Income as a possible factor in the employment of Saudis in private- and public-sector organizations: A human capital theory approach

The Kingdom of Saudi Arabia places great emphasis on developing the productive skills of its labor force. Part of this effort involves providing jobs for Saudi nationals, the so-called ""Saudization"" program. The number of Saudis employed in the private sector is very low, and for years Saudi Arabia has tried to reduce dependence on expatriate labor.; This study examined income as a possible factor in the low rate of private-sector employment of Saudis. It used the human capital theory approach pioneered by Mincer (1962) and Becker (1964). Regression equations for the public and private sectors' Saudi employees were constructed, using estimated terminal income as the dependent variable and education, experience, hierarchy, and entry-level pay as independent variables. Unlike earlier studies, this study used data obtained directly from two private-sector and two public-sector firms, rather than questionnaire data.; Ten hypotheses were formulated and tested. One important finding was that those in the public sector did not achieve a significantly higher hierarchical status than those in the private sector, as is commonly thought. The study also showed that entry level income was not significantly different between the sectors---going against the belief that the public sector pays more. This has been perceived as a barrier to private-sector employment of Saudi nationals. In fact, the salaries of Saudis and non-Saudis were more alike than many have thought.; Based on the findings, recommendations were made to (1) launch an aggressive educational campaign to inform educated Saudi nationals of the lack of difference in private versus public sector pay; (2) encourage private firms to place greater emphasis on hierarchical advancement for Saudi nationals; (3) make private-sector entry-level pay more attractive; and (4) implement advancement plans based on factors other than experience for Saudi employees.; Based on the literature review and the research results, additional general recommendations were made that were unrelated to study findings. While the present results cannot be generalized due to the nature of the sample, the findings may still prove useful in advancing Saudi social policy and as a starting point for further research, in addition to other general recommendations.