Transformations in the Labor Market

Saudi Arabia’s labor market has undergone significant transformations in recent years. It no longer follows a traditional path; instead, it has become more flexible, diverse, and adaptive, aligning with the Kingdom’s ambitious economic transformation agenda outlined in Vision 2030.

The country is advancing efforts to diversify its economy and reduce dependence on oil, aiming to become a regional and global hub for investment and innovation. This ambition is reflected in comprehensive labor market reforms and initiatives that support increased female participation, enhance employment opportunities for Saudi youth, and promote the integration of modern technologies across various sectors.

With growing attention from policymakers, Saudi Arabia’s labor market is increasingly becoming an attractive environment for both local and international talent. It brings together diverse cultures and skill sets, supported by inclusive reforms in labor regulations, wages, productivity frameworks, and job creation mechanisms.

One of the key indicators of labor market performance is the labor force participation rate, which reflects the economy’s capacity to generate employment. This rate rose from 56.4% in early 2019 to 68.2% in Q1 2025, driven primarily by increased participation among Saudi nationals, while non-Saudi participation remained relatively stable.

A major milestone has been the significant increase in female workforce participation, which grew from 20.9% in 2017 to 36.3% in Q1 2025. This progress surpassed Vision 2030 targets and followed the implementation of several landmark government policies, including permitting women to drive, promoting female education and employment, and empowering women across diverse sectors. As a result, the target has now been raised to 40% by 2030.

Regarding unemployment, a key indicator of economic stability, data from the General Authority for Statistics show that the unemployment rate for Saudi nationals declined to 7% in Q4 2024, down from 12.8% at the end of 2017. The overall unemployment rate also fell to 3.5% in Q4 2024, compared to 4% in 2023. These improvements reflect the Kingdom’s continued efforts to enhance the work environment and create job opportunities across various sectors.

Despite these achievements, several challenges remain. Key among them is the need to generate sufficient job opportunities to accommodate population growth, support ongoing economic diversification, ensure job quality, and adapt to global trends such as digital transformation and job automation, which may reshape the future of work.

A recent IMF study confirmed notable improvements in labor productivity, particularly within the public sector. This progress is attributed to Vision 2030’s wide-ranging reforms, including digital transformation initiatives that have driven stable sectoral growth. However, the private sector has experienced volatility linked to fluctuations in oil prices.

The IMF also noted that artificial intelligence (AI) technologies have the potential to significantly boost productivity, economic growth, and income levels. Yet, risks remain, including large-scale job displacement, data privacy, governance, and security concerns.

Saudi Arabia is well-positioned to harness AI. The National Strategy for Data and AI (SDAIA) aims to attract $20 billion in investments, train 20,000 data and AI specialists, and establish 300 startups by 2030. AI is projected to contribute $135 billion, approximately 12.4% of the Kingdom’s GDP, making Saudi Arabia the largest AI beneficiary in the Middle East.

Entities supervised by the National Development Fund (NDF) play a central role in strengthening the labor market and stimulating economic activity. Through various programs and initiatives, they support growth by financing projects across multiple sectors, providing incentives to entrepreneurs and SMEs, and investing in key industries that contribute to the development of the national economy.

To ensure long-term sustainable development, it is essential to align educational outcomes with labor market needs. Emphasizing digital literacy and innovation-driven skills will be critical to achieving Vision 2030’s objectives, creating high-quality jobs in priority sectors and driving inclusive and sustainable economic and social development.