Three Essays About the Kuwaiti Labor Market: Policies for Labor

Ebtesam M H E H A Alansari

2018

To my family.

THREE ESSAYS ABOUT THE KUWAITI LABOR MARKET: POLICIES FOR LABOR

MARKET INTEGRATION AND PAY DIFFERENTIAL BASED ON GENDER AND

CITIZENSHIP

Ebtesam M H E H A Alansari

ABSTRACT

This dissertation consists of three essays about the labor market in Kuwait. After Kuwaiti independence in 1961 and the oil boom in the 1970’s, there was a great need for workers to help develop the country and build its infrastructure. The excess demand was satisfied by importing labor from abroad, such that foreign workers filled important niches in the economy as skilled and unskilled workers. The aim of this dissertation is to investigate two main issues in the Kuwaiti labor market: job segregation and wage gaps based on gender (male vs female) and citizenship

(Kuwaiti vs non-Kuwaiti). The first essay provides a historical framework for the way that

Kuwait’s labor force policies have evolved over time and assesses whether they were successful in integrating Kuwaiti workers into the labor force and across public and private sectors of employment. The second essay investigates the pay differential between male and female workers for a specific job given equivalent worker qualifications using the Oaxaca and Blinder (OB) decomposition model of the Unrestricted Quantile Regression (UQR) analysis. The third essay examines the wage gap in the Kuwaiti labor market based on workers’ nationality, using the aforementioned model to identify whether the wage gap between Kuwaiti and non-Kuwaiti workers is persistent, how much of the gap is due to discrimination, and whether it is different across the wage distribution.

Kuwaiti government policies successfully integrated Kuwaiti nationals into the public labor force but have had less success integrating Kuwaiti nationals into the private sector. This resulted in ii

segregated labor markets and pay differentials based on gender and citizenship. The analysis shows that Kuwaiti male workers earn more than Kuwaiti females and this is mainly due to unobservable factors and discrimination in the social and child allowances that favor males.

Non-Kuwaiti males earn more than non-Kuwaiti females and this is mainly due to unobservable factors and market discrimination in returns to the endowments of the endowment-advantaged group (males and females). Kuwaitis earn more than Arab and non-Arab workers, and the wage gap is mainly due to unobservable factors that work in favor of Kuwaiti workers.

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ACKNOWLEDGMENTS

"Lord, inspire me to be thankful for the blessings You have granted me and my parents, and to do good deeds that please You; admit me by Your grace into the ranks of Your righteous servants” The Holy Qur’an 27:19

All praise to Allah for strengthening and guiding me through my journey. For empowering me to overcome the obstacles and challenges I faced in life and during writing my dissertation. For the hidden kindness and care of Allah that surrounded me during my easy and tough days that allowed me to succeed in my life and career.

I would like to thank my committee members for their contribution to this dissertation.

Also, I would like to express my gratitude to my committee chair Professor Willoughby for the kindness, respect and support he showed me during writing my dissertation as well as professor

Radchenko and Professor Mohseni. Furthermore, I would like to thank Dr. Riyad Faras and the staff of Kuwait Central Statistical Bureau (Ms. Mona Aldaas and Ms. Wafa’a Alyahya) for providing the confidential micro data for this dissertation.

I would like to thank my beloved husband “Bassam” for his love and support, for walking through this journey with me, for believing in me and my abilities when I doubted myself, for cheering me up when I was feeling down, and for taking over when I was absent, busy and overwhelmed. My dream would not have become a reality without you. Thank you so much.

I would like to thank my lovely children “Arwa, Yousef and Saba” for being patient with me and my busy schedule, for waiting for me by the door with the biggest smile and the warmest hug every time I came back home. Thank you for your cheerful letters before every big step in my program and for repeatedly declaring that you love me and that I am the best mother in the world. You gave my life meaning and made it sweeter, just like the icing on a cake.

I love you more than anything. iv

I would like to thank my parents, siblings, my family in-law, friends and collogues for their support, love and prayers. You all made this journey easier on us. Also, I would like to thank my best friend “Lama” for inspiring me to write my dissertation on this topic. Thank you for your unconditional love and support, for always being by my side on my good days and my not-so- good days. You are an amazing person and a source of inspiration and encouragement for those around you.

TABLE OF CONTENTS ABSTRACT ...... ii

ACKNOWLEDGMENTS ...... iv

LIST OF TABLES ...... viii

LIST OF ILLUSTRATIONS...... x

LIST OF ABBREVIATIONS ...... xi

CHAPTER 1 GOVERNMENT POLICIES FOR LABOR MARKET INTEGRATION: HISTORICAL FRAMEWORK ...... 1

1.1. Introduction...... 1 1.2. Kuwait’s Demographics and Labor Force ...... 7 1.3. How has this picture evolved over time? Historical Events and Government Decisions ...... 8

1.3.1. 1750’s – First Independence of Kuwait ...... 8 1.3.2. 1899 - The British protectorate...... 10 1.3.3. 1920s - The Decision to Search for Oil ...... 11 1.3.4. 1960s – Second Independence and Kuwait Constitution ...... 12 1.3.5. 1990’s– Iraqi Invasion and First Gulf War ...... 13

1.4. The Development of Labor Market Laws and Regulations ...... 14

1.4.1. Efforts to Nationalize Government Work and Control the Migration of Foreigners ...... 14 1.4.2. Efforts to Nationalize Private Sector ...... 27 1.4.3. Polices Regarding Female Labor Force Participation ...... 33

1.5. Conclusion ...... 34

CHAPTER 2 GENDER WAGE GAP IN THE KUWAITI LABOR MARKET ...... 37

2.1. Introduction...... 37 2.2. Literature Review ...... 46 2.3. Conceptual Framework ...... 50

2.3.1 Human Capital Model ...... 51 2.3.2 Wage Decomposition ...... 54 2.3.3 Estimation Procedure ...... 56

2.4. Data and Descriptive Statistics ...... 57 2.5. Results ...... 62

2.5.1 Human Capital Returns ...... 63

2.5.2 Wage Decomposition: Structural and Composition Effects ...... 69

2.6. Conclusion ...... 81

CHAPTER 3 CITIZENSHIP WAGE GAP IN THE KUWAITI LABOR MARKET ...... 84

3.1. Introduction...... 84 3.2. Literature Review ...... 88 3.3. Conceptual Framework ...... 92 3.4. Data and Descriptive Statistics ...... 92 3.5. Results ...... 95

3.5.1 Human Capital Returns ...... 96 3.5.2 Wage Decomposition: Structural and Composition Effects ...... 98

3.6. Conclusion ...... 110

APPENDIX A KUWAIT DEMOGRAPHICS AND LABOR MARKET REPORT ...... 113

A.1. Kuwait Demographics ...... 113 A.2. Kuwait Labor Force...... 114

A.2.1 Participation and Unemployment ...... 114 A.2.2 Composition of the Labor Force and Foreign Workers’ Country of Origin ...... 115 A.2.3. Sectors of Employment ...... 116 A.2.4. Education Level ...... 116 A.2.5. Occupations ...... 117 A.2.6. Economic Activity ...... 118 A.2.7. The Pay Structure...... 119

A.3. Kuwaiti Labor Market Pay Differential Studies ...... 128

REFERENCES ...... 131

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LIST OF TABLES

Table 1-1: Key Periods in Kuwait’s History ...... 13

Table 1-2: Kuwait Labor Market Laws and Regulations ...... 25

Table 1-3: Proportion of Economically Active Population (15 + Years) ...... 35

Table 1-4: Share of Kuwaiti Workers in the Private Sector (as % of Private Sector Workers) ...... 36

Table 2-1: Descriptive Statistics for Workers Ages 18-65 Years Old ...... 61

Table 2-2: OLS & UQR Coefficients for Kuwaiti workers in the Public Sector Ages 18-65 ...... 67

Table 2-3: OLS & UQR Coefficients for Non-Kuwaiti Workers in the Private Sector ...... 71

Table 2-4: Gender Wage Gap Decomposition Results ...... 72

Table 3-1: Descriptive Statistics for Workers Ages 18-65 Years Old ...... 95

Table 3-2: OLS & UQR Coefficients by Country of Citizenship for Workers Ages 18 - 65 Years Old ...... 100

Table 3-3: Citizenship Wage Gap Decomposition Results ...... 103

Table A-1: Population Composition ...... 120

Table A-2: Population by Age Group ...... 121

Table A-3: Proportion of Economically Active Population Aged 15 + ...... 121

Table A-4: Proportion of Unemployed Labor ...... 121

Table A-5: Composition of Labor Force (%) ...... 122

Table A-6: Distribution for Foreign Employees by Region (%) ...... 122

Table A-7: Distribution of Employee by Sector of Employment (%) ...... 123

Table A-8: Education Level of Economically Active Population (%) ...... 124

Table A-9: Percent of Total Workers in Selected Occupations...... 125

Table A-10: Percentage distribution of working population by Economic Activity ...... 126

Table A-11: Mean Monthly Wages in KWD* by Education Level and Citizenship ...... 127

Table A-12: Mean Monthly Wages in KWD* by Sector of Employment ...... 127

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Table A-13: Mean Monthly Wages in KWD* by Gender, Citizenship and Sector in 2015 ...... 127

Table A-14:Summary of Kuwaiti Labor Market Pay Differential Studies ...... 128

LIST OF ILLUSTRATIONS

Figure 2-1. Global Gender Gap Index 2017 vs Global Human Capital Index 2017 ...... 39

Figure 2-2. Kuwait Population Pyramid 2017 ...... 39

Figure 2-4. MENA International Migrant Stock as a Percent of Population in 2015 ...... 43

Figure 2-5. Kuwaiti Wage Distribution, Public Sector ...... 59

Figure 2-6. Non-Kuwaiti Wage Distribution, Private Sector ...... 60

Figure 2-7. Kuwaitis Wage Distribution, Public Sector ...... 77

Figure 2-8. Non-Kuwaitis Wage Distribution, Private Sector...... 81

Figure 3-1. Wage Distribution of Kuwaiti, Arab and Non-Arab Workers ...... 94

Figure 3-2. Wage Distribution Kuwaiti vs Non-Kuwait Workers ...... 94

Figure 3-3. Kuwaitis vs Arabs Wage Gap Decomposition ...... 108

Figure 3-4. Kuwaitis vs Non-Arabs Wage Gap Decomposition ...... 110

LIST OF ABBREVIATIONS

BP British Petroleum CPI Consumer Price Index CSB Central Statistical Bureau CSC Civil Service Counsel FLFP Female Labor Force Participation GCC Gulf Cooperative Council GDP Gross Domestic Product GGGI Global Gender Gap Index HDI Human Development Indicator ID Civil Identification IF Influence Function ILO International Labour Organization ISCO International Standard Classification of Occupations KLFS Kuwaiti Labor Force Survey KOC Kuwait Oil Company MENA Middle East and North African MGRP Manpower and Government Restructuring Program MMT Million Metric Tons OB Oaxaca-Blinder PACI Public Authority for Civil Information PAM The Public Authority of Manpower RIF Recentered Influence Function STEM Science, Technology, Engineering, and Mathematics UQR Unrestricted Quantile Regression US United States

CHAPTER 1

GOVERNMENT POLICIES FOR LABOR MARKET INTEGRATION: HISTORICAL FRAMEWORK

1.1. Introduction

Kuwait and other oil-rich Gulf Cooperative Council (GCC)1 countries experienced major political, social, and economic transformations after the discovery of oil. The increase in wealth after the first shipment of crude oil in 1946 led to massive economic and infrastructure development in the country. The oil revenues were used to finance infrastructure (roads, schools, hospitals, etc.) as the economy shifted from a dependence on trade, pearl diving, and shipbuilding to a dependence on one source of income: oil revenue.

The urgent need for skilled workers who could implement the government’s development plans was not met nationally or in the domestic labor market at the time because the Kuwaiti population was small, and the national workers did not have the required skills. As a result, the

Kuwait government implemented policies that facilitated immigration and offered free education, better job availability, and higher pay relative to other countries in the region.

Coupled with the excess labor force in neighboring countries (such as Egypt, Palestine, Jordan,

Syria, and Iran), there was a massive migration of workers to Kuwait. As the number of foreign workers increased in the country, the government realized that its open door and welfare policies came with a price. These policies impacted the economy such that: 1) Kuwaitis are a minority in their country, 2) the economy is highly dependent on foreign workers, 3) young Kuwaitis joining

1 The Gulf Cooperative Council (GCC) countries include: Bahrain, Kuwait, Qatar, Saudi Arabia, Oman and United Arab Emirates. 1

the labor market are subject to unemployment or prolonged wait time to get a public-sector job, and 4) the demand for public services (such as schools and hospital) is huge.2

With the large inflows of oil money to the government and the end of shipbuilding and natural pearl industries in Kuwait, the government encouraged Kuwaitis to join the labor force though policies that provided very generous wages and other benefits. These benefits and wages were exclusive for Kuwaiti workers.

The job segregation approach has been used to investigate the wage gap in many countries, not just Kuwait. Job segregation in the Kuwaiti labor market is a continuing problem.

The Kuwaiti market is dominated by non-Kuwaiti workers, who accounted for 82.1 percent of the labor force in 2016.3 In addition, Kuwaiti workers are highly concentrated in the public sector (86.6 percent in 2015), while non-Kuwaiti workers are highly concentrated in the private sector (74.8 percent in 2015).4Finally, previous studies have shown that job segregation exists in

Kuwait between both male and female and Kuwaiti and non-Kuwaiti workers (Hosni and Al-

Qudsi 1988). This is further complicated because Kuwaiti workers reject certain jobs that they consider non-Kuwaiti jobs (such as manual labor), resulting in a segregated job market based on citizenship. The cultural beliefs regarding who should hold specific jobs have caused problems related to the labor market in Kuwait and have impacted the young population and the government.

2 Due to increased population size, demand for public services increased dramatically. The government used to offer free education, health and other services. Today, not all non-Kuwaiti individuals are eligible for free education and they are required to obtain health insurance and pay for health services themselves. But the amount of the payment is very small relative to the market price because Kuwaiti healthcare is still heavily subsidized by the government, even if some of that cost is now passed on to foreign residents.

3 Appendix, table (A-5).

4 Appendix, table (A-7).

The public sector has been the main realm for Kuwaiti nationals to find employment since the development of the oil economy. In 1960, the government issued law no. 18 (18/1960) which prioritized Kuwaitis in public sector employment. In addition, article (41) of the Kuwaiti constitution (1962) guarantees employment for every Kuwaiti individual willing and able to perform a job in the public sector.5 Over the years, this has resulted in huge costs for the government. With the recent decline in oil prices, the government budget lost all its surpluses and shifted into a deficit. In 2015, the cost of wages in the public sector was approximately 17 percent of Kuwait’s Gross Domestic Product (GDP) (IMF 2017). This figure is only expected to rise given that the Kuwaiti population is also young. Additionally, the high employment of

Kuwaitis in the government sector has led to the under-employment of public sector workers as the government hires more Kuwaiti workers than it needs.6 The government patterns of hiring only Kuwaitis has also led to a mismatch between workers’ skills and jobs, the concentration of

Kuwaiti workers in service and clerical jobs, the low participation of Kuwaitis in the private sector, and the continued dependence on foreign workers to satisfy the market demand for labor.

Jobs are segmented across citizenship because there are jobs (such as construction, manufacturing and sanitation jobs) that Kuwaiti workers refuse to perform (Hosni and Al-Qudsi

1988). In addition to the refusal to work in sectors that require a lot of manual labor, Kuwaitis have other negative attitudes toward work such as an owner attitude: an attitude which makes it difficult for Kuwaitis to take directions from non-Kuwaitis; and Kuwaitiness: the entitlement mentality which ties being Kuwaiti to a series of clear privileges, a preference for office jobs

5 Article (41) stated that “every Kuwaiti has the right to work and to choose the type of work. Work is the duty of every citizen, and the state provides it to citizens”. Retrieved from (GCC-Legal-Network n.a.), Accessed on June 1st, 2108.

6 The over staffing of workers in the public sector results in disguised unemployment where about half the workers are under employed and their productivity is zero in some cases (Salamah and Al-Enezi 1999). 3

and a rejection of manual work (Alessa 1981, Garrison 2015, Abdalla and Al-Homoud 2012, Al-

Qudsi 1985).

The private sector labor market is characterized by a majority of non-Kuwaiti workers employed in low-skill jobs and earning low wages.7 Private sector employers have a preference for employing non-Kuwaitis because they are cheaper, easier to control, accept any type of jobs assigned to them, and are less demanding. Private sector employers create jobs that do not attract

Kuwaiti workers: they offer low-skill and low-wage jobs and depend on highly labor-intensive production processes rather than investing in cost-efficient technologies. These practices have a negative impact on economic development because they discourage higher levels of private sector investment and economic diversification. In addition, they counteract the government’s policies that aim to encourage Kuwaiti employment in the private sector (Harry 2007, Hertog

2013).

Given Kuwaiti employment practices and beliefs, the government has realized the important role that the private sector plays in diversifying the economy and leading the development process. Because the employment of Kuwaitis is now a major challenge for the

Kuwaiti government, it has taken several corrective steps to direct new Kuwaiti labor market entrants toward the private sector. First, the government has not only nationalized the labor force in the government sector, where non-Kuwaitis are only employed in positions that no Kuwaiti worker can satisfy, but it has also established The Manpower and Government Restructuring

Program (MGRP) in 19978 as a separate government institution responsible for the employment

7 In 2013, 52.6 percent of the non-Kuwaiti workers who worked in the private sector worked in production related industries in positions such as transport equipment operators and laborers, and about 59 percent of the workers earned KWD 120 or below . Source: (CSB 2007), page 9 and 25.

8 Decision of the Council of Ministers No. 767 of 1997.

of Kuwaitis in the private sector through training programs, connecting private sector employers with Kuwaiti job seekers, determining the quota of Kuwaitis in the non-public sector, conducting studies to evaluate the policies of nationals’ employment in the non-public sector and finding ways to match graduates’ skills with the labor market needs. Second, a quota system was imposed in the private sector, where the share of Kuwaiti workers in specific jobs is determined by the Council of Ministers, while other jobs are restricted outright to Kuwaitis only. The quota policy with respect to the private sector was first implemented in 20009. Third, the government began to subsidize the employment of Kuwaitis in the private sector in 2001.10 The goal of the subsidy policy is to minimize the wage gap between Kuwaitis employed in the public sector versus the private sector, where the gap is usually large and favors public sector workers. The subsidies include a wage allowance, which increases with education; social benefits and child allowances, which vary by marital status and number of children; and an allowance for high living expenses.11

Even though the government is trying to encourage Kuwaitis to seek employment in the private sector, there are many obstacles that discourage these efforts. These obstacles are related to Kuwaiti workers and the private sector as well. Kuwaiti workers are reluctant to join the private sector for the following five reasons: 1) greater job insecurity 2) longer working hours 3)

9 Law (19/2000) regarding supporting and encouraging national labor to work in non-governmental organizations.

10 The decisions of the council of ministers (39/2001) and (593/2003); granting the social allowance and the allowance for children to craftsmen, professionals and employees of non-governmental organizations, the decision of the Civil Service Council (3/2008); granting public and private sector workers’ high cost of living allowance, and the decision of the council of minister (548/2012); assigning financial reward for Kuwaitis who work for Non-public sectors.

11 Note that the wage allowances are paid equally for male and female workers based on their degree of education (number of years of education and field of study). On the other hand, the social allowance is paid in two categories, married and unmarried. The married social allowance is higher and paid only for married male workers. Females receive the unmarried allowance even if they are married. A child allowance is paid for male workers only with a few exceptional cases where the female worker might receive it instead of her spouse.

fewer paid days for leave; 4) lower skill requirements (except for banks, investment, and telecommunication companies); 5) the need for “Wasta” 12 or connections to be hired in the private sector; and 6) the relative insecurity that private sector jobs offer in comparison with public sector job stability. In addition, Kuwaiti women believe public sector jobs are more suitable for women, given their adherence to traditional gender roles.

Compounding this issue, private sector employers are also reluctant to hire Kuwaitis because they lack the appropriate skills to work in the private sector; are hard to control; can change employers at any time, thus making the employer less willing to develop Kuwaiti workers’ skills through training; and are perceived as lazy and inefficient.

This chapter will provide a historical framework of how Kuwait’s labor force policies have evolved over time and assess whether they have been successful in integrating Kuwaiti workers into the labor force across public and private sectors of employment. It argues that government policies have been successful at integrating Kuwaitis in the labor force and in the public sector, but that they have failed to do so in the private sector. This chapter adds to the existing literature by discussing the Kuwaiti economy in different eras and the labor policies that were formed to address various needs and complications in the economy. It discusses the limitations of these policies and suggests some recommendations based on the Kuwaiti labor market’s current needs. Data from Kuwait’s Central Statistical Bureau will be used to provide summary statistics for population demographics and the composition of the labor force, the distribution across jobs, economic activities and sectors of employment for the available years.

The chapter is organized as follows. Section 1.2 provides an overview of Kuwait’s demographics and labor force; section 1.3 describes the government’s decisions and policies that

12 “Wasta” is a type of cronyism that is dependent on strong social networks and the exchange of favors between individuals regardless of their skills or qualifications. 6

led to the current demographic and labor market characteristics; section 1.4 describes the development of labor market laws and regulations; 1.4.1 describes government efforts to nationalize government work and control foreigners’ migration; section 1.4.2 describes government efforts to nationalize private sector work; section 1.5 describes policies to encourage women’s labor force participation; and section 1.6 concludes.

1.2. Kuwait’s Demographics and Labor Force

Kuwait experienced a major change in terms of the number and composition of its population in the early 1970s. The oil boom dramatically increased the amount of capital generated by oil exports, which stimulated the Kuwaiti economy. Development projects and infrastructure work were undertaken in quick succession to take advantage of the windfall, although these projects also required many workers which the domestic labor supply was unable to satisfy at the time. As a result, the country began encouraging workers from neighboring countries to join the Kuwaiti labor force and to be part of the development process in 1959. The open-door policy, free education and higher pay relative to the foreign workers’ countries of origin made Kuwait very attractive for migrants looking for work abroad. Furthermore, these conditions changed the composition of the population, and Kuwaitis became a minority in their own country. The foreign workers that came to Kuwait were both skilled and unskilled, and they worked mainly in the construction and service industries. The majority were from Arab countries

(such as Egypt, Palestine, Syria, , etc.) and had higher educational attainments relative to

Kuwaitis. Workers from Asian13 countries came in second in the composition of the labor force.

13 During 1980s, Asian workers were mostly from South Asian countries like India, Pakistan and Bangladesh (Shah and Al-Qudsi 1989).

Today, Kuwaiti workers’ educational attainments are better than non-Kuwaitis on average, their participation in the labor force has increased, and female labor force participation has increased relative to the 1970s for both Kuwaiti and non-Kuwaiti women. Nevertheless, male non-Kuwaiti workers still dominate the private sector labor force. Kuwaiti workers are highly concentrated in the public sector and mostly in upper management, professional technical and associate professionals14, and clerical jobs. On the other hand, non-Kuwaiti workers are mainly in the private sector, working in primary15, professional and craft jobs. Unlike the 1970s, today most non-Kuwaiti workers are from Asian countries, followed by those from Arab countries.

Gender and citizenship both play important roles in shaping labor market participation in

Kuwait, but these roles have changed in recent decades. In the next section, these changes are placed in the broader historical context of the evolution of Kuwait’s economy and labor market.

More details about Kuwait’s demographics and labor force are discussed in the appendix of this dissertation.

1.3. How has this picture evolved over time? Historical Events and Government Decisions

1.3.1. 1750’s – First Independence of Kuwait

The first law implemented in regards to the labor market in Kuwait can be traced back to

1752 when Kuwait decided to be independent from Al Hasa. Kuwait started as a fishing village that was known as Grane (kureyn). In 1670, a tribe named “Bani Khalid” expelled the Ottomans

14 Technicians and associate professionals “perform technical and related tasks connected with research and the application of scientific or artistic concepts and operational methods, and government or business regulations”. (ILO 2012), page 169.

15 Primary or Elementary occupations “involve the performance of simple and routine tasks which may require the use of hand-held tools and considerable physical effort” (ILO 2012), page 337. 8

from the eastern part of the Arabian peninsula, a region called “Lahsa Eyalet”16, and began to rule the region (Abu-Hakima 1983). Families arrived from Najd (Central Arabia), who were known as Bani Utbah, and settled in Kuwait in 1713, after previous stays in Qatar and Iraq

(Lorimer 1908). In 1718, each important merchant family in Kuwait gathered and decided that the non-merchant Al-Sabah family should take over the business of government under the

Emir of Al Hasa (Crystal 2016, Casey 2007). In 1752, the independence agreement between the

Emir of Al Hasa and the Sheikh of Kuwait was signed. Kuwait thrived after gaining independence, becoming an important trade center for the transit of goods between merchants from the Persian Gulf (from Asia, Africa, and the Gulf Countries) and other Asian regions such as Baghdad, Aleppo, and Arabia (Kumar 1961). Between 1775 and 1779, Kuwait benefited from interaction with the Persians of Basra by using the Iraqi merchants that flooded its market to divert both shipbuilding and trading to Kuwait. Kuwait became the center of shipbuilding, with high quality boats and professional sailors who were capable of sailing up to China with their well-designed vessels (Bennis and Moushabeck 1991). Besides the local fishing and pearling trades, Kuwait traded pearls from the pearling banks of Sri Lanka; they also exchanged frankincense, textiles, and spices from Oman, China and India respectively. All these products, in turn, went on to be exchanged with European markets (Archer 2013). In the early 20th century, Kuwait’s annual revenue reached the astounding figure of 100,000 riyals. This economic explosion attracted a large variety of people, including Iraqis, Persians, Jews,

Armenians, and Arabs; and Kuwait became known as the ‘Marseilles of the Persian Gulf’

(Armstrong 1946, Fattah 1997).

16 Composed of eastern Saudi Arabia, Kuwait, and Qatar in present-day maps. 9

1.3.2. 1899 - The British protectorate

Kuwait’s only natural resource at this early time was pearls. Hundreds of pearling ships traveled each summer to exploit its lucrative pearl banks. However, as Kuwait prospered throughout the nineteenth century, various regional and European powers threatened to encroach on Kuwait’s independence. Sheikh Mubarak; the ruler of Kuwait at that time, asked Britain leaders for a partnership, and they saw this as a chance to neutralize German impact in the district. They signed an agreement in January 1899 that promised Kuwait would not support any country without the British Government's consent (Congress 1993). Thus, the national security of Kuwait became Britain’s responsibility, and in return, Kuwait’s foreign policy fell under

Britain’s control (Scudder III 1998). Britain agreed to protect Kuwait and subsidize the ruling family annually with 15,000 Indian rupees.

