How COVID-19 Transformed Social Mobility in the Arab Gulf States

Omar Al-Ubaydli
Omar Al-Ubaydli is the Director of Research at the Bahrain Center for Strategic, International and Energy Studies, an affiliated associate professor of economics at George Mason University, and an affiliated senior research fellow at the Mercatus Center. He previously served as a member of the Commonwealth of Virginia's Joint Advisory Board of Economists and a Visiting Professor of Economics at the University of Chicago.

Citizens of the six Arab Gulf states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE – have some of the highest living standards in the world. The most salient cause is the abundance of oil and gas resources, but sound management of the resources has played an important role, too, as the Gulf states have preferred the capitalist development model to the failed socialist model adopted by other oil-rich Arab countries.

Nevertheless, despite the comfortable lifestyles afforded to nationals, social mobility has been persistently weak, with limited opportunities for those with modest means to scale the social ladder. Through its forced restructuring of government bureaucracies, Covid-19 can contribute to a permanent rise in social mobility.

Labor Markets in the Arab Gulf States

A typical labor market has two salient properties. First, the public sector accounts for around 25% of employment, meaning that a majority of employed people work in the private sector. Second, around 90% of people in the labor force are citizens. While the public sector is almost exclusively reserved for nationals, the small contribution that non-nationals make to the total labor force means that nationals dominate the private sector, too.

The Arab Gulf states’ economies differ from the traditional structure in both dimensions. First, among citizens, the public sector dominates employment. For example, in Kuwait and Qatar, upward of 90% of employed citizens work in the public sector; and while the figures are lower in the remaining countries, they are still considerably higher than in industrialized countries with comparable levels of per capita income, such as Germany or Japan.

Nominally, the high levels of public sector hiring reflect bureaucratic bloat, as the Gulf public sectors exhibit very low productivity levels. At a deeper level, the public sector hiring represents efforts by the Gulf governments to provide high living standards for their people in a centralized manner that is therefore administratively simple to manage. In contrast, building a dynamic and decentralized private sector as a source of jobs is a much more complex and chaotic process. Governments have preferred to circumvent this latter route via their abundant oil and gas revenues.

Second, migrant workers represent upward of 60% of the labor force in the Arab Gulf states (over 90% in Qatar and the UAE), and they dominate the private sector. There are several reasons for this historically, most notably that the educational systems of the Gulf states are young by global standards, and so they are unable to furnish the private sector with the volume and quality of skills required for economic growth. The straightforward solution was to allow thousands of migrant workers to fill out the gaps in the labor market, especially given the abundance of financial capital required to fuel the economic growth.

Low Social Mobility

This economic system has many pros and cons, but from the perspectives of citizens, it does offer the advantage of good job security, high income, and a pleasant work environment (public sector jobs are primarily white-collar desk jobs in air conditioned offices with many benefits). However, the dominance of the public sector for employment among nationals has an important drawback: the negative effect on social mobility.

In all countries, public sector work differs fundamentally from private sector work in that it is generally much harder to measure an individual worker’s productivity. This is partially due to the fact that many more of the jobs happen to be administrative ones, where quantifying output is difficult, such as a human resources specialist or a communications manager. Moreover, it is also caused by the fact that many public sector organizations do not collect revenues, or they collect revenues but in a manner that does not reflect successfully carrying out their mission, such as a police force or a telecommunications regulator.

As a result, in the public sector, there are few analogues to private sector jobs such as brick-layer, sales representative, or professional athlete, where performance measures are readily available. This makes it much harder to decide who merits a promotion, and who needs to be laid off. Instead, in all public sectors, administrators are left with three options for allocating promotions.

First, using subjective promotion criteria that are ultimately at the discretion of each worker’s supervisor. Second, using seniority, i.e., years of service. Third, using “input” measures, such as educational qualifications or punctuality.

In all of these cases, the result is that someone who is talented and deserves to rise the ranks more quickly than their peers will have their progress slowed considerably. This negatively impacts productivity, as workers feel there is no point in exerting extra effort. It also incentivizes investment in credentials that have no impact on productivity just to secure promotions, as well as people spending time sucking up to the boss in the pursuit of a favorable performance review rather than working.

