Nationality and wages in 1986 in Riyadh, Kingdom of Saudi Arabia

The Kingdom of Saudi Arabia\u27s Fourth Economic Development Plan, 1985-1990, proposed to replace foreign workers with Saudis. This study describes the population and labor force in Riyadh in 1986, estimates the wage differences by nationality after controlling for other variables, and evaluates the feasibility of the Fourth Five Year Plan in the context of the capital. This study is based on The Riyadh Development Authority\u27s October 1986 random sample survey of 5,009 occupied dwelling units in Riyadh, including 2,736 Saudi and 2,273 non-Saudi households. Regression analysis was used to estimate the determinants of wages. Riyadh\u27s population in 1986 was 1,402,280 (835,774 Saudi and 566,506 non-Saudi) with 494,897 currently employed (169,653 Saudi and 325,244 non-Saudi); 80% of the Saudis were employed in the public sector; 80% of non-Saudis were in the private sector. We found that wages were affected most by sex, education, occupation, employment in the private or public sectors and nationality. Detailed tables are included describing the total employed population and the parameters estimated in the regression analysis. We found significant differences in wages based on the employee\u27s nationality when the effects of all other variables are controlled. We suggest that these wage differentials reflect a hiring system in a radial labor market system which is the concept of segmented labor markets taken to the extreme. There is virtually, no labor market for foreign workers in Riyadh and wages are fixed at the time of employment in the local labor market in the home country where the migrant worker is hired. Given the population and employment structure in Riyadh, it is unlikely that the foreign workers could be replaced in any significant numbers in the near future by Saudis. To have replaced the foreigners by Saudis would have cost the public sector an additional $21,219,799 per month in wages, and the private sector an extra \$170,302,321 per month