In 1900, Kuwait had a population of 70,000 citizens, mostly living in Kuwait City. After the protectorate was established, however, hundreds of people flooded to Kuwait, attracted to its organized governance and commercial activity. In 1911, Mubarak tried to increase taxes and stop the pearl business in order to force the merchants to finance one of the wars he was involved in. However, businessmen—Ibrahim Almudaf, Helal Almutairi, and Shamlan Alroumi— protested against Mubarak and fled to Bahrain and Ahsa. This caused the economy in Kuwait to stall as their business was extremely important to the economy. Sheikh Mubarak himself travelled to Bahrain and sent his son to Ahsa to apologize and bring the businessmen back in an effort to reignite the economy (Al-Rushaid 1978).

During World War I, the British Empire believed that Kuwait’s rulers were supporting the Ottoman Empire by facilitating the transfer of supplies to the Ottoman forces through its port.

Thus, the British Empire imposed a sea blockade against Kuwait in 1918 (Scudder III 1998). The blockade ended later that same year after the British-Ottoman Empires’ conflicts ended, and 10

487,000 rupees were paid by Britain as a compensation to Kuwait (Slight 2018). In 1920, the labor market of the pearling industry reached its peak. At that time, more than 800 boats were involved in pearling in and around Kuwait, and most of the economically active population worked to serve this industry (Casey 2007, Crystal 2016).

1.3.3. 1920s - The Decision to Search for Oil

Unfortunately, after a period of economic boom, a great economic recession hit Kuwait in 1929 because of reduced demand for luxury goods in Europe and America, combined with the competition from Japan which had developed an industry of less-expensive artificially cultivated pearls, which started to replace natural pearls from the Gulf (Casey 2007, Crystal 2016). In addition, Abdul-Aziz Al-Saud (the ruler of Saudi) imposed a trade embargo between 1923-1937 on Kuwait. Many Najdi tribes escaped the taxation of the Saudi ruler and took refuge in Kuwait.

The embargo was imposed because Sheikh Ahmad Al-Sabah (the ruler of Kuwait) refused to be a tax collector for Saudi and collect the tax from the tribes that escaped to Kuwait. The embargo was not lifted officially until 1940 (Scudder III 1998). The Kuwaiti people struggled during this period because they imported most of their food and water due to the difficult climate and their poorly developed agriculture.

In 1913, the Amir of Kuwait that time, Sheikh Ahmad Al-Jaber Al-Sabah had begun to think about other potential resources that could help stimulate the economy and wrote to the

British representative asking him to search for oil in Kuwait, but no one was interested.

Fortunately, Frank Holmes, who is known by Arabs as "Abu Naft" (the Father of Oil), started his exploration in Kuwait in the early 1920s. There were no developments until the Kuwait Oil

Company (KOC) was established by the Gulf Oil Corporation (known today as Chevron) and the

Anglo-Persian Oil Company (known today as British Petroleum; BP) in 1934, where each 11

owned one-half interest (KOC 2012). On February 23, 1938, KOC discovered Burgan, the first oil well in Kuwait, which is the world’s second largest oil field. By 1946, Kuwait had nine wells producing a total of approximately 1.5 million metric tons (MMT) each year (Casey 2007,

Crystal 2016). By 1950, 100 wells had been discovered, and modern infrastructure began to develop. Kuwait had roads, ports, factories, power generating stations, desalination stations, hospitals, schools, supermarkets, and new residential areas (Casey 2007, Crystal 2016).

1.3.4. 1960s – Second Independence and Kuwait Constitution

In June 1962, the British agreed to give Kuwait its independence and to end the protectorate. In the same year, Amir Abdullah Al-Salem Al-Sabah drew up a constitution to regulate the country and called for the first parliamentary elections (Casey 2007). The

Constitution controls the natural resources and labor market and gives the government more power to control revenues under the supervision of the parliament (IBP 2015).

The population significantly increased due to the thousands of foreign technicians, advisors, and workers who came to Kuwait in the 1960s, attracted by the huge development program. In 1965, 68 percent of the foreign workers in Kuwait were Arabs, and the total share of foreign workers in the labor market was 76 percent (Shah 1994). At the same time, new roles for

Kuwaitis in the labor market appeared. They became contractors, importers, landlords, and government officials (MEARR 2000). The government’s role also increased in the economy due to the development plans and increase of wealth due to oil rents. The changes to the Kuwaiti economy that began in the 1960s continued through the 1970s and 1980s as well.

1.3.5. 1990’s– Iraqi Invasion and First Gulf War

After the Gulf War and liberation from Iraq’s invasion in 1991, Kuwait saw a population decrease of about 30% between 1992 and 1993 due to a national security policy that restricted the number of resident foreigners, especially Palestinians, who represented 60 percent of the

Arab foreigner population at that time, and who played a significant role in Kuwait’s development (Sab 2014, Shehabi 2015). Furthermore, in 1992, the Ministry of Interior implemented new rules for issuing visas to dependents of non-Kuwaiti workers and limited visas to higher wage earners. Then, in June 1992, the government set aside $842 million to end the contracts of foreign workers (Congress 1993). The consequences of these policies were to reduce the availability of skilled labor, increase the need for qualifying national employees, and increase the need for private sector investment (Sab 2014).

Table 1-1: Key Periods in Kuwait’s History

Period Title Year Main Development and Events Before the British protectorate 1700- • Small villages were dependent on fishing, pearls, trades, and boat 1898 building. Merchant families chose Al-Sabah to rule the country.

The British protectorate 1889 - • Al-Sabah and merchant families gained more power, the 1920 economy boomed, and trading became safer and more attractive for foreigners.

• The British Empire imposed a blockade on Kuwait’s sea trade for about one year in 1918.

The oil economy under the 1938- • Kuwait built roads, ports, factories, power plants, desalination British protectorate before 1960 stations, hospitals, schools, supermarkets, and residential areas. independence • The population significantly increased due to the thousands of foreign technicians, advisors, and workers who were attracted by the huge development program.

• Saudi ruler imposed a trade embargo between 1923-1937.

Independence 1962 • Parliament controlled revenues and labor laws.

Gulf War 1990- • Population decreased, as did the availability of skilled workers 1991 and the need for the private sector investment

1.4. The Development of Labor Market Laws and Regulations

The historical changes that Kuwait experienced since its independence resulted in various laws and regulations designed to grant the government more control of the rapidly increasing foreign population and to encourage Kuwaiti citizens to be part of the development process. In this section, I will discuss these laws and regulations in chronological order.

1.4.1. Efforts to Nationalize Government Work and Control the Migration of Foreigners

1.4.1.1. Regulations for Public Workers – 195517

In January 1955, regulations for public sector workers went into effect. The regulations specified conditions for public sector employment; the classification of government jobs, including ranks and different pay scales; promotions and holidays; and government contracts with foreign workers and their rights. They also specified payments in the case of workers’ illness and/or injury. In addition, the regulations outlined the pensions and end-of-service benefits that government workers should receive. The regulations were amended in 1960 by Law no 18, which I will discuss later.

1.4.2.1. Residence of Aliens Law (1959) and Sponsorship “Kafala” System

In 1959, Amiri Decree No. 17 of 1959 on the Residence of Aliens Law (17/1959)18 was issued to regulate foreigner immigration in Kuwait. There were subsequently many laws and amendments to its articles that followed between 1963 and 2014 that tightened restrictions and

17 (GCC_Legal_Network n.a.-b).

18 Last amended by: Law No. 6 of 2011 (GLMM n.a.). http://www.gcclegal.org/LawAsPDF.aspx?country=1&LawID=2696

made it more difficult for foreigners to obtain residence in Kuwait. Amiri Decree No. 17 states that: “Every foreigner wishing to reside in Kuwait must obtain a residence permit from the Head of the Police & Public Security Department” (GLMM n.a.). The law aimed to control the entry and residence of a rapidly increasing foreign population. It distinguished between 3 groups of foreigners: 1) permanent residents, 2) visitors, and 3) temporary residents. As a result of these regulations, a residence permit can be issued to the spouse and children of a Kuwaiti citizen

(male or female) as long as they are not employed in the public or private sector (Article 9).

Visitors are not required to obtain a residence permit and are only allowed to stay for a maximum of one month (Article 10). Temporary residents must obtain a “visitors” residence permit, which allows them to stay for 3 months. This can be renewed upon request but is subject to approval by the Ministry of Interior for up to a maximum of one year (Article 11). In addition, temporary residents can request a residence permit to stay up to 5 years (as long as they have a valid passport during this entire period) (Article 12). The law also prohibits providing residence and/or the employment of illegal foreign residents as well as employing a foreign worker who is sponsored by another employer during his/her contract period (Article 12). Furthermore, foreigners employed by the government are issued a residence visa for the duration of their contact (Article 12). Article 19 of the law also states cases in which a foreign worker can be deported even if s/he has a valid residence permit, which is referred to as “iqama.” These cases include: 1) court order for deportation, 2) lack of means of living, and 3) violation of public order, security or morality. Note that this decree does not mention the “Kafala” system of employer sponsorship. But, law (17/1959) was the actual beginning of the “Kafala” system.

1.4.1.3. “Kafala” system

The sponsorship system was established to limit the number of foreign workers as they became dominant in the country and labor market. Under this system, non-Kuwaiti workers “are recruited by a sponsor or kafeel; their presence in the country is as a temporary ‘guest’ of their sponsor or employer” (Baldwin-Edwards 2011, p 24). The sponsor could be an individual (who would sponsor workers to serve in households by working as a maid, driver, cook or nanny), the government ( which would sponsor foreign workers to work in the public sector) or a private company (which will sponsor foreign workers employed in the company). Also, to further regulate the entry of non-Kuwaitis, only professional non-Kuwaiti workers can bring their families with them based on their skill level and earnings. The term “kafeel” was first used in article no. 32 of the executive regulations no. 640 issued in 1987 (640/1987). As Kuwait and other GCC countries started to import labor to fulfill their development plans, the Kafala system was developed in response to several political, economic, and social factors. Socially, Gulf culture was shaped by the Bedouin tradition of bonded labor relationships, which temporarily offered strangers protection by the tribe for specific reasons (APMM 2014). It was also socially important for Kuwaiti natives to monitor the influence of the immigrants on their identity and culture, and thus importance was placed on retaining control over immigrant workers. On the other hand, it was important to take into account economic and political factors, including the need for the government to provide a cheap labor force to private companies, but also the need to control any threat to national security that could emerge from the immigrants who would eventually outnumber citizens. For these reasons, Kuwait considers this system a custom from the culture of the people, not a legal code (APMM 2014).

Working non-Kuwaitis who earn more than a specified monthly minimum (KD 450 or

US$1350)19 can sponsor any non-working family member (i.e., a spouse or children). This sponsorship ends when the daughter marries, or the son reaches the age of 21; they must leave the country unless they find a new sponsor (Shah, 2011). Furthermore, Article 24 of the Kuwait

Residence Law mentions that immigrants can sponsor themselves. Foreign workers who have lived in Kuwait for at least 20 years, and who can provide evidence that they can support themselves financially are allowed to sponsor themselves for a residence visa of two to five years, as long as they have not committed a crime in Kuwait (Shah 2011). In 2013, according to

Kuwait’s Ministry of Interior, there were 2,179 self-sponsorships, including 1,107 men and

1,072 women (GLMM 2015). There are a number of new rules that are being debated to further tighten restrictions. It is proposed that applicants will now have to own a share of KD100,000 minimum in a company that is at least two years old (Shah 2011). In 2017, it was suggested by the Ministry of Interior Affairs that the fees for self-sponsorship be increased to 300 KWD for annual renewal (Ebrahim 2017).

Human rights activists, government officials, and the foreign workers themselves have raised many concerns about the Kafala system, and there have been calls to stop the system for years. These issues impact low-skilled workers the most because their numbers are large and they are easy to replace. First, these workers face poor living standards, often living in collective houses that are usually over occupied and fail to meet the minimum hygienic standards (Khan and Harroff-Tavel 2011). In many cases, the sponsor includes the provision of this kind of housing as part of the workers’ contract. In other cases, the workers might have to live in remote

19 Updated based on Ministerial decision no. 3384 of 2016 (3384/2016): The minimum wage increased from 250 KWD to 450 KWD and there are 14 professional occupations that are excluded from the minimum wage requirement to apply for dependent residence. Accessed on July 11th, 2018, retrieved from: http://kuwaitalyawm.media.gov.kw/content/20163384 17

areas if they are working as shepherds or as guards for farms, chalets or camps. Second, the sponsorship system guarantees the sponsor more control over the worker. Thus, the worker is more vulnerable and subject to abuse from the sponsor. Some workers are underpaid relative to their job contract. Employers might delay their wages for many months and make employees bear costs that should be paid by the sponsor, such as medical insurance, residence permit fees, work permit issuance fees, and housing (Khan and Harroff-Tavel 2011). Third, the sponsor sometimes manipulates and coerces workers and asks for money to sponsor them to enter the country; it is then up to the workers to find a job upon arrival in Kuwait. Similarly, recruitment agencies abroad also sometimes require workers to pay them in order to apply for a job abroad

(Malit and Naufal 2016), and also make workers pay their own travel expenses. Fourth, under the

Kafala system workers are subject to working unpaid extra hours or working in harsh conditions

(Khan and Harroff-Tavel 2011), such as those contracted to work on construction projects during the summer. Even though the law prohibits such practices, it is not guaranteed that the employer will follow the law. Lastly, workers cannot quit their jobs if they are unhappy about their working conditions because 1) the sponsor holds their passports, thus making it difficult for them to leave the country or change jobs without the sponsor’s approval; and 2) in addition to being financially responsible for their families in their home countries, some poor, low-skilled workers are in debt due to the costs they incurred to obtain a job and a work permit. Thus, these workers have no choice but to tolerate unpleasant working conditions to provide for their families and pay off their debts. These problems associated with the Kafala system are especially severe for female domestic servants. They are more vulnerable because they live with the household and the labor market regulations does not apply to them. This makes it harder for the officials to

observe them and to assure their wellbeing unless they openly come forward and complain (Shah

2011).

In Kuwait, human rights groups, local civil society, and the national parliament have played an important role in fighting for foreigners’ rights and allying with international human rights groups and some Western governments. After the labor riot in the summer of 200820, moves were made toward solving the sponsorship problem in Kuwait; there was even an emergency session of parliament called in order to address the sponsorship situation for foreign workers. A proposal suggested that the government should create a private joint stock company that would handle the recruitment of foreign laborers. However, the new labor law issued in late

2009 did not remove the Kafala, and negotiations reached a dead end (Hertog 2012).

1.4.1.4. Employment in the Government Sector Law – 196021

Law No. 18 of 1960 (18/1960) consists of 31 articles that regulate the public sector and specify wages, periodic leaves, pensions, benefits and more for public sector employees. These specific laws include some key articles that motivate Kuwaitis to work in the public sector. For example: Article 3 gives Kuwaitis priority in employment, Article 7 gives Kuwaiti workers periodic raises, Article 8 makes seniority more important than qualifications for promotions (this law was clarified further in 1975 to say that experience will be considered for candidates that have the same level of seniority), and Article 11 institutes the marriage grant awarded to every

20 In 2008, there was a riot by foreign workers because the working conditions were poor and they did not get paid by their employers or they were paid late. The government got involved and promised to respond to the requests of the workers and to follow up to make sure that employers honor the job contracts of the workers (Al-Jazeera 2008).

21 http://www.gcc-legal.org/BrowseLawOption.aspx?country=1&LawID=3240

Kuwaiti worker.22 Article 13 states that working hours should not exceed 8 hours/day, Articles

16 and 17 designates 7 holidays and 14 days per year of fully paid vacation, Article 18 governs sick leaves and the number of days that are permitted without salary deduction.23 Article 19 states that every Kuwaiti worker is eligible for a one-time 30 day leave with full payment to complete the Haj (an annual pilgrimage to Mecca that every Muslim is expected to make at least once in his or her lifetime), and Article 24 makes every Kuwaiti worker eligible for retirement when he/she reaches 70 years or leaves work because of his health status. All of these laws attracted citizens to work in the public sector and made the private sector jobs seem much less lucrative and secure by comparison.

These laws that provide benefits and entitlements to public sector workers were revised and modified over the years. For example, Law No. 14 of 1963 (14/1963) gave Article 3 more incentives regarding the yearly leave: after one year of work, a worker has 21 days of leave; after the second year of work, each worker has 30 days of leave; and leave days can be saved for five years. Article 4 stated that every Kuwaiti working in the public sector will be eligible automatically for social security (pensions). These social security laws have been modified many times (1981, 1988) but generally, offer Kuwaiti workers generous benefits and a high level of protection.24

22 At that time it was five hundred rupees, increased now to 6000 KD (2000KD as an award and 4000KD paid back to the government with no interest), which is about $18,000 on average.

23 30 days with full payment, then 15 with 75% payment, then 15 days with half payment, then 15 days with 25% payment, then 30 days without payment, and lastly 2 years for special medical cases with full payment.

24 Some of law 18/1960’s articles were amended by the following laws: law no. 14/1963, law no. 34/1964, law no. 65/1966, law no. 33/1969, decree-law no. 9/1977. In 1979, law 18/1960 was canceled and decree-law no. 15/1979 was in-effect.

1.4.1.5. Kuwait Constitution - 1962

Upon Kuwait’s independence in November 1962, Amir Sheikh Abdullah Al-Salem Al-

Sabah signed the constitution, which regulates the country as well as the labor market.25 . To encourage Kuwaitis to be involved in the development process, Article no. 41/1962 in Kuwait’s

Constitution states that work is mandatory for every citizen; Kuwaitis have the right to work and to choose the type of work, and the government is obligated to provide it. The main goal of this law was to encourage more employment of Kuwaiti workers and to reduce reliance on foreign workers. However, these policies have also led to more reliance on the government for Kuwaiti citizens. Indeed, now the supply of Kuwaiti workers seeking public sector employment has exceeded the demand. Because the government is obligated by law to provide employment for all Kuwaiti job seekers in the public sector, they have to create more jobs than are necessary. As a result, some workers are given positions, but they do not have anything to do because of over staffing (or over-employment) in the public service, which reached 50 percent26 (Salamah and

Al-Enezi 1999, Hertog 2012). Moreover, according to Shah (2011) “the historical high reliance on the government as the main employer of about 80 percent of Kuwaitis has resulted in the expectation that it is the government’s duty to provide gainful occupations for nationals” (p.

340). This over employment led to the accumulation of employees who are not actually working; they just draw a salary and stay at home. To solve this problem, in July 2017 the Civil Service

Council announced in Law No. 8 of 2017 that beginning in October 2017, every worker is obliged to prove their attendance at work but clocking in and out, by fingerprint and all previous exemption cases

25 Kuwait constitution. Retrieved from: http://www.kna.kw/clt-html5/run.asp?id=2024. Accessed on June 25th, 2018. (KNA n.a.)

26 The productivity of the workers who are over staffed is zero and they make up more than 50 percent (Salamah and Al-Enezi 1999).

are cancelled (KUNA 2017). According to Khalifa Hamada, the undersecretary of Kuwait’s

Finance Ministry, in the yearly quarter after this law went into effect, 5,000 Kuwaiti workers left the public sector (Fattah 2018) out of 294,32227 total Kuwaitis that the public sector employed at the time.

1.4.1.6. Obligatory Education Law -1965

Kuwait’s government passed an obligatory education law in 1965 to reduce the dependency on foreign workers and strengthen Kuwaitis’ education attainments. Law no.11 of

1965 (11/1965) states that “education is compulsory, free of charge for all Kuwaiti children, male and female, from the beginning of primary to middle school. The State is committed to providing school buildings, books, teachers and all that guarantees the success of compulsory education from human and material forces” Article (1).28 The law successfully increased Kuwaitis enrollment in schools, especially for female students, and resulted in higher participation in the labor market in later years. By the 1980s, school enrollment increased, and the percentage of illiterates decreased dramatically relative to the 1960s. Between 1965 and 1985, the share of illiterate Kuwaiti males and females dropped from 91.3 percent to 32.8 percent and from 65.5 percent to 5.8 percent respectively (Shah 2011). In addition, the number of Kuwaitis in the labor force increased dramatically between 1965 and 1985 from about 42,000 to over 100,000 for males and from 1,000 to about 25,000 for females (Hosni and Al-Qudsi 1988). Today, there are no Kuwaiti workers who are illiterate, whereas in 1965 illiteracy was still a reality for 50 percent of the Kuwaiti labor force (Abdalla and Al-Homoud 2012). The education system was

27 (LIMS 2017).

28 (GCC-Legal-Network n.a.). 22

designed to prepare Kuwaitis for public sector jobs, and public school education focused on teaching the Arabic language, religion studies and mathematics when it started in 1912 (Alessa

1981). After a earning high school degree, most students choose majors in fields of study like literature and the humanities. In 2014/15, Kuwaiti graduates from Kuwait University in science, technology, engineering, and mathematics (STEM) education majors accounted for only 24 percent of total Kuwaiti graduates.

Even though the compulsory education law and the free education and training in Kuwait increased the educational attainment of Kuwaiti workers as well as their labor force participation, it does not prepare them well for workforce (Abdalla and Al-Homoud 2012). The existing educational system mostly provide graduates with skills that are more appropriate for public sector jobs, where jobs are less competitive and do not match the workers’ skills or educational background in many cases. In addition, Burney and Mohammed (2002) argued that “The provision of free education may have the effect of distorting the types of skills and graduates that come out of the public education system” page (279). Wiseman, Abdelfattah, and Almassaad

(2016) found that youth GCC nationals rely on factors other than education to get a job, such as family connections and influence (Wasta). Also, it is less important to focus on STEM education or do well in these subjects especially those with more educated parents as their parents would have a stronger Wasta to get them in the job they want.

1.4.1.7. Civil Service Law 1979

The Amiri Law-Decree no. 15 of 1979 (15/1979) was issued to amend the public sector employment regulations outlined in law no. 18/1960. The 1979 law establishes the Civil Service

Counsel (CSC) (Article no. 4), and the law classifies jobs in the public sector and the premiums

related to each category and identifies employees’ rights, obligations, penalties, and pensions.

Article no. 15 states that non-Kuwaitis are eligible for appointment in jobs based on temporary contracts only.

Table 1-2: Kuwait Labor Market Laws and Regulations

Year Law Number Law Title Law Description Regulated the government sector and specified work conditions for public sector 1955 N/A Regulations for Public Workers employment; including the different classifications given to government jobs, ranks, and workers’ payments; promotions and holidays; and foreign workers' contracts. Amiri Decree No. 17 1959 Residence of Aliens Law Regulates the residency of foreigners in Kuwait. of 1959 (17/1959) Establishes that Kuwaitis have priority to others in employment, and they are eligible Law No. 18 of 1960 Employment in the Public Sector 1960 for periodic increments, job promotions, marriage grant, holidays, sick leaves, Haj (18/1960) Law vacation, and indemnity. Establishes that Kuwaitis have the right to work and to choose the type of the work, 1962 N/A Kuwait Constitution and government is obligated to provide it. Outlines the rules for immigration, sponsorships, labor hours, domestic workers, Law No. 38 of 1964 Employment in the Private Sector 1964 contracts, wages, hours, vacations, working environment, indemnity, women, and (38/1964) Law minors. Law No. 11 of 1965 Confirms that enrollment in schools for Kuwaiti males and females ages between 6 1965 Obligatory Education Law (11/1965) and 12 years old is mandatory in order to reduce number of foreign workers. Amiri Law Decree No. Enrollment of Kuwaitis in pensions is obligatory in all sectors (public, private, and oil 1976 Social Security Law 61 of 1976 (61/1976) sector). Amiri Law-Decree 1979 No. 15 of 1979 Civil Service Law Amends the public sector employment Law No. 18/1960; establishes the Civil Service (15/1979) Counsel (CSC) (Article no. 4); regulates public sector employment. Decision of the Establishment of The Manpower 1997 Council of Ministers and Government Restructuring Integrates Manpower and the Restructuring of the Workforce project in one program No. 767 of 1997 Program (MGRP) (MGRP) Supporting and encouraging Law No. 19 of 2000 Nationalization in the Private Sector Law: Specifies quotas for Kuwaitis in the private 2000 national labor to work in non- (19/2000) sector, subsidies for employers, and providing training for Kuwaiti workers. governmental organizations

Law No. 6 of 2010 New Private Sector Employment 2010 Amended the old law No. (38/1964). (6/2010) Law

Table 1-2: Kuwait Labor Market Laws and Regulations (Continues)

Year Law Number Law Title Law Description

Runs the Manpower and Government Restructuring Program (MGRP) which provides Law No. 109 of 2013 Establishment of The Public 2013 training, motivation, and job search services for Kuwaiti workers who are potentially (109/2013) Authority of Manpower (PAM) joining the private sector. Law No. 101 of 2013 2013 Unemployment Insurance Law Determines that Kuwaitis who lose their jobs in the private sector are eligible for (no. 101/2013) unemployment compensation during their search for a new job. Source: GCC Legal Network. Accessed June 25. 2018; Retrieved from http://www.gcc-legal.org/CountryHome.aspx?country=1

1.4.2. Efforts to Nationalize Private Sector

1.4.2.1. Employment in the Private Sector Law -1964

Law No. 38 of 1964 (38/1964) was the first law to regulate employment in the private sector. The law prohibits the employment of non-Kuwaitis (except for GCC citizens) unless the Non-Kuwaiti worker has a work permit from the Ministry of Social Services and

Labor (Article no. 3). The issuance of the work permit requires a residency permit and the payment of the processing fees (Article no. 4). Intended to facilitate the inflow of foreign workers based on employer’s needs, the law allows the establishment of local employment agency offices to match job seekers abroad with local employers. However, these agencies are prohibited from charging job seekers any amount for their employment or retention (Article no.

11). Furthermore, the law regulates the employment of women and prohibits women from working at night and in dangerous jobs (Articles no. 23-27).

This law did not distinguish between Kuwaitis and non-Kuwaitis except in two articles: 1) Article no. 3, which requires work permits for non-Kuwaitis, and 2) Article no. 10, which gives unemployed Kuwaitis priority registration with the Ministry of Social Services and

Labor. This agency is obligated to help the registered Kuwaiti worker to find a job in the private sector.

1.4.2.2. Social Security Law – 1976

Amiri Law Decree no. 61 of 1976 was issued to establish and regulate social security in Kuwait. The pension system actually began in 1955, but it was only for public sector workers. Law 61/1976 expanded the existing public sector system to include workers in the

private and oil sectors as well. The law provided protections for aging workers, and disability and disease insurance (Article no 11) as well as other pension benefits (Article no.19).

This expansion of the social security system included both Kuwaiti and non-Kuwaiti workers in the private and oil sectors. This regulation made the private sector more attractive for

Kuwaitis because the prior exclusion of private sector workers from the pension system had discouraged Kuwaitis from seeking employment in the private sector (Alessa 1981).

