Introduction

In April 2013, the then Saudi King, Abdullah bin Abdulaziz Al-Saud issued a direction to the Ministry of Interior and Ministry of Labor to grant workers who are in violation of the law of labor and residency a three months grace period to correct their status, under the penalty of deportation._king_2013 Directions came after the two ministries started a inspection campaign in the premises and facilities of firms to make sure of the validity of its workers’ legal documents, whose count could mount up to hundreds of thousands, according to local newspapers._king_2013 These inspections came to be known “the correction campaign of the status of foreign labor.” This paper will look at direct results of the campaign in light of the goals set by the labor market regulating agencies, and will provide a background on the historical context of the labor market and the political economy of Saudi Arabia, and the wider Gulf Cooperation Council (GCC) countries.

This correction campaign represents a vital case study for the policies of the GCC countries in the area of labor market and demographics, as it is the first-of-a-kind initiative to adopt active labor market policies (ALMP) to encounter the structural problems in the labor market and demographics. The campaign has two prongs: providing subsidies for firms that employ Saudis and discourage employing non-Saudis by increasing their cost, and enforcing the law on foreign irregular workers. Since Saudi is the largest country among GCC countries in terms of GDP and population and because of the far-reaching implications of the campaign on millions of citizens and noncitizens, it has become of vital importance to study it, starting from its causes, stances of the different stakeholders, to its results and implications.

The main hypothesis of the paper is that this law enforcement campaign has had a very negative effect on specific non-Saudi communities, especially the Yemeni community, for the accompanying media campaign that worked on demonizing the foreign labor, setting it as a scapegoat for the economic and security troubles in the Kingdom. On the other hand, the effects of the campaign on the unemployment rate among Saudis has been very limited mainly because the majority of occupations of the foreign labor require low skills with limited wages, which Saudis are reluctant to take on. Economic implications are mainly an increase price levels and and delays in completion of projects and construction of facilities which depend on the labor of foreigners. This raises questions on the effectiveness of the campaign, and whether it represents a long-term solution for the structural distortion in the labor market in the Kingdom.