Employment incentives should not become a welfare program
Objective of ‘Hafiz Program’ to help Saudi youth become gainfully employed as soon as possible
EARLIER this year, the Ministry of Labor of Saudi Arabia launched the revolutionary “Hafiz Program.” The word hafiz in Arabic has a double meaning of “incentive” and “motivator.” Under this program, job seekers are paid SR2,000 ($ 553) monthly, provided they meet certain conditions. Millions have applied for the program, but only about one million have been enrolled. As admission into the program and termination of its benefits are done on a rolling basis, the numbers keep changing almost constantly.
Considering the fact that the establishment of this program was the first time Saudi Arabia has set up such a benefits program for job seekers, its execution has faced relatively few obstacles and numbers of applicants are growing dramatically and numbers of beneficiaries are also growing. However, the number of the program’s graduates has been small. But for the program to succeed, it has eventually to reduce the numbers of its beneficiaries by finding them suitable jobs.
From its name, it is clear that its main objective is to facilitate job seekers’ entry into the labor market. For that reason, the ministry has set up strict conditions to qualify for these stipends, under which about a million Saudis have been enrolled.
Many more applicants were turned down, leading to complaints about the fairness of those conditions and the manner in which they are implemented. It is easy to see why, as the number of Saudis outside the labor force counts in the millions, according to official statistics
It gets more difficult, even for the lucky ones who are accepted into the program. They have to remain in good standing to continue to receive its benefits. Last week, the Ministry of Labor adopted a regulation that sets up five situations where membership in the program may be revoked, including when a job seeker does not pass training programs he or she is directed to take, misses appointments with potential employers, rejects suitable job offers, or fails to visit his electronic file on the program’s website at least once week. Finally, qualification for the program is revoked when the job seeker reaches 35 years of age.
The new regulation is expected to enter into force on May 21, 2012.
Once the new regulation is applied, some current beneficiaries of the program may lose the privilege, but it is doubtful
Abdel Aziz Aluwaisheg that many would, as the process of employing Saudis is moving quite slowly, especially for women, who constitute a majority of the program’s beneficiaries. As a result, the numbers of Saudi job seekers and those unemployed keep growing. Last week, a senior Ministry of Labor official admitted that the ministry had received the applications of 1.6 million qualified Saudi women, including nearly 400,000 university graduates, many with post-graduate degrees. This is good news in a way, as it indicates that the Hafiz program is motivating Saudis to brush up their dusty CVS and start diligently to look for work. End of despair.
In addition, there are always new entrants to the labor market who should also benefit from the program while they look for work. They include university and high school graduates, and others, who start their search for jobs. According to the 9th Development Plan (2010-2014), around 200,000 new Saudi job seekers enter the labor market every year.
For these reasons, the number of applicants for the program will continue to rise, even as a limited number of enrollees are graduated or eliminated.
In other words, as a result of these factors and on balance the number of program beneficiaries will have to grow, as the number of new entrants into the job market exceeds the number of those absorbed into gainful employment.
We could probably say that the program is falling victim of its own early success. By raising expectations of discouraged qualified Saudis, the number of active job seekers is growing, as they become more optimistic about finding jobs. The monthly stipend the Hafiz Program provides constitutes an additional, financial, incentive for actively looking for work. According to the new regulations, in fact, unless a job seeker actively looks for work, he or she risks losing the stipend.
As the numbers of its beneficiaries grow, its cost would escalate beyond its current cost, which is already in the tens of billions of Riyals annually. But for the program to achieve its objectives, and to avert the financial squeeze that could result if the number of beneficiaries keeps growing, the Ministry of Labor will have to do more to find jobs for Saudis, especially women who constitute the bulk of the program’s current and potential enrollees.
It is important to keep in mind that the Hafiz Program is not another welfare or entitlement program. Its objective is to help Saudis become gainfully employed as soon as possible. It should not be used to delay that process or buy time, because every day a Saudi is unemployed represents a drain on the economy. I am not talking only about the financial cost to the government of this program, which is sizable, but the economic or opportunity cost of remaining idle. Finding them jobs should not be an insurmountable hurdle, as Saudi Arabia enjoys one of the fastest economic growth rates in the world, and consequently magnificent growth in job opportunities.
Numbers of applicants for the Hafiz Program are growing dramatically and numbers of beneficiaries are also going up. However, for the program to succeed it has eventually to reduce the numbers of its beneficiaries by finding them suitable jobs. It should not turn into a welfare program that could prolong unemployment.