1.4.2.3. Nationalization in the Private Sector Law – 2000

Nationalization programs were discussed by many of the Gulf States in the early 1990s, as authorities from the various governments began creating ‘Nationalization’ programs. In the late 1990s29, the Kuwaiti Civil Service Commission adopted a nationalization policy in the public sector that set the rate of replacement of non-Kuwaitis with Kuwaiti nationals at ten percent yearly in the public sector and one percent yearly in the private sector (Salih 2010). Law no. 19 of 2000 (19/2000) was passed to support the employment of Kuwaiti nationals and to also encourage the employment of Kuwaiti nationals in non-governmental organizations. Article no.

5 requires the Civil Service Commission (CSC) to 1) develop policies to employ Kuwaiti nationals in various agencies; 2) establish systems that encourage the non-governmental sectors to employ Kuwaitis and determine the appropriate incentives to attract these forces to those employers; 3) coordinate between educational and training institutions and make graduates aware of the employment opportunities available in the various sectors; and 4) propose policies concerning the labor force composition adjustment to replace foreign workers with nationals. In addition, the law stipulates that Kuwaitis in the non-government sector receive a social

29 1997. 28

allowance and a child allowance. It also states that the government will provide training for unemployed Kuwaitis and pay them an unemployment benefit.

The private sector is the largest source employer in Kuwait. About 65 percent of the labor force in Kuwait were employed in the private sector in 2015 (but only about 8 percent of

Kuwaitis were employed in the private sector) (Appendix, Table A-7). Thus, the government realizes how important the private sector is and wants to encourage Kuwaitis to seek employment in the private sector. The government has also tried to support Kuwaiti labor by subsidizing the employees who satisfy the quota of Kuwaitis in the private sector directly. Article (7) stated: “Among the criteria to qualify for property or financial support awarded by the government to non-governmental bodies, these bodies are to be committed to hiring the percentage of national manpower as established by the Council of Ministers.” The financial support for every Kuwaiti worker in the private sector depends on many factors, including education, marriage, and number of children.

The government increased this incentive, and it is now between 534 KWD and 898 KWD for a married worker and between 456 KWD and 790 KWD for an unmarried worker (Diab 2013).

To finance the law, Article 12 imposed a 2.5 percent tax called the National Labor

Support Tax (NLST) to be paid by Kuwaiti companies listed on the Kuwaiti Stock Exchange

Market. Revenue from this tax is used to contribute social services, including the training of

Kuwaiti employees in the private sector. The law also allows for the imposition of extra fees on work permits for non-Kuwaitis, thereby reducing the cost benefits of hiring non-Kuwaitis, who work for lower wages than their Kuwaiti counterparts.

1.4.2.4. New Private Sector Employment Law – 2010

There were many factors that required a modification of the private sector labor law, including 1) increasing pressure on the government regarding the sponsorship system and non-Kuwaiti employees’ rights; 2) increasing demand for employment by new Kuwaiti graduates and the long wait for employment in the public sector; and 3) increasing pressure on the government budget, which dedicates a large share to wages for public sector workers, especially with the decrease in oil prices and thus government revenues. Law no. 6 of 2010 (6/2010) was formulated to amend law no (38/1964). The law includes 7 general provisions and 150 articles that regulate employment, apprenticeship, vocational training, individual employment contracts, labor contracts, employee and employer's obligations, disciplinary sanctions, termination of employment contracts, and end-of-service benefits.

1.4.2.5. Establishment of The Public Authority of Manpower (PAM)– 2013

The Public Authority of Manpower was established to help speed the replacement non-

Kuwaitis with Kuwaitis in both the public and private sectors. PAM was established by law no.

109 of 2013 (109/2013) . One of the most prevalent programs under the authority of PAM is the

Manpower and Government Restructuring Program (MGRP). The MGRP provides training, motivation, and job search services for Kuwaiti workers who are potentially joining the private sector (Law 19 of 2010).

An Assessment of the MGRP’s achievements and performance by independent sources have never been conducted (Salih 2010). Although this program is encouraging, there are still many factors that block national workers from the private sector, including social relations, nepotism, the feeling of insecurity that accompanies working in the private sector, the avoidance of stressful environments and long working hours, the moral obligation of the government to 30

employ its citizens, and the private companies’ belief that Kuwaitis are expensive, lack skills, and are hard to manage (Madzikanda and Njoku 2008, Salih 2010). As Harry (2007) mentioned, governments in the GCC fear foreign workers, but the real threat is their own failure to create a productive indigenous workforce with the needed skills and work attitudes and to provide their citizens with a sufficient number of productive jobs.

Because the private sector employers in Kuwait are more interested in low-cost employees and look for rent-seeking contracts rather than entrepreneurial business opportunities (Harry 2007), the government has instituted required quotas of Kuwaiti workers. Article (8) stated: “The Council of Ministers shall specify the percentage of national manpower to be committed to by every beneficiary of Government privileges such as land or any other form of property or funds for the purpose of practicing a profession, an industry, a trading, vocational or agricultural business”

(GCC-Legal-Network n.a.). Unfortunately, this program was improperly planned and affected the quality of services it delivered (Salih 2010). Some companies that were able to afford higher salaries and needed national workers to interact with the public succeeded in fulfilling the quotas

(i.e., the communications and banking sectors). However, many companies faced a hard time meeting these quotas and escaped the pressure by hiring Kuwaitis but not requiring them to perform many or any significant work duties, a phenomenon called “Ghost or Phantom employment” (Salih 2010,

Hertog 2012). This phenomenon—which was acknowledged by the Secretary General of the MGRP— accounted for 33% of national workers in the private sector in 2010, especially for women aged 35 or older with pre-secondary school education (Salih 2010). Scholars note that multiple groups are responsible for these problems, including the private sector, the government, Kuwaiti workers, and the parliament, whose representatives use “Wasta,” or their power to use social networks of influence and favors to bypass laws, rules, or regulations for personal interest (Salih 2010).

1.4.2.6. Unemployment Insurance Law – 2013

The GCC countries were impacted by the financial crisis in 2008 like the rest of the world. Khamis and Senhadji (2010) indicated that the financial markets and trade implications were the channels which through the impact of the crisis came to these countries. Due to the low oil prices as a result of the decline in demand for oil, the external positions and finances of the governments were directly impacted. In addition, the GCC experienced major capital outflow and this affected investors’ confidence and tightened liquidity. As a result, major investment companies defaulted on their debt and bank profits declined (Khamis and Senhadji 2010). The financial and banking sectors are the main employers of Kuwaitis in the private sector. During the 2008 financial crisis, 500 Kuwaiti workers in the private sector lost their jobs. This discouraged Kuwaitis from seeking private sector jobs due to insecurity concerns, counteracting the government’s efforts to encourage Kuwaiti employment in non-government jobs. In response, Law no. 101 of 2013 (no. 101/2013)30 established unemployment insurance for

Kuwaitis employed in the private or oil sector. Articles (1) and (4) indicate that Kuwaitis employed in the private or oil sectors are eligible for unemployment benefits if they get fired from their jobs. The other articles specify how these benefits are financed, the conditions the workers have to meet in order to be eligible and how the benefits are calculated. This law provides a safety net (buffer) for private and oil sector workers as they are less likely to default on their debts, or miss regular payments for their housing such as rent or mortgage payments.

They are also less likely to fall behind on school tuition or face difficulties in providing for their families and themselves during the period when they are searching for a new job. Also, it

30 Law no. (101/2013). Accessed on June 26th.2018. Retrieved from: http://www.gcclegal.org/BrowseLawOption.aspx?country=1&LawID=4113 32

provides a sense of security which is a main factor in why Kuwaitis are reluctant to join the private sector.

1.4.3. Polices Regarding Female Labor Force Participation

The government realized that increasing the share of Kuwaitis in the labor force is achieved by increasing the participation of women. The constitution did not differentiate between men and women. However, in Law (1964/38) there was a specific chapter called

“Women Employment” that contained five articles regulating female employment. Article 23 mentioned that women should not work at night, except those who work in the health sectors and their specified institutions. Article 24 mentioned that women were forbidden from working in risky jobs. Article 25 mentioned that pregnant women should take 30 days leave before delivery and forty days after delivery with full payment and that they could stay at home after that with payment for 100 days. Article 26 mentioned that if a woman used the previously mentioned privileges in order to care for a newborn, she could not take the yearly vacation. Lastly, Article

27 mentioned that women should be paid the same as men for the same job.

These laws gradually motivated women to enter the labor market (especially the public sector), yet it also restricted women from some jobs and hours. In 2010, the government revised the labor law and allowed women to work night shifts in more occupations (Law No. 6 of 2010).

However, the law still prevents female employment in physically dangerous or hard or harmful to health occupations (i.e., manufacturing, construction, and petrochemical fields).

Despite these changes, the government continues to counteract its efforts to encourage female participation in the labor market by offering voluntary early retirement to all Kuwaiti women. According to this policy, women can retire after 15 years on the job. Many scholars see

this incentive as a restriction and claim that it discourages women from participation in the workforce at the most productive stage of their career (Al-Sabah 2013).

1.5. Conclusion

There are many factors that contribute to the segregation problem in the Kuwaiti labor market. As Harry (2007) mentioned, “Rapid demographic changes, highs and lows of oil prices, inequality of wealth, inadequate education systems and ineffective government policies are creating major human resource challenges for the region” (p. 132). It is clear that labor market policies are affected by many complex factors. One of the important factors is that the link between the political and economic spheres in Kuwait was blurred because of the unique relationship between the royal family and the merchant's families (Ayubi 1995). This relationship leads to more benefits for the private sector and fewer painful changes affecting the merchant families who control it. Additionally, cultural concepts such as “Wasta” and the social networks in this small country affect the implementation of many changes. Yet another factor that impacts Kuwait’s labor market are the cultural concepts and societal restrictions related to acceptable professions and working hours for women, along with a lack of policies that encourage women to work in the private sector.

There do exist some policies and laws that should help motivate Kuwaitis to engage in private sector work. However, their implementation remains slow. There government should increase the role of MGRP and expand the training of students in colleges and higher education institutes and develop their awareness of working in the private sector. After all,

“investing in human capital and promoting private sector employment remains the key to sustained economic growth and employment in the region” (Etheridge 2015, p. 14). (Etheridge 2015)

The government successfully integrated Kuwaitis in the public sector, but it has had less success with the private sector. Just as the private sector is not attractive to Kuwaitis, Kuwaiti workers are not attractive for private sector employers because they are expensive and enjoy other protections that make them more costly to employers. To remedy this, the government needs to formulate policies that match the education and skill expectations of the private sector.

This would include building a follow-up program to ensure that the private sector is creating legitimate positions and hiring and training Kuwaiti workers to fill them, not practicing phantom employment.

Table 1-3: Proportion of Economically Active Population (15 + Years)

Kuwaiti Non-Kuwaiti Year Male Female Male Female 1965 64.8 1.8 94.3 5.4 1970 62.9 2.1 91.4 8.2 1975 71.2 6.2 92 13.2 1980 66.8 10.3 93.2 12.8 1985 59.5 13.8 91.7 19.7 2003 54.5 26.2 91.7 59 2008 54.7 32 93.4 60.1 2014 54.2 37.6 94.2 61.3 2015 52.6 39.3 95.4 66.4 Source: 1965-1985 (Hosni and Al-Qudsi 1988); 2003 – 2015 (KLFS 2015).

Table 1-4: Share of Kuwaiti Workers in the Private Sector (as % of Private Sector Workers)

Year Male a Female b Total c 2005 1.12 9.17 1.67 2006 1.41 11.96 2.13 2007 1.55 14.49 2.46 2008 1.64 15.51 2.68 2010 2.73 27.39 5.22 2011 2.79 26.97 5.27 2012 2.62 25.98 5.07 2013 2.25 22.31 4.35 2014 2.23 21.30 4.23

Source: 2005-2008 : (CSB 2014b); 2010-2015 : calculated from various reports (CSB 2011, 2010, 2012, 2013b, c, a, 2014b, a) a As a % of total males in the private sector b As a % of total females in the private sector c as a % of total workers in the private sector

CHAPTER 2

GENDER WAGE GAP IN THE KUWAITI LABOR MARKET

2.1. Introduction

The Middle East and North African (MENA) group of countries has the world lowest rank in The Global Gender Gap Index (GGGI) (WEF 2017). The gender gap in the MENA region is slightly below 40 percent and driven mostly by a poor economic and participation opportunity sub-index and a poor political empowerment sub-index for women. It is estimated that it will take 157 years to close the gender gap in the MENA region given the current progress rate (WEF 2017).

The Gulf Cooperative Council (GCC) Countries are in a similar situation as the other

MENA region countries. The GCC countries were ranked among the bottom 20 countries (out of

144) in the GGGI. Furthermore, Kuwait ranked 129 out of 144 in the GGGI. Its score dropped over time from 0.634 in 2006 to 0.628 in 2017, mainly due to decreases in economic participation and opportunity sub-index scores. Kuwait’s score is below the global average in all the sub-index factors (0.518 and 0.585 respectively) (WEF 2017). In Kuwait, the ratio of female to male labor force participation is 0.58, while females’ estimated earned income relative to males is 0.43, and their ratio to males in empowered positions including legislators, senior officials, and managers is 0.17 (WEF 2017).

Over the past five decades, women in Kuwait have come a long way but they are still not equal to men in the workplace. Studying gender inequality in the workplace (wage, participation, and inequality of representation in certain occupations) is important because such inequality has an adverse impact on the development of the economy. It results in the underutilization of educated women, thus preventing the economy from reaching its ultimate potential and reducing

its growth. Economically active females (age 15+) in 2015 accounted for 57.7 percent of the population (KLFS, 2015), yet their labor force participation rate was 48.4 percent (UNDP 2016).

Also, there is a sound positive correlation between the GGGI and the Human Development

Indicator (HDI), as shown in Figure 2-1 (WEF 2017). Kuwait scored 94 out of 124 in the HDI in

2015 despite huge government spending on education because youth are not meeting the 21st century required skills (WEF 2016 ). Also, low female economic participation and opportunity results in high dependence on temporary migrant workers who are mainly male (Abdalla 2015).

As a result, Kuwaiti society suffers from a population composition imbalance in terms of gender and citizenship as shown in Figure 2-2. In 201731, Kuwaitis accounted for 29.6 percent of the population (49.8 percent males and 50.2 percent females) relative to 70.4 percent non-Kuwaitis

(67.2 percent males and 32.8 percent females). Overall, the total proportions of females and males in the population are 37.9 percent and 62.1 percent respectively. Achieving gender parity is essential for equality and it also enhances innovation and decision-making and expands the talent pool (WEF 2016 ).

31 Appendix, table (A-1): Population Composition. 38

Figure 2-1. Global Gender Gap Index 2017 vs Global Human Capital Index 2017 32

Figure 2-2. Kuwait Population Pyramid 2017 33

32 Data Source: (WEF 2017); * results for Oman are for 2016.

33 (PACI 2017). 39

Since the discovery of oil, the Kuwaiti economy and society have undergone a major transformation, especially in terms of female education and participation in the labor force. The increase in female education level along with sociodemographic and sociocultural changes has had a positive impact on female labor force participation (FLFP). For example, over the past three decades, 1985-2015, the literacy rate of females and males (Kuwaiti and non-Kuwaiti) aged

15+ increased from 68.8 percent to 94.5 percent and from 78.2 percent to 96.4 percent respectively (World Bank).34

Sociodemographic changes in Kuwaiti society include a higher marriage age; the average age of marriage increased from 22.4 years old for Kuwaiti females and 23.4 years old for non-Kuwaiti females to 27.5 years old (for both groups) between 1985 and 2017 (Shah and Al-

Qudsi 1990) (WEF 2017). The number of migrant female workers in Kuwait increased from

107,325 in 1965 (Hosni and Al-Qudsi 1988) to 467,645 in 2017 (PACI 2017).35 Furthermore, sociocultural changes have allowed more Kuwaiti females to study abroad and work in what used to be considered exclusively male jobs such as the police force, judicial system positions and the private sector. These changes have all contributed to the increase in FLFP over time. The

FLFP increased from 1.8 percent in 1965 to 39.3 percent in 2015 for Kuwaiti females and from

5.4 percent to 66.4 percent for non-Kuwaiti females over the same time (Hosni and Al-Qudsi

1988, KLFS 2015).

Even though females are still highly concentrated in the professional, technicians and associate professionals, and clerk occupations, their representation in occupations in the judiciary, senior government and management positions has increased over time. In 1985, 0.9

34 (WDI n.a.).

35 (PACI 2017). 40

percent of Kuwaiti females and 0.2 percent of non-Kuwaiti females worked in these sectors

(Shah and Al-Qudsi 1990). This number increased to 8.7 percent and 1.3 percent for Kuwaiti and non-Kuwaiti females respectively in 2015 (KLFS 2015). Also, Kuwaiti females have increased their participation in professional occupations as well as technicians and associate occupations and shifted away from clerk and service occupations. Their share increased by 20 percent in professional occupations as well as technicians and associate occupations between 1985 and

2015, while their share in clerk occupations dropped from 38.3 percent to 17.3 percent over the same period (Shah and Al-Qudsi 1990, KLFS 2015). The data for non-Kuwaiti females is hard to compare, as recent data includes workers in the Household sector which affects the calculation on their share in other occupations. Although females’ share of legislators, senior officials and managers as well as technicians and associate occupations increased over time, Kuwait’s rank and score for these occupations is still below the global average (WEF 2017).

The analysis in this paper distinguishes between two groups of workers, Kuwaitis and non-Kuwaitis when examining the gender wage gap. This is the case because previous literature shows that the market is segmented across citizenship and sector of employment (Al-Quisi 1984,

Hosni and Al-Qudsi 1988, Al-Qudsi 1989, Shah and Al-Qudsi 1990). The majority of Kuwaiti workers are employed in the public sector, while non-Kuwaitis tend to be employed in the private sector (about 87 percent and 75 percent respectively in 2015).36 The gender wage gap in the public sector will be driven mostly from differences in wages between Kuwaiti males and females, and in the private sector by non-Kuwaiti males and females. As a result, we will focus

36 (KLFS 2015).

only on Kuwaiti workers in the analysis of the public sector and only on non-Kuwaitis in the analysis of the private sector.

The case of Kuwait is very important as a case study that can be extended in the future for other GCC countries. The GCC countries share the following labor market characteristics: migrant workers are the majority in the population and labor force (Figure 2-4); there is a wage premium for national workers over migrant workers, public sector workers over private sector workers, and males over females; the labor market is dominated by male workers, which is mainly a characteristic of the MENA region countries (Figure 2-3); female labor force participation is low; national workers refuse manual work; and females are usually concentrated in a few service occupations and are under-represented in higher management positions. These different labor market challenges result in the under-utilization of national workers, especially females, and prevent the economy from reaching its full potential to impact the development and growth of the country.

Females face many challenges in the labor market in general, although the challenges that

Kuwaiti women face are different than those faced by non-Kuwaiti women. In general, females are prohibited by law37 from specific occupations that are hard, dangerous, or harmful to health, and from occupations that utilize their femininity, violate their manners or are not in line with public morals. Also, they are prohibited from working in institutions where clients are only men such as spas, fitness clubs, etc.

37 Law no.6 of 2010, Section (4), Article (23); (PAM 2010). 42

Figure 2-3. Ratio of Female to Male Labor Force Participation Rate in 201538

Figure 2-4. MENA International Migrant Stock as a Percent of Population in 201539

Non-Kuwaiti females have residence in Kuwait either on a working visa provided by their employer or a dependent visa accompanying their husbands or fathers. The dependent visa does not allow females to work, so as a result, non-Kuwaiti FLFP is smaller relative to males.

The LFP of non-Kuwaiti females is mainly impacted by job availability and the job search

38 Retrieved from: (WDI n.a.), Accessed on May 1st, 2018.

39 Retrieved from: (WDI n.a.), Accessed on May 1st, 2018.

network the female migrant can maneuver, as well as the ease of moving to Kuwait, and their desired wage. Demographic factors such as age, marital status, family size, and age of children also play a role (Shah and Al-Qudsi 1990). Non-Kuwaiti females have a higher FLFP relative to

Kuwaitis, indicating that being a female is not a barrier for LFP, but being a Kuwaiti female creates specific obstacles to LFP (Young 2016). For Kuwaiti females, obstacles to participating in the labor market are related to the supply of labor and demand for their services. As for non-

Kuwaitis, Kuwaiti female labor supply is impacted by demographic factors, in addition to sociocultural variables that are less important to non-Kuwaitis. The socio-cultural variables that affect Kuwaiti females in the domestic labor market can be summarized as follows: females are expected to have the approval of a male relative (husband, father or brother) to work, choose a female-appropriate job which is gender-segregated, safe, and has flexible and short working hours. It also should not require physical effort or travel outside the country (Garrison 2015).

Females are also expected to avoid low status jobs that requires serving others (such as a waitress or flight attendant) and appearance in public (such as TV reporter or actress) as these occupations impact her and her family’s reputation40 (González 2013, Garrison 2015). Another sociocultural expectation is that males are responsible for providing for the family and thus their careers are considered more important than that of females.

On the other hand, the demand for Kuwaiti females’ service is limited by the following: employer bias in recruiting Kuwaiti females because of the socio-cultural sensibilities41 and the

40 This is not entirely related to Islamic religious rules because even non-practicing families do not tolerate sending their daughters abroad alone or accept their daughters working in jobs that are stigmatized by the society (such as TV announcer, waitress, etc.) or allow them to choose their career freely (González 2013).

41 Garrison (2015) mentioned that a Kuwaiti female she interviewed was denied employment at one company because she would have to share an office with non-Kuwaiti male workers, which is not socially acceptable.

cost related to their employment,42 experience and skill requirements, as well as administrative rules limit female access to certain jobs.43 There is also gender bias in job offers as some employers will specify that the job offer is limited to male workers,44 the perception that females are less committed to their careers,45 the importance of “Wasta46” in obtaining interviews and leads about a job, and the likelihood that women are less likely to be chosen for leadership positions in the public sector by the Council of Ministers. There are also barriers for Kuwaiti women to enter leadership positions in the private sector labor market because hiring managers expect applicants to have received their education from Western educational institutions

(Garrison 2015). This latter practice creates a barrier for females as the majority of females are not free to travel outside the country to earn their education. In sum, females face strong sociocultural constraints and obstacles that limit the roles they play in the job market.

This chapter explores whether these constraints inhibiting female participation in the

Kuwaiti labor market are also reflected in pay discrimination. The paper focuses on the gender wage gap of workers engaged in the labor market. It explores the gap in the public and private sectors and across wage quantiles. The analysis is run using an extension of the Oaxaca-Blinder

(OB) decomposition, unrestricted quantile regression analysis (UQR) offered by Firpo, Fortin, and Lemieux (2009) and (Fortin, Lemieux, and Firpo 2011).

42 The cost could be assumed or actual if the employer needs to have a separate office space for national females (CSC n.a.-b, Rutledge et al. 2011).

43 (MAUME 1999).

44 (Alessa 1981).

45 Females’ unequal opportunity to work in senior positions is due to the belief that females’ productivity is constrained by casual and maternity leave (Alessa 1981).

46 “Wasta” is a type of cronyism that is dependent on strong social networks and exchange of favors between individuals regardless of their skills or qualifications. 45

The chapter contributes to the existing literature in two ways: First, it investigates the current gender pay gap in the public and private sectors of the Kuwaiti labor market, a topic which was last investigated empirically by Al-Qudsi (Al-Qudsi 1996, 1989) and (El-Toni 2004) more than a decade ago. Second, it applies an innovative methodology. While the OB decomposition based on UQR provides a powerful tool of gender wage gap analysis, its applications have been rather scarce (Fortin, Lemieux, and Firpo 2011, Heywood and Parent

2012, Carruthers and Wanamaker 2017). This approach using the OB decomposition based on

UQR is a new analytical method that has never been applied to the Kuwaiti labor market. This study also uses new data sets (Kuwaiti Labor Force Survey data (KLFS) from 2014 and 2015).

The OB-UQR analysis allows us to investigate the wage gap across the wage distribution and identifies the contribution of each explanatory variable to the wage gap.

The paper is organized as follows. Section 2.2 provides the literature review; section 2.3 outlines the conceptual framework; section 2.4 describes the data; section 2.5 presents the results; and section 2.6 concludes the chapter.

2.2. Literature Review

The gender wage gap has been extensively studied in the literature. Blau and Kahn

(2017) summarized the literature about the factors that contributed to the gender wage gap in the

United States (US). According to the authors, these factors are also applicable to other economies, though the degree of applicability of these factors to other economies depends on the degree of similarity between these economies and the US economy. Blau and Kahn (2017) divided the contributing factors into two groups: traditional and non-traditional. The traditional factors include female labor force participation, selection bias, education and mathematics test scores, labor force experience and working hours, gender differences in job training and 46

turnover, gender division of labor and motherhood, occupations, industries and firms and labor market discrimination. On the other hand, non-traditional factors include norms, psychological attributes (self-esteem, importance of work/money, importance of family/people, competitiveness, risk, time preference, tests for competitiveness and self-confidence) and non- cognitive skills (negotiation, and risk aversion).

Although the gender wage gap continues to be a rich area of research with various applications and empirical findings in many different contexts around the world, only a very limited number of studies have examined the gender wage gap in Kuwait. This could be because the data is very limited and/or restricted in Kuwait. Thus, in this section, I will review the literature regarding Kuwait to provide an overview of the different methodologies used to examine the gender wage gap and their findings.

In Kuwait, there are two main sources for data about the population (Shah 2014). The first source is the official national censuses (Population Census, Household Consumption and

Expenditure Survey and Labor Force Survey) conducted by the Central Statistical Bureau (CSB) in the Ministry of Planning. The second source is an electronic database operated by the Public

Authority for Civil Information (PACI) that covers all residents’ (citizens and foreigners) civil identification (ID) information. As Shah explains, the differences between the two sources are as follows: “The first provides a cross-sectional view of the population at specified points of time while the latter provides an ongoing picture of the number of residents holding civil ID cards, along with their major socio-demographic characteristics” (Shah 2014, p. 3). Both sources provide aggregated data for public use on their websites and through their publications, but the micro data is unpublished and restricted. The micro data can be provided upon request and

approval but some of the old data of the surveys is not available (lost, damaged or only available in hard copy form).

The literature about Kuwait has mostly examined some of the traditional factors that contribute to the gender wage gap. It focuses on returns on education and experience and controls for individual and family characteristics, occupation, citizenship and sector of employment based on the human capital model. This might be because the available data does not provide enough information to assess wage gaps thoroughly, such as firm level data, time use, test scores, firm-worker match data, and the information necessary to evaluate non- traditional factors.

Table (A-14) in the appendix summarizes the existing empirical studies of the pay differential in the Kuwaiti labor market and their finding. These studies are based on the human capital model; they estimate the basic Mincer earning function and extend the basic model for more accuracy in the estimation. The extension of the basic Mincer function controls includes, in addition to education and experience, family characteristics (marital status, family size, children at different ages), occupation, sector of employment (public, private), economic activity, hours worked, job tenure and citizenship (Kuwaiti vs Non-Kuwait (Arab, Non-Arab)).

