Youth Unemployment and Productivity-Pay in the GCC Countries

Although the total youth unemployment rate in the Gulf Cooperation Council countries is less than in other high-income countries, the female youth unemployment rate is more than quadruple the male youth unemployment rate compared to equal rates in high-income countries. The gender bias in youth unemployment is attributable to the generous social contract GCC nationals enjoy as well as the largely conservative GCC culture that perceives a more important role of women in the household than in the job market. The generous social contract is also a key factor in the duality of the GCC labor markets with one segment for national labor and the other for foreign labor. Foreign labor constitutes most of the labor force, and the link between pay and productivity is strong in the foreign labor segment indicating labor market efficiency. This chapter investigates whether the presence of strong pay-productivity links in both labor market segments reduces the national youth unemployment rates in the GCC countries. Empirical evidence shows that linking pay to productivity robustly reduces the total and female youth unemployment rates. The influence is strongest on the female youth unemployment rate, however. Productivity-pay helps reduce youth unemployment and the associated gender bias.