Lack Of Jobs In Kuwait

By Author: Anthony W Bills
Total Articles: 158
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Lack of Jobs in Kuwait
Introduction
Unemployment can be defined as a state where people are willing but unable to contribute to the economic growth due to lack of jobs. According to International Labour Organization guidelines, a person is said not to be employed if the person is not working, currently is available for work and is seeking work (Bruno& Jeffrey, 1982). For the reason that people are not employed, they are incapable to contribute to the economic growth of their countries not that they are weak, but lack some monetary support which their counterparts who are employed enjoy. The people occasionally may be qualified, willing and even enthusiastic but unable to secure themselves a job.
The pattern of unemployment is in most cases used as a gauge of the well-being of a labour market and an imperative appraise of the state of an economy in broad-spectrum. The most primitive efforts to ascertain international statistical standards of the measurement of unemployment root back to 1895 and the definition of unemployment as fore stated above has its roots in a verdict by the Eighth International Conference ...
... of Labour Statisticians assembled in Geneva in 1964 (Keane, 1996).. The approach to definition of unemployment is based on the Labour force framework which at any point in time classifies the working age population into three groups according to some set rules i.e. employed, unemployed and out of labour force.
Kuwait today is a country that is still recovering from an upsetting war that saw the peaceful nation devastated with violence. After Gulf War I in 1991, President Saddam Hussein of Iraq and his military set on fire Kuwait’s 782 oil wells out of a total number of 950 which is a reflection of 2 billion barrels that were burnt of Kuwait oil (Bruno& Jeffrey, 1982). The result was massive financial loss and unthinkable environmental damage which has rendered jobless most of the potential youths in the country. Even if those wells were under control after ten months, the economy has not recovered fully from the loss which was caused and the environmental damages that were caused rendered the some environments unproductive.
Literature review
Youths between the ages of 15 and 24 form a fifth of the population of Kuwait while those who are between 20 and 40 years form 60 percent of the population. They form part of the majority who are looking for jobs after graduating from different institutions of learning. Given the high unemployment rates it means that new entrants into the labour market will not be able to enroll to the productive employment unless they are equipped with the necessary skills otherwise they will join the informal sector increasing the pool of underemployed or increase the number of unemployed. This has made the Kuwait governments to phase out permanent employment, decreasing the role of labour unions and adjusting to the value of the Euro currency.
The restructuring process has been on for sometime but facing out the problem of unemployment has been hard than never. Otherwise as for now what is required are basic structural and institutional alterations to equip the youths with the relevant expertise to be absorbed into the labour market with ease which is information technology compliant. According to Robinson (2002) this efforts have been thwarted by a number of factors which include: high population growth rates, alarming rates of illiteracy, quality of education which is not promising, imperfect industrial skills, and attitudes to work that are prejudiced on the management positions, limited experience in the private sector, and limited regional cooperation. There are other youths who are not ready to work because of the culture in which they are brought up in that the parents provide for them everything.
The economy of Kuwait has been unable to create new jobs for the ever increasing number of graduates for what the government is terming as global economic crisis hence increasing the number of uneducated youths into alarming levels. The number of graduates is increasing daily while the number of jobs seems to be receding daily. It is also due to the lack of consistency between the educational sector and the needs and requirements of the labour market in terms of various specializations and skills (Keane, 1996). Whatever the universities are offering and other high institutions of learning are not in line with what is needed in the market at the moment.
Published reports for the ESCWA region reveal that on average, current rates of unemployment for the ESCWA countries range from 10-19 percent and 59 percent of the unemployed are first time job seekers (Burbidge & Alan, 1984). In Kuwait the total number of students graduating annually from scientific institutions, colleges and schools and other potential jobseekers is about 10,000. In the past most of the new graduates were absorbed by the public sector, however the public sector currently saturated and downsizing through privatization(Layard, &Stephen (1991). The private sector is the main source of jobs in Kuwait but it has been flooded by foreigners who are now to a percentage of about 90 leaving the 10 percent to locals and mainly in the manual sector which is not solving the problem of the unemployed Kuwait citizens who are working. Sometimes this can be attributed to the prejudice among the locals of not willing to take jobs under the leadership of foreigners.