Among the few empirical studies about the Kuwaiti labor market that exist, only three considered the gender issue specifically. Shah and Al-Qudsi (1990) focused on female work roles in Kuwait and used subsamples of females based on citizenship (Kuwaiti, Arab and Non-

Arab). Hosni and Al-Qudsi (1988) studied sex discrimination in the Kuwaiti labor market and divided their sample in a similar way as the previous study. The two previously mentioned studies use Kuwaiti males as the reference group in the analysis. Finally, El-Toni (2004) studied returns on human capital in the Kuwaiti labor market across sectors of employment (Public vs

Private). He used a dummy variable for gender in both sectors and a subsample of females only in the private sector analysis.

The findings of these studies are summarized as follows: First, the human capital model has a higher explanatory power for females relative to males and for Non-Arab females relative to Kuwaiti and Arab females (Hosni and Al-Qudsi 1988). Second, the findings regarding the rate of return on human capital are inconclusive. One study found that the rate of return on education and experience is higher for males relative to three groups of females and for Non-Kuwaiti females relative to Kuwaiti females (Hosni & Al-Qudsi 1988). On the other hand, evidence also shows that returns on education are higher for females relative to males while the returns on experience are higher for males relative to females (Shah & Al-Qudsi 1990; El-Toni 2004).

Third, male and female workers in the public sector enjoy an earning premium over those employed in the private sector (Hosni & Al-Qudsi 1988; Shah & Al-Qudsi 1990). Fourth, family characteristics (marriage and family size) are positively associated with male earnings but not female earnings, such that married men earn more relative to married females (Hosni & Al-

Qudsi 1988; Shah & Al-Qudsi 1990). Last, the degree of female representation in the Kuwaiti labor market across occupations varies. This is also true across certain jobs within broad occupations. Female job segregation varies by citizenship, where Kuwaiti female workers are underrepresented in the majority of occupations but overrepresented in professional/technical and clerical occupations. On the other hand, Non-Kuwaiti females are overrepresented among clerical workers, professionals and service workers (Shah & Al-Qudsi 1990).

Culture plays a major role in discrimination against females in the Kuwaiti labor market.

A recent study (Abdalla 2015) examined three samples of female managers (Kuwaiti, Emirati and Qatari) to identify the opportunities and obstacles they face in their careers and investigate

their views of the capabilities of Arab females as leaders. The questionnaire responses of the managers who were interviewed revealed that discrimination based on gender, whether formal or informal, is a major obstacle in their careers. They also experience the underestimation of female skills and job segregation in which females have difficulty accessing specific professions. This could be due to social structure norms such as gender roles. Where females are supposed to care for their husbands and children as their primary role, society considers only jobs with certain characteristics to be suitable to women. These include jobs that are safe, gender-segregated, and with shorter working hours. Jobs that are suitable for females should also require limited physical effort and no travel outside the country (Garrison 2015).

To summarize, the Kuwaiti labor market is segmented based on gender and citizenship.

Empirical evidence reveals duality in the pay structure between the public and private sectors

(Al-Quisi 1984). Culture and social norms define the labor market structure. These factors contribute to discrimination against females and result in the wage gap between male and female workers in the Kuwaiti labor market.

2.3. Conceptual Framework

The basic framework of the analysis is the decomposition of the gender differential of the gross wage into productivity and discrimination components. I consider a set of wage differentials, an average gender gap as in the standard framework of Oaxaca (1973) and gender gaps at different quantiles of wage distribution. The starting point in both cases is an extended model of human capital describing wage formation as a function of individual characteristics.

The models applied differ in their dependent variable relating to wage. The parameters of the human capital models allow us to obtain wage gap decomposition at various levels of the wage distribution. 50

2.3.1 Human Capital Model

The Human Capital Model describes wage formation as a function of individual

characteristics. The model parameters differ for men and women allowing their wage returns βm

and β f to human capital Zm and Z f be different between male and female workers:

ìYemmmmm=+a β Z + í (2.1) îYefffff=+a β Z +

Here, em and ef are the error terms and Ym and Yf are the wage outcomes of men and women respectively.

Two types of outcomes are used. The standard log hourly wage (YWmm= ln ,YWff= ln ) yields a standard linear regression approach to the Human Capital Model47; On the other hand, I

also use a wage transformation called the recentered influence function, ( YRIFWmm= (ln ),

Yff= RIF(ln W )) in order to yield an unconditional quantile regression introduced by Fipro,

Fortin and Lemieux (2009). The OB-UQR analysis has various applications in the literature. It is used to investigate the impact of union status on male workers’ wages (Firpo, Fortin, and

Lemieux 2009), gender wage gap (Fortin, Lemieux, and Firpo 2011, Sun and Kim 2017), racial wage gap (Heywood and Parent 2012), regional wage differences (Galego and Pereira 2014), determinants of labor incomes inequalities in Brazil48 (Ferreira, Firpo, and Messina 2017). The advantage of the unconditional quantile regression is that it identifies the marginal effects of human capital along the whole wage distribution rather than focusing on its mean level.

47 "#$% is the natural logarithm of male wage and "#$& is the natural logarithm of female wage.

48 Investigated determinants are: labor market institutions, human capital, spatial segmentation, demographic characteristics of workers, and sectoral distribution of the labor force.

2.3.1.1.Linear regression approach

Estimating human capital model described by (2.1) while using log hourly wages as the

dependent variables yields relationships between wage mean values lnWm and lnWf of men and

women and the mean values of their individual characteristics, Z m and Z f :

ì ˆ ïlnWmm=+aˆ βmmZ í (2.2) ˆ ˆ îïlnWff=+a βffZ

ˆ ˆ ˆ ˆ aˆm , aˆ f , βm , βf are the estimates of the parameters of model (2.1). βm and βf provide the marginal effects of human capital on average wages of men and women respectively.

2.3.1.2. Unconditional quantile regression

Unconditional quantile regression is based on a transformation of log hourly wages of men and women. The goal of the transformation is to generate relationships which describe wage unconditional quantiles (rather than means) as functions of individual characteristics and their returns on the labor market:

ì ˆ ïlnWmq,,=+aˆ mq βm,qZ m í (2.3) ˆ ˆ îïlnWfq,,=+a fq βf,qZ f

where lnWmq, and lnW fq, are the q-quantiles of the lnWm and lnW f respectively.

ˆ ˆ Fortin et al. (2009) show that the parameters aˆmq, , aˆ fq, , βm,q , β f ,q can be obtained by

uisng the recentered influence functions, YRIFWmm= (ln ) and Yff= RIF(ln W ), as dependent variables of regressions (2.1). The RIF functions are defined as follows:

ì qWW-£1[lnmmq ln, ] ïRIF(ln Wmmq , q )=+ ln W , fW(ln ) ï lnWmqm , ï í (2.4) ï qWW-£1[ln ln ] ïRIF(ln W , q )=+ ln W ffq, ï ffq, fW(ln ) î lnWfqf ,

where f ()× and f ()× are the density functions of the wage variables lnW and lnWm lnWf m

lnW f respectively; 1[× ] is an index function returning the value of 1 for workers from the low wage q-quantile and 0 otherwise.

The second terms of the right sides of system (2.4) correspond to the so-called influence function, IF. The IF function for the q-quantile, , IF(ln W , q )= ( q-£ 1[ln W ln WqWq ]) fln (ln W ) represents the influence of an individual wage lnW on the q-quantile of the wage distribution,

lnWq . IF comes through the index function 1[lnWW£ lnq ] . The RIF function recenters the IF

by adding back the quantile value lnWq to the influence function. In its nature, the RIF remains an indicator variable for whether a worker’s wage is smaller than or equal to the wage quantile

lnWq .

The interest of using the RIF transformation lies in a nice statistical property of the RIF function: its expectation equals the statistic to which it is applied (for the derivation, see Fortin et al., 2009). In our context it means

ERIF( (ln Wq , )) = ln Wq (2.5)

Since the RIF function is defined at the individual level (unlike a distributional statistic

ˆ ˆ such as a wage quantile lnWq ), property (2.5) enables estimation of aˆmq, , aˆ fq, , βm,q , β f ,q using the RIF wage functions as dependent variables in (2.1):

ïìRIF(ln Wmmqmq , q ) =+a ,,βm,qZ m + e í (2.6) îïRIF(ln Wffqfq , q ) =+a ,,βf,qZ f + e

Regression function (2.6) implies that

ì ˆ ˆ ïE( RIF(ln Wmmq , q ) | Zmm,qm) =+a , β Z í (2.7) E RIF(ln W , q ) | Z =+aˆ βˆ Z îï ( ffqf) , f,q f

There are two points worthy to note here: 1) plugging (2.5) into (2.7) yields the desired relationships describing unconditional wage quantiles as functions of individual characteristics of workers and the estimates of the labor market returns to these characteristics:

ì ˆ ïlnWmq,, (Zmm,qm ) =+aˆ mq β Z í ˆ ˆ îïlnWfq,, (Zf ) =+a fq β f,qZ f

ˆ ˆ 2) The estimates βm,q and β f ,q have a straightforward interpretion: they represent the

marginal effects of the explanatory variables on the wage quantiles lnWmq, and lnW fq, .

2.3.2 Wage Decomposition

Wage decomposition is based on the standard OB procedure regardless of the wage outcome used. First, subtracting the second equations systems (2.2) and (2.3) from the first ones

yield the distributional wage gap DW (mean DWmf= lnWW- ln or q-quantile

DWmqfq= lnWW,,- ln ) as a function of mean covariates and corresponding wage returns:

ˆˆ lnWWmfmf- ln= (aaˆˆ- )+ (βmmZ - β ffZ )

ˆˆ lnWWmq,,,,- ln f q= (aaˆˆ mq- f q )+ (βm,qZ m- β f,qZ f )

The total distributional wage gap DW is next decomposed into two components: 1) the

structural effect, DS , related to the estimated difference of the structural parameters of the male

ˆˆ ˆˆ and female wages, Δβββ = ()mf- or Δββ = ()m,q- β f,q and 2) the composition effect, DC ,

related to the differences in individual characteristics of men and women, Δzmf= ()ZZ- :

DWSC= D + D (2.8)

The structural effect, DS = Da + ZmΔβ , evaluates the share of the wage gap related to

different returns to observable ( Δβ ) and unobservable ( Da ) human capital of men and women.

It can have several origins. Different returns to observables ( Δβ ¹ 0) signal a gender discrimination on the labor market consisting of different rewards or penalties associated with observable human capital or demographic characteristics of men and women. Different returns to

unobservables ( D¹a 0) might be also related to the same type of gender discrimination but based on the individual characteristics unobserved in the data. Alternatively, they can be related to selection in working based on unobservable characteristics. The nature of this selection can be either: a gender discrimination consisting of different degrees of access to jobs paying different wages or self-selection of men and women into jobs offering different wages.

ˆ The composition effect, DC = ΔβZf, identifies the advantage/disadvantage in endowments of male workers over female workers. The composition effect might also have several sources such as different preferences of men and women relative to education, family and carrier, gender discrimination on the labor market or selection in working based on observable characteristics of female and male workers. As previously, the selection might come from both, labor supply related to self-selection and/or labor demand relating to discrimination.

Depending on the dependent variable of Human Capital Model, the decomposition is obtained for different levels of wage: at the mean wage level in case of a classical regression of log hourly wages or at various wage quantiles when the wage RIF is used. The whole set of decomposition outcomes allows us to run a detailed analysis of the gender wage gap considering its whole distribution rather than focusing on its mean level.

2.3.3 Estimation Procedure

The empirical procedure consists of several steps49. First, we calculate the sample

quantiles of male and female wages, lnWmq, and lnWfq, . Second, we estimate the wage density f ()× and f ()× using a kernel density estimator: lnWm lnWf

1 nm æölnWW- ln fW(ln ) = Kç÷mq, lnWmqm , nhå ç÷ h mmi=1 èø m

1 n f æölnWW- ln fW(ln ) = Kç÷fq, lnWfqf , nhå ç÷ h ffi=1 èø f

where K (×) is the Epanichnikov kernel function; nm and nf are the numbers of observations in the samples of the male and female workers respectively; hm and hf are the bandwidths parameters. These allow us to calculate the wage RIF functions for each worker using (2.4).

Next, using the OLS estimator, I separately estimate male and female equations in (2.1) using various wage outcomes: the hourly real wages and the real wage RIF transformations

49 Implemented using “rifreg” Stata package.

corresponding to the 10th, 25th, 50th, 75th, and 90th wage quantiles. Finally, I calculate the gender wage gap and its decomposition components along the wage distributions using (2.8).

2.4. Data and Descriptive Statistics

I use individual cross-sectional data from Kuwait Labor Force Survey (KLFS) 50 for 2014 and 2015 to conduct my analysis51. The data are collected by the State of Kuwait Central

Statistical Bureau and cover the whole country. They are representative of the Kuwaiti labor force population based on the labor force participation of Kuwaiti and Non-Kuwaiti workers in the labor market in 2014 - 2015. The data report demographic and job characteristics of working individuals ages 15+. The data do not include firm information or sufficient data to calculate job tenure or actual work experience. Also, the data do not provide information about the number or age of the children, if any, per individual.

The Kuwaiti worker sample is made up of 5,068 workers (2,315 men and 2,753 women) between 18 and 65 years old working for wages in the public sector. The sample excludes workers in the following occupations: agriculture and fishery, craft and related trades, plant and machine operators and assemblers, and primary occupations as few or no Kuwaiti female workers are employed in these sectors.

The non-Kuwaiti worker sample is made up of 16,057 workers (14,602 men and 1,455 women) between 18 and 65 years old working for wages in the private sector. The sample excludes workers in the following occupations: agriculture and fishery, craft and related trade,

50 I would like to thank Dr. Riyad Faras from Kuwait University and Ms. Mona Al-Daas from the Kuwait Ministry of Planning for providing access to the restricted microdata for this research.

51 The aggregated statistics are available at the State of Kuwait Central Statistical Bureau website http://www.csb.gov.kw/Default.aspx 57

plant and machine operators and assemblers, as few or no non-Kuwaiti female workers are employed in these sectors.

The key variable of the analysis is the natural logarithm of the hourly real wage of workers. The real hourly wage was calculated by dividing the monthly wage by the number of working hours per month and using consumer price index (CPI) data from the World Bank.

Potential Work Experience is calculated following Mincer (1974).52

Given different levels of education and primary occupations for Kuwaitis and non-

Kuwaitis, education and occupations are categorized slightly differently: Education is categorized by five levels: 1) Primary or Secondary, 2) High School, 3) Diploma (one to two- year programs following a high school degree), 4) University (Bachelor’s degree), and 5)

Masters and/or Ph.D. degree for the Kuwaiti sample and 1) No Degree, 2) Primary, 3)

Secondary, 4) High School, 5) Diploma (one to two-year programs following a high school degree), 6) University (Bachelor’s degree), and 7) Masters and/or PhD degree for the non-

Kuwaiti sample. I also control for the ability to read and write for the latter sample because many of the non-Kuwaiti workers have no degree. A dummy variable was added: Read/Write (any language).

Occupation is categorized following the ISCO-88 job description code: 1) Legislators,

Senior Officials and Managers, 2) Professionals, 3) Clerks, 4) Technicians and Associate

Professionals, and 5) Service, Shop and Market Sales. For non-Kuwaiti there is an additional category: 6) Primary Occupations53.

52 Potential Work Experience = Age – Years of Schooling – 6.

53 Primary or Elementary occupations “involve the performance of simple and routine tasks which may require the use of hand-held tools and considerable physical effort” (ILO 2012), page 337. 58

Table 2-1 displays the descriptive statistics by citizenship, sector of employment, and gender. Figures 2.5 and 2.6 show the distribution of Kuwaiti male and female wages in the public sector and non-Kuwaiti male and female wages in the private sector respectively.

Rightward shifts of the male wage densities imply that the wage distribution among male workers is statistically greater (higher wages) than that of female workers in the public sector.

The opposite is true for non-Kuwaitis in the private sector. 5 2 . 2 . e t a m i t s 5 E 1

. y t i s n e D 1

. l e n r e K 5 0 . 0

-2 0 2 4 Logarithm of Hourly Wage

Women Men

Figure 2-5. Kuwaiti Wage Distribution, Public Sector

Figure 2-6. Non-Kuwaiti Wage Distribution, Private Sector

For the sample of Kuwaiti workers, the average real hourly wage and the standard deviation for males are higher relative to females. This suggests that there is more wage dispersion between males than females. In contrast, the opposite is true for non-Kuwaiti workers in the private sector. The descriptive statistics reveal differences between male and female workers in education, potential experience and occupation. For both samples, male workers have more potential work experience while females have more years of schooling. The difference in education and experience is larger between non-Kuwaiti males and females. For the Kuwaiti sample, females are dominant in professional and clerk occupations. Non-Kuwaiti females are dominant in the same occupations as Kuwaiti females in addition to service, shop and market sales occupations.

In sum, differences in education and experience between males and females are present in both samples. These two samples show similar patterns in male and female employment, education, and experience.

Table 2-1: Descriptive Statistics for Workers Ages 18-65 Years Old

Kuwaiti Workers Non-Kuwaiti Workers Sample Public Sector Private Sector Variable Mean St. Dev. Mean St. Dev. Mean St. Dev. Mean St. Dev. Demographics Female 0 1 0 1 Age 36.7 9.326 35.6 8.605 36.85 8.76 33.84 9.00 Married 0.72 0.449 0.68 0.465 0.83 0.37 0.78 0.41 Citizenship Arab N/A N/A N/A N/A 0.19 0.39 0.25 0.43 Asian N/A N/A N/A N/A 0.79 0.40 0.72 0.45 Other N/A N/A N/A N/A 0.01 0.12 0.04 0.19 Education Read and Write (any Language) N/A N/A N/A N/A 0.91 0.28 0.96 0.18 No Degree 0 0 0 0 0.13 0.33 0.07 0.26 Primary 0 0.07 0 0.034 0.27 0.45 0.07 0.26 Secondary 0.1 0.3 0.07 0.262 0.36 0.48 0.26 0.44 Highschool 0.19 0.394 0.17 0.372 0.13 0.33 0.37 0.48 Diploma 0.23 0.423 0.25 0.434 0.02 0.15 0.04 0.19 University (Bachelors Degree) 0.4 0.49 0.48 0.5 0.09 0.28 0.19 0.39 Master or PhD 0.07 0.253 0.03 0.158 0.00 0.07 0.01 0.09 Number of Years of Schooling 14 2.749 14.3 2.389 7.32 4.47 10.45 4.37

Potential Working Experience Experience 16.7 9.731 15.3 9.126 24.54 10.06 17.39 10.46 Experience Squared 372 380.5 318 334.9 654.89 523.85 411.71 481.01 Occupation Legislators, Senior Officials & Managers 0.12 0.32 0.06 0.232 0.02 0.14 0.02 0.15 Professionals 0.36 0.479 0.41 0.493 0.04 0.20 0.11 0.31 Technicians and Associate Professionals 0.28 0.451 0.23 0.421 0.03 0.18 0.05 0.23 Clerks 0.21 0.405 0.27 0.444 0.06 0.23 0.18 0.39 Service Workers, Shop & Market Sales 0.04 0.188 0.03 0.162 0.24 0.43 0.46 0.50 Primary Occupations Workers 0.00 0.07 0.00 0.03 0.61 0.49 0.17 0.38 Survey Year 2014 0.44 0.497 0.45 0.497 0.42 0.49 0.59 0.49 2015 0.56 0.497 0.55 0.497 0.58 0.49 0.41 0.49

Real Hourly Wage (in 2014 KWD) 6.05 3.469 4.68 1.942 0.83 1.26 1.11 1.29 Log Real Hourly Wage 1.7 0.428 1.47 0.371 -0.55 0.70 -0.23 0.74

Number of Observations 2,017 2,538 14603 1455 Diploma is a degree with 1 to 2 years of schooling After High School Potential Work Experience = Age - 6 – Years of Schooling

2.5. Results

This section discusses two sets of outcomes. First, the parameters of the human capital models are discussed in Section 2.5.1. In line with the conceptual framework above, several regressions are run for each gender group: specifically, a regression of the hourly real wages and five regressions of their RIF transformations corresponding to 10th, 25th, 50th, 75th, and 90th wage quantiles. Additionally, the analysis is run for both public and private sectors and the results are displayed in Table 2-2 for Kuwaitis in the public sector and Table 2-3 for non-Kuwaitis in the private sector.

Section 2.5.2 reports decompositions of the gender wage gap at both mean level and different quantiles. The decomposition results are displayed in Table 2-4. The results of this section identify differences in the wage gap across income quantiles and the contribution of each independent variable to the gap separately for the public and private sectors. In addition,

exploring the 10th and 90th percentiles helps to identify whether there is a sticky floor or glass ceiling in the Kuwaiti labor market. This will be helpful for the policy recommendations presented at the end of this chapter.

The empirical analysis results of the OLS model indicate that returns to human capital endowments vary by gender. The Chow tests performed on the wage equations for males and females (Kuwaitis and non-Kuwaitis separately) result in the rejection of the regression coefficients equivalence according to gender.54

2.5.1 Human Capital Returns

The results of the human capital model estimations are shown in Table 2-2 for Kuwaiti workers in the public sector and in Table 2-3 for non-Kuwaiti workers in the private sector. The first two columns report marginal effects of individual characteristics on the log of hourly real wages of men and women. The next columns provide similar information at different wage quantiles.

2.5.1.1 Kuwaiti Workers in the Public Sector

As shown in Table 2-2, hourly wages increased on average between 2014 and 2015 by about 3% for men and 7% for women. As expected, more schooling and potential work experience have a positive impact on wage earnings. There is no gender gap in return to education among wage earners with a bachelor’s degree who make up the most significant group of workers in the public sector (about 40% of males and about 50% of females). For less

54 The computed F-values of the Chow-tests are 46.37 for Kuwaitis and 12.54 for non -Kuwaitis. These values are greater than the 0.05 critical values (1.75 and 1.67 for Kuwaitis and non-Kuwaitis respectively).

educated workers, male workers have mainly stronger returns to education (up to 10% advantage) except for at the tails of the distribution. This is different from previous findings based on data from the 1980s: Hosni and AlQudsi (1988) reported higher returns on education for women. This can be explained by an increase in female labor supply over the last 30 years, especially in the public sector. Thus, the supply and demand forces that used to reward educated females more because their labor supply was thin back then, now are working in favor of male workers as their number in the public sector is smaller relative to females. Males with only a high school degree usually end up in the military or working for the police if they are not willing to obtain more education because those wages are higher relative to any other job in the public sector. Jobs available with a high school degree in the private sector are not prestigious and do not fit their criteria for appropriate jobs for Kuwaitis.

Similarly to Hosni and AlQudsi (1988), I find stronger returns to potential experience for men than for women except for at the tails of the wage distribution. One explanation for higher female return at the tail of the wage distribution is that females are eligible for retirement with full benefits at younger age than men.55 As a result, females who end up working more years enjoy higher returns due to potential experience because their supply of labor is thin. Also, more years of actual experience are associated in the public sector with promotions to senior positions, which results in wage increases. Keeping in mind that I do not include the job tenure variable

(because including it will drop almost half of my sample due to missing observations), it could be that the potential work experience variable in my model is capturing the job tenure effect as well.

55 In 2015, Kuwaiti females out of the labor force due to childcare and retirement was 50.9 percent relative to 37.8 percent for males. (KLFS, 2015). 64

Returns to occupation (relative to Service, Shop and Market Sales workers) reveal that participation in more highly skilled occupations (such as Legislators, Senior Officials &

Managers) yields higher returns than other occupations. The returns to occupation decrease as we move down the employment hierarchy to lower skilled occupations. Males enjoy stronger returns to occupation than females at the mean level, which is consistent with the findings of Hosni and

AlQudsi (1988). Across wage quantiles, females’ return to occupation are higher at higher quantiles (75th and 90th quantiles) for Legislators, Senior Officials and Managers occupations as well as professional occupations.

Married men have higher wages as compared to single men in the lower half of the wage distribution. There is no difference between wages of married and single women. The positive marriage effect on male wages in Kuwait is also reported in previous literature (Hosni and

AlQudsi,1988). It is partly mechanical; married men receive a wage supplement related to social and child allowances.56 The social allowance is paid to male and female workers based on marital status and educational degree. Single male workers receive an equal social allowance to female workers if they have the same educational degree and years of experience. Once married, a male worker’s social allowance increases, but this is not the case for females. Similarly, male workers receive a wage increase in the form of a child allowance when they have children. Both the increased social allowance at marriage and the child allowance are paid per family, thus only one earner in the family receives it. The allowances are usually paid to the male because, by

Kuwait Personal Status law no. 51/198457, the male in the family is responsible for providing the

56 Social allowance is paid in two categories: single, married; where it is higher for married than single. Social allowance increases with educational attainment and years of experience. Child allowance is 50 KWD per child up to 7 children; @ $150 per child). (CSC n.a.-b).

57 (GCC_Legal_Network n.a.-a). 65

living expenses for the family (wife and children). A female worker receives these allowances only if her spouse does not receive them due to his inability to work. The child allowance is stopped once a male child reaches 24 years old and once a female child gets married or becomes employed. This is reflected in the insignificant returns to marriage at the top quantile, which is even true for senior workers who have reached the top tiers of their professions because men in the top quantile tend not to have dependent children. The data do not allow us to select for and eliminate the social and child allowances from individual wage earnings.

