I’m very pleased today to host my friends from Bridge the Data for a guest post. Bridge the Data was formerly know as Cost of Living reports, and I mentioned their reports in previous articles. Today, they share with us an extract from their KSA report which was published right at the end of 2015. Good reading !
In this bulletin, we’re going to look at Saudi’s labour market, and how the price of oil is expected to affect employers over the coming year, with thorough economic analysis on the GCC’s largest employer; which we hope will help you with your salary adjustments and compensation and benefits decisions in 2016.
Salaries and the cost of living in KSA – Amidst cheap oil and a very stubborn government
The Kingdom of Saudi Arabia headlined in 2015 for the instability its economy faced due to a deflated world oil price (reaching as low as $35 a barrel – well below Saudi Arabia’s breakeven point of $80).
But that was not the only buzz Saudi Arabia generated.
As the global energy sector lost jobs, assets and cut back on production to salvage costs, Saudi Arabia insisted on not cutting back its output, in fact, the Kingdom’s publicly funded energy firm Aramco invited talent from Western economies to join its labour force in KSA, during downward economic times. Spectators and speculators argued that the Kingdom would not be able to withhold the losses any further, and that a decline in output was necessary.
Our research team was then faced with the task of analysing whether there were in fact job losses in Saudi’s energy sector, the impact of cheap oil on salaries, and to try and get a glimpse of the future – If at all possible.
The total number of oil & gas job losses globally was at 150,000 in June 2015, according to global oilfield staffing firm Swift Worldwide Resources. While global exploration and production companies relied on cutting back payroll, contracts and whatever expenses they could spare to survive, Saudi Arabia announced that its plan to reduce a budget deficit of over USD 98 billion would be to reform energy subsidies and begin an even stronger privatisation drive – without reducing its oil output.
But have there actually been job cuts? Where are these job cuts saturated, and how were salaries in 2015 impacted (a sample of the reported salaries in our Cost of Living KSA Report is shown below)? Have there been any gains in salaries, in any sectors, and how has the cost of accommodation, education and healthcare adjusted to changes in the supply and demand of labour?
If we look more closely at Saudi’s oil output strategy, what we can deduce is that Saudi Arabia has been flooding the market with cheap crude, in an effort to drive its high-cost competitors out of business – but perhaps that isn’t as simple as it has been in the past. Shale drillers can stay profitable at lower prices than before, and more importantly, can turn production on or off as needed, for relatively little expense. So is the Kingdom really as immune to low global oil prices as it claims to be?
The truth is, probably not….. Being impervious to such circumstances is a near on impossibility, and as a result, the energy sector in Saudi Arabia has made substantial cuts. One indicator of this is the freeze in earning gains witnessed in the energy sector during 2015.
The graph below is extracted from the Salary Benchmarking section of our Cost of Living KSA Report, and shows the average change in earnings for a selection of roles in the energy and engineering sectors over time.
Since mid-2015, hiring practises have been more focussed on the talent that saves money. Occupations that analyse processes and recommend cost saving improvements are highest in demand, whilst roles closest to the wellhead are most in threat. In addition, hard bargaining with contractors has led to job losses at the bottom of the food chain (the closer to the wellhead, the bigger the losses.)
Google Trends’ two cents on Saudi’s labour market in 2015
Our analysts have used the publicly-available data on Google Trends to graph the frequency of job searches from within Saudi Arabia over time. The graph we generated is below.
A spike in job search arises in late 2010, as the Arab Spring begins. Several individuals have fled their home countries seeking employment in other more stable nations.
By Mid-2012, as the GCC countries tighten their borders from a potential influx of refugees a decline in search intensity is apparent.
The next time the search intensity spikes again is in Mid-2015, when the oil price fell from $110 to $50 in early 2015. In addition, a major part of the search seems to be generated by users in the Eastern Province, where most oil firms reside.
Data on salaries and the cost of living
The Cost of Living KSA Report 2015/ 2016 is a valuable source of intelligence for firms looking to appropriately resize budgets and readjust allowances which reflect the actual market climate in KSA, rather than simply mimicking the competition. With 10+ years of data and trends in the Middle East, our reports, both quantitative & qualitative, provide insight into the socioeconomic, political & legislative reforms, for the UAE, Qatar, KSA and rest of the GCC, as well as Egypt & Iran.
About the authors :
Bridge The Data has over 12 years of data, 40 individual reports on the cost of living, in 30 cities throughout the MENA region, and has been helping more than 50 Fortune 500 clients make sound compensation and benefits decisions, each financial year. You can reach them at email@example.com or call them at +971 4409 6838.
Full disclosure : If you decide that you like what you read, and buy a report from Bridge the Data, I will earn a small commission on it if you mention that you were introduced by Compensation Insider / Sandrine Bardot. Given that the price of the report is very decent, I obviously won’t become super rich in the process, but this will be an encouragement for me that indeed, the products and services I recommend are useful to my community. So go check them out !