The high unemployment rate of youth can be ascribed to the limited relevance of education and skills development to the needs of the labour market; to the virtual absence of the effective systems of public and private employment agencies; and to the inefficiency of programs aimed specifically at the employment of the youth. The imbalances between the shrinking demand and the ever increasing supply expose the realities of the labour markets with the outcome of swelling rates of unemployment and underemployment (Burbidge & Alan, 1984).
Economists have observed that there were huge rises in the price of crude oil in 1973 and 1979 and after every of this occasion it was followed by falls in output throughout the world Sachs (1985). This could be the cause of the diminutions in the global unemployment in the mid of the which concurred with oil prices, on the other hand, the start of the most recent US and UK recessions was brought about by the attack of Kuwait and caused the rise in oil prices, and this brought about a believe that US recessions was associated with increases in the price of petroleum, and econometric research suggests there are strong oil-price effects upon the labour market. The reason for such a connection is that by requiring wages to fall to restore profit margins, higher energy costs indirectly force up unemployment. When the oil sheikhs take more of the world’s income, workers have to take less.
Methodology
Unemployment is a vital object of study in macroeconomics, nevertheless it remains poorly understood. In this paper I propose a model that generates substantial business- cycle frequency movements in equilibrium unemployment rate. This research is on advancement of an efficiency-model in which input prices affect the equilibrium rate of unemployment. A simple framework based ion the two prices, the real price of oil and the real rate of interest is able to explain the main post war movements in the rate of Kuwait joblessness (Bruno& Jeffrey, 1982).
Data
The model is a description of the efficiency-wage framework by Shapiro and Stiglitz (1984). Since the Shapiro and Stiglitz model is familiar, I will use it as the starting point as I begin from the wage equation of the model and leave its derivation to an appendix. Then it comes from substituting the utility of a fired worker into the nonshirking condition and states that the equilibrium of wage must be equal to the sum of the income of not working, the required effort and a mixture of the shirking detection rate, the effort level and the probability of finding work once unemployed.
Logw =logb + e + e.d [1-a (U)] (1-d) [1]
In the above equation w is the wage, b is the level of unemployment benefits, e is the level of on-the-job effort, d is the probability of successfully fudging, U is the unemployment rate and (U) is the probability of an employed worker finding work. It is useful to rewrite [1] in the compressed form of logw = h (U), where h (U) is a moribund function.
It is assumed that the three inputs, labour n, capital k, and energy input labeled “oil,” X, are used to generate one output sold at price p. Oil is dealt with on a world market at exogenously given price Po. Output is generated through a constant return to scale technology y = µf (n, k, x), where y is output and f (…) is homogenous of degree one. The valuable µ measures neutral technical progress and perfect competition in the product market is assumed.
Given perfect competition, profits must be eliminated in equilibrium, so P-C =0. The cost function c (…) is homogenous of degree one, so p can be set to unity without loss of Generality. Therefore the real prices in the economy are tied together by the relation
µ = C (W, r, Po) [3]
Where the wage w, interest rate or rental rate of capital r, and oil price Po can now all be thought of as in real units. As technology µ improves, the economy gets richer. The higher the output goes to labour through, and to the owners of the oil through Po.
Real income while unemployed, b, must be adjusted in line with the economies technology. Define this relationship as b (µ); it can be thought of as the rule of government uses for updating real employment benefits as the economy becomes more productive over time (Layard, &Stephen (1991). The model is equipped with sharp predictions which connote that the equilibrium rate may be consequential of [1] and [3] by surrogating out the wage.
The anticipated effectiveness of a worker who has been fired, denoted w~, is equitable to an average of the utility from working at the required effort level and of the income-equivalent value of being unemployed, weighted by the probability of finding work.
W~ = a (U) (logw-e) = [1-a (U)] logb [A1]
a(U), the probability of finding work, depends inversely on the level of unemployment, while the value of b will include an element of government unemployment benefits. A worker who does not work hard in his area of working or specialization faces sacking minus any benefits attached to the sacking (Akerlof & Janet 1990). The above equation also has an assumption that some one cannot shirk twice and if rehired by any employer then he will be closely monitored (Hooker, 1996). This implies after losing a first job due to performance related issues then a chance that you will get another job in Kuwait is minimal and this is so, to encourage seriousness in places of work and to create more jobs for those who have never had one. For the reason that individuals start decide whether to supply effort equal to e or to zero, firms have to behave in a way that guarantees that sufficient numbers of employees do not shirk. Assuming that workers are identical, to keep the analytic structure simple, this implies that in equilibrium everyone must provide effort, e, because otherwise output would be zero and the outcome would not be sustainable (Burbidge & Alan, 1984). The no-shirking wage is the smallest wage required to persuade employees to offer effort; it is obtained by equating the utility from not shirking and the expected utility from not shirking.