Table 2-2: OLS & UQR Coefficients for Kuwaiti workers in the Public Sector Ages 18-65

Dependent Variable: Ln(wage) OLS UQR Explanatory Variables Mean level 10th 25th 50th 75th 90th Female 0 1 0 1 0 1 0 1 0 1 0 1 Married 0.109*** -0.0184 0.208*** 0.00982 0.207*** -0.0143 0.121*** -0.0216 0.0491* -0.0298 0.00638 -0.0564* (0.0189) (0.0129) (0.0365) (0.0191) (0.0277) (0.0164) (0.0252) (0.0177) (0.0285) (0.0218) (0.0330) (0.0324) Survey Year 2015 0.0321** 0.0747*** 0.00478 0.0564*** 0.0328* 0.0475*** 0.0538*** 0.0740*** 0.0136 0.0957*** 0.0665** 0.185*** (0.0147) (0.0121) (0.0239) (0.0179) (0.0192) (0.0151) (0.0193) (0.0166) (0.0251) (0.0210) (0.0335) (0.0313) High School Degree 0.160*** 0.0974*** 0.163** 0.224*** 0.177*** 0.0671 0.155*** 0.0204 0.157*** 0.0912** 0.205*** 0.174*** (0.0304) (0.0265) (0.0693) (0.0593) (0.0470) (0.0424) (0.0397) (0.0378) (0.0383) (0.0376) (0.0411) (0.0338) Diploma 0.285*** 0.219*** 0.278*** 0.291*** 0.212*** 0.123*** 0.291*** 0.152*** 0.324*** 0.224*** 0.302*** 0.360*** (0.0329) (0.0275) (0.0703) (0.0603) (0.0498) (0.0432) (0.0430) (0.0388) (0.0445) (0.0403) (0.0494) (0.0436) Bachelor Degree 0.471*** 0.394*** 0.387*** 0.407*** 0.368*** 0.328*** 0.434*** 0.381*** 0.536*** 0.441*** 0.566*** 0.549*** (0.0393) (0.0334) (0.0717) (0.0629) (0.0535) (0.0484) (0.0509) (0.0486) (0.0605) (0.0563) (0.0825) (0.0715) Master or PhD Degree 0.679*** 0.558*** 0.356*** 0.381*** 0.388*** 0.326*** 0.577*** 0.457*** 0.976*** 0.593*** 1.109*** 1.049*** (0.0466) (0.0486) (0.0740) (0.0709) (0.0560) (0.0567) (0.0559) (0.0657) (0.0743) (0.0983) (0.123) (0.169) Potential Work Experience 0.0240*** 0.0204*** 0.00731 0.00634* 0.0239*** 0.0131*** 0.0323*** 0.0244*** 0.0368*** 0.0319*** 0.0230*** 0.0406*** (0.00296) (0.00232) (0.00486) (0.00370) (0.00391) (0.00303) (0.00382) (0.00319) (0.00489) (0.00406) (0.00686) (0.00582) Potential Work Experience Squared -0.000169** -0.000184*** 2.07e-05 -5.58e-05 -0.000284*** -0.000148* -0.000382*** -0.000313*** -0.000350*** -0.000325*** 0.000101 -0.000401** (7.22e-05) (6.30e-05) (0.000114) (0.000109) (9.13e-05) (8.50e-05) (9.06e-05) (8.65e-05) (0.000123) (0.000113) (0.000185) (0.000161) Legislators, Senior Officials & Managers 0.103** 0.201*** 0.0147 -0.0277 0.0400 -0.0200 0.150** 0.0713 0.0746 0.322*** 0.0389 0.539*** (0.0477) (0.0457) (0.0813) (0.0573) (0.0619) (0.0587) (0.0668) (0.0657) (0.0812) (0.0840) (0.0808) (0.136) Professionals 0.105** 0.0854** 0.0634 -0.0431 0.0647 -0.0134 0.145** 0.0287 0.0804 0.144* 0.161* 0.211** (0.0490) (0.0432) (0.0825) (0.0587) (0.0650) (0.0587) (0.0671) (0.0644) (0.0811) (0.0741) (0.0884) (0.103) Technicians and Associate Professionals 0.0404 -0.0756** -0.0157 -0.111** -0.00674 -0.104** 0.0106 -0.141** -0.0155 -0.0715 0.0870 -0.0701 (0.0423) (0.0380) (0.0813) (0.0541) (0.0598) (0.0528) (0.0587) (0.0567) (0.0659) (0.0625) (0.0579) (0.0824) Clerks -0.0428 -0.0817** -0.0723 -0.153*** -0.130** -0.174*** -0.0981* -0.169*** -0.107* -0.0632 0.0501 0.00665 (0.0411) (0.0374) (0.0824) (0.0566) (0.0598) (0.0532) (0.0568) (0.0555) (0.0623) (0.0594) (0.0491) (0.0773) Constant 0.883*** 0.907*** 0.659*** 0.707*** 0.708*** 0.917*** 0.801*** 0.948*** 1.049*** 0.950*** 1.301*** 0.905*** (0.0490) (0.0471) (0.0993) (0.0801) (0.0710) (0.0685) (0.0651) (0.0694) (0.0751) (0.0734) (0.0754) (0.0975)

Sample Size 2,017 2,538 2,017 2,538 2,017 2,538 2,017 2,538 2,017 2,538 2,017 2,538 Adjusted R-Square 0.4254 0.388 0.1307 0.1078 0.2569 0.1996 0.3267 0.2811 0.2892 0.2544 0.1884 0.1956 Diploma is a degree with 1 to 2 years of schooling after high school; Potential Work Experience (Age - 6 - Years of Schooling); Standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1

2.5.1.2 Non-Kuwaiti Workers in the Private Sector

Arab workers across the wage distribution earn up to 50 percent higher wages as compared to non-Arab workers. The marriage impact is similar to the impact found in the public sector.

Males who can read and write Arabic or non-Arabic languages earn more than those who are illiterate. This is not the case for females, however. Females who can read and write earn less at the mean level and between the 10th and 25th quantiles.

One importance difference with the public sector is that the private sector favors women over men. First, the returns to females’ for schooling are higher on average than the returns to males, which is consistent with the literature (El-Toni 2004). This is mainly driven by the upper half of the wage distribution. In contrast, more schooling has a negative impact on wages for males between the 10th and 25th quantiles. This is due to the nature of jobs in the private sector, which do not require sophisticated skills as the majority of workers are in primary occupations.

Second, unlike the findings of El-Toni (2004), I found that females have on average stronger returns to potential experience than men at the mean level (3.7% for women versus

1.8% for men). This is the case across the wage distribution as well except at the 90th quantile.

Finally, I found that females’ returns to occupation are also on average stronger than the returns to males in this category (except for the upper two quantiles).

The previous findings are related to the nature of the Kuwaiti labor market which is segregated by gender and citizenship. Non-Kuwaiti females have more years of schooling relative to non-Kuwaiti males and thus are employed in higher skilled occupations relative to males. In 2015, excluding the household sector jobs, non-Kuwaiti females were dominant in professional occupations as well as technical & associates occupations, while non-Kuwaiti males

were dominant in craft and related trades as well as plant and machine operators & assemblers occupations (KLFS 2015). As a result, the returns to females for schooling and occupation are higher than males. Furthermore, higher returns to occupation at the lower half of the wage distribution could indicate that females accept low skills/low wage occupations more than males.

Females could be better qualified than males at these occupations or they may have more experience at them as well if there is a tendency for women to accept these jobs more frequently.

It is possible that women are paid more than males because it is women candidates that have the most experience in these fields. Also, private-sector employers prefer to employ non-Kuwaiti females in certain occupations that are not acceptable for Kuwaiti females and cannot be fulfilled by males (Kuwaiti or non-Kuwaiti). Such occupations include but are not limited to spa specialists, female hair and beauty industry staff (hair dresser, makeup artist, …), wedding party services as these occupations provides services exclusive for females.

2.5.2 Wage Decomposition: Structural and Composition Effects

Table 2-4 shows the results of the OB decomposition applied by sector at mean wage level and across the wage distribution (at the 10th, 25th, 50th, 75th and 90th quantiles). It reports gender wage gaps along with the total composition and wage structure effects. The table also shows the contribution of the explanatory variables (summarized as groups). A positive value indicates male advantage in the contribution to the gap, while a negative value indicates female advantage.

2.5.2.1 Kuwaiti Workers in the Public Sector

The overall wage advantage of males relative to females is 0.229 log points at the mean level and it increases from 0.168 to 0.295 log points across the wage distribution. This is in line with Hosni 69

and Al-Qudsi’s (1988) finding, which identified a 0.225 log points gap. The overall composition effect is in favor of male workers. Potential years of experience, male dominance in the higher- wage occupations and marital status are the main contributing factors to the composition effect.

In comparison, the overall male composition effect advantage is mitigated by females’ endowment advantage in education, where females have more years of schooling than males.

Males have more potential experience because they join the work force earlier than females, who would be mainly at school in place of joining the work force. The difference in education and potential experience is about one year for each gender as shown in the descriptive statistics

(Table 2-1).

The main feature of the gender wage gap is the relative importance of the total wage structure effect in favor of males. At the mean level and across the wage distribution, the contribution of the total wage structure effect is strong and highly significant. The discrimination against females is evident in the contribution of marriage to the total wage structure effect as well as potential experience. This is expected due to the higher social allowance and child allowance that married males receive, which increases with promotions as workers accumulate more years of experience. The insignificance of the constant term at the mean level and various wage quantiles (10th, 50th and 75th quantiles) implies that the wage gap is mainly due to discrimination against females. The results at the 90th percentile are quite interesting. The total composition effect is very small relative to the total gap. This implies that the differences in endowments between males and females are negligible at the top quantile. In addition, the constant term is positive, large in magnitude and significant. This implies that there are other factors that contribute to the wage structure effect which are not considered by the model. Also, females have higher returns as legislators, senior officials and managers than males.

Table 2-3: OLS & UQR Coefficients for Non-Kuwaiti Workers in the Private Sector

Dependent Variable: Ln(wage) OLS UQR Explanatory Variables Mean level 10th 25th 50th 75th 90th Female 0 1 0 1 0 1 0 1 0 1 0 1 Married 0.0291*** -0.101*** 0.000686 -0.0758* -0.0019 -0.0244** 0.0259* 0.113 0.161*** -0.126 -0.0152 -0.164 (0.0112) (0.0286) (0.00461) (0.0391) (0.00809) (0.0114) (0.0153) (0.0734) (0.0250) (0.0951) (0.0357) (0.114) Arab 0.106*** 0.280*** 0.0117*** 0.0249 0.0932*** 0.0143* 0.105*** 0.446*** 0.216*** 0.149 0.0394 0.568*** (0.0107) (0.0328) (0.00241) (0.0314) (0.00480) (0.00834) (0.0146) (0.0639) (0.0313) (0.138) (0.0488) (0.209) Y2015 -0.0153** 0.0554** 0.0788*** -0.388*** 0.104*** -0.0262** -0.0458*** -0.0612 -0.0891*** 0.369*** -0.114*** 0.518*** (0.00761) (0.0252) (0.00382) (0.0484) (0.00576) (0.0125) (0.0102) (0.0596) (0.0173) (0.0823) (0.0259) (0.117) Read and Write 0.0757*** -0.432*** 0.0126* -2.127*** 0.0940*** -0.665*** 0.0231 0.0185 0.242*** -0.0793 0.00767 -0.0838 (0.0181) (0.0650) (0.00743) (0.177) (0.0141) (0.0481) (0.0282) (0.0812) (0.0356) (0.0766) (0.0265) (0.145) Primary -0.0765*** 0.0439 -0.0108 0.673*** -0.111*** 0.0292 -0.145*** 0.152 -0.108*** 0.0322 0.0377 0.151* (0.0165) (0.0613) (0.00685) (0.188) (0.0124) (0.0360) (0.0251) (0.109) (0.0354) (0.0792) (0.0245) (0.0794) Secondary 0.013 0.130** -0.0433*** 0.216 -0.0679*** 0.0873*** -0.105*** 0.369*** 0.0109 0.184** 0.182*** 0.210** (0.0168) (0.0550) (0.00720) (0.166) (0.0123) (0.0337) (0.0254) (0.0886) (0.0371) (0.0733) (0.0304) (0.0933) High School Degree 0.237*** 0.302*** -0.0291*** 0.125 -0.0759*** 0.0787** 0.107*** 0.543*** 0.469*** 0.578*** 0.594*** 0.779*** (0.0211) (0.0632) (0.00729) (0.177) (0.0141) (0.0364) (0.0307) (0.130) (0.0563) (0.148) (0.0675) (0.180) Diploma 0.535*** 0.954*** -0.0238*** 0.232 -0.0715*** 0.0927*** 0.221*** 1.371*** 1.030*** 2.879*** 1.561*** 1.661*** (0.0318) (0.0792) (0.00918) (0.172) (0.0181) (0.0341) (0.0393) (0.135) (0.0860) (0.238) (0.169) (0.347) Bachelor Degree 0.590*** 0.767*** -0.0261*** 0.0853 -0.0705*** 0.0485 0.169*** 1.217*** 0.883*** 1.947*** 1.968*** 1.382*** (0.0272) (0.0672) (0.00826) (0.175) (0.0160) (0.0360) (0.0349) (0.132) (0.0737) (0.200) (0.137) (0.235) Master or PhD Degree 1.173*** 1.347*** -0.0132 0.167 -0.0238 0.0678** 0.245*** 1.280*** 1.042*** 2.192*** 2.970*** 2.775*** (0.0581) (0.135) (0.00926) (0.177) (0.0176) (0.0345) (0.0379) (0.176) (0.110) (0.212) (0.285) (0.736) Potential Work Experience 0.0186*** 0.0377*** -9.20e-05 0.0245*** -0.00239** 0.000713 0.00556** 0.0838*** 0.0150*** 0.0500*** 0.0656*** 0.0363* (0.00171) (0.00434) (0.000632) (0.00636) (0.00109) (0.00182) (0.00217) (0.00999) (0.00448) (0.0139) (0.00743) (0.0190) Potential Work Experience Squared -0.000165*** -0.000546*** -1.14e-06 -0.000719*** 6.22e-05*** -6.47E-05 2.22E-05 -0.00116*** 2.97E-05 -0.000608** -0.000867*** -0.000306 (3.09e-05) (9.09e-05) (1.13e-05) (0.000162) (1.96e-05) (4.78e-05) (4.01e-05) (0.000211) (8.29e-05) (0.000249) (0.000131) (0.000344) Legislators, Senior Officials & Managers 1.531*** 1.667*** 0.0712*** 1.927*** 0.205*** 0.651*** 0.651*** 1.761*** 2.003*** 2.166*** 4.560*** 3.565*** (0.0306) (0.0843) (0.00523) (0.127) (0.00943) (0.0295) (0.0201) (0.138) (0.0553) (0.255) (0.158) (0.450) Professionals 1.327*** 1.255*** 0.0671*** 1.929*** 0.205*** 0.651*** 0.667*** 1.765*** 1.965*** 1.928*** 3.602*** 1.592*** (0.0272) (0.0611) (0.00559) (0.127) (0.0108) (0.0298) (0.0241) (0.125) (0.0640) (0.216) (0.166) (0.341) Technicians and Associate Professionals 0.875*** 1.079*** 0.0844*** 1.702*** 0.230*** 0.625*** 0.753*** 2.174*** 1.910*** 1.486*** 1.408*** 0.488** (0.0213) (0.0568) (0.00434) (0.121) (0.00723) (0.0310) (0.0174) (0.121) (0.0601) (0.210) (0.130) (0.196) Clerks 0.638*** 0.887*** 0.0582*** 1.749*** 0.200*** 0.616*** 0.476*** 1.860*** 1.267*** 0.674*** 1.295*** -0.138 (0.0199) (0.0526) (0.00422) (0.124) (0.00859) (0.0316) (0.0257) (0.119) (0.0630) (0.183) (0.111) (0.227) Service, shop & market workers 0.388*** 0.648*** 0.0613*** 1.735*** 0.154*** 0.607*** 0.461*** 1.035*** 0.787*** 0.577*** 0.337*** 0.378*** (0.00976) (0.0381) (0.00417) (0.118) (0.00675) (0.0308) (0.0141) (0.0921) (0.0292) (0.0933) (0.0290) (0.0891) Constant -1.307*** -1.287*** -1.199*** -0.514*** -1.145*** -0.609*** -1.088*** -3.389*** -1.530*** -1.883*** -1.278*** -0.938*** (0.0252) (0.0801) (0.0101) (0.124) (0.0175) (0.0408) (0.0334) (0.162) (0.0601) (0.212) (0.0970) (0.307)

Observations 14,603 1,455 14,603 1,455 14,603 1,455 14,603 1,455 14,603 1,455 14,603 1,455 Adjusted R-Squared 0.6119 0.7291 0.0623 0.6148 0.1224 0.7277 0.2571 0.5452 0.4589 0.6126 0.501 0.3879 Arab is a dummy variable =1 if the workers is a citizen of an Arab country and =0 otherwise; Diploma is a degree with 1 to 2 years of schooling After High School; Potential Work Experience = Age - 6 - Years of Schooling Occupation reference group is "Primary occupations" and Education reference group is "No Degree"; Standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1

Table 2-4: Gender Wage Gap Decomposition Results

Sample Kuwaiti Workers (Public Sector) Reference Group: Male Coefficients OLS 10th percentile 25th percentile 50th percentile 75th percentile 90th percentile Coef. Coef. Coef. Coef. Coef. Coef. Mean Wage Gap 0.2294795 *** 0.1679034 *** 0.2066033 *** 0.2541265 *** 0.2626249 *** 0.295193 *** (0.0120715) (0.0155353) (0.0136927) (0.0149179) (0.0187694) (0.0249511) Composition effects attributed to Married 0.0039116 0.0074621 ** 0.0074201 ** 0.0043363 ** 0.0017598 0.000229 (0.0016313) (0.003159) (0.0030091) (0.0019089) (0.0012814) (0.0012695) Survey Year 2015 0.0000577 8.58E-06 5.90E-05 9.66E-05 2.44E-05 1.20E-04 (0.0004773) (0.0003638) (0.0005652) (0.0008481) (0.0004256) (0.0011062) Education -0.0098041 * -0.0167844 *** -0.0122483 *** -0.0114822 ** -0.0029675 0.0020525 (0.0056061) (0.0046226) (0.0042508) (0.0052432) (0.0077731) (0.0097294) Potential Experience 0.0231528 *** 0.0109877 *** 0.016813 *** 0.0227674 *** 0.0305469 *** 0.0365475 *** (0.0052084) (0.003052) (0.0042301) (0.0055475) (0.0072346) (0.0083671) Legislators, Senior Officials & Managers 0.006065 * 0.0008668 0.0023568 0.0088407 * 0.0043928 0.0022881 (0.0029392) (0.0048369) (0.0036952) (0.0041708) (0.0048711) (0.0048201) Professionals -0.0061432 * -0.0037031 -0.0037816 -0.0084924 * -0.0046976 -0.0094037 (0.003244) (0.005049) (0.004021) (0.0045515) (0.0050173) (0.0058087) Technicians and Associate Professionals 0.0021314 -0.0008295 -0.0003554 0.0005604 -0.000815 0.0045829 (0.0022933) (0.0044216) (0.0032495) (0.003191) (0.0035851) (0.0033426) Clerks 0.0026974 0.0045588 0.0081974 * 0.0061869 0.0067691 -0.0031605 (0.0026477) (0.0053769) (0.0041804) (0.0038561) (0.0042297) (0.0032189) Total Explained by Characteristics 0.0220686 *** 0.0025668 0.0184609 ** 0.0228137 ** 0.035013 *** 0.0332553 *** (0.0084268) (0.0075604) (0.0081897) (0.0094189) (0.0111445) (0.0123029) Wage Structure effects attributed to Married 0.0871914 *** 0.1355434 *** 0.1512198 *** 0.0974121 *** 0.0539246 ** 0.0429142 (0.0157067) (0.0282829) (0.0221237) (0.0211409) (0.0245661) (0.0316566) Survey Year 2015 -0.0235818 ** -0.0286044 * -0.0081111 -0.0111859 -0.0454807 ** -0.0656317 ** (0.0105581) (0.0165569) (0.0135543) (0.0141237) (0.0181632) (0.0254201) Education 0.0674267 * -0.0233859 0.0615344 0.086139 0.0916179 -0.0000693 (0.0393529) (0.0821665) (0.0588316) (0.0534615) (0.0579171) (0.0703149) Potential Experience 0.0601521 ** 0.0391174 0.1227677 *** 0.0994309 ** 0.0677495 -0.109269 (0.0303094) (0.0483446) (0.0398709) (0.0403137) (0.0505531) (0.0708052) Legislators, Senior Officials & Managers -0.0055719 0.0024243 0.0034284 0.0045065 -0.0141221 -0.0285773 ** (0.0037977) (0.005704) (0.0048962) (0.0053801) (0.0067939) (0.0093765) Professionals 0.0081819 0.0441952 0.0324189 0.0484083 -0.026179 -0.0206375 (0.0271061) (0.0420206) (0.0363567) (0.0385927) (0.0455864) (0.0563832) Technicians and Associate Professionals 0.0267828 ** 0.0220357 0.0223783 0.0350179 * 0.0129397 0.0362754 (0.0131712) (0.0225887) (0.0184483) (0.0188947) (0.0210008) (0.023307) Clerks 0.0105234 0.0217514 0.01202 0.01922 -0.0119333 0.0117518 (0.0150193) (0.027043) (0.0216494) (0.0214924) (0.0232808) (0.0247702) Constant -0.0236937 -0.0477407 -0.2095141 ** -0.1476361 0.0990953 0.3951809 *** (0.0679084) (0.1275561) (0.0986427) (0.0951457) (0.1050515) (0.1232645) Total Wage Structure (unexplained) 0.2074109 *** 0.1653366 *** 0.1881424 *** 0.2313128 *** 0.2276119 *** 0.2619376 *** (0.0098438) (0.015554) (0.0131143) (0.0132544) (0.0166583) (0.0227726)

Table 2-4 (Continues): Gender Wage Gap Decomposition Results

Sample Non-Kuwaiti Workers (Private Sector) Reference Group: Male Coefficients OLS 10th percentile 25th percentile 50th percentile 75th percentile 90th percentile Coef. Coef. Coef. Coef. Coef. Coef. Mean Wage Gap -0.3143758 *** 0.128329 *** 0.2870612 *** 0.2891743 *** 0.4600338 *** 0.3853946 *** (0.0202105) (0.0251703) (0.0081574) (0.0354916) (0.0430104) (0.0493921) Composition effects attributed to Married 0.0014195 *** 0.0037051 * 0.0011937 *** -0.0055189 0.0061439 0.0080278 (0.0006373) (0.0021395) (0.0006363) (0.0038932) (0.0049729) (0.006015) Arab -0.005934 *** 0.0013881 0.0008002 0.0249064 *** 0.0083024 0.0317087 *** (0.0013873) (0.0018157) (0.0005046) (0.0063948) (0.0080535) (0.0136915) Survey Year 2015 -0.0025232 ** 0.0638531 *** 0.0043129 *** 0.0100727 -0.0606514 *** -0.0851606 *** (0.0012686) (0.0095596) (0.0020933) (0.0098742) (0.0144761) (0.0204975) Education -0.1472096 *** -0.2293469 *** -0.0249101 *** 0.2118675 *** 0.36038 *** 0.306174 *** (0.0083602) (0.0271623) (0.0071874) (0.0396134) (0.0505999) (0.0514448) Potential Experience 0.074188 *** 0.0239274 * 0.0113388 *** -0.2338457 *** -0.1599263 *** -0.1489842 *** (0.0050712) (0.0128704) (0.0037608) (0.0251837) (0.03424) (0.046734) Legislators, Senior Officials & Managers -0.0045258 0.0056973 0.0019241 0.0052058 0.0064029 0.0105368 (0.0061388) (0.007753) (0.0026137) (0.0070938) (0.0087761) (0.0144649) Professionals -0.0861465 *** 0.1251665 *** 0.0422471 *** 0.114529 *** 0.1251345 *** 0.1033233 *** (0.0112008) (0.0180827) (0.0057648) (0.0168131) (0.0213794) (0.0259596) Technicians and Associate Professionals -0.0174909 *** 0.0340157 *** 0.0124853 *** 0.0434438 *** 0.0296985 *** 0.0097594 ** (0.0053816) (0.0107359) (0.003884) (0.0135618) (0.0101093) (0.005069) Clerks -0.0811487 *** 0.2225291 *** 0.0783087 *** 0.2365764 *** 0.0858018 *** -0.0175271 (0.0070576) (0.023991) (0.0075304) (0.0244744) (0.0244132) (0.0289997) Service, shop & market workers -0.0859964 *** 0.3844638 *** 0.1344746 *** 0.22936 *** 0.1278853 *** 0.0838179 *** (0.0056801) (0.0352353) (0.010684) (0.0247889) (0.0221314) (0.0204258) Total Explained by Characteristics -0.3553676 *** 0.6353991 *** 0.2621753 *** 0.6365971 *** 0.5291716 *** 0.3016761 *** (0.0167742) (0.0497882) (0.0119855) (0.0387548) (0.0440728) (0.0456172) Wage Structure effects attributed to Married 0.1020646 *** -0.0636361 * -0.0187403 0.0723663 -0.2385535 *** -0.1239694 (0.0241036) (0.0327728) (0.0116575) (0.0623643) 0.0817843 (0.0994797) Arab -0.0429103 *** 0.0025222 -0.015111 *** 0.0654405 *** -0.0128673 0.1013036 *** (0.0087493) (0.0060374) (0.0018608) (0.0126099) 0.0270781 (0.0412399) Survey Year 2015 -0.0292977 *** -0.270298 *** -0.0754356 *** -0.0089133 0.2650106 *** 0.3656221 *** (0.0109562) (0.0281486) (0.007984) (0.0350023) 0.0487285 (0.0692397) Education 0.3767261 *** -1.634108 *** -0.5635614 *** 0.4239035 *** -0.041047 -0.0682641 (0.0669403) (0.1422089) (0.0420867) (0.0905508) 0.0851338 (0.119713) Potential Experience -0.17463 *** 0.1096027 * -0.010141 1.068494 *** 0.4074426 *** -0.3224442 (0.0453859) (0.0597908) (0.0215575) (0.1208387) 0.1867819 (0.2622538) Legislators, Senior Officials & Managers -0.0029941 0.0353373 *** 0.0084831 *** 0.0211366 *** 0.0031088 -0.0189452 *** (0.0020398) (0.0032117) (0.0007766) (0.0029432) 0.0049737 (0.0091561) Professionals 0.0079099 0.0813262 *** 0.0194659 *** 0.0479539 *** -0.0016033 -0.0878139 *** (0.0072912) (0.0063765) (0.0015787) (0.0058506) 0.0098314 (0.0169367) Technicians and Associate Professionals -0.0110453 *** 0.0554907 *** 0.0135364 *** 0.0487226 *** -0.0145386 ** -0.0315661 *** (0.0035089) (0.0048213) (0.0012451) (0.0047021) 0.0075186 (0.0081898) Clerks -0.0457759 *** 0.0951894 *** 0.0234171 *** 0.0778694 *** -0.0333543 *** -0.0806413 *** (0.0106176) (0.0076794) (0.0020085) (0.0073385) 0.0109766 (0.0144909) Service, shop & market workers -0.1191412 *** 0.3965205 *** 0.1071853 *** 0.1361095 *** -0.049697 *** 0.0098144 (0.0183275) (0.0286651) (0.0076331) (0.0221729) 0.0231722 (0.0221976) Constant -0.0199142 0.684983 *** 0.5357875 *** -2.300506 *** -0.3530387 0.3406226 (0.0839765) (0.1247537) (0.0443608) (0.1650474) 0.2207161 (0.3224434) Total Wage Structure (unexplained) 0.0409918 *** -0.5070701 *** 0.024886 *** -0.3474228 *** -0.0691378 *** 0.0837185 *** (0.0125745) (0.0580122) (0.0128544) (0.0329148) 0.0304439 (0.0347771) Standard Errors in parentheses, *** p<0.01, ** p<0.05, * p<0.1

The difference is significant, but its magnitude is very small. This is consistent with some of the obstacles mentioned by Abdulla (2015) in her study the perspectives of women managers. She mentioned that female managers face formal and informal gender discrimination practices. Such practices include but are not limited to “trivialization of female skills and scholarship, difficulty in accessing certain professions and cross-gender social network and support” (Abdulla 2015, p.

