The labour market dynamics of Saudi Arabia

A small domestic population, the rapid need for transformation, declining labour productivity, and lack of skilled workers will define Saudi Arabia’s labour market through to 2030.

With industry talent shortages in key future growth areas – AI and robotics, as two examples – higher education can play a central role in addressing these issues. Saudi Arabian institutions need to connect the potential of its domestic and international student populations with the needs of employers to drive economic growth across the Kingdom.

The risk of skills shortages is well documented, and the impact of any shortages will be concentrated in highly skilled sectors. According to the World Economic Forum’s Future of Jobs Report, 84% of Saudi Arabian employers accept that the biggest driver of business transformation will be AI and information processing technologies, followed by robots and autonomous systems. Equipping graduates with these digital-oriented, high-value skills should be a priority for Saudi Arabian universities.

Saudi Arabia is currently a middling performer in the QS World Future Skills Index, with performance below the G7 average, but above the wider MENA region. There is certainly opportunity to strengthen alignment between the skills graduates will need for the future of work and business needs. Unless significant changes are made, Saudi Arabia’s future-focused industries will face skills shortages, and not realise their full potential and exacerbate declining workforce productivity. Adapting curricula to include applied learning, and working hand-in-glove with employers will improve higher education’s alignment with industry.

In the short-term, the increasing number of international students arriving in Saudi Arabia can play a crucial role in filling high-impact skills gaps. With a growing international student population, ensuring these students can work – and can work in highly skilled sectors – offers a potential lifeline as businesses grapple with skills gaps.

In tandem with skills gaps, International Labour Organisation data shows that since 2005, the average value of work per hour in Saudi Arabia has declined from over US$80 to under US$60. Upskilling and reskilling workers will be key if Saudi Arabia is to reverse this trend.

Saudi Arabia’s higher education system can play a central role in powering the country’s economic growth, and its transition away from oil dependency. However, misalignment between industry and academia poses a challenge. Without alignment, Saudi Arabia may underutilise its growing talent pipeline, and miss out on innovation-led growth.

Saudi Arabia performance in QS World Future Skills Index

As outlined in our QS World Future Skills Index: Saudi Arabia Spotlight, "Saudi Arabia is undergoing a bold transformation, propelled by Saudi Vision 2030 in a nationwide effort to diversify its economy and upskill its population. With an overall score of 66.1, the Kingdom performs strongly on Academic Readiness (82.5), indicating a growing commitment to future-focused education. However, Skills Fit (56.9) and Economic Transformation (51.0) highlight the ongoing need to better connect education with employment opportunities. While workforce participation is expanding, employer demand for AI, Green, and Digital skills is still developing beyond flagship public initiatives."