The first challenge is low labor participation rates among the national workforce (particularly among youth and women), and the prolific use of expatriate labor across all skills categories. Second, is a mismatch between the skillset of the national labor force and the demands of private sector companies. Third, is the abundance of cheap expat labor which has reduced incentives for firms to invest in automation and productivity improvement levers. These challenges are reducing the competitiveness and long-term growth prospects of GCC economies.
A tradable permit system is an efficient way to manage expat labour in the GCC. The ‘tradable’ nature of the permit offers a market approach to allocating expatriate labour to where its value added is the highest and gives governments better control over the total number of expatriate workers in their countries. In this paper, we shall look at how a permit system would overcome many of the challenges currently facing existing quota systems and encourage national hiring and enabling expatriate labor to be allocated to where its value added is the highest.
