Economics Essay: Analyzing Unemployment in Kuwait and Its Impact

This essay provides a comprehensive analysis of unemployment in Kuwait, examining its various types, including structural, cyclical, and frictional unemployment. It identifies key factors contributing to the issue, such as the country's dependence on hydrocarbon resources, demographic structure, inclination towards the public sector, and the labor force participation rates. The essay also explores the beliefs and cultural norms influencing female participation in the labor force, and the role of voluntary and frictional unemployment. It suggests several solutions, including economic diversification, encouraging private sector growth, fostering entrepreneurship, increasing investment in the public sector, and promoting education and skill development to enhance labor productivity and female participation. The conclusion emphasizes the importance of sustainable economic growth and the need for policy changes to address the challenges of unemployment in Kuwait.

Running Head: UNEMPLOYMENT IN KUWAIT
Economics Assignment
Unemployment in Kuwait

UNEMPLOYMENT IN KUWAIT 1
Contents
1. Introduction..................................................................................................................................2
1.1 Unemployment, its Types and Costs......................................................................................2
1.2 Current Scenario of Unemployment in Kuwait.....................................................................2
2. Plausible Reasons for the Unemployment...................................................................................4
2.1 Dependence on the Resources................................................................................................4
2.2 Demographic Structure..........................................................................................................4
2.3 Public Sector Inclination........................................................................................................5
2.4 Labor Force Participation.......................................................................................................5
2.5 Beliefs of the People..............................................................................................................6
2.6 Others.....................................................................................................................................7
3. Suggestions and Conclusion........................................................................................................7
4. References....................................................................................................................................9

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1. Introduction
1.1 Unemployment, its Costs and Types
Unemployment is a situation where an individual who is actively looking for work, is unable to
find one. It could be because of the rate of growth of economy. If the economy has high level of
unemployment, the economic condition of the country is not good. Its potential lies untapped and
the resources are not allocated efficiently. There are various types of unemployment including
structural, cyclical and frictional. The given paper analyses the issues influencing the current
unemployment scenario and the cost associated with it in Kuwait.
1.2 Current Scenario of Unemployment in Kuwait
Kuwait is a small economy where petroleum and oil propel the economy. With the discovery in
1934, the economy transformed and it occupies 9% of the world oil reserves (Ertl, 2014). It has
the highest unit valued currency around the globe. The major employment occurs in the
petroleum industry. The economy faces a problem of unemployment because of many factors.
Unemployment in the males fell from 1.2% (2015-16) to 0.9% (2016-17) while it roe in females
from 4.4% (2015-16) to 5.8% (2016-17) (Saleh, 2018).
The unemployment in Kuwait touched 4.7% in the year 2015 while the total unemployment rate
fell from 2.5% to 2.2%. Meanwhile, 1.8% of non-Kuwaitis are yet to be employed (Jabr, 2016).
People are disinclined towards working in sectors other than the public and wait for the
opportunities to show up.

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(Statista, 2017)
Female unemployment in Kuwait even though declining, is very high in magnitude. The
labour force participation of females is 54% while that of males is 85% (Kuwait Times,
2015). Females are reluctant to join the labour force.
(Kuwait Times, 2015)

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2. Plausible Reasons for the Unemployment
2.1 Dependence on the Resources
Kuwait has been endowed with and largely dependent on the hydrocarbon resources for the
development of its economy. This magnitude has been high even in respect to other GCC states.
50% of its GDP is dependent on the export of petroleum and oil. This is around 86% of Kuwait’s
exports and 85% of the revenues of the government. This makes the economy highly volatile to
the changes in the international markets (Ertl, 2014). For the sake of sustainable development
and stable employment generation, the country needs to diversify its economic activities.
2.2 Demographic Structure
The demographic structure of the Kuwaitis for the year 2017 is given below. It does not include
the data for non-Kuwaitis. It shows that the major population is below the age of working age.
There is an unbalanced structure contributing to the high rate of immigration and heavy reliance
on the imported labor (World Population Review, 2018).
(The Public Authority for Civil Informaion, 2018)
2.3 Public Sector Inclination
The increase in the labor force is not accommodated by the job creation in the public sector. This