It also hurts social mobility, as enterprising and exceptional people from modest backgrounds are either given no opportunity to quickly rise, or – even worse – are actively pushed down because of their lack of access to top schools and universities, and their inability to schmooze in the same social circles as the boss.

When a Lionel Messi or a Michael Jordan shows great promise as a young athlete, the ease of objectively gauging their performance means that they will be fast-tracked to higher levels of responsibility, and will quickly earn the millions that they deserve. This kind of honest and corruption-free rags-to-riches story is almost unheard of in any public sector.

In the Arab Gulf states, this problem is amplified due to the outsized role played by the public sector. When 25% of your citizens are stuck in these rigid organizations, as in the UK or US, the economy as a whole can bear the weight; but when it is 85% of your citizens attending endless meetings and having 90 minute coffee breaks, the ill effects become catastrophic. The problem is further exacerbated by the over-hiring within the public sector, that makes it even harder to measure productivity, as some workers are barely assigned any tasks by their supervisors.

Moreover, it is made even more acute by the importance of tribalism to daily life in the Gulf states. People have an innate tendency to favor their kin in hiring and promotion decisions, and this is reinforced socially by the celebration of one’s tribal affinity at a cultural level. The result is that it is even harder for someone from a lower social class to reach the highest echelons of society, i.e., the opposite of the American dream.

In many ministries in the Gulf countries, morale is tangibly low among the workforce as a direct result of the ossified organizational structure. A talented public administrator who joined as little as one year after an incompetent colleague will be permanently behind them in the career ladder, and may even have to suffer the ignominy of being supervised by their less capable peer. No matter how hard the bright employee tries, and how well they perform in the tasks they are assigned, they will continue to get mediocre scores in their annual review, and will advance no faster or slower than other members of the same cohort.

This counterproductive system is reminiscent of the Japanese men’s soccer team that star player Hidetoshi Nakata used to complain about in the late 1990s. Nakata entered the team at the age of 20, and was already significantly better than many of his older teammates, meaning that he should have been the primary playmaker. However, Nakata found that the older players would demand that he would pass them the ball even when they were in inferior positions to him, and would decline the opportunity to pass to him when he was in a superior position, because they regarded seniority as more important than performance and talent. After being perennially bad, the national team started to thrive in the early 2000s only after this culture was dropped, but it took the generational talent of Nakata to effect the change.

A crushed spirit is not the only adverse consequence of a system that fails to recognize and promote talent. When poor-performing workers secure upper positions in ministries by virtue of their seniority or personal relations with those who have influence, these people often actively undermine their more talented colleagues in an attempt to fortify their own position. This is because they feel threatened by the presence of a more talented underling, even if the only damage is a bruised ego. Most public sector workers in the Arab Gulf states have seen directly – or heard about – less competent managers oppressing more competent employees by giving them menial tasks and otherwise marginalizing them, and this phenomenon is often depicted in the locally-made TV dramas.

Covid’s Disruption of the Public Sector

The Covid-19 pandemic has had a large negative impact on all countries, including the Arab Gulf states, spanning health, social, and economic domains. However, there have been some positive effects, too, such as the investment in certain hybrid work and education systems that could increase access for underrepresented groups, including those with physical disabilities or who need to care for infirm relatives.

In the context of the public sector, Covid has given principals – including ordinary citizens – access to something they have long yearned for and been denied: the opportunity to accurately measure performance. Winston Churchill once quipped: “never let a good crisis go to waste,” implying that crises offered opportunities. For a talented worker in the public sector, that means the opportunity to irrefutably perform better than their colleagues; and for a senior manager in the public sector, that means the opportunity to objectively identify which one of their workers is a true star, and which is out of their depth. Covid has brought this about for three reasons.

First, the pandemic has required many governmental organizations to change the way they work to deal with a health emergency. Employees have to show high levels of creativity and adaptability, as they come up with new systems for dealing with the crisis. They also have to do all of this quickly. This deluge of tasks makes it clear to any observer which worker has high aptitude, and who is lost or simply averse to work.

