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Finance & Development, December 1980
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Migration and manpower needs in the Middle East and North Africa, 1975–85: By 1 985 foreign workers will hold one out of every three jobs in the region: a study of the volume and occupational characteristics of these workers in eight oil producing countries

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
December 1980
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Ismail Serageldin and James Socknat

Migration for employment is an increasingly significant phenomenon in the Arab countries of the Middle East and North Africa. Assessments of national development prospects are impossible without considering the regional labor market, within which the volume, characteristics, and timing of labor flows are critical factors, but hitherto have been neither closely monitored nor comprehensively assessed, much less planned. In 1975, nearly 1.7 million expatriate workers were employed in the eight major oil-endowed, labor importing countries of the region: Algeria, Bahrain, Kuwait, the Socialist People’s Libyan Arab Jamahiriya, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. By 1985, this number will have more than doubled to 3.6 million persons, a figure which will represent an expatriate share of 35 per cent of the total employment in these countries, compared with 27 per cent in 1975. The reliance on foreign labor in these countries will increase in all but the least skilled occupational levels.

This reliance on foreign migrant labor has advantages and disadvantages. It facilitates the execution of extensive development projects in countries that have expanding oil revenues, but face difficulties in putting them to productive use because of persistent and acute shortages of indigenous manpower. Yet when foreign labor is used to fill these needs, major issues are raised affecting labor markets and economic, social, and political conditions—which involve not only the nations importing labor, but also those supplying it. This article presents an assessment of these massive transfers of manpower and discusses some of the implications for the region.

The international movement of labor in the Middle East and North Africa seems to have moved beyond the phase when it was considered unequivocally beneficial by both the states supplying and importing labor. The economies of both groups of states, in their different ways, are very vulnerable now to any sudden changes in the numbers of those migrating internationally for employment. In this context, future projections for the trends in migrant labor during the 1980s become significant. The World Bank has attempted to forecast manpower requirements, the participation of nationals in the work force, the numbers graduating from educational and training programs, and the expatriate manpower requirements of the eight labor importing countries mentioned based on the available data. (See Interim Report in the related reading list.)

Trends in migration

In 1975 the volume of migrant labor working in the eight major oil exporting countries of the Arab world was 1.7 million persons. In absolute terms, this was less than the comparable numbers of 6.4 million in Western and Northern Europe but represented a far more significant proportion of total regional employment. Migrant workers outnumbered the indigenous labor force by large margins in several oil exporting countries. Out of every ten of these migrants, about six came from other Arab countries, two came from the Indian subcontinent, one was from Europe or North America, while one originated from other regions such as East Africa and East Asia. Expatriate workers held about 27 per cent of all jobs in these countries. Over one third of them worked in the construction sector, 24 per cent in services, 15 per cent in trade and finance, and 9 per cent in agriculture. The major part of this foreign labor worked in unskilled (26 per cent) or semiskilled office and manual occupations (28 per cent), and skilled office and manual jobs (26 per cent).

These patterns of employment reflected the deficiencies in the local labor supply. In each of the eight countries reviewed, the highest representation of nationals was in agriculture. Primarily because of the attractiveness of civil service employment, the services sector also reported a high incidence of nationals. The lowest incidences of nationals (and hence the highest need for, and dependence on, expatriates) occurred in the professional, technical, and other similar categories.

Since 1975, the level of international migration to the Arab world has increased substantially, to about 2.7 million, an increase of about 60 per cent by 1980. The composition, too, has changed. Workers from Arab countries have increased, particularly from Egypt and Jordan, although the bulk of new workers now comes from South and East Asia. Bangladesh entered the market in late 1975 and over the next three years nearly 75,000 Bangladeshi workers had migrated to the region. The strongest new element, however, was the influx from Korea and the Philippines, and, to a lesser extent, from Indonesia, Sri Lanka, and Thailand.

Three other distinct trends in migration became evident in the late 1970s. First, the Southeast Asian countries entered the Middle East labor market through national contracting firms. These firms brought in the labor for their projects, and established work camps for their duration—providing most of the necessary basic housing, and utility and health services. This approach proved attractive to host countries. It provided for the physical separation of the expatriate workers from the local community, lowered recruitment costs, and alleviated pressures on services, notably on housing. Second, Jordan and the Yemen Arab Republic, hitherto major labor exporters, began to import workers. Third, with the accelerated labor flows of the late 1970s, political factors visibly affected the market for expatriate workers: when Libya disagreed politically with Egypt many Egyptians returned home; when Iran changed regimes, some 85,000 European and American expatriates, as well as the majority of Afghan laborers, left the country.

