The Gulf States’ Expat Dividend

PARIS – How should policymakers in the Middle East’s Gulf States manage their countries’ large expatriate workforces? In Saudi Arabia, foreign nationals account for roughly one-third of the population. In Qatar and the United Arab Emirates, nine out of every ten residents is an expatriate. Should these countries’ governments continue to invest heavily in developing indigenous labor forces, with the aim of decreasing dependency on foreign workers?

The extraordinarily high proportion of foreign labor within the Gulf Cooperation Council (GCC) countries is often considered problematic, because, as some see it, it threatens local cultures and national identities, holds down wages, and impedes the development of domestic skills and talent. With so many trades and professions dominated by relatively cheap overseas labor, the indigenous population is often left with few occupational domains offering competitive wages. These tend to be predominantly in the public sector, where oil revenues are used to maintain high pay and attractive working conditions.

But an important dimension of the policy debate within the region risks being overlooked: The Gulf States’ large foreign populations are not just workers; they are also consumers. By inflating the population of the countries in which they live, expatriate workers are helping drive economic growth.

In fact, the GCC benefits from a double expat dividend: not just a diverse consumer base on the demand side, but also a flexible, youthful workforce on the supply side. As a result, following the rapid decline in oil prices of recent years, companies could lay off thousands of workers without having to worry about raising the unemployment rate or putting a substantial burden on government coffers.