UNEMPLOYMENT IN KUWAIT 5
puts a burden on the government to create job as the people are interested to work in the public
sector and not the private sector. This eventually increases the government expenditure in terms
of high wages and social benefits given to the inefficient and over-staffed public sector units.
2.4 Labor Force Participation
The labor force participation in 2017 was 69% in comparison to 69.6% in 2016 (CEIC, 2017).
The national estimate for female participation in the labor force (15-24 years of age) was 14.50%
in 2016 while the modeled ILO estimate was 25.05% and 25.29% in the year 2016 and 2017
respectively. The national estimate for male participation in the labor force (15-24 years of age
was 44.20% in comparison to the modeled ILO estimate 42.43% and 43.56% in the year 2016
and 2017 respectively (Index Mundi, 2018).

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(World Bank, 2018)
2.5 Beliefs of the People
The unemployment rate in Kuwait can be attributed to the lower female participation. This could
be because of the beliefs, ethics, moral values and traditions that the people follow. Many
countries do not favor the working of females. There are conservative laws prohibiting the
female participation (M et al., 2014). Some countries bar their education as well. The labor force
is not only unskilled and uneducated but also unemployed. Many of them are not even a part of
the labor force. This reduces the potential of the country and the output, efficiency and
employment realized are low. There is a huge potential lying untapped because of conservative
mindset of the people.
2.6 Others
There is voluntary unemployment where people are not willing to work at the prevailing wages
in the market. They value leisure over work. They look for the unemployment modes and
compensations provided by the government and hesitate to work. They weigh the opportunity
cost associated with being unemployed to that of being employed. The people in Kuwait are very
rich and own petroleum and oil reserves. Thus, some of them are reluctant to work. Frictional
unemployment is also prevalent in the economy. The job search process and the rigidity of wages
are the factors responsible for the non-immediate nature of employment. This form of
unemployment is generally short-term. The long-term unemployment can be attributed to
structural changes and issues in the economy.
3. Suggestions and Conclusion
Unemployment in Kuwait and other nations in the GCC region hamper their growth and
development. Human resource is the most important asset of a nation. The heavy dependence on
exports of hydrocarbons as well as the public sector leads to unstable and non-sustainable growth
in the country. The hydrocarbon sector despite the scale does not create large number of jobs
(Al-Habees & Rumman, 2012). There is a need to shift towards more reliant and long-term
sustainable growth which will improve the conditions of the society as well as the government.
Unemployment not only adds to the burden of the public sector also contributes to the low
economic growth. The lifestyle of the people and the society can be improved with the help of

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proper education and employment.
The unsecure private sector is one of the main reasons for the prevailing unemployment in the
GCC region. The issue can be solved by building the trust in the masses towards the private
sector. The firms should attract the labor force by providing high wages and job security. This
will help to remove the burden from the government expenditure. Also, the government should
formulate polices in favor of private sector which will boost the opportunities and the attract
people towards the same. Labor security and insurance must be made necessary for the firms.
On the other hand, the governments in the GCC region should encourage entrepreneurship by
providing benefits. This will provide people an incentive to shift from public sector to
entrepreneurship. This could be done by lowering down the interest rates which will boost the
loans for business setups. The other steps could be tax exemption and lessen the burden of paper
work and legal requirements in most of the industries.
The government should increase the investment in the public sector to incorporate the growing
labor size (Nagel, 2015). It can also encourage the foreign direct investment (FDI) and reduce
the trade barriers. FDI will increase employment in the nation.
Also, the government should encourage the education and skill development in the nation. This
increases the labor productivity and efficiency. The people will be more willing to work when
provided the higher wage due to increased knowledge and skill. The opportunity cost of not
working will increase in this case and people will move towards private sector for higher wages.
There will be sustainable growth and the employability of the people will increase. Education
will also improve the conservative thinking of the people and female participation in the labor
force will increase.
Thus, unemployment can be reduced by increasing the investment, the level of education,
promoting private sector and increasing the female labor force participation.