Implications for importers

The needs of the labor importing countries are unique in two ways. First, they are not concentrated in a specific skill group (as is, for example, the demand for semiskilled migrants in Europe) nor one sector (as with mining in South Africa). Second, the extent of reliance upon expatriates in the Middle East and North Africa is substantially greater than elsewhere. Given the limited indigenous work force in these countries relative to their financial resources from oil exports, rapidly rising expectations meant that, once economic growth had begun, there were no viable short-run alternatives to the import of foreign labor.

By the end of the 1970s, a third factor was added: as the need to keep the expatriate population down to a politically and culturally tolerable level became more evident, labor inputs once again became the primary constraint on further accelerated economic growth. Future policies will have to involve the more effective use of local labor, by stepping up the participation rate of the population in the economy, and by increasing the quantity and quality of technical training and of graduates from educational institutions.

But the effects of improvements in education take time to become apparent. There has been a substantial expansion of enrollment in education and training programs in the Arab countries in recent years. In Kuwait, for instance, crude enrollment ratios at the primary and intermediate levels of education for both males and females are at or near 100 per cent. Yet the lags inherent in producing graduates will preclude any dramatic improvement in the share of nationals in high-level and middle-level employment until some time beyond the mid-1980s. Over the longer term, of course, these investments in education will have an effect on the labor market.

The number of women coming out of the education and training systems in these countries will contribute an increasingly important share of the new entrants into the labor force. In Kuwait, where the education of women has been promoted for some time, women represented about one fourth of new entrants in 1975, a share that is estimated to rise to about one third in 1985. Kuwaiti females’ entry into professional, especially teaching, and clerical occupations, primarily in the government sector, typify the regional pattern of female labor force participation. These occupations, especially in government agencies, most closely accord with individual, familial, and governmental perceptions of socially and culturally acceptable roles for females outside the home.

However, in the other major labor importing countries, despite similar female labor participation rates for those out of school, the numbers of women being educated are relatively smaller. These numbers are expected to increase to represent a share similar to Kuwait’s once the effects of the present investments in female education have become evident. But the delays that are inevitable before educational improvements are visible, together with the small indigenous population bases, will ensure continued heavy reliance on expatriates at least until the mid-1980s.

Implications for exporters

The economic implications for the countries exporting their manpower are complex and varied. The most widely recognized immediate benefit remains the flow of remittances, which not only augments scarce foreign exchange earnings and thereby cushions some of the effects of oil price increases but also provides—especially in the poor Arab labor exporting states—a potential source of additional savings and capital formation. Excluding remittances in kind, and those sent through unofficial channels (which, in some countries, are considerable), the flow of remittances to Egypt, Jordan, the Syrian Arab Republic, the Yemen Arab Republic, and the People’s Democratic Republic of Yemen was over $3.1 billion by 1977—a dramatic increase from the 1974 figure of $526 million. Remittances are also of growing significance in balance of payments (BOP) accounts, meeting substantial proportions of the import bills of the labor exporting countries. At one extreme, the external payments of the Yemen Arab Republic, indeed its total economy, are overwhelmingly dominated by such remittances.

The unpredictability of the flow of remittances, the inflation generated by the extra (and uncontrollable) volume of money then circulating within the home country, and the consequent additional consumer imports have all led to a reconsideration of the initial enthusiasm over remittances among the governments of Arab states that supply labor. For example, the Egyptian National Plan, 1978–82, includes the observation that “… growing numbers of Egyptians work abroad for very high wages, if compared with domestic salaries. These individuals return to Egypt with huge purchasing powers, which they individually direct not to savings and investment, but to flagrant and luxurious consumption.”

A second major area in which international labor migration affects the supplying countries concerns the domestic labor markets. There are perceived benefits: the migration of the unskilled and the unemployed, in addition to decreasing domestic unemployment, can even increase employment to the extent that remittances fuel demand for goods and services in the home country; government welfare and social overhead expenditures may decrease, and the resultant savings can be channeled to investment (and hence produce more jobs). Finally, the forgone consumption of these migrated unemployed may also increase the savings of those hitherto supporting them. On the other hand, emigration of labor can only be considered unequivocally beneficial up to the point where it begins to draw on the pool of productively employed whose positions cannot be filled promptly by other equally qualified unemployed in the labor market. Beyond this point, three sets of costs become crucial in evaluating the overall benefits of labor exports: (1) costs of loss of output (withdrawal of a few skilled workers at the margin may severely impair certain industries); (2) costs of additional education and training to replace the emigrating workers; and (3) forgone output of the unskilled labor under training.

