Towards a National Jobs Strategy in Kuwait

This report is one of the main deliverables outlined in the legal arrangement of September 10, 2019, between the General Secretariat of the Supreme Council for Planning and Development (GS-SCPD) in Kuwait and the World Bank. A separate overview report is also available. The social contract in Kuwait is at risk. Kuwaiti citizens are used to the state providing public sector jobs, free education, free healthcare, and subsidized fuel to all citizens. These benefits have been bought and paid for using Kuwait’s oil revenues, however, the sustainability of the social contract has been questioned by three mutually reinforcing challenges. First, oil demand is projected to steadily decline the next few decades. This decline is partly the result of changing consumer preferences away from carbon-based fuel sources, and partly the result of increasingly cost-effective alternative energy sources becoming available. Second, with mounting fiscal deficits, the size of the wage bill for the government is a growing concern. Third, the needs in the labor market will continue to grow as Kuwait’s population is young and growing. Central to these structural challenges are challenges to Kuwait’s labor market. A growing number of young Kuwaitis are entering the labor market with high expectations of well-paid, secure, public sector jobs. In the private sector, employers are dependent on low-cost and largely unskilled foreign workers. The 2019 COVID-19 global pandemic, which has led to an oil price crisis and a global economic slowdown, has intensified the debate surrounding jobs challenges in Kuwait. These jobs challenges need to be addressed to ensure the sustainability of the economic growth model and avoid major social disruption. The government has asked The World Bank for assistance to formulate a National Jobs Strategy to help confront these challenges, based on evidence and best practices. Reforms are recommended in four areas, or pillars: (i) make the public sector more sustainable, (ii) improve human capital, (iii) support private sector growth, and (iv) build a social protection system. In addition, the jobs strategy covers two cross-cutting themes: behavioral economics, and monitoring and evaluation, also embedded in the four pillars. This introduction briefly explains the critical challenges facing Kuwait that require substantial changes in policy. The subsequent sections analyze the major issues of these four topics, with recommendations for policy change to improve sustainability and enhance incomes.