Second, for remote work to function properly – specifically to avoid people shirking on the job, workflows have to be restructured in a manner that makes it much clearer who is responsible for which task, and how each person contributes to the final outcome. Public sector workers used to coasting by just showing up to meetings and claiming partial credit for work done by a large team can no longer use these ploys, as everything is digitally documented. With in-office work, some managers were content to judge productivity by “face time”, i.e., who is physically in the office, but in remote work, there is a much larger emphasis on task completion.

Third, the stakes are much higher (literally life or death), and this dissuades people from strategically undermining workflows in a self-serving manner, such as the managers who love to drone on in three hour meetings, or employees who hide information from their colleagues because they want to shine. The culture shifts to working toward the common goal of overcoming the pandemic, and this makes it much easier to discern individual workers’ capabilities.

A Brighter Outlook for Social Mobility

In principle, going from a situation where performance is difficult to evaluate to one where it is easy to evaluate should be good news for talented workers repressed by rigid promotion criteria. Therefore, in this narrow sense, Covid-19 can have a positive impact on social mobility.

Naturally, in countries such as the UK and US, where civil servants are a small minority of total employment, the benefits will be barely perceptible at the level of the entire economy. However, in the Arab Gulf countries, the effects can be transformational, especially by helping talented workers from modest backgrounds to more quickly scale the government ladder.

This has been reflected in waves of fresh appointments in key government positions in countries such as Bahrain, Kuwait, and Saudi Arabia during the pandemic. A noticeable feature has been that the new hires have been young (under the age of 40, sometimes even under the age of 30), boasting high quality credentials. Most importantly, they are often people who have performed well in their early years in the civil service, demonstrating the potential to shoulder a lot more responsibility.

These hiring practices are quite different from the past, where senior positions were frequently reserved for those who had been in the public sector for 20 or more years, and where the appointment seemed to represent more of a survivorship bonus than a reward for an extended track record of high performance. The idea of someone in their late 20s or early 30s being a minister because they excelled in their first five years as a civil servant would have been totally alien 20 years ago. As with many changes, Covid didn’t initiate the transformation alone, but it accelerated a transformation that was already in progress.

An additional cause for hope is in the momentum that these changes represent. Once a critical mass of forward-thinking, performance-focused executives and managers come together in an organization, the culture begins to change sustainably. Workers start to believe that if they work hard and excel, they can advance up the career ladder more quickly than those with less ability or desire – a microcosmic version of the American dream.

Instead of using their office time to curry favor with the boss, workers start to focus on completing their work tasks to the best of their ability. Instead of getting empty educational credentials to check boxes for their promotion evaluation, employees get qualifications that help them to perform better on the job. A virtuous cycle of promoting the right people and motivating people to work hard emerges.

Other Favorable Factors

These changes are part of a broader shift toward higher levels of social mobility in the Arab Gulf states, brought about by their economic transitions. During the last 20 years, each of the six states has launched an economic vision that emphasizes downsizing the government, empowering the private sector, and boosting innovation. While such transitions are very difficult to achieve, there have been some signs of success, such as promising startups in Kuwait, Saudi Arabia, and the UAE, most notably ride-sharing company Careem which was purchased by Uber for $3.1 billion in 2020.

The UAE also recently scrapped a long-standing rule that granted established family companies monopolies on the importing of certain goods and services, such as luxury cars or high-end electronics. These protections helped to cement certain social structures, and limited the opportunities available to young upstarts to scale the social ladder.

Having the public sector bureaucracies transition to more merit-based and impersonal formats will surely aid in improving social mobility, and in this regard, the positive jolt provided by the Covid-19 pandemic may end up being a net plus. The final goal should be what the Nigerian novelist Chinua Achebe once described: “Age was respected among his people, but achievement was revered. As the elders said, if a child washed his hands he could eat with kings.”

Omar Al-Ubaydli
Omar Al-Ubaydli is the Director of Research at the Bahrain Center for Strategic, International and Energy Studies, an affiliated associate professor of economics at George Mason University, and an affiliated senior research fellow at the Mercatus Center. He previously served as a member of the Commonwealth of Virginia's Joint Advisory Board of Economists and a Visiting Professor of Economics at the University of Chicago.