25). Women find it hard to be part of the decision-making processes or access promotions and training due to the nature of Kuwaiti society. Decisions are made in small social gatherings known as “Diwaniya”58 which are exclusive to men (Garrison 2015). Opportunities for higher management positions or senior positions in the government and other channels for career advancements require “Wasta” in Kuwait. “Wasta” is a type of cronyism59 that is dependent on strong social networks and exchange of favors between individuals regardless of their skills or qualifications. People in Kuwait believe that “Wasta” is stronger than the law. It impacts the fairness of the judiciary system and prevents the establishment of a merit-based system (Garrison

2015). “Wasta” works in favor of males because they have access to social networks through

“Diwaniya”; which females do not (Garrison 2015). Furthermore, the appointment to leadership positions in the public sector is by decree from the Council of Ministers.60 Usually the nominations for such positions are done through informal gatherings such as Diwaniya or private small groups meetings and females are rarely nominated for such positions.61

58 “Diwaniya” is where “male heads of families and other men from a similar social background” regularly meet and form a society to operate for “its own collective benefit.” (Al-Mughni 2001) page 16.

59 Cronyism refers to the appointment of friends and associates to positions of authority without proper regard to their qualifications. Retrieved from: http://www.dictionary.com/browse/cronyism?s=t, accessed on May 8th, 2018.

60 (CSC n.a.-a).

61 Since females got the political right to vote in 2005, there have been 7 elections in total (between 2006 and 2016) for the Kuwaiti Parliament and 13 governments. During these elections, only 5 females won positions to represent 74

We can conclude from the discussion above that the discrimination against females is a result of the differences in the social and child allowances provided to males and females, differences in returns on potential experience at the mean level and the 25th and 50th quantiles of the wage distribution, as well as unobservable factors at the 90th percentile. The gender segregation and societal restrictions on females in terms of occupations and their gender roles seem to have a negative impact on the careers of female workers, especially at higher positions in the public sector. As a result, the gender wage gap is persistent over time.

The previous results are consistent with prior expectations for the public sector. The wages in the public sector are determined based on education level, occupation, marital status, and gender (the last two are related to social allowance and child allowance). In addition, promotions to higher occupation rank, which results in wage increases, are based on the actual years of experience. Thus, individuals who end up in the high income quantiles are those who have worked more years. Furthermore, there are special allowances granted based on the occupation (such as an accountant allowance, a judge allowance, etc.) or based on the occupation rank in the employment hierarchy (such as an allowance for leading or supervisory positions).

This implies that workers can earn higher wages by increasing their education level or working more years to receive periodic raises (for all workers annually and varying by occupation group and rank) and promotions to higher rank occupations.

The Kuwaiti population is young and most of working age individuals (15-20 years old) are studying rather than in the labor market. At lower wage quantiles, females are advanced in terms of education relative to males. This implies that the males in the lower wage quantiles started working earlier than females and thus have better potential work experience, which

Kuwaitis in the parliament. Furthermore, 8 females were appointed as Ministers in the government by the Council of Ministers during the same time period (KNS 2012, CMGS n.a., AlQabas 2017). 75

matches the results. Based on the civil service law, male and female workers should have equal employment opportunities in the public sector but the results show that male workers are more frequently represented in occupations at the 25th and 50th percentiles. This could reflect job segregation, where jobs are classified based on gender and thus female workers might not have access to male dominated jobs, either by their choice as it is socially not acceptable, or because employers might request male workers for these jobs.

Given that the Civil Services Law in Kuwait62 ties public sector wages to educational degree and years of experience; the workers’ gender is irrelevant except for the married social allowance and child allowance. Also, according to the private sector labor law No.6 of 2010 article 2663, female and male workers are equally paid for equal jobs. Thus, the wage gap could be due to a glass ceiling, where females find it difficult to access highly skilled jobs. The gap could also be due to occupational segregation where certain types of jobs are gendered by social norms.

62 (CSC n.a.-b).

63 (PAM 2010). 76

Figure 2-7. Kuwaitis Wage Distribution, Public Sector

2.5.2.2 Non-Kuwaitis in the Private Sector

The results at the mean level are opposite to the results across the wage distribution. At the mean level, the overall wage advantage of females relative to males is 0.314 log points. The overall composition effect is in favor of female workers. Education level and gender distribution across different occupations are the main contributing factors to the composition effect. These effects are mitigated by males’ endowment advantage in years of potential experience; males have fewer years of school than females but join the work force earlier. The total wage gap is reduced slightly by the wage structure effect in favor of males. All explanatory variables contribute to the total wage structure effect except for the constant term and legislators, senior officials and managers as well as professional dummy variables. The difference in estimates of 77

the coefficients between males and females indicates that there is discrimination as the market values male characteristics differently than female characteristics. But the wage gap at the mean level is mostly due to differences in endowments as the wage structure effect is small compared to the composition effect.

The results of the analysis at the mean level are misleading as the story is completely different across the wage distribution. Results across the wage distribution reveals that the overall wage advantage of males relative to females is between 0.128 and 0.385 log points across the wage distribution. Unlike the results at the mean level, the overall composition effect favors male workers. Potential years of experience, education, gender distribution across occupations and citizenship are the main contributing factors to the composition effect at different quantiles.

At the 10th and 25th quantiles, females are endowed with better education and males are endowed with better potential experience. The opposite is true between the 50th and the 90th quantiles.

Evaluating the importance of the composition effect and the wage structure effect to the overall wage gap, it is clear that the wage structure effect is less important at higher quantiles than at lower quantiles.

The main contributors to the total wage structure effect between the 10th and 50th quantiles are unobserved wage determinants. Males enjoy an earning premium (significant constant term) over females at the lower two quantiles while the opposite is true at the 50th quantile due to some unobserved wage determinants. Unlike the results at the mean level, females have higher returns to occupation only at the top two quantiles.

In general, occupations between the 10th and 50th quantiles represent low wage/skill jobs, while the occupations between the 50th and 90th quantiles represent a high wage/skills jobs. It is not clear why there is an imbalance in gender distribution across occupations. At lower quantiles,

females have better education, while males have better potential experience and the returns to these endowments are higher for the endowment-advantaged group. Keeping in mind that I do not control for specific jobs within each occupation group, it could be that there are different job requirements within each occupation group. These occupations might attract a certain group of workers due to their endowment advantage and reward them better than the other group of workers. Also, it could be that females are facing difficulties accessing high skill jobs. As a result, they will accept low skill jobs and earn higher returns to their qualifications as they are over-skilled for the type of occupations they accept. For example, Filipino females with high school education are accepting primary occupations such as house maids.

In contrast, the story is quite different at the higher wage/skill occupations. Males have better education while females have better potential experience. At these quantile, gender distribution across occupation is in favor of males but the returns to occupations are higher for females. In addition, returns to education and potential experience (only at the top quantile) are higher for females. This implies that females could have specific skills/experiences that the market rewards more and thus the higher returns to occupation for females mitigates the gender wage gap. Also, females are preferred to males in certain occupations that provide services exclusive to females, such as nurses, spa specialists, beauty salon workers, etc.

The imbalance in the gender distribution across various occupations is evident from the descriptive statistics and contributes to the gender wage gap. This could be due to many reasons such as: 1) selection issues either by the employers who prefer to hire males or by the workers themselves. A major factor that impacts the job choice of foreign workers is networking; which is one way to get a job in Kuwait. Networks are mainly among individuals who share the same background (gender or country of citizenship). Thus, it could be that the concentration of

workers across occupations based on gender is impacted by networking; 2) omitted factors such as workers’ skills where a certain group of workers might be advanced relative to other groups and preferred for employment. For example, workers from East Asia (such as China and

Thailand) are preferred as spa specialists, Indians are preferred in professional occupations such as medical staff and technicians, and Arabs are preferred as teachers; 3) Skill endowments where certain occupations might require more schooling while other occupations might require actual experience. This can be seen from the descriptive statistics where females who have more years of schooling are concentrated in professional occupations, while males who have more years of potential experience and are concentrated in primary occupations; 4) Employment laws that provide exclusive access to certain occupations for one gender group but not the other. For example, Article no. 23 of the new private sector law (PAM 2010) indicates that females are prohibited from working in occupations that provide exclusive service for males. Also, females are not allowed in occupations or trades that are dangerous, hard or harmful to their health.

Similarly, males are prohibited from be employed at establishments that provide services exclusively to females like beauty salons, spas and fitness centers.

Figure 2-8. Non-Kuwaitis Wage Distribution, Private Sector

2.6. Conclusion

The results of the analysis presented in Section 2.5 lead to the following conclusions. For

Kuwaiti workers in the public sector, males earn higher wages than females across the wage distribution and the gap is the widest in the top quantile. Discrimination against females is mainly due to returns from the social allowance and child allowance paid to married males but not females, as well as work experience. At the top quantiles, the gap is mainly due to unobservable factors in favor of males. This could reflect the obstacles that females face in the labor market such as job segregation, traditional gender role perceptions and difficulty in obtaining access high managerial positions. The UQR analysis results confirms the results at the mean level and shows that returns vary across the wage distribution. Returns to education are 81

higher for males and significant at the mean level but insignificant across the wage distribution.

This is consistent with the wage scale in the public sector, which rewards the level of education of males and females equally.

For the non-Kuwaiti workers in the private sector, males earn more than females and the gap widens across the wage distribution. Differences in endowments between males and females are strong and significant. Discrimination is evident against males at top quantiles as their returns to education and occupation are lower, even though they have better endowments. In contrast, discrimination is evident against females at the 50th quantile as their better potential experience is rewarded less than males. The analysis by percentile reveals heterogeneity in the gaps as well as their components. This means that the mean level results might be misleading for policy recommendations. While the composition effect at the mean level is in favor of females, this is not the case across the wage distribution. Females are endowed with better education at lower quantiles and better potential experience at higher quantiles. They are under-represented across various occupations, but their returns are higher at top quantiles. Further research needs to be done to explain the imbalance in the gender distribution across occupations. It could be a result of selection, omitted factors, different skill requirements, or government policies that impacts job access.

Foreign female labor participation is not an issue in Kuwait as they do not face societal restrictions regarding the type of occupations they work in. In addition, their service is critical to the Kuwaiti economy as they cannot be substituted by Kuwaiti females or by males (Kuwaiti or non-Kuwaiti). The decomposition results imply that non-Kuwaiti females would benefit from policies that would improve their potential experience and their access to various occupations to balance the gender distribution across occupations especially in high wage/high skill

occupations. Non-Kuwaiti females are highly concentrated in the service sector. Diversifying females occupations and promoting their accessibility into higher skilled occupations could reduce the gap because the clustering of females in low skilled, low pay occupations widens it.

This analysis is subject to some limitations but it also has possible future extensions.

First, the analysis does not control for selection. Selection is an issue in the Kuwaiti labor market where workers self-select whether or not to participate in the labor market. They also make a choice to work in one sector or occupation rather than another; or they are selected by an employer who might prefer to hire one group over the other. For example: women might self- select to not participate in the labor force to take care of their children or because they have another source of income and thus do not need to get a job. Or, they self-select a specific sector, such as the public sector, since its working conditions easier for women; or they self-select a specific job, such as teaching, because it has longer paid vacation, it is gender segregated, and more prestigious relative to other jobs. In contrast, employers might reject the idea of hiring females because they worry the traditional women gender roles might impact their career commitment or they wish to avoid any tensions that may arise if they trespass the societal sensibilities that are associated with Kuwaiti women and employment. Controlling for selection might result in different findings than what we found in the analysis in this chapter. Second, the analysis controls for the education degree but makes no conclusions about the quality of education and how it might impact wages. Third, the potential experience category is calculated following Mincer, but it does not control whether the experience gained was in the same field as the workers’ occupation.64

64 It is common for Kuwaitis specifically employed in the public sector to be hired in occupations that do not match their field education. 83

CHAPTER 3

CITIZENSHIP WAGE GAP IN THE KUWAITI LABOR MARKET

3.1. Introduction

It was the discovery of oil in Kuwait in 1938 and the first shipment of crude oil in 194665 that changed the shape of the Kuwaiti labor market. The economy of Kuwait shifted from a simple, small economy based mainly on the natural pearl trade as well as other commercial trade activities with countries like India and those along the northern and eastern African coasts, to become an economy that is dominated by oil as Kuwait is one of the most important oil exporting countries in the world because of its large oil reserves. As the economy expanded and its structure changed, it was necessary to have the appropriate manpower to accommodate these changes. At that time, the small population of Kuwait could not satisfy the huge demand for labor. As a result, the country’s doors opened widely to migrant workers from other countries

(Alessa 1981). The economy became highly dependent on foreign workers, and eventually the number of foreigners exceeded the number of Kuwaitis in the population. This continues to be the case today, where foreigners account for about 70 percent of the population 66 and about 82 percent of the labor force.67

Given the economy’s labor needs, Kuwaiti and non-Kuwaiti workers are complementary to each other. It would not have been possible for the Kuwaiti economy to achieve the necessary shift without the help of the foreign workers, and the economy today cannot operate solely with

Kuwaiti workers. Non-Kuwaiti workers hold jobs that Kuwaitis will not fill, either because

65 (KPC 2017).

66 Appendix, table (A-1).

67 Appendix, table (A-5). 84

Kuwaiti workers lack the required skills (such as in the case of blue-collar jobs) or because these jobs are dead-end (in terms of career advancement) or they are low-paying jobs, which are considered non-prestigious and fail to satisfy the career goals of Kuwaiti citizens (Al-Qudsi

1989). The demographic changes in the last 50 years and the changing needs of the labor market resulted in the government’s active involvement in the economy in general and the labor market in particular. The government has intervened in the labor market in four important ways. First,

Kuwaiti workers have been paid more than non-Kuwaiti workers to encourage them to engage in the labor force and thus increase the labor force participation rate (Al-Qudsi 1985). Second, the government, as the owner of Kuwait’s oil and gas resources, chooses to redistribute the wealth derived from these natural resources by offering social benefits and free government services such as health and education to national citizens, while non-national citizens pay a price lower than the market price (Shah and Al-Qudsi 1990). Third, the government grants every Kuwaiti worker a job in the government sector, where wages and promotions are not related to performance or efficiency (Al-Enezi 2002, Abdalla and Al-Homoud 2012). Last, the government, aiming to control and limit foreigners in the country, has restricted foreign workers migration to Kuwait by imposing sponsorship arrangements which are called ‘kafala’. In addition, Kuwaitis have access to purchasing power through joint ownership of businesses with foreigners. In order to limit foreigners competition with the Kuwaiti merchant class in the private sector; a foreigner can only establish a private business if a Kuwaiti investor owns at least 51 percent of the business and registers it under his/her name (Alessa 1981).

The result of these policies has been that Kuwaiti workers have moved out of productive self-employment or employment in productive private industries such as pearl diving, ship making, and blacksmithing into government service jobs (Al-Qudsi 1985). The majority of

Kuwaiti workers are employed in the public sector (about 87 percent in 2015)68, and they seek employment mostly in office jobs and reject the kind of work that requires manual labor or pays low wages. They perceive that such jobs negatively impact their social status and do not satisfy their career goals (Al-Qudsi 1989). The guaranteed employment of Kuwaitis in the public sector has resulted in a mismatch between jobs and worker qualifications. It has also meant the underemployment of Kuwaiti workers, as their numbers exceed the number of jobs available so they are less productive (Abdalla and Al-Homoud 2012, Harry 2007). These conditions have led to further reliance on foreign workers to achieve the development plans of the country. Because

Kuwaiti workers are less productive and more expensive relative to non-Kuwaiti workers; the private sector operates in favor of non-Kuwaiti workers and creates fewer jobs for Kuwaitis

(Shah 2006). This creates two segregated job markets with separate wage systems for Kuwaiti vs. non-Kuwaiti workers (Al-Qudsi 1989).

This chapter updates this seminal research by examining the wage gap in Kuwait based on workers’ citizenship using an extension of the Oaxaca-Blinder (OB) decomposition,

Unrestricted Quantile Regression (UQR) analysis, and new Kuwait Labor Force Survey data

(KLFS) to investigate whether the citizenship wage gap is persistent in the Kuwaiti labor market, and whether it is different across the income quantiles. It hypothesizes that the gap is persistent, and the gap is wider at the bottom quantile of the wage distribution. Given that foreign workers represent the majority in the Kuwaiti labor market, it is important to re-visit the pay differential issue between Kuwaiti and non-Kuwaiti workers because of the following issues:

First, although foreign workers represent the majority of the labor force, their share of income is very low. For example, in 2015, non-Kuwaiti workers accounted for 81.4 percent of

68 (KLFS 2015). 86

the workers in the labor market, but the ratio of non-Kuwaiti to Kuwaiti average monthly earnings was only about 20 percent.69 Second, unequal pay for the same work is unfair to the disadvantaged group, and skilled foreign workers might leave the country to look for better job opportunities and better pay in other countries. This problem of adverse selection could mean that those expatriate workers who stay in Kuwaiti may be the ones who are careless and less efficient in their work (Alessa 1981). In either case, Kuwait’s economy will be negatively impacted. Third, the low wages of non-Kuwaitis give them an advantage over Kuwaiti workers.

This make it hard for Kuwaitis to find a job in the private sector, as private sector businesses are profit-oriented and preferentially hire non-Kuwaitis who are cheaper and willing to do any kind of job. This works against the government’s efforts to direct Kuwaitis toward employment in the private sector. Finally, most foreign workers in Kuwait are low skilled laborers (about 73 percent of foreign workers had at most a secondary (middle school) in 2015).70 This could indicate that employers (especially those in the private sector where the majority of non-Kuwaitis are employed) are not investing in cost-efficient new technologies, but rather continue to use more labor-intensive production processes. This in turn is harmful to the country’s development and economic advancement. Investigating the pay differential based on citizenship, its persistence, and the role that discrimination plays in perpetuating the wage gaps will help formulate policy recommendations to correct the market distortions and enable the government to achieve its development plan, it will also help to increase the participation rate of the Kuwaiti workers, and improve their efficiency and performance. Also, resolving the pay differential issue will attract

69 Source: Integrated data of December 2015, Kuwaiti Statistical Bureau – Accessed on 12.16.2017 http://lmis.csb.gov.kw/En/integrateddata_graphview.aspx?graph_id=1004

70 Appendix, table (A-8). 87

better-qualified foreign workers who are more highly skilled, as they will be able to earn higher wages and face less discrimination.

This chapter contributes to the existing literature in two ways. First, it investigates the current citizenship pay gap in the Kuwaiti labor market, a topic which was last investigated empirically by Al-Qudsi (1989) and El-Toni (2004) more than a decade ago. Second, it applies the Blinder-Oaxaca decomposition model (OB) using unrestricted quantile regression (UQR)71; this is a new analytical method that has never been applied in research on the Kuwaiti labor market. This chapter also uses new data sets (Kuwaiti Labor Force Survey data (KLFS) from

2014 and 2015). The OB-UQR analysis allows us to investigate the wage gap across the wage distribution and identifies the contribution that each explanatory variable makes to creating or sustaining the wage gap.

The chapter will be organized as follows. Section 3.2 provides the literature review, and section 3.3 discusses the conceptual framework. Section 3.4 describes the data, its source and the selected sample, section 3.5 presents the analysis results and interpretation, and finally section

3.6 summarizes the findings and presents the conclusions and policy recommendations.

3.2. Literature Review

The Kuwaiti economy is characterized by high dependence on non-Kuwaiti workers in addition to a pay differential between Kuwaiti and non-Kuwaiti workers. Although the ethnicity/citizenship wage gap continues to be a rich area of research with various applications and empirical findings, a very limited number of studies have examined the citizenship wage gap in Kuwait specifically. This could be because the data is very limited and/or restricted. As

71 (Firpo, Fortin, and Lemieux 2009, Fortin, Lemieux, and Firpo 2011). 88

Baldwin-Edwards (2011) indicates, “historically the poor quality – or even existence – of data has made analysis extremely difficult and in certain respects impossible” (Baldwin-Edwards

2011, p. 1). Thus, in this section, I will review the existing literature regarding Kuwait to provide an overview of the different methodologies used to examine the citizenship wage gap and their findings.

The literature about Kuwait has mostly examined some of the traditional factors that contribute to the citizenship wage gap. It focuses on the returns that workers experience given their education levels and work experience but also controls for individual and family characteristics, occupation, citizenship and sector of employment based on the human capital model. This might be because the available data does not provide enough information, such as firm level data, time use, test scores, or firm-worker match data to evaluate non-traditional factors.

Few empirical studies have investigated the pay differential in the Kuwaiti labor market.

They estimate the basic Mincer earning function but extend the basic model in order to attain more accuracy in the estimation. In addition to education and experience, the basic Mincer function is extended to include family characteristics (marital status, family size, children at different ages), occupation, sector of employment (public, private), economic activity, hours worked, job tenure and citizenship (Kuwaiti vs non-Kuwait (Arab, non-Arab)).

Even though few studies have empirically investigated the discrimination issue in the

Kuwaiti labor market, all these studies focused on the workers’ country of origin and sector of employment. The earliest empirical study of the Kuwaiti job market carried out by Al-Qudsi in

1979 examined the distribution of wages (Al-Qudsi 1979). Al-Qudsi investigated the inequality between Kuwaiti and non-Kuwaiti workers as well as the sources of within-group inequality.

Another study by Al-Quisi (1984) focused on earning determinations and differentials in the

Kuwaiti labor market. Al-Quisi investigated the wage gap between Kuwaiti and non-Kuwaiti workers, public versus private sector workers, and white-collar versus blue-collar workers. In another study around the same time using the Human Capital model, Al-Qudsi investigated the earning differences between Kuwaitis and non-Kuwaitis based on education and experience (Al-

Qudsi 1985). Furthermore, he estimated the returns on education for Kuwaiti and non-Kuwaiti workers and how the returns differed across sectors of employment (private vs public sector)

(Al-Qudsi 1989).

It was not until the late 1980s and early 1990s that researchers began to examine the differentials in wage earning due to on gender. Shah and Al-Qudsi (1990) focused on female work roles in Kuwait using subsamples of women based on citizenship (Kuwaiti, Arab and Non-

Arab). Hosni and Al-Qudsi (1988) studied sex discrimination in the Kuwaiti labor market and divided their sample in a similar way as the previous study. The last two mentioned studies used

Kuwaiti males as the reference group in the analysis. It was later when El-Toni (2004) studied returns on human capital in the Kuwaiti labor market across sectors of employment (public vs private) using subsamples of Kuwaiti and non-Kuwaiti workers.

The findings from the above studies based on citizenship and different sectors of employment can be summarized as follows:

First, the human capital model has a higher explanatory power for non-Kuwaiti workers than for Kuwaiti workers (Hosni and Al-Qudsi 1988, Al-Quisi 1984, Al-Qudsi 1979, Al-Qudsi

1985), and for Non-Arab workers relative to Arab workers (Hosni and Al-Qudsi 1988, Shah and

Al-Qudsi 1990). Only one study found that the Human Capital Model’s explanatory power for

Kuwaiti workers was higher relative to non-Kuwaiti workers (El-Toni 2004). Furthermore, the

human capital model has a higher explanatory power for private sector workers compared to public sector workers (Al-Quisi 1984, Al-Qudsi 1989). The main differences between El-Toni

(2004) and the previous studies is in the data used and the focus of the analysis. He used data from the Kuwaiti Civil Commission Service (1997) and Kuwait Ministry of Social Affairs and

Labor (1998). These are not survey data. Furthermore, he used the human capital model to estimate the earning function based on sector of employment and citizenship to measure the returns to education and experience.

Second, the findings regarding the rate of return on human capital are inconclusive. Some studies found that the rate of return on education and experience is higher for Kuwaitis relative to non-Kuwaitis (Al-Qudsi 1979, Al-Qudsi 1985, Hosni and Al-Qudsi 1988). On the other hand, other evidence shows that returns on education and experience are higher for Non-Kuwaitis relative to Kuwaitis (Al-Quisi 1984). Furthermore, El-Toni (2004) found that Kuwaiti workers have higher returns on experience relative to non-Kuwaiti workers in the public sector, while non-Kuwaitis have higher returns on education relative to Kuwaitis.

Third, workers in the public sector enjoy an earnings premium over those employed in the private sector (Hosni and Al-Qudsi 1988, Al-Qudsi 1989, Shah and Al-Qudsi 1990).

Although it is also significant to note that workers in the private sector enjoy higher returns on education and experience relative to those employed in the public sector (Al-Quisi 1984, Al-

Qudsi 1989).

Fourth, evidence reveals that non-Kuwaiti workers suffer more discrimination in the public sector compared to the private sector (Al-Qudsi 1989). There is more inequality among non-Kuwaitis than among Kuwaitis (Al-Qudsi 1979), and unexplained income variations among

Kuwaiti workers are larger relative to non-Kuwaiti workers (Al-Qudsi 1989).

To summarize, the Kuwaiti labor market is segmented across citizenship and sector of employment with separate wage scales. There are important factors other than education and experience that explain the earnings differences between workers in the Kuwaiti Labor market.

3.3. Conceptual Framework

To study the difference in wage earnings between Kuwaiti and non-Kuwaiti workers, this paper uses an extension of the OB Decomposition Model Regression by Fortin, Lemieux, and

Firpo (2011). The aforementioned decomposition model is identical to the model used in the second chapter to investigate the gender wage gap. Thus, I will refer the reader to section 2.3 where the conceptual framework is discussed in detail.

3.4. Data and Descriptive Statistics

The data used in this chapter is the same as the data used in the gender gap analysis in chapter 2. The data is divided into 3 sub-sample: Kuwaiti Workers, Arab workers, and Non-Arab workers. There are 4886, 2095, and 1764 observations respectively of workers in these three categories who are between the age of 18 and 65 years old. The sample excludes workers in the following occupations: service, shop and market sales, agriculture and fishery, craft and related trades, plant and machine operators and assemblers, and primary occupations, as few or no

Kuwaiti workers are employed in these sectors. This exclusion is also necessary to avoid bias in the analysis results due to the clustering of non-Kuwaiti workers in low paying occupations.

Potential Work Experience is calculated following Mincer (1974).72 Education is categorized by five levels: 1) Secondary and below, 2) High School, 3) Diploma (one to two-year programs following a high school degree), 4) University (Bachelor’s degree), and 5) Masters and/or Ph.D. degree. Occupation is categorized following the ISCO-88 job description code: 1) Legislators,

Senior Officials and Managers, 2) Professionals, 3) Clerks, and 4) Technicians and Associate

Professionals.