Yet the governments of states supplying labor have been unable to curtail effectively the drain of skilled and unskilled labor needed domestically. Powerful private economic inducements, causing wide disparities in real wages, have combined with the attractiveness of increased foreign exchange earnings on the part of the governments of the labor exporting countries to form a laissez-faire system of transferring labor in the region. Some exporters have now themselves become labor importers to alleviate critical skill bottlenecks. Such labor shortages are especially disturbing as the future demand for labor by oil exporting countries will be increasingly for yet more skilled and highly skilled manpower.

Eight Arab labor importing countries:1 manpower requirements, by occupation, 1975, 1980, and 1985
197519801985
OccupationsPercentPer centPer cent
Professional and technical
Total manpower requirements110,200100.0202,600100.0297,300100.0
Available supply of nationals42,30038.457,20028.282,70027.8
Expatriates required67,90061.6145,40071.8214,60072.2
Other professional
Total manpower requirements250,100100.0399,600100.0563,400100.0
Available supply of nationals116,10046.4143,70036.0184,60032.8
Expatriates required134,00053.6255,90064.0378,80067.2
Technician
Total manpower requirements190,300100.0334,300100.0476,600100.0
Available supply of nationals113,50059.6123,20036.9151,20031.7
Expatriates required76,80040.4211,10063.1325,40068.3
Other subprofessional
Total manpower requirements249,700100.0361,500100.0490,200100.0
Available supply of nationals194,30077.8237,50065.7324,20066.1
Expatriates required55,40022.2124,00034.3166,00033.9
Skilled office and manual
Total manpower requirements923,500100.01,353,100100.01,750,100100.0
Available supply of nationals497,70053.9530,40039.2638,90036.5
Expatriates required425,80046.1822,70060.81,111,20063.5
Semiskilled office and manual
Total manpower requirements1,752,100100.02,077,700100.02,685,800100.0
Available supply of nationals1,280,50073.11,470,80070.81,816,10067.6
Expatriates required471,60026.9606,90029.2869,80032.4
Unskilled
Total manpower requirements2,735,000100.03,523,200100.04,042,900100.0
Available supply of nationals2,305,30084.33,031,20066.03,492,60086.4
Expatriates required429,70015.7492,00014.0550,30013.6
Total manpower requirements6,210,900100.08,252,000100.010,306,400100.0
Available supply of nationals4,549,70073.35,594,00067.86,690,30064.9
Expatriates required1,661,20026.72,658,00032.23,616,10035.1
Source: Interim Report: Assessment of Migration Situation in 1975 and Preliminary Projections of Labor-Importing Country Manpower Requirements to 1965, Work) Bank (1979).

Algeria, Bahrain, Kuwait. Libya, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Source: Interim Report: Assessment of Migration Situation in 1975 and Preliminary Projections of Labor-Importing Country Manpower Requirements to 1965, Work) Bank (1979).

Algeria, Bahrain, Kuwait. Libya, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

The future

Using 1975 as the base year, the World Bank has made provisional manpower requirement and supply projections to 1985 for the eight labor importing countries. The model assumes national real growth rates in gross domestic product (excluding mining and quarrying) of between 6 and 11 per cent for the period 1975–85.

Noteworthy aspects of the changing economies in these countries are the expected decline in the share of agriculture—from 37 per cent in 1975 to 27 per cent in 1985—and increasing shares for manufacturing—from 6 to 9 per cent—and services—from 24 to 28 per cent (see Chart 1). Occupational composition of total manpower requirements will also change: the share of unskilled occupations will fall (from 44 per cent in 1975 to 39 per cent in 1985) as will that of semiskilled occupations (from 28 to 26 per cent), while all other occupations show steadily increasing shares over the decade (see Chart 2 and the table). With 1975 as the base year with an index of 100, the relative growth in professional and technical occupations is projected at 269.8 in 1985, followed by technicians (250.4), and other professional occupations (225.3). Unskilled (147.8) and semiskilled office and manual occupations (153.3) show slow relative growth but will account for a majority of the net growth of manpower requirements during the 1975–85 period.

Chart 1.Eight Arab labor importing countries: sectoral composition of employment in 1975 and projections for 19851

(In per cent)

1 See source and note to table

Chart 2.Eight Arab labor importing countries: occupational composition of employment in 1975 and projections for 19851

1 See source and note to table

The projected supply of nationals to the labor force from the educational and training systems shows that the Arab labor importing countries will increasingly rely upon expatriate manpower in the near future. Only in the unskilled occupational category is there a potential for reduced dependence on expatriates. Further, because many local entrants to the labor force will have had little, if any, education, a major challenge is posed for designers of training programs.