Logw – e = dlogw = (1-d) w~ [A2]

Empirical model

From the figures shown above, it is evident that unemployment is the standard 16 and over rate, and the crude real oil price seems to be the producer price of the index for crude oil which is then divided by the GDP deflator. The data is quarterly and run from 1954:2 to 1995:2.
Some notable apparatus in Figure 1a is the timing of the comovement between unemployment and the real price of oil. The correlation has been paid relatively little attention in the unemployment literature. Unemployment seems to follow the oil price with a lag of about one year: the simple correlation between unemployment and the four-quarter lagged oil price is 0.72; it steadily declines to 0.64 for the contemporaneous measure. The real interest rate displayed in fig. 1b depicts much more short-term volatility than the price of oil or the rate of joblessness, and a limited degree of comovement with unemployment and real interest rates move together in some periods like 1975 ad 1991-1992 (Burbidge & Alan, 1984).
Granger Causality test
It has been a tradition on putting in to test whether oil prices do really affect the macro economy by the use of Granger causality tests, beginning with Hamilton (1983). The model I have discussed in this paper implies that oil prices ought to Granger cause the unemployment rate in a bivariate or trivariate system including real interest rates. Oil prices are supposed to continue to granger cause the unemployment rate in larger systems, according to the model, if the additional variables are too collinear with oil. Hamilton (1983) showed that oil prices strongly Granger caused Kuwait’s GNP growth and the unemployment rate, in bivariate equations and the 6 variable system of Sims (1980), with data up through 1980. This claim has also been supported continued rising unemployment rate by different scholars who have also done a research on employment in Kuwait and the reasons that have pushed the cause.
Results and discussion
It is evident that the estimated period gave equal periods of the rise and fall or oil prices. Hence the results do not support the idea that oil price shocks generate unemployment mostly through sectoral reallocation and the concomitant search and wait unemployment. Such a view would predict that unemployment ought to rise after any change in the price of energy either up or down.
Other causes of unemployment from the above discussion in Kuwait would be the following or a combination of the following factors.
Performance issues
If a person lacks relevant expertise to work in a certain capacity or some job group that one leads to unemployment. Due to technological advancements in the various fields of production some people have been laid off due to technological advancement that calls for change and if the person holding the position is not willing to change then a different person is likely tom fit into the job. If the performance of the person in charge is under question marks then the management is forced to take action against the person in question (Bruno& Jeffrey, 1982). Absenteeism from the place of job is also likely to lead to unemployment as it paves way for tardy performance. In Kuwait sometimes there are terror attacks to ort even some rumors of the same to different parts of the country making some people to be absent from the place of work at times and this has led some of them to be laid off at a tender age leading to proliferation of criminal activities. Conflicts between the management and workers due to various reasons and major among them is religion and political stands has seen people not to acquire retain their jobs.
Economic conditions
The oil sector in Kuwait which is the main economic earner has been technologically uplifted in that most of the manual work which was done by the citizens. This forces a lot of citizens to earlier retirement while the youth of the country have limited job opportunities or none. In some situations some companies have wanted to cut down the costs of running the countries and in that sense what they do is to offer employees w2ith incentives to retire early or lay them off altogether (Ferderer, 1996).
Unemployment may root from a supply of labour in excess of demand or the physical inability or unwillingness of a worker to accept work when offered. This may be due to the working conditions that one is exposed to or the size of package that one is offered (Hooker, 1996). The highly developed and complicated demands which arise from a variety of tastes now shown by the consuming public have accentuated all the difficulties which were present even in the earliest developments of society. The demand for labour in Kuwait has been diminished as regards to the total quantity by causes such as pestilence, disease, war and civil disturbances. Sometimes also nature brings disturbances for example land mines, earthquakes and famine.
