George Naufal on the Economics of GCC Migration
George Naufal, Assistant Professor of Economics at the American University of Sharjah and a research fellow at the Institute for the Study of Labor (IZA), delivered a CIRS Monthly Dialogue lecture titled, “The Economics of Migration in the Gulf Cooperation Council Countries” on September 9, 2013. The lecture mapped the history of non-Gulf Cooperation Council (GCC) Arab workers migrating to GCC states, and explained how and why there were such dramatic changes to these migration patterns since the 1970s.
Naufal elaborated upon the history of labor migration to the GCC states in order to explain why these countries became a uniquely attractive destination for large numbers of foreign laborers. The chief factor turning the region into a hub of temporary economic migration was the discovery of large oil and natural gas reserves in the early twentieth century. Decades after the discovery of hydrocarbon reserves, during the time of the oil embargo of the 1970s, Naufal explained that “the GCC countries—Saudi Arabia first—received the largest transfer of wealth in human history.” Because the local populations were small in number and inexperienced, there was a dire need to import foreign labor in order to fully exploit the nascent industry. Naufal recounted that “in 1981, when the GCC was formed, the population was around 15 million” people living on a relatively vast amount of land. As the growth of the hydrocarbon industry accelerated, this in turn led to increased economic growth and related development projects, which required even more labor power. “The ultimate goal was to develop and develop fast, and the best way to do so is to bring labor,” he added.
Owing to geographical proximity as well as shared language, culture, and religion, “it was the non-GCC Arabs who came first in the ‘70s and the ‘80s” as migrant workers to the GCC states. However, this influx was gradually capped in the mid-1980s when GCC governments realized that the Arab migrant workers posed a disruptive threat by introducing their own domestic religious and political ideologies, which were not always welcome in the region. Naufal cited the first Gulf war as “a structural break in the nationality, or the source of workers,” to the GCC. During this time, citizens of Middle East countries that supported Iraq were deported en mass from GCC states.
The large numbers of non-GCC Arab migrant laborers were replaced with Asian and South Asian workers. Naufal argued that “the estimates put the non-GCC Arabs in the ‘70s to be around 70 percent of the labor force and the Asians less than 20 percent.” These figures were almost exactly reversed in 2005. GCC policymakers found that the Asian workers were economically beneficial as they would work more for less pay, and there was also less chance that they would be politically, religiously, or ideologically influential.
The determinants of migration to the Gulf are the results of push and pull factors that are international and domestic according to the needs of both the sending and receiving countries. On their part, South Asian and South East Asian laborers traveled to the GCC to escape unemployment and poor standards of living in their home countries. “In comparison, in 2010, the standard of living in Qatar, measured by income per capita, was 23 times that of Sri Lanka, 35 times that of Yemen, 50 times that of Sudan, and 70 times that of Bangladesh.” Naufal noted that these macro-economic measurements translate on a micro personal level: “if you were an Egyptian farmer in the ‘70s, and you came to Saudi Arabia, you made 30 times your salary. In the 80s, if you were a school teacher in Egypt, you made 20 times your salary. In the 90s, if you were a Jordanian engineer, you tripled your income by moving to Kuwait.”
Naufal also explored the remittances phenomenon from the Gulf, which “are much less volatile and much more stable than foreign direct investment and foreign aid.” During the global economic crisis, remittances from the GCC remained strong, “basically, one fourth or one fifth of remittances in the world comes from the GCC,” he added. Pointing out the direct correlation between GCC labor policies and the growth and development of labor sending countries that receive direct remitted capital, Naufal commented that Middle East countries have thus missed out on potential investments and wealth that has been redirected to Asian countries.
Similarly, he noted the direct correlation between geopolitical events and GCC labor policies. Because of the volatility of many Middle East countries, the GCC states are especially attractive as a migration destination to the populations of neighboring Arab countries. Naufal argued that “since World War II, before the Arab Spring, up until 2010, the Middle East has had 28 serious conflicts.” Conflicts result in high unemployment rates and a lack of job opportunities, which for a large youthful population spell serious future challenges. To this end, he proposed that GCC labor policies could have partially alleviated some of the employment stresses that resulted in the Arab uprisings.
In conclusion, Naufal noted the future challenges to the GCC labor market. “The GCC countries were able to create, in the last ten years, 7 million jobs—that’s almost one million jobs a year,” he said. However, job creation matters less than ensuring that the local population enters fully into the labor market. Currently, unemployment rates are extremely high for local GCC populations who either refuse unattractive jobs, or cannot compete with more experienced foreign workers. “Countries in the Gulf have to think about what will happen to the price of oil and if at some point they will be able to balance their budget,” Naufal commented. In order to offset these worries, some GCC governments have begun diversifying their economies and investing heavily in education to give the local populations a competitive advantage in any future labor market.
George Naufal has a Ph.D. in Economics from Texas A&M University. His primary research includes migration and its consequences, mainly the impact of remittances on the remitting countries. Naufal’s research has focused mostly on the Middle East and North Africa region with an emphasis on the Gulf countries. He is the co-author of Expats and the Labor Force: The Story of the Gulf Cooperation Council Countries (Palgrave Macmillan, 2012). His work has been cited by regional and international media outlets including The National, Gulf News, and the New York Times. Professor Naufal has served as a consultant on issues related to the Middle East.
Article by Suzi Mirgani, Manager and Editor for CIRS Publications.