A Discussion on Trade Agreements and Trans-Border Flows of Labor in Saudi Arabia

Over the recent decades, the number of foreigners has increased in Saudi Arabia providing the skilled and unskilled workforce of the nation. According to Alhamad (2014), due to an imbalance in wage bills in countries, people tend to move to a place of greener pasture to get better pay and the Asian nation, Saudi Arabia has been the hotspot for these expatriates. Economists and other financial experts analyze and assert that the economic development of Saudi Arabia seems to have sparked more due to a large number of immigrants in the nation. Although the assertion might be true, the realization of the reality in the notion that expatriate spark the national economic growth lies in the critical study of the benefits and cost related to the deployment of foreigners in the labor market as the main source of both skilled and unskilled labor. As much foreign labor force might enhance economic growth, precaution measures should be enacted by including labor mobility in the regional trade agreement to manage the influx of expatriates who might threaten the labor market for native citizens.

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First, foreign workers enhance positive productivity through the supply of both skilled and unskilled labor. Especially for manufacturing companies, the external workforce is at the demand to provide qualified individuals in top-tier jobs in accounting, finance, human resource management, engineering, and information technology (Jordaan, 2017). Moreover, manual labor is at the demand for drivers, packagers, distributors, and provision of other low skilled tasks on a contract basis. In the event, of employing foreigners, the difference in the nations wage policies between their nation and that of Saudi Arabia makes them available at a cheaper hiring salary as compared to when a native is employed. Cheap labor provides enormous financial returns to the manufacturing sector that enjoy huge profits that reflect in the Gross Production Development margin of the state (Jordaan, 2017). In another circumstance, high skilled foreigners dedicate and incorporate their expertise and knowledge in the employer's missions and goals to materialize high production levels. On the other hand, a considerate on how low labor supply spark productivity as based on the notion that the workers have high motivation levels and always satisfied with the work demands, thus work more compared as to when natives are employed.

In another circumstance, employers have noted it that low skilled labor at disposal in Saudi Arabia is essential at the time of slow economic growth rather than hiring the local labor force supply (Jordaan, 2017). Foreigners are always risk-averse; they tend to take jobs that natives cannot accept such as jobs in rural areas and marginalized interior areas which have sparse population. When hiring natives for such manual jobs, they inefficiently perform in their work while requesting high pays yet expatriates show commitment to the position despite accompanying hardships. The job commitments of foreigners have made profitable for the nation in production which enhances economic development.

Moreover, when foreigners are employed in Saudi Arabia, they are governed and managed with the trade agreements signed between the nation and the nation of the individual through the issued work permit (Alhamad, 2014). The permit remits the taxes the foreigners are expected to pay to the government for selling their services to the country. Usually, expatriates pay vast sums of income taxes compared to natives, an aspect that has helped Saudi Arabia obtain significant income tax returns from the numerous foreigners in the labor market. In the end, the more the number of foreigners the more substantial the tax collected by the nation. Indeed, expatriates have not only enhanced on productivity but also in tax returns a reason as to why Saudi Arabia depends on the enormous foreign labor force.

The influx of foreigners from neighboring nations and nation of distant geographical location such as Africa and South America have increased competition for all types of labor in the job market with the natives. To regulate and produce healthy labor competition among the natives and foreigners, Saudi Arabia should seek to include labor mobility in future regional trade agreements to protect the native's labor market (Jurje & Lavenex, 2018). Under the regional trade agreements, the states immigration department will control the general movement of people into the nation, free movement of expatriate's services in the labor market, or any other movement of trade-offs or investments in the country. The labor mobility will seek to determine which kind of labor is to be supplied in the nation and how the demand and supply of expert services is available in the local market (Jurje & Lavenex, 2018). The policies will regulate the issuing of work permits and work contracts to labor services that most citizens can supply, where low expertise job requirements will be reserved to the locals hence, natives will have more job opportunities. If the current free regional trade agreements are not controlled, then the natives are under threat of high unemployment levels shortly since people are migrating from all over the world to enjoy low skills job demand at the expense of local natives.

Conclusion

In conclusion, most studies have focused more on the negative impacts of foreigners on the nation's economy without a thoughtful exploration of the cost benefits on the dependence of them to the economy of the land. From the scenario of Arabia, we realize that expatriates are the captains of the economy in the country through the enhancement of production, infrastructural development, and source of revenue. However, if the influx rate of immigrants will not be controlled in the future, it will narrow down the benefits arising from foreigners by being a threat to the existence of natives in the labor market. A reason for the inclusion of labor mobility terms in the regional trade agreements to regulate the number of expatriates in the nation in the future.

References

Alhamad, H. S. (2014). "The Labor Market in Saudi Arabia: Foreign Workers, Unemployment, and Minimum Wage." Inquiries Journal/Student Pulse, 6(06). Retrieved from http://www.inquiriesjournal.com/a?id=905

Jordaan, J. (2017). Foreign workers and productivity in an emerging economy: The case of Malaysia. Review Of Development Economics, 22(1), 148-173. doi: 10.1111/rode.12334

Jurje, F., & Lavenex, S. (2018). Mobility Norms in Free Trade Agreements. European Journal Of East Asian Studies, 17(1), 83-117. doi: 10.1163/15700615-01701005