Consequences of unemployment
The situation of unemployed people mostly the youths in Kuwait pose a social problem to the society as each day we have more entrants into the job searching arena. The exclusion of youths from major decision making procedures because they are not represented in any decision making arena, demoralizes them which is likely to undermine social cohesion. This is likely to lead to social problems such as crime, drug abuse, vandalism, religious fanatism and general alienati9on to the vicious circle of poverty (Akerlof & Janet 1990). If no action is to be taken by the state then that is the society that we are likely to breed in Kuwait and this subsequently will involve the youths going to school leading to early school dropout and subsequently brain drain for Kuwait.
Perceptions of the technical work and the work of the female labour force must be changed, particularly among the young who will be required to join the private sector and compete with the global labour force (Ferderer, 1996). Also the common feeling that people have that it is only the government that should give those jobs is misinformed and likely to stress some. Let each graduate find something to do to wait for luck to come from the government and it is not only the government that offers competitive salaries. Some private sectors pay well than the government that most people are yearning for.
The education and training sectors need to be reformed for they are very instrumental when it comes to offering employment opportunities, productivity and income earning capacity of a nation (Nickell, 1990). They should be prepared to offer general employable skills combined with training in specific skills and exposure to the world of work that will ease shift from school to work. Women also need not to be sidelined when acquiring education so that they have relevant skills to compete with their counterparts in the job market.
Rural areas have been ignored for long and the educational standards of them are under questioning. The government should look unto it that a learner friendly environment is created to take care of those who stay in rural areas. Also there is need to intensify vocational training, alter the methods of production from capital to labour intensive, and undergo structural changes in the labour marker in order to avoid consequences of long term unemployment of the Kuwait citizens and where it seems more difficult to integrate the unemployed in the future markets due to improvements in information and technology (Layard, &Stephen (1991).
Conclusion
One problem facing most developing countries including Kuwait is that they seem to be in a vicious circle (Akerlof & Janet 1990). Due to the countries financial constraints and the increasing debts and financial problems, they are incapable of reforming the educational sector so that it favors those who are going through it to enable them earn a living minus any formal employment. The graduates produced from some institutions are not technologically up-to-date, a blow to the job market is. Thus the problem of Kuwait is two folded i.e. the slow pace of national development and the continuously rising unemployment and underemployment rates among the youths especially the educated.
Like any other commodity oil is subject to price fluctuations and at times they are very sharp (Nickell, 1990). When the prices of oil decline and the rate of unemployment remains high this would be a lethal combination as it is likely to have dire consequences. The world is facing global jobs crisis of mammoth proportions, and a deficit in decent work that isn’t going to go away by itself ant this statement is true for Kuwait.
Unemployment is a grave source of hopelessness which paves way for people to look for extremes provided you meet your daily needs. This was evident in the twentieth century in the rise of the Nazism and fascism. Unemployment has a great potential of being a source of political instability and even violence and it is to no one’s advantage to treat this economic dislocation with equanimity.

References
Akerlof, A., & Janet L. (1990) “The Fair Wage-Effort Hypothesis and Unemployment,” Quarterly Journal of Economics 105, 255-83.
Bruno, M., & Jeffrey S. (1982) “Input Price Shocks and the Slowdown of Economic Growth: The Case of UK Manufacturing,” Review of Economic Studies 49, 679-705.
Burbidge, J, & Alan H (1984) “Testing for the Effects of Oil-Price Rises Using Vector Auto regressions,” International Economic Review 25, 459- 484.
Ferderer, J. (1996) “Oil Price Volatility and the Macroeconomy,” Journal of Macroeconomics 18, 1-16.
Hamilton, D. (1983) “Oil and the Macroeconomy since World War II,” Journal of Political Economy 91, 228-248.
Hooker, A. (1996) “What Happened to the Oil Price-Macroeconomy Relationship?,” Journal of Monetary Economics 38, 195-213.
Hooker, A. (1998) “The Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis,” Review of Economics and Statistics 78, 389-400.
Layard, R, &Stephen J. (1991) Unemployment: Macroeconomic Performance and the Labor Market: Oxford: Oxford University Press.
Nickell, J. (1990), “Unemployment: A Survey,” Economic Journal 100, 391-439.
Shapiro, C., & Stiglitz, E. (1984) “Equilibrium Unemployment as a Worker Discipline Device,” American Economic Review 74, 433-444.

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