, it also managed to improve its position by 13 places compared with last year, despite the challenges created by the pandemic.

“Being the Arab world’s leading economy and maintaining economic stability have laid the foundation for improvement,” Flynn said of the Kingdom’s success. “But Saudi Arabia has also moved to invest in resilience supports, such as digitalization and education, and has enacted beneficial policy reforms, such as improving labor-market flexibility.”

Many other countries in the region continue to have significant resilience gaps, however, including the challenges of youth unemployment and preparing their labor markets for digital and “green” jobs. Consequently, they are encouraged to explore youth-employment schemes, green-growth opportunities and policies conducive to entrepreneurship and innovation.

“The GLRI provides Middle Eastern policymakers with a blueprint to develop sustainable jobs — a critical challenge for the region, which has relatively fragile labor markets and economies,” Fadi Farra, a co-founder and partner at Whiteshield Partners, told Arab News.

“One lesson from this year is that resilience leaders often developed strong labor markets by focusing efforts on improving specific economic foundations or policies to drive resilience, rather than attempting whole-scale reform.”

In the case of Saudi Arabia, the GLRI indicates there is room for improvement at a policy level. For example, the Kingdom ranks 76th on the cyclical pillar, which assesses a country’s policy response cycle when faced with crises.

“In particular, attracting and developing talent and improving the overall business environment, such as in business insolvency and access to credit, can help Saudi Arabia drive growth in innovative small and medium enterprises and start-ups and provide new sources of private-sector jobs,” Farra said.

According to Flynn, digitalization, the green economy and a growing youth population will continue to challenge the Kingdom and its regional neighbors to provide more, and better-quality, jobs geared toward future industries.

“The COVID-19 crisis has shown how relying on a few industries and natural resources for economic growth leaves Middle Eastern labor markets, particularly in the Gulf, vulnerable to shocks, with youth and lower-skilled workers particularly hurt,” Flynn said.

“While the Middle East, and particularly Saudi Arabia, has experienced clear improvements in labor-market resilience, there is potential to go further.”

Firstly, he argues, governments must adopt policies that promote the digital and green economies as well as traditionally job-creating sectors such as logistics and manufacturing.

“Strong skills-development and apprenticeship programs can help prepare young and experienced workers for these new jobs,” Flynn said.

“Secondly, resilience leaders such as Germany and the Netherlands have shown that strong institutions that can develop and implement job-creating policies, and respond quickly during crises, have proven more critical than ever.”

The GLRI defines a resilient labor market as one that generates sustainable demand for a wide range of occupations for much of the workforce, supplies quality work and can withstand disruptions. While governments can plan for climate change and technological disruption, they cannot accurately forecast economic, social or health-based shocks, which may become more frequent.

Vulnerabilities in the global workforce related to inclusivity, especially in relation to young people, women and casual workers, have been exacerbated by the pandemic. Women and young people have been the hardest hit by job losses. At the same time, many informal or “gig economy” workers have found themselves without a social safety net.

Focusing on the long term, the GLRI advises governments to invest more in building labor-market resilience by investing in digitalization, improving employment-related inclusivity, and prioritizing environmental sustainability.

“Having a good resilience index is always important, at any time, because labor markets are changing all the time and the resilience index tells us where labor markets are going and how good they are at absorbing shocks and creating new jobs,” said Sir Christopher A. Pissarides, a Nobel Prize winner in economics, chair of the GLRI Advisory Board and a director of Whiteshield Partners.

“This year is particularly important because, as we all know, there has been a massive new shock which was completely unexpected. Learning more about labor markets and how resilient they are to new shocks such as COVID-19 is very important.”