Gulf labor nationalization may preserve social stability, but also raise labor costs – Moody’s

Gulf labor nationalization may preserve social stability, but also raise labor costs – Moody’s:

Efforts by Gulf Cooperation Council (GCC) countries to employ their nationals may meet social objectives, but it would be at a higher price and cost to diversification, Moody’s Investors Service said in a report this week.

“Rapid GCC population growth is leading to increased demand for jobs as new entrants join the market and only modest numbers of workers retire. Social changes will compound higher employment demand, particularly if more women enter the workforce,” the credit ratings agency noted in its report “Sovereigns — GCC, Labour market nationalization aims to curb unemployment but may raise labor costs and hamper diversification.”

“Nationalization strategies can have both credit positive and negative implications for sovereigns. It will be credit positive if these strategies are effective in providing wider job opportunities for nationals, while preventing a rise in unemployment and as a result maintain social and political stability,” Moody’s said. “However, large increases in public sector wage bills for the government to accommodate an increasing number of nationals in the administration would reduce fiscal flexibility and, in some cases, weaken fiscal strength.”