In most important regards, the economies of the GCC have been doing exquisitely well during the last decade – but in one critical area, there has been stagnation, if not regression: levels of labor productivity and, closely related, the involvement of locals as employees in the private economy. While public sectors in the GCC are increasingly nationalized, private labor markets remain dominated by foreigners: The share of national employees in the private labor force lies between one percent and a quarter in the various countries of the region. Due to decades of unrestricted labor imports from the developing world, average wages in the private sector are very low, as are skills levels and productivity. The region is locked into a development path where many businesses have substituted the minimization of labor costs for skills and productivity development – to the detriment of nationals, who can seldom compete on price and who, due to the availability of public sector employment, have limited incentives to work on their marketable skills in any case.