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4. References
Al-Habees, M.A. & Rumman, M.A., 2012. The Relationship Between Unemployment and
Economic Growth in Jordan and Some Arab Countries. World Applied Sciences Journal, 18(05),
pp.673-80. Available at:
https://pdfs.semanticscholar.org/95c3/7e58c6b350dd0eb30e7bfdeb53d6c524564a.pdf [Accessed
13 April 2018].
CEIC, 2017. Kuwait Labour Force Participation Rate. [Online] Available at:
https://www.ceicdata.com/en/indicator/kuwait/labour-force-participation-rate [Accessed 13 April
2018].
Ertl, V., 2014. The Path to Economic Growth in Kuwait. [Online] Available at:
http://www.sciencespo.fr/psia/sites/sciencespo.fr.psia/files/ERTL_Veronika_KSP_Paper_Award.
pdf [Accessed 13 April 2018].
Index Mundi, 2018. Kuwait - Labor force participation rate. [Online] Available at:
https://www.indexmundi.com/facts/kuwait/labor-force-participation-rate [Accessed 13 April
2018].
Jabr, A., 2016. 58 percent unemployed Kuwaitis unwilling to work in private sector – Efforts to
Kuwaitize private sector largely failed. [Online] Available at:
http://news.kuwaittimes.net/website/58-percent-unemployed-kuwaitis-unwilling-work-private-
sector/ [Accessed 12 April 2018].
Kuwait Times, 2015. Labor force participation rate in Kuwait reached 72 percent – Labor Force
Survey 2014: Main Findings – Part I. [Online] Available at: http://news.kuwaittimes.net/labor-
force-participation-rate-in-kuwait-reached-72-percent-labor-force-survey-2014-main-findings-
part-i/ [Accessed 12 April 2018].
Kuwait Times, 2015. Labor force participation rate in Kuwait reached 72 percent – Labor Force
Survey 2014: Main Findings – Part I. [Online] Available at: http://news.kuwaittimes.net/labor-

UNEMPLOYMENT IN KUWAIT 9
force-participation-rate-in-kuwait-reached-72-percent-labor-force-survey-2014-main-findings-
part-i/ [Accessed 13 April 2018].
M, I.P., Udosen, A. & Okoro, C., 2014. Social-Cultural Impact on Women Education and
Employment in Emouha Local Government Area of Rivers State, Nigeria. Scholarlink Research
Institute Journals, 05(02), pp.179-83. Available at:
https://pdfs.semanticscholar.org/f65d/9d02aae8f2d452be9875b5e0c6d7e93f3390.pdf [Accessed
13 April 2018].
Nagel, K., 2015. Relationships between unemployment and economic growth – the review
(results) of the theoretical and empirical research. Journal of Economics and Management,
20(02), pp.64-79. Available at:
https://www.ue.katowice.pl/fileadmin/_migrated/content_uploads/05_23.pdf [Accessed 13 April
2018].
Saleh, A., 2018. Kuwait unemployment rate remains at 2.2 percent. [Online] Available at:
http://news.kuwaittimes.net/website/kuwait-unemployment-rate-remains-2-2-percent/ [Accessed
12 April 2018].
Statista, 2017. Kuwait: Unemployment rate from 2007 to 2017. [Online] Available at:
https://www.statista.com/statistics/438871/unemployment-rate-in-kuwait/ [Accessed 13 April
2018].
The Public Authority for Civil Informaion, 2018. Gender By Nationality and Age and
Governorate. [Online] Available at: http://stat.paci.gov.kw/englishreports/ [Accessed 14 April
2018].
World Bank, 2018. Unemployment , youth female (% of female labor force ages 1-24) (modeled
ILO estimate). [Online] Available at: https://data.worldbank.org/indicator/SL.UEM.1524.FE.ZS
[Accessed 13 April 2018].
World Population Review, 2018. Kuwait Population 2018. [Online] Available at:
http://worldpopulationreview.com/countries/kuwait-population/ [Accessed 13 April 2018].