Table 3-1 displays the descriptive statistics by citizenship and sector of employment.

Figures 3-1 and 3-2 shows the distribution of wages for Kuwaiti, Arab, and non-Arab workers.

Rightward shifts of the Kuwaiti workers wage densities imply that in the Kuwait labour market, the wage distribution among Kuwaiti workers is statistically greater (higher wages) than that of non-Kuwaiti workers (Arab and non-Arab). Furthermore, the wage distribution among Arab workers is statistically greater (higher wages) than that of Non-Arab workers. This is not the case across the entire wage distribution.

The average real hourly wage and the standard deviation for Kuwaiti workers are higher relative to Arab and non-Arab workers. This suggests that there is more wage dispersion between

Kuwaitis than non-Kuwaitis. Furthermore, Arab workers have higher average real hourly wages relative to non-Arab, but the wage dispersion is higher among Non-Arab workers relative to

Arabs. The descriptive statistics reveal differences between Kuwaiti and non-Kuwaiti workers in education, potential experience and occupation. For both Non-Kuwaiti samples, workers have more potential work experience than Kuwaitis. In addition, Arabs have slightly more average years of schooling than Kuwaitis. Results show that most Kuwaitis are employed in the public sector and they are dominant in professional occupations. Non-Kuwaitis are mostly employed in

72 Potential Work Experience = Age – Years of Schooling – 6. 93

the private sector. Arab workers are dominant in the same occupations as Kuwaitis, while Non-

Arabs are dominant in technical and associated professional occupations.

In sum, differences in education and experience between Kuwaitis and non-Kuwaitis are present, although The Kuwaiti and Arab samples show similar patterns in employment and education.

Figure 3-1. Wage Distribution of Kuwaiti, Arab and Non-Arab Workers

Figure 3-2. Wage Distribution Kuwaiti vs Non-Kuwait Workers

Table 3-1: Descriptive Statistics for Workers Ages 18-65 Years Old

3.5. Results

This section discusses two sets of outcomes. First, the parameters of the human capital models are discussed in Section 3.5.1. In line with the conceptual framework, several regressions are run for each citizenship group: specifically, a regression of the hourly wages and five regressions of their RIF transformations corresponding to 10th, 25th, 50th, 75th, and 90th wage quantiles. The results are displayed in Table 3-2 for the three sub-samples.

Section 3.5.2 reports decompositions of the citizenship wage gap at both mean level and different quantiles. The decomposition results are displayed in Table 3-3. The results of this section identify differences in the wage gap across income quantiles and the separate

contribution of each independent variable to the gap. In addition, exploring the 10th and 90th percentiles helps us to identify whether there is a sticky floor or glass ceiling in the Kuwaiti labor market. This will be helpful for the policy recommendation presented at the end of this chapter.

The empirical analysis results of the OLS model indicate that returns due to human capital endowments vary by citizenship. The Chow tests performed on the wage equations for

Kuwaitis and non-Kuwaitis (Arabs and Non-Arabs separately) result in the rejection of the regression coefficients’ equivalence according to citizenship.73

3.5.1 Human Capital Returns

The results of the human capital model estimations are shown in Table 3-2. The first two columns report marginal effects of individual characteristics on the log of hourly wages of each group of workers (Kuwaiti, Arab, and non-Arab). The next columns provide similar information at different wage quantiles.

As shown in Table 3-2, hourly wages increased for Kuwaitis and decreased for non-

Kuwaitis in general between 2014 and 2015. As expected, more schooling and potential work experience have a positive impact on wage earnings. Non-Kuwaiti workers have stronger returns to education than Kuwaiti workers at the mean level and across the different wage quantiles except for bachelors and masters/PhD degree holders at the top two quantiles. This is different from previous findings based on 1970s data and consistent with previous findings based on

1980s data; Al-Qudsi (1985) reported higher returns to education for Non-Kuwaitis in the

Kuwaiti labor market. On the other hand, Al-Qudsi (1989) reported an opposite finding to his

73 The computed F-values of the Chow-tests are 65.35 for Kuwaitis vs Arabs and 51.34 for Kuwaitis vs non-Arabs. These values are greater than the 0.05 critical values (1.75).

previous work when he analyzed the public and private sector separately. This can be explained by the nature of the private sector which is close to a competitive market (Al-Qudsi 1989). Since most Non-Kuwaitis are employed in the private sector, their returns to education are higher than

Kuwaitis because of the competitive nature of the private sector relative to the public sector.

Similarly to Al-Qudsi (1989) findings in the private sector, I find stronger returns to potential experience for Non-Kuwaitis than for Kuwaitis at the mean level and all quantiles except for the 50th and 75th quantiles. One explanation for higher non-Kuwaiti return is that

Kuwaitis are eligible to retire with full benefits at younger age, while non-Kuwaitis are working based on a temporary job contract and they are not eligible for retirement.74 As a result, non-

Kuwaitis end up working more years relative to Kuwaitis and enjoy higher returns to potential experience as they have no incentives to retire as early as Kuwaitis.

Returns to occupation (relative to clerks) reveal that participation in more highly skilled occupations (such as Legislators, Senior Officials & Managers) yields higher returns than other occupations. The returns on occupation decrease as we move down the employment hierarchy to lower skilled occupations. Non-Kuwaitis enjoy stronger returns to occupation than Kuwaitis at the mean level and across the wage distribution, which is consistent with the findings of El-Toni

(2004). The only exception is for technicians and associated professionals. Kuwaitis enjoy higher returns to occupation at the mean level and between the 10th and 50th quantiles.

74 Based on the Kuwait civil service law for public sector workers and the private sector work law, non-Kuwaitis are not eligible for retirement benefits and only receive terminal service indemnity (CSC n.a.-a, PAM 2010). In the public sector, non-Kuwaitis are hired based on temporary job contracts in the public sector. There are 3 types of contracts with different benefits: 1) Second contract: to hire non-Kuwaitis in temporary jobs except for expert and senior technicians, 2) Third contract: to hire experts and senior technicians, 3) The lump sum contract: to hire workers for simple occupations such as support or technical assistance, and jobs that does not require a specialized degree. Workers based on contracts are not eligible for any wage increases or promotions and only those hired based on a second contract are eligible for the terminal service indemnity (CSC n.a.-a).

Public sector workers enjoy higher wages relative to private sector workers at the mean level and across the wage distribution. Kuwaiti and Non-Arab women have lower wages as compared to Kuwaiti and Non-Arab men, while the opposite holds for Arabs at the mean level.

This is consistent with previous findings in the literature about the public sector (El-Toni 2004).

In contrast, females earn less than males for all sub-groups across the wage distribution except for Arabs in the 10th percentile. This is consistent with our findings from chapter 2 where we found that males earn more than females across the wage distribution.

Finally, married workers have higher wages as compared to single workers at the mean level and across the wage distribution for all groups except Arab at the top two quantiles. The positive marriage effect on the wages of Kuwaitis is partly mechanical; married men receive a wage supplement related to social and child allowances.75 The social allowance is paid for male and female workers based on marital status and educational degree. Single male workers receive an equal social allowance to female workers if they have the same degree and years of experience. Non-Kuwaitis employed in the public sector used to receive the social allowance but it was decided after the liberation in 1990 to suspend this disbursement to non-Kuwaiti employees (CSC n.a.-b).

3.5.2 Wage Decomposition: Structural and Composition Effects

This study applies the basic OB decomposition model at the mean level and across the wage distribution (at the 10th, 25th, 50th, 75th and 90th quantiles. Table 3-3 shows the mean of the citizenship wage gap, the total composition effect, the total wage structure effect, and the

75 Social allowance is paid in two categories, single and married, where it is higher for married than single. Social allowance increases with educational attainment and years of experience. Child allowance is 50 KWD per child up to 7 children; @ $150 per child). (CSC n.a.-b). 98

contribution of the explanatory variables (summarized as groups) to each effect for Kuwaiti,

Arab and Non-Arab workers in the labor market. A positive value indicates Kuwaiti advantage in the contribution to the gap while a negative value indicates Non-Kuwaiti (Arab or Non-Arab) advantage. The wage gap decomposition between Kuwaiti workers vs Arab workers and between

Kuwaiti workers vs Non-Arab workers are displayed also in Figure 3-2 and Figure 3-3 respectively. Note that I will compare my results to Al-Qudsi (1989) as the research in this study is most similar to mine in this chapter. One difference is that Al-Qudsi investigates the gap in the public sector and private sector separately. Thus, it is expected that my analysis of the joint public-private gap will result in a larger gap. Also, there have been some wage increases over time for Kuwaiti workers only and thus I expect a wider gap relative to Al-Qudsi (1989) in general. My study does not investigate the gap by sector because the labor market is segregated.

Kuwaitis are mainly employed in the public sector while the opposite if for non-Kuwaitis. The sample size (Kuwaitis in the private sector and non-Kuwaitis in the public sector) is too small to conduct the analysis by sector.

Table 3-2: OLS & UQR Coefficients by Country of Citizenship for Workers Ages 18 - 65 Years Old

Kuwaiti Workers Sample Dependent Variable: Ln(wage) OLS UQR Explanatory Variables Mean level 10th 25th 50th 75th 90th Sample Kuwaiti Kuwaiti Kuwaiti Kuwaiti Kuwaiti Kuwaiti Female -0.218*** -0.140*** -0.198*** -0.226*** -0.230*** -0.284*** (0.00990) (0.0160) (0.0125) (0.0126) (0.0158) (0.0276) Married 0.0299*** 0.0297 0.0161 0.0473*** 0.0354** 0.0160 (0.0113) (0.0197) (0.0153) (0.0146) (0.0167) (0.0268) Survey Year 2015 0.0520*** 0.0421** -0.0157 0.0683*** 0.0910*** 0.0922*** (0.00989) (0.0165) (0.0125) (0.0125) (0.0153) (0.0267) High School Degree 0.172*** 0.229*** 0.123*** 0.0875*** 0.161*** 0.239*** (0.0212) (0.0513) (0.0329) (0.0272) (0.0255) (0.0351) Diploma 0.304*** 0.351*** 0.204*** 0.185*** 0.311*** 0.444*** (0.0226) (0.0529) (0.0344) (0.0289) (0.0280) (0.0417) Bachelor Degree 0.522*** 0.514*** 0.418*** 0.395*** 0.501*** 0.740*** (0.0262) (0.0544) (0.0368) (0.0337) (0.0377) (0.0634) Master or PhD Degree 0.723*** 0.463*** 0.385*** 0.435*** 0.813*** 1.607*** (0.0335) (0.0569) (0.0396) (0.0392) (0.0507) (0.118) Public Sector 0.194*** 0.464*** 0.217*** 0.0833*** 0.0487** -0.0445 (0.0169) (0.0408) (0.0241) (0.0216) (0.0242) (0.0443) Potential Work Experience 0.0209*** 0.00489 0.0139*** 0.0281*** 0.0332*** 0.0314*** (0.00192) (0.00321) (0.00248) (0.00239) (0.00289) (0.00536) Potential Work Experience Squared -0.000138*** -6.08e-06 -0.000117* -0.000367*** -0.000331*** 1.65e-05 (4.97e-05) (8.66e-05) (6.34e-05) (6.06e-05) (7.66e-05) (0.000153) Legislators, Senior Officials & Managers 0.229*** 0.156*** 0.191*** 0.256*** 0.298*** 0.324*** (0.0223) (0.0376) (0.0279) (0.0282) (0.0383) (0.0700) Professionals 0.127*** 0.100*** 0.179*** 0.221*** 0.164*** 0.0365 (0.0216) (0.0354) (0.0282) (0.0280) (0.0333) (0.0565) Technicians and Associate Professionals 0.0469*** 0.0785** 0.0826*** 0.0850*** 0.0255 -0.0307 (0.0156) (0.0326) (0.0238) (0.0195) (0.0195) (0.0261) Constant 1.174*** 0.606*** 1.079*** 1.271*** 1.430*** 1.661*** (0.0269) (0.0600) (0.0379) (0.0342) (0.0369) (0.0632)

Sample Size 4,886 4,886 4,886 4,886 4,886 4,886 Adjusted R-Square 0.4382 0.1641 0.2451 0.316 0.3016 0.2239

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Table 3-2 (Continues): OLS & UQR Coefficients by Country of Citizenship for Workers Ages 18 - 65 Years Old Arab Workers Sample Dependent Variable: Ln(wage) OLS UQR Explanatory Variables Mean level 10th 25th 50th 75th 90th Female 0.0467* 0.956*** -0.0867* 0.0611 -0.139*** -0.119** (0.0272) (0.132) (0.0448) (0.0381) (0.0296) (0.0522) Married 0.0194 1.217*** 0.0224 -0.0558 -0.144*** -0.176*** (0.0329) (0.203) (0.0664) (0.0476) (0.0348) (0.0652) Survey Year 2015 -0.0682*** -0.534*** -0.0431 0.0950** 0.000156 -0.0545 (0.0239) (0.130) (0.0460) (0.0374) (0.0259) (0.0474) High School Degree -0.00635 -0.707 -0.333* 0.156 0.143*** 0.0860 (0.0654) (0.431) (0.173) (0.109) (0.0515) (0.0934) Diploma 0.526*** 1.540*** 1.185*** 0.535*** 0.241*** 0.198 (0.0753) (0.427) (0.180) (0.132) (0.0669) (0.123) Bachelor Degree 0.469*** 0.807* 0.843*** 0.572*** 0.314*** 0.247** (0.0681) (0.430) (0.172) (0.117) (0.0561) (0.102) Master or PhD Degree 0.941*** 0.919** 0.799*** 0.832*** 0.750*** 1.657*** (0.0969) (0.445) (0.189) (0.159) (0.105) (0.252) Public Sector 0.460*** 0.469*** 0.507*** 0.854*** 0.355*** 0.168** (0.0290) (0.0907) (0.0479) (0.0505) (0.0364) (0.0661) Potential Work Experience 0.0297*** 0.0755*** 0.0422*** 0.0250*** 0.0298*** 0.0215** (0.00461) (0.0216) (0.00912) (0.00753) (0.00486) (0.00961) Potential Work Experience Squared -0.000265*** -0.000770* -0.000369* -0.000185 -0.000360*** -0.000134 (0.000101) (0.000447) (0.000206) (0.000174) (0.000108) (0.000222) Legislators, Senior Officials & Managers 0.636*** 0.576** 0.589*** 0.879*** 0.415*** 0.569*** (0.0545) (0.285) (0.120) (0.104) (0.0593) (0.106) Professionals 0.365*** 0.171 0.287** 0.548*** 0.340*** 0.289*** (0.0503) (0.301) (0.120) (0.0925) (0.0463) (0.0737) Technicians and Associate Professionals -0.162*** -1.514*** -0.687*** -0.0349 0.0836** 0.0776* (0.0430) (0.313) (0.114) (0.0729) (0.0325) (0.0451) Constant -0.305*** -2.537*** -1.022*** -0.524*** 0.508*** 1.049*** (0.0696) (0.406) (0.172) (0.111) (0.0600) (0.121)

Sample Size 2,095 2,095 2,095 2,095 2,095 2,095 Adjusted R-Square 0.5584 0.2401 0.5145 0.4682 0.2845 0.1186

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Table 3-2 (Continues): OLS & UQR Coefficients by Country of Citizenship for Workers Ages 18 - 65 Years Old Non-Arab Workers Sample Dependent Variable: Ln(wage) OLS UQR Explanatory Variables Mean level 10th 25th 50th 75th 90th Female -0.103*** 0.0917 0.0348 -0.0489 -0.138*** -0.426*** (0.0325) (0.0637) (0.0432) (0.0439) (0.0461) (0.0827) Married 0.00234 0.0990 0.0158 0.0411 0.00542 -0.126 (0.0365) (0.104) (0.0567) (0.0499) (0.0466) (0.0796) Survey Year 2015 -0.00403 0.0318 -0.0267 -0.0168 -0.0716* 0.111 (0.0266) (0.0586) (0.0381) (0.0375) (0.0374) (0.0685) High School Degree 0.295*** 0.625*** 0.355*** 0.291*** 0.0343 0.269*** (0.0508) (0.152) (0.0884) (0.0722) (0.0493) (0.0783) Diploma 0.727*** 1.378*** 0.759*** 0.703*** 0.402*** 0.646*** (0.0612) (0.169) (0.106) (0.0879) (0.0721) (0.114) Bachelor Degree 0.697*** 1.128*** 0.697*** 0.635*** 0.356*** 0.660*** (0.0576) (0.170) (0.0964) (0.0827) (0.0670) (0.111) Master or PhD Degree 1.027*** 1.092*** 0.703*** 0.781*** 0.708*** 1.592*** (0.0820) (0.174) (0.102) (0.109) (0.123) (0.271) Public Sector 0.604*** 0.475*** 0.500*** 0.766*** 0.692*** 0.362*** (0.0345) (0.0516) (0.0382) (0.0451) (0.0546) (0.103) Potential Work Experience 0.0274*** 0.0199 0.0227*** 0.0134* 0.0208*** 0.0656*** (0.00509) (0.0125) (0.00775) (0.00689) (0.00718) (0.0127) Potential Work Experience Squared -0.000249** 5.47e-05 -0.000281* -2.00e-05 -0.000176 -0.000842*** (0.000108) (0.000256) (0.000167) (0.000145) (0.000151) (0.000262) Legislators, Senior Officials & Managers 0.617*** 0.216** 0.474*** 0.774*** 0.694*** 0.815*** (0.0603) (0.108) (0.0838) (0.0914) (0.0938) (0.180) Professionals 0.390*** 0.00792 0.293*** 0.520*** 0.606*** 0.599*** (0.0540) (0.124) (0.0837) (0.0843) (0.0721) (0.125) Technicians and Associate Professionals -0.102** -0.484*** -0.128 0.00363 0.107** -0.142** (0.0446) (0.114) (0.0780) (0.0697) (0.0458) (0.0688) Constant -0.475*** -1.611*** -0.796*** -0.453*** 0.253*** 0.0560 (0.0597) (0.183) (0.0953) (0.0769) (0.0764) (0.131)

Sample Size 1,764 1,764 1,764 1,764 1,764 1,764 Adjusted R-Square 0.4895 0.1341 0.2425 0.3828 0.3276 0.1797 Diploma is a degree with 1 to 2 years of schooling After High School; Potential Work Experience = Age - 6 - Years of Schooling Occupation reference group is "Clerks" and Education reference group is " Secondary Degree or below". Standard errors in parentheses ; *** p<0.01, ** p<0.05, * p<0.1

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Table 3-3: Citizenship Wage Gap Decomposition Results

Reference Group: Kuwaiti Coef. Kuwaitis vs Arab Quantile Mean Level 10th 25th 50th 75th 90th Mean Wage Gap 1.262579 *** 1.860662 *** 1.572023 *** 1.104232 *** 0.9816284 *** 0.9706385 *** (0.0186043) (0.0731416) (0.032227) (0.0251249) (0.017234) (0.0285146) Composition effects attributed to Demographics -0.0564909 *** -0.0376767 *** -0.0499688 *** -0.0606096 *** -0.0599722 *** -0.0707733 *** (0.0038638) (0.0045632) (0.0041892) (0.0045284) (0.0053846) (0.0088881) Survey Year 2015 0.001373 * 0.0011109 -0.0004132 0.0018009 * 0.0024002 * 0.0024324 * (0.0007263) (0.0007315) (0.0004203) (0.0009621) (0.0012672) (0.0014356) Education -0.0201952 *** -0.0215376 *** -0.0248868 *** -0.0208326 *** -0.0136466 ** -0.0154771 (0.0056403) (0.0065633) (0.0055178) (0.0053606) (0.0064877) (0.0110928) Potential Experience -0.0221831 *** -0.0067182 -0.0133621 *** -0.0192438 *** -0.0286395 *** -0.0463951 *** (0.004042) (0.001984) (0.0026514) (0.0037366) (0.0053711) (0.0088679) Public Sector 0.1104412 *** 0.2642352 *** 0.1237452 *** 0.0474916 *** 0.0277733 ** -0.0253588 (0.0098593) (0.0238393) (0.0139602) (0.0123665) (0.0137869) (0.0252535) Occupation -0.0097855 *** -0.0107203 ** -0.0165899 *** -0.0191379 *** -0.0103988 *** 0.003351 (0.0027361) (0.0041758) (0.0035326) (0.0036023) (0.0038839) (0.0055679) Total Explained by Characteristics 0.0031596 *** 0.1886933 *** 0.0185245 -0.0705313 *** -0.0824837 *** -0.1522209 *** (0.0132892) (0.0258886) (0.016543) (0.0153702) (0.0175122) (0.0309734) Wage Structure effects attributed to Demographics -0.0717022 ** -1.295571 *** -0.0388863 -0.0033887 0.1181288 *** 0.1055889 * (0.0290802) (0.1778709) (0.0564132) (0.0407723) (0.0309546) (0.0550251) Survey Year 2015 0.0634311 *** 0.3037761 *** 0.0144858 -0.0141198 0.0479057 *** 0.0773998 *** (0.0137007) (0.0693643) (0.0251271) (0.0208294) (0.0159023) (0.0287629) Education 0.0581583 -0.0116899 -0.20359 -0.1569093 0.1219192 ** 0.3459568 *** (0.0648123) (0.3908254) (0.1605512) (0.1073934) (0.0566864) (0.1007211) Potential Experience -0.1004317 ** -0.9035057 *** -0.3824568 *** -0.0185806 0.067113 0.2269338 ** (0.0449973) (0.2062181) (0.0837855) (0.0686489) (0.0507413) (0.094802) Public Sector -0.0887129 *** -0.0018212 -0.0965478 *** -0.2566801 *** -0.1019447 *** -0.0707208 *** (0.0114982) (0.0331425) (0.0181372) (0.0199475) (0.0149099) (0.0266105) Occupation -0.0809804 ** 0.4375804 * 0.1590001 * -0.1700324 -0.1106566 *** -0.1736827 *** (0.0399023) (0.2460888) (0.0960718) (0.068895) (0.036547) (0.0537103) Constant 1.479657 *** 3.1432 *** 2.101494 *** 1.794474 *** 0.9216466 *** 0.6113836 *** (0.0746494) (0.4101874) (0.1756965) (0.1164164) (0.0704758) (0.1366148) Total Wage Structure (unexplained) 1.259419 *** 1.671968 *** 1.553499 1.174763 *** 1.064112 *** 1.122859 *** (0.0180409) (0.0757261) (0.0324508) (0.0259376) (0.0217102) (0.0403619)

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Table 3-3 Continues: Citizenship Wage Gap Decomposition Results Reference Group: Kuwaiti Coef. Kuwaitis vs Non-Arab Quantile Mean Level 10th 25th 50th 75th 90th Mean Wage Gap 1.36076 *** 1.824079 *** 1.536093 *** 1.357237 *** 1.13999 *** 1.101381 *** (0.0188932) (0.0361316) (0.0227797) (0.0230958) (0.0229932) (0.0384937) Composition effects attributed to Demographics -0.069808 *** -0.0459503 *** -0.062393 *** -0.0739553 *** -0.0738857 *** -0.0887954 *** (0.0042216) (0.0052599) (0.0046721) (0.005013) (0.0060263) (0.0100858) Survey Year 2015 0.0004411 0.0003569 -0.0001327 0.0005786 0.0007711 0.0007815 * (0.0007246) (0.0006405) (0.0002966) (0.0009655) (0.0012823) (0.0013468) Education 0.0452075 *** 0.0437142 *** 0.0334445 *** 0.033348 *** 0.0456813 *** 0.0669507 *** (0.0061873) (0.0069731) (0.0055464) (0.0053159) (0.0066555) (0.011284) Potential Experience -0.0455344 *** -0.0136898 *** -0.0275216 *** -0.0401918 *** -0.0592146 *** -0.0943766 *** (0.0046185) (0.0033359) (0.003431) (0.004408) (0.0062906) (0.0110179) Public Sector 0.1330446 *** 0.3183148 *** 0.1490716 *** 0.0572115 *** 0.0334575 ** -0.0305488 (0.0117725) (0.0284689) (0.0167236) (0.0148811) (0.0166027) (0.0304177) Occupation 0.0117295 *** 0.0035473 0.0105067 *** 0.0156407 *** 0.0194144 *** 0.016656 *** (0.0027962) (0.0035032) (0.0033393) (0.0038125) (0.0042998) (0.0063341) Total Explained by Characteristics 0.0750803 *** 0.3062932 *** 0.1029754 *** -0.0073684 -0.033776 * -0.1293327 *** (0.0146392) (0.029962) (0.0185256) (0.0172846) (0.0199045) (0.035468) Wage Structure effects attributed to Demographics -0.0058868 -0.1094809 -0.0552418 -0.0373592 0.0016915 0.1446302 ** (0.0309564) (0.0832892) (0.0471375) (0.0415938) (0.0407591) (0.0685384) Survey Year 2015 0.0305784 ** 0.005621 0.0060472 0.0464159 0.0886489 *** -0.010084 (0.0155087) (0.0331777) (0.0218684) (0.0215719) (0.0221027) (0.0401167) Education -0.1769889 *** -0.5244039 *** -0.2658731 *** -0.2385628 *** 0.0814077 -0.0049976 (0.0459882) (0.1343939) (0.0774304) (0.0639231) (0.0508458) (0.0828854) Potential Experience -0.0698728 -0.3040154 ** -0.0893209 0.117096 0.1588229 ** -0.2496219 * (0.0525923) (0.1292125) (0.0776602) (0.0716669) (0.0750824) (0.1374819) Public Sector -0.0889209 *** -0.0024903 -0.0613131 *** -0.1479189 *** -0.1392084 *** -0.088042 *** (0.0092404) (0.0142582) (0.0101853) (0.012755) (0.014399) (0.0246496) Occupation -0.0530693 0.2348463 *** 0.0234056 -0.0988462 * -0.1947756 -0.1659523 *** (0.0343581) (0.0829854) (0.057139) (0.0530082) (0.0395036) (0.0617396) Constant 1.64984 *** 2.217709 *** 1.875414 *** 1.72378 *** 1.177179 *** 1.604781 *** (0.0654764) (0.1929687) (0.1025774) (0.084121) (0.084892) (0.1457168) Total Wage Structure (unexplained) 1.285679 *** 1.517786 *** 1.433118 *** 1.364605 *** 1.173766 *** 1.230714 *** (0.0197336) (0.0462937) (0.0272622) (0.0261489) (0.0274583) (0.049046) Positive coefficient indicates advantage of Kuwaitis and negative coefficient indicate advantage of the other group (Arab or non-Arab); *** p<0.01, ** p<0.05, * p<0.1 ; Standard Errors in parentheses; Demographics include Gender and Marital status

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3.5.2.1 Kuwaiti vs Arab Workers

The overall wage advantage of Kuwaitis relative to Arabs is 1.26 log points at the mean level and it decreases from 1.86 to 0.97 log points across the wage distribution. This is greater than the findings of Al-Qudsi (1989), who identified a 0.4358 log points gap in the public sector and 0.5505 log points gap in the private sector. The overall composition effect is in favor of

Kuwaitis at the mean level and the lowest quantile. The frequency of Kuwaitis in the public sector is the main contributing factor to the composition effect. In comparison, the overall

Kuwaitis composition effect advantage is mitigated by Arabs’ endowment advantage in education, potential experience and frequency across various occupations. Arabs have more years of schooling (about one year) and potential experience (approximately 1.5 years) and are more dominant in professional occupations such as technical and associated professional occupations. Even though the total composition effect is significant in general, its contribution to the wage gap is very weak. This implies that Kuwaiti and Arab workers are equivalent to each other in terms of endowments.

