Rob Amor, Senior Vice President – Global Channels at Concentra Analytics, discusses how companies in the Gulf states can prepare for and plan upskilling programmes for local workers to meet new regulations.
Economic migrants first arrived in the Gulf in large numbers during the 1970s to fill highly skilled roles opening up in the growing oil and gas industries. Today, there are more than 30 million expats living in the region, with the UAE having the largest community representing more than 80% of the population.
Significantly, migrants make up an even larger proportion of the workforce. In Saudi Arabia, for example, foreign workers occupy nine out of every 10 positions in the private sector, while in the UAE nationals represent just 8% of the workforce. This number is expected to drop further to 6% in 2020.
In recent years, governments have begun to take action to curb the ripple effects of supporting an expat community. Saudi Arabia was the first to introduce a quota system for foreign workers back in 2015. More recently, it has introduced a policy that requires companies with a majority of expats in their workforce to pay a fine of 2,400 riyals (about $640) a year for every foreign worker above the number of local workers employed.
Such legislation is beginning to weigh heavily on businesses in the region and is set to become more commonplace. Little wonder then that companies are preoccupied with upskilling their local workforce but this is easier said than done.
The socio-economic impact of migrant workers a cause for concern
Governments are legitimately concerned about the balance between local and foreign workers for several reasons. The sheer number of expats places a strain on essential services and infrastructure. Kuwait in particular sees this as damaging. There’s also a correlation between foreign workers and rising unemployment in local populations. In Saudi Arabia, the dependence on expats has led to 10% of nationals being out of work.
Yet there are many factors that make this a complex problem to solve. The region has not seen the level of skills transfer it had hoped for. Employers say that skills gaps are still a major impediment to business growth and several countries fall below the global average in finding skilled employees.
The social and cultural impact of a transitory migrant community is another cause for concern for Gulf state authorities, who wish to preserve local values. Foreign workers also take money out of the economy when they send their earnings home.
Despite these concerns, it’s important to note that the Gulf states depend on labour mobility and capacity building to attract foreign investment and underpin the local economy. Expats can accelerate the transfer of skills if managed well and help meet quotas in the short term.
Know your organisation in analytical detail before you start upskilling
Underlying the issues is the fact that most companies do not have a clear understanding of their workforce. They lack an inventory of skills, detailed knowledge of the work being done, and the costs associated with each activity. This lack of insight makes it difficult to identify the most in-demand skills versus the most costly ones, and to prioritise and plan targeted upskilling programmes to replace expats with local workers over time.
The skills gap is not evenly distributed across the economy. It’s very difficult for private companies to compete with government bodies and public sector organisations for local workers when it comes to salaries and benefits. For this reason, Saudi Arabia is considering a generous minimum wage of SAR 5,300 for nationals entering the private sector.
Every company we speak to asks how they should start off on the journey of upskilling local workers. Starting with the cost of people and work is a good first step, but this needs to move on to a discussion around the value of work in terms of contribution to the company’s profitability. This requires good data, so it’s essential to prepare and clean your data before you start. Without this, everything is guesswork.
Once you have an accurate view of the most valuable work being done, you can break it down into skillsets and associated roles. You can then compare this against skills available among local workers to identify the gaps and use this information to develop and prioritise upskilling programmes for different sections of the workforce.
We’ve found that companies tend to focus on people, rather than the work they do, when planning organisational changes, and they have little visibility of where costs reside. This is compounded by the fact that most run decentralised systems, so there’s no common dataset.
Building up a view of the company’s structure requires more than an org chart, so if you’re serious about organisation design, using presentation or diagram software is not enough. You need to be able to dynamically visualise your workforce and then model different scenarios to understand the work and skills you actually need.
A change of mindset to thinking about skills, work and activities rather than hierarchy and job titles is fundamental to any upskilling programme. But without advanced analytics and strategic workforce planning, it will be difficult to know which skills companies need to promote among local workers.
Transferring skills and reducing dependence is not a zero-sum game
In the short term, upskilling is about reducing workforce dependencies that lead to higher costs through fines and visas by training local workers to take up more skilled roles.
In the next decade, many young nationals are likely to enter the workforce through graduate programmes and fast-track schemes. Over time, this will change the demographic, reducing the need for upskilling in years to come.
There’s also the changing nature of work to think about. The World Economic Forum’s Future of Jobs report found that, by 2020, 21% of core skills in Gulf Cooperation Council countries will be different to skills needed in 2015. Then there’s automation. Across the region around 47% of all jobs are open to automation, so many jobs are likely to see major changes to their skills profile.
In summary, this is not a binary situation but a multi-layered one. We can’t discount the fact that migrant workers have a widespread influence in the Middle East, so any upskilling effort needs to be gradual. Companies should not focus on upskilling based solely on today’s skills gap but begin to plan for and build competencies and assemble the skills they need to take advantage of future economic opportunities.