The projections made in the study indicate that expatriate manpower requirements by 1985 in the “technician” category will more than quadruple compared with 1975 levels, from 76,800 to 325,400, and in professional and technical occupations more than triple, from 67,900 to 214,600. Only in unskilled and semiskilled office and manual occupations will requirements be less than double 1975 levels: yet these last two categories will account together for just over one quarter of net additional expatriate manpower requirements. Technical and other professional occupational groups will account for 20 per cent, technician and other subprofessional occupations for 18 per cent, and skilled office and manual groups for 35 per cent, of that net group.

This trend to more qualified expatriate manpower will continue to drain the labor exporting countries of the Arab region of their high-level and middle-level personnel. The South and Southeast Asian exporting countries may suffer from the diminishing need for unskilled and semiskilled production and service occupations, and may only be able to supply other needs if the Arabic language is not an important qualification for expatriate workers. It is possible that labor importing countries may adopt entire labor force import “packages” (like those now used in construction and ports operation) for plant operation in the manufacturing sector. On the other hand, for political reasons such countries also need to have a high number of nationals employed in such highly visible and, therefore, symbolic efforts at economic diversification.

Some qualifications need to be made about the participation of expatriates in various sectors, as presented in Chart 1. A basic (and oversimplifying) assumption is that qualified nationals of the labor importing countries are allocated to the various occupational sectors in weighted proportion to need, the remaining positions then being filled by the import of expatriates. Apparent patterns of preference shown for particular sectors by these nationals, however, have been deliberately ignored. Further, authorities in such countries are increasingly concerned with developing incentives and other mechanisms to facilitate government-preferred allocation of jobs for nationals.

Policy issues

Four policy issues emerge from this review of the trends in international labor migration to the eight oil producing countries. First, the type of labor needed in these countries is changing. As the pace of construction slows down, the demand for the huge numbers of unskilled and semi-skilled labor existing in 1975 will diminish and requirements for skilled, technical, and professional workers will increase. In addition, labor importing countries are shifting, at least at the margin, from recruiting Arabs to employing South and Southeast Asian labor—whether because it is cheaper, more convenient, or simply because the relatively more skilled Arab labor is not available. This trend may lead to even wider diversification in the workers coming in, if for example, China successfully follows through its announced plans to supply construction crews for the Middle East labor market. As the size and diversity of the foreign labor force increases in the labor importing countries, cultural tensions are likely to be exacerbated. Policymakers in labor importing countries will thus be increasingly forced to balance this factor with their desire for economic growth and diversification when deciding upon appropriate development strategies.

At the same time as the demand for more skilled and nationally diverse workers rises, the growth rate of unskilled jobs will lag slightly behind the growth rate of nationals whose limited education and training will likely restrict their employment opportunities to unskilled occupations. It remains to be seen whether these nationals will want to work in the construction, manufacturing, and personal service sectors that they have shunned in the past, but which will provide the bulk of unskilled job opportunities. If these past preferences remain, the labor importing countries may well encounter serious problems with underemployment, disguised unemployment, and unemployment among their nationals who choose not to work in expatriate-dominated sectors and occupations. Programs to minimize this potential underutilization of domestic human resources will pose major design and implementation challenges. It is highly unlikely that job preferences can be quickly or significantly altered in the near future. Greater success may result from training programs for accelerated literacy and technical skills for young adults to facilitate their entry into the more skilled jobs in less socially stigmatized sectors.

Third, for the Arab labor exporting countries, the potential displacement of Arab migrant unskilled and semiskilled labor by non-Arab workers and the consequent net return flow of former migrants presents a critical economic issue. These states will be faced with the need to absorb returning migrants. At the same time, their foreign exchange receipts from remittances will decline, impairing their ability to create jobs.

Fourth, the fact that the oil producing countries prefer to recruit high-level and middle-level workers from other Arab countries, because of cultural and language considerations, means that such labor exporting countries will be increasingly drained of their more skilled and talented labor. Since such migrants are usually accompanied by dependents, their remittances are generally much lower than those of other migrants. Further, the absence of such key workers can cause severe production and development bottlenecks. This in turn will impede the economic growth of the labor supplying countries, and hence their ability to absorb net returns of unskilled workers.

Attempted resolutions of these challenging issues will rank high on the agendas of policymakers in the years ahead, in both labor exporting and labor importing countries in the Middle East and North Africa.

Related reading

Zafer Ecevit and Kunniparampil C. Zachariah, “International labor migration,” Finance & Development (December 1978).

Interim Report: Assessment of Migration Situation in 1975 and Preliminary Projections of Labor-Importing Country Manpower Requirements to 1985, World Bank (December 1979).

J. S. Birks and C. A. Sinclair, Arab Manpower (London, Croom Helm, 1980).

J. S. Birks and C. A. Sinclair, International Migration and Development in the Arab Region (Geneva, International Labour Office, 1980).

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