The main feature of the wage gap is the relative importance of the total wage structure effect in favor of Kuwaitis. At the mean level and across the wage distribution, the contribution of the total wage structure effect is strong and highly significant. The constant term is positive and significant at the mean level and decreases across the wage distribution. This implies that the wage gap is mainly due to unobservable factors that works in favor of Kuwaitis in the labor market. The discrimination against Arabs is evident in the contribution of demographics to the total wage structure effect as well as potential experience and education at the top quantiles. This is expected due to the social allowance and child allowance that Kuwaitis receive, which increases with more education and promotions as workers accumulate more years of experience. 105

In contrast, Arabs in general receive higher returns to potential experience and occupation. Even though Arabs have better education endowments across the wage distribution, the difference in returns to education between the two groups is insignificant between the 10th and 50th quantiles.

The contribution of explanatory variables to the total composition effect at the mean level is similar to what we observe at the wage distribution, but the total results are different. At the mean level, the total composition effect is in favor of Kuwaitis, but this driven by results at the lower quantiles only. On the other hand, the results across the wage distribution confirms the mean level results where the total wage structure effect is in favor of Kuwaitis, but the contribution of the explanatory variables vary across the wage distribution. Arabs have higher returns to all variables at the mean level except for the constant term. The higher returns are driven by the lower quantiles for demographics, education, potential experience and sector of employment as well as occupation at the upper quantiles.

The results at the 90th percentile are quite interesting. The total composition effect is negative, large and significant relative to the total gap and is mainly due to Arabs potential experience advantage as the contribution of other variables is insignificant. This implies that the differences in potential experience between Kuwaitis and Arabs are significant at the top quantile. In addition, the constant term is positive, large in magnitude and significant. This implies that there are other factors in favor of Kuwaitis that contribute to the wage structure effect which are not considered by the model. In addition, Arabs have higher return to occupation and sector of employment than Kuwaitis. The difference in endowments between

Kuwaitis and Arabs at the top quantile is very small and insignificant for education and distribution across occupations. This implies that it is not totally true that Kuwaitis are not equivalent to non-Kuwaitis in general. Given that Kuwaitis at higher quantiles have higher

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returns to education and experience, this implies that there might be some particular skills that

Kuwaitis exclusively have which are rewarded in the labor market.

This result is consistent with the conclusion that Kuwaitis would be willing to take less prestigious occupations if the pay is high. This could reflect a change in the societal perception of Kuwaiti workers’ occupations. For example, Kuwaitis are working as cashiers in the gas stations owned by Kuwait Oil Company (KOC) while a cashier job is considered a non-Kuwaiti occupation. They accept such a job because of the high pay and other benefits they received.

Also, many Kuwaitis are willing to work for the petroleum companies; even though their working hours are longer, working conditions are harder relative to the public sector and the commute is longer relative to other occupations in Kuwait City, because of the high wages, annual cash bonuses and job trainings that these companies provide.

A main source of the wage gap between Kuwaitis and non-Kuwaitis is due to government intervention in the labor market. In the public sector, for example, the government have separate wage scales for Kuwaiti and non-Kuwaiti workers. Kuwaitis have priority in employment in the public sector over expatriate Arab workers. (Non-Arab workers are less likely to be employed in the public sector.) In addition, non-Kuwaitis are appointed in the public sector based on temporary job contracts under fixed wages and not subject to any kind of promotions. They are not covered by pension plans and are only eligible to receive an end of service benefit (a onetime cash payment) in some cases. On the other hand, the government intervention in the private sector is in the form of wage subsidies paid to Kuwaiti workers, and these are meant to encourage them to join the private sector as the wages are very low compared to the public sector. The wage subsidy increases with educational level, marital status and size of their family, but the last two factors just named are related to social and child allowances.

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We can conclude from the discussion above that the differences in endowments between

Kuwaiti and Arab workers are marginal. The wage gap in favor of Kuwaitis is a result of the difference in social and child allowances paid to Kuwaitis, as well as differences in returns depending on education, potential experience and unobservable factors.

Figure 3-3. Kuwaitis vs Arabs Wage Gap Decomposition

3.5.2.2 Kuwaiti vs Non-Arab Workers

The overall wage advantage of Kuwaitis relative to Non-Arabs is 1.28 log points at the mean level and it decreases from 1.82 to 1.10 log points across the wage distribution. This is greater than the findings of Al-Qudsi (1989), which identified a 0.3988 log points gap in the

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public sector and 1.3466 log points gap in the private sector. The overall composition effect is in favor of Kuwaitis at the mean level and the lower two quantiles. The dominance of Kuwaitis in the public sector, their education endowments and distribution across occupations are the main contributing factor to the composition effect. In comparison, the overall Kuwaitis composition effect advantage is mitigated by non-Arabs’ endowment advantage in potential experience. Non-

Arabs have fewer years of schooling (less than one year) but they have more years of potential experience (about 3 years) and are dominant in less sophisticated occupations relative to

Kuwaitis as shown in the descriptive statistics (Table 3-1). Even though the total composition effect is significant across the wage distribution, its contribution to the overall wage gap is very small. This implies that the difference in endowments of Kuwaiti and Non-Arab workers are not significant.

Non-Arabs is not evident even though the wage structure effect is not in their favor. In fact, non-

Arabs have higher returns to education, potential experience (except for the 75th quantile) and occupation (except for the 10th quantile) relative to Kuwaitis. The main contributing factor to the wage structure effect is the constant term; which is large, positive and significant. The higher returns that non-Arabs received are mitigated by the positive constant term. This implies that the wage gap is mainly due to unobservable factors. As discussed in the previous subsection, government intervention in the labor market led to discrimination against non-Kuwaiti workers in both sectors of employment by creating a separate wage scale for each group of workers.

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Figure 3-4. Kuwaitis vs Non-Arabs Wage Gap Decomposition

3.6. Conclusion

The results of the analysis presented in Section 3.5 lead to the following conclusions.

Kuwaitis earn more than Non-Kuwaitis (Arab and non-Arab) and the wage gap is persistent over time. In general, the gap widens across the wage distribution, it is larger between Kuwaitis and

Arabs than between Kuwaitis and Non-Arabs at the lower quantiles, while the opposite is true between the 50th and 90th quantiles. The composition effect show that Kuwaitis have better endowments at the mean level relative to non-Kuwaitis, but this is only true for the lower two quantiles across the wage distribution. This is an advantage of using the extension of the OB model as it shows the variations across the wage distribution. The contribution of the

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composition effect to the total wage gap is significant but it is very small in magnitude. This implies that the difference in endowments between Kuwaitis and non-Kuwaitis is marginal.

Thus, the wage gap is mainly due to the wage structure effect. Analyzing the wage structure results, there are differences between Kuwaitis and non-Kuwaitis in the returns to endowments.

The results at the mean level indicate that discrimination is practiced against Kuwaitis as they receive lower returns to their endowments relative to an equivalent non-Kuwaiti worker. But, the results across the wage distribution show that this is not totally true as Kuwaitis receive higher returns to occupation at the lower two quantiles relative to both Non-Kuwaitis groups. They also receive higher returns to demographics, education and potential experience in general at the upper quantiles. This is again an advantage for the quantile analysis as it shows different patterns than what is observed at the mean level. Finally, even though there are differences in returns to endowments among workers in the Kuwaiti labor market, these differences are either insignificant or small in magnitude relative to the total wage structure effect. There are unobserved factors that result in the large and significant wage structure effect in favor of

Kuwaiti workers at the mean level and across the wage distribution relative to Arab and non-

Arab workers.

The analysis results reflect the practices that were undertaken by the government to encourage Kuwaitis to be part of the labor force in both the public and the private sectors.. As mentioned earlier, these practices have led to a segregated labor market with separate wage scale and occupations for Kuwaitis and non-Kuwaitis. The government needs to address the wage gap as it is not related to major differences in endowments. Re-evaluating the wage scale for

Kuwaitis and their guaranteed employment in the public sector is a starting point as it is increasing the reservation wage of Kuwaitis and deterring them from joining the private sector as

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well as accepting more diverse occupations than what are considered appropriate occupations for Kuwaitis.

This analysis is subject to some limitations as will be outlined below. There are also some possible future extensions of the research that are similar to the second chapter: First, the analysis does not control for selection. Selection is an issue in the Kuwaiti labor market where workers self-select to work in one sector or occupation rather than the other; or selection is also a factor when the employer prefers to hire one group over another. Second, the analysis controls for the level of education but makes no conclusions about the quality of education and how it might impact wages. Third, potential experience is calculated following Mincer but does not control for whether the experience was gained in the same field as the worker’s occupation76.

76 It is common for Kuwaitis specifically employed in the public sector to be hired in occupations that do not match the fields they were educated in or their major. . 112

APPENDIX A

KUWAIT DEMOGRAPHICS AND LABOR MARKET REPORT

A.1. Kuwait Demographics

Kuwait experienced a rapid growth in population both in terms of citizens and foreigners

(migrants) since the 1970s. After Kuwaiti independence in 1961 and the oil boom in the 1970s, there was a great need for workers to help develop the country and build its infrastructure. The demand for labor was higher than the labor supply of both Kuwaiti and non-Kuwaiti workers in the country at that time. The excess demand was satisfied by importing labor from abroad, and foreign workers came to fill important niches in the economy as skilled and unskilled workers.

Al-Quisi (1984) summarizes some major factors that contributed to the unprecedented population growth in the 1970’s, including a growing number of foreign workers seeking job opportunities in Kuwait and an increase in the natural rate of population growth among citizens.

The share of Kuwaiti citizens relative to foreigners continues to decline over time.

Kuwaitis accounted for 55% and 41.5% of the population respectively for the years 1957 and

1980 (AL-Quisi 1984). Today, about 30 percent of the population is Kuwaiti based on the 2017 estimate of the population by the State of Kuwait. Table (A-1) shows the composition of the population from 1965 to 2017.

The Kuwaiti population is considered a young population. In 2017, children and infants made up about 21 percent of the total population. Most of the population is between the ages of

15 and 64 years old, which implies that a large share of the population is economically active.

Finally, elderly people account for less than 3% of the total population. The proportion of the non-Kuwaiti population that is economically active was 83% in 2017, higher than the 61% of

Kuwaitis that were active. The non-Kuwaiti population that is economically active was also

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higher in 1981 (AL-Quisi 1984) and 2005. Table (A-2) compares the population by age groups for the years 2005 and 2017.

A.2. Kuwait Labor Force

A.2.1 Participation and Unemployment

The proportion of economically active individuals is increasing for the population in general, for both Kuwaiti and non-Kuwaiti populations. The largest increase was made by

Kuwaiti females, from about 26% in 2003 to about 39% in 2015. Kuwaiti male participation declined slightly (less than 2%) to account for about 53% in 2015. The total Kuwaiti population participation rate increased from 40% to about 46% in 2015. The non-Kuwaiti male participation rate rose over this period to reach about 95% in 2015. Furthermore, non-Kuwaiti female participation continued to increase from 59% in 2003 to about 66% in 2015 respectively. To summarize, the Kuwaiti economy has experienced an increased participation rate across all groups in the population (Kuwaiti and Non-Kuwaiti, male and female) as shown in Table (A-3).

Despite this overall increase, the unemployment rate is higher for Kuwaiti relative to non-

Kuwaiti workers and for female relative to male workers. Unemployment among females increased between 2008 and 2015 for both Kuwaiti and non-Kuwaiti populations. In contrast, the rate of unemployment among Kuwaiti male workers increased between 2008 and 2015 but decreased for non-Kuwaiti workers for the same years. Table (A-4) shows how the unemployment rate changed between 2008 and 2015. These changes could be due to the increased in average transition time from school to labor force. For university graduates this takes about one year, during which the new labor market entrant receives a wage-search

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allowance from the government in addition to financial support from their families (Abdalla and

Al-Homoud 2012).

A.2.2 Composition of the Labor Force and Foreign Workers’ Country of Origin

Foreign workers play an important role in the Kuwaiti labor market. They helped satisfy the excess labor demand that accompanied the oil boom in the 1970s and helped the government fulfill the country’s development plan. Most of the workers in the labor force are non-Kuwaitis, such that their share continues to increase over time to reach about 82 percent of the labor force in 2016. There are more non-Kuwaiti males and females in the work force.

The share held by Kuwaiti females in the total female labor almost doubled between 2005 and 2016 while the opposite is true for non-Kuwaiti females. In contrast, the share of Kuwaiti male to total male workers declined by 7% between 2005 and 2016, as Kuwaiti males were substituted by non-Kuwaiti male workers. Finally, females made up more of the overall labor force over time. Table (A-5) summarizes the composition of the labor force between the years

2005 and 2016.

In the 1970’s and 1980’s, most non-Kuwaiti workers were from different Arab countries.

Palestine and Jordan (together) contributed the majority, followed by Egypt; these countries accounted for 39.1% and 11.6%, respectively, of the total Non-Kuwaiti worker population in

1975 (Shah 2007). There were fewer Asian workers than Arab workers by about 50%; the majority of these were from Iran, India and Pakistan (7.8, 6.1 and 4.4% of the non-Kuwaiti workers in 1975, respectively) (Shah 2007).

The share of Asian workers increased by 100% between 1975 and 2016 to become the largest share of the labor force, while the share of Arab workers declined from 69% to about

37% of the total labor force over the same time. Today, Asian workers are mainly from India, 115

Bangladesh, Pakistan and the Philippines. On the other hand, Arab workers are mostly from

Egypt and Syria. Workers from other regions accounted for about 2 percent in 2016. Table (A-6) shows the change in the non-Kuwaiti labor composition by region between 1975 and 2016.

A.2.3. Sectors of Employment

Looking at the distribution of workers among the different sectors of employments in

Table (A-7), it is apparent that Kuwaiti and non-Kuwaiti workers are employed in distinct sectors, and that employment is also shaped by gender. Specifically, we note the following. First, the majority of Kuwaiti workers are employed in the government sector while the majority of

Non-Kuwaiti workers are employed in the private sector (86.6 percent and 74.8 percent respectively in 2015). This has been the case since the 1980s (Al-Qudsi 1989). Second, the proportion of female workers employed in the government sector is slightly higher than male workers. This is also true for Kuwaiti and non-Kuwaiti workers. Third, while the private sector is the main employer of non-Kuwaiti male workers, the household sector is the main employer for non-Kuwaiti female workers.

A.2.4. Education Level

Table (A-8) compares educational attainments for Kuwaiti and Non-Kuwaiti populations.

Women had generally attained a higher level of education than men, and Kuwaiti men’s educational advantage over non-Kuwaiti men has grown over time. Specifically, we see that, in general, the educational attainments for females are higher relative to males for both Kuwaiti and

Non-Kuwaiti workers. In 2015, more than 50% of Kuwaiti females had at least a bachelor’s degree, while this proportion is around 40% for Kuwaiti males. Similarly, the proportion of those with a bachelor’s degree for non-Kuwaiti females and males are around 26% and 8%

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respectively. Last, Kuwaiti workers improved their education attainments over time relative to non-Kuwaitis. In 1965, the percentage of Kuwaitis with high school and college degrees was 1.8 percent, compared to 11.4 percent for non-Kuwaitis (AL-Quisi 1984). In 2015, the opposite is true. The number of Kuwaitis who have at least a high school degree is 85% compared to less than 30% for non-Kuwaitis.

A.2.5. Occupations

The classification of occupations follows the International Labour Organization (ILO)

“International Standard Classification of Occupations: ISCO-08”. Occupations are classified in major groups, sub-groups, minor groups and unit groups. The major groups are: 1) Managers, 2)

Professionals, 3) Technicians and Associate Professionals, 4) Clerical Support Workers, 5)

Services and Sales Workers, 6) Skilled Agriculture, Forestry and Fishery Workers, 7) Crafts and

Related Trades Workers, 8) Plant and Machine Operators and Assemblers, 9) Elementary

Occupations, 10) Armed Forces Occupations (ILO 2012).

In 2015, male and female Kuwaiti workers were concentrated in four occupations: 1) professionals; 2) technicians and associates; 3) legislators, senior officials and managers; and 4) clerks. On the other hand, non-Kuwaiti workers mostly worked in: 1) elementary occupations, 2) professionals, 3) craft and related trade, 4) plant and machine operators and assemblers, and 5) service, shop and market, and 6) technicians and associates.

Comparing male to female Kuwaiti workers, we note that there is a huge gap in the share of females vs males working as Legislators, Senior Officials & Managers. Only 8.7% of females compared to 38.6% of males were working as Legislators, Senior Officials & Managers in 2015.

In contrast, 43% of females but only 24.2% of males were employed as professionals in 2015.

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Comparing male to female non-Kuwaiti workers in 2015, we note that the largest share of both groups is working in elementary occupations77 (59.5 and 39.7% respectively). More than

30% of males worked as: 1) Craft & Related Trade Workers and, 2) Plant & Machine Operators while the share of females in these occupations continued to be negligible (0.2%).

In 2015, 85% of Kuwaiti male workers were working in: 1) Upper Management, 2)

Professional, and 3) Technician positions, compared to less than 16% of non-Kuwaiti male workers. Most non-Kuwaiti males were working as: 1) Craft & Related Trade Workers, 2) Plant

& Machine Operators, and 3) Elementary Occupations (71.9%).

The share of Kuwaiti females and non-Kuwaiti females in occupations classed as 1)

Professionals, 2) Technicians & Associates, 3) Legislators, Senior Officials & Managers, and 4)

Clerks were 97.3% and 29.3% respectively. No Kuwaiti females were working in primary

(elementary) Occupations compared to about 60% of non-Kuwaitis in these occupations in 2015.

For 2015 in general, male workers (Kuwaiti and Non-Kuwaiti) were mostly working as:

1) Technicians & Associates, and 2) Elementary Occupations. On the other hand, female workers

(Kuwaiti and non-Kuwaiti) were working in 1) Elementary Occupations, and as 2) Professionals.

Table (A-9) summarizes the distribution of labor among various occupations.

A.2.6. Economic Activity

The Kuwaiti labor force is highly concentrated in the service sector. In 2014, about 90% of Kuwaiti workers were employed in sectors that provide services. This has been true since the

1960’s. Also, the second highest proportion of Kuwaiti workers worked in commerce in 1965, but this changed dramatically by 2014, when the proportion dropped from about 13% to 2%.

77 “Elementary occupations involve the performance of simple and routine tasks which may require the use of hand- held tools and considerable physical effort” page 337 (ILO 2012). 118

The migration of non-Kuwaiti workers during the 1960’s and 1970’s was due to the high demand for labor to help build the infrastructure of the country. Thus, about 19% of foreign workers were employed in building and construction activities. This proportion has declined over time to reach about 14% in 2014, but it is still considered the second largest employment sector for Non-Kuwaitis after the service sector. The number of Non-Kuwaitis in the service sector continues to increase over time, as more than 50% of foreign workers are in service activities.

Non-Kuwaiti workers are distributed among various economic activities, but the smallest proportion is employed in agriculture and electricity, gas, and water activities.

In general, service oriented economic activities are the largest employer of workers (both

Kuwaiti and non-Kuwaiti); in 2014 this sector employed about 60% of all workers. Agriculture and electricity, gas, and water activities have the smallest share of workers (around 1%).

Building and construction is the second largest activity for workers in 2014 with about 12% of the workers. Table (A-10) provides a summary of the labor force distribution across economic activity.

A.2.7. The Pay Structure

Looking at the pay structure in the Kuwaiti labor market in Tables A-11, A-12 and A-13, we note the following patterns: first, wages for Kuwaiti and non-Kuwaiti workers increase with education over time. Also, Kuwaiti workers earn more than non-Kuwaitis at all education levels and in all employment sectors. In addition, the wage ratio of Non-Kuwaiti to Kuwaiti workers increases as education levels increase. This indicates that the pay differential is lower among skilled professional workers relative to unskilled ones. Moreover, Kuwaiti workers earned more on average in the private sector than they did in the government sector in 1983, but the opposite was true in 2015. Non-Kuwaiti workers earned more in the government sector relative to the 119

private sector in 1983 and 2015; however, the ratio of earnings in the private sector to government sector decreased in 2015 relative to 1983. In addition, wages in the government sector were higher than the private sector in 2015. This was the case in 1977-1979 when controlling for education level, which implies that the wages in the government sector are not equal to the competitive wages in the market (AL-Quisi 1984). Last, in 2015, the overall wage ratio of non-Kuwaiti to Kuwaiti workers was 0.2. The ratio was higher among females (0.37) relative to males (0.16). The ratio was higher in the government sector relative to the private sector for both males and females. This implies that the pay differential between Kuwaiti and

Non-Kuwaiti workers was less in the government sector compared to the private sector. The ratio is larger for females relative to males in the private sector. This implies that Non-Kuwaiti male workers face a larger pay differential relative to Non-Kuwaiti females.

Table A-1: Population Composition

Kuwaiti Non-Kuwaiti Total Year Male Female Total Male Female Total Male Female Total 1965 50.9 49.1 36.1 67.1 32.9 63.9 61.3 38.7 100.0 1985 50.6 49.4 27.7 59.3 40.7 72.3 56.9 43.1 100.0 2005 49.4 50.6 39.2 65.6 34.4 60.8 59.3 40.7 100.0 2017* 49.8 50.2 29.6 67.2 32.8 70.4 62.1 37.9 100.0 * Preliminary Results; Source: Kuwait population Census Report 2005 Kuwaiti Central Statistical Bureau. Accessed on 10.23.2017, retrieved from https://www.csb.gov.kw/Socan_Statistic.aspx?ID=67

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Table A-2: Population by Age Group

Absolute Number Percentage of Total Population Age Group Kuwaiti Non-Kuwaiti Total Kuwaiti Non-Kuwaiti Total 2005 0 - 14 341651 205417 547068 39.7 15.4 24.9 15 - 64 493757 1116007 1609764 57.4 83.7 73.4 65 + 24916 11903 36819 2.9 0.9 1.7 Total 860324 1333327 2193651 100.0 100.0 100.0 2017 0 - 14 450703 453417 904120 35.5 15.0 21.1 15 - 64 769309 2498449 3267758 60.6 82.7 76.2 65 + 28007 67564 117753 2.2 2.2 2.7 Total 1270201 3019430 4289631 100.0 100.0 100.0 Source: Kuwait population Census Report (2005) & Kuwaiti Central Statistical Bureau. Accessed on 10.23.2017, retrieved from https://www.csb.gov.kw/Socan_Statistic.aspx?ID=67

Table A-3: Proportion of Economically Active Population Aged 15 +

Kuwaiti Non-Kuwaiti Total Year Male Female Total Male Female Total Male Female Total 2003 54.5 26.2 40 91.7 59 78.5 81.5 46.8 66.3 2008 54.7 32 43 93.4 60.1 83 83.1 47.2 69.3 2014 54.2 37.6 45.7 94.2 61.3 81.1 85.2 53.8 71.7 2015 52.6 39.3 45.8 95.4 66.4 84.5 86.2 57.7 74.5

Source: Kuwait LFS report 2014 and 2015.

Table A-4: Proportion of Unemployed Labor

Kuwaiti Non-Kuwaiti Total (K & NK) Year Male Female Total Male Female Total Male Female Total 2008 3.8 4.9 4.2 2.5 1.2 2.1 2.8 2 2.5 2014 4 6.4 5 1.5 4.5 2.4 1.9 4.9 2.9 2015 4.2 5.5 4.7 0.8 4.2 1.8 1.2 4.4 2.2

Source: Kuwait LFS report 2014 & 2015.

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Table A-5: Composition of Labor Force (%)

Kuwaiti Non-Kuwaiti Total Year Male Female Total Male Female Total Male Female 2005 16.6 25.8 18.9 83.4 74.1 81.1 74.8 25.2 2008 17.6 31.2 21.1 82.4 68.8 78.9 74.0 26.0 2011 16.4 24.5 19.1 83.6 75.5 80.9 66.2 33.8 2016 9.6 54.6 17.9 90.4 45.4 82.1 81.7 18.3 Source: Kuwait LFS report (2008), Salvini (2014) & Labor Market Information System (LIMS) accessed on 9.22.2017, Retrieved from https://lmis.csb.gov.kw/ar/ Note: excludes workers in Household Sector (servants, ...) for 2016. This could be the reason behind the decline in the proportion on Non- Kuwaiti females in 2016 as the proportion of Non-Kuwaitis in the Household sector was 17 percent in 2015 based on KLFS report 2015.

Table A-6: Distribution for Foreign Employees by Region (%)

Year Arab Asian Other 1975 69 30 2 1980 60 38 2 1985 46 52 2 2007 39 59.1 1.9 2014 21.1 72 6.8* 2016 36.9 61.3 1.8 Note: * 4.7 % from non-Arab African Countries; Source: Shah & Al-Qudsi (1989), Shah (2007), KLFS report (2014), Labor Market Information System (LIMS) accessed on 9.22.2017, Retrieved from https://lmis.csb.gov.kw/ar/

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Table A-7: Distribution of Employee by Sector of Employment (%)

Sector of Kuwaiti Non-Kuwaiti Total (K, NK) Employment 2008 2014 2015 2008 2014 2015 2008 2014 2015 Males Government 90.1 81.9 84 10.8 5.1 3.5 5.1 13.6 Private 9.1 10.2 7.9 77.8 84 92.2 84 81.8 Public 0.6 7.6 5.4 0.3 5.4 0.9 0.4 1.7 Households 0 0 0 10.2 5.3 3.1 5.3 2.7 Other 0.2 0.3 0.1 0.3 0.2 0.3 0.2 0.2 Females Government 91.9 87.3 89.9 14.7 13 16.1 13 31.9 Private 7.1 9.1 6.8 16.6 35.3 32.2 35.3 26.8 Public 0.5 3.1 3.2 0.1 1.2 0.7 1.2 1.2 Households 0 0 0 68.5 50.2 51 50.2 40.1 Other 0.5 0.5 0.1 0.1 0.3 0 0.3 0 Total (Male & Female) Government 84.1 86.6 7.5 7.2 20.1 19.3 Private 9.8 7.9 69.4 74.8 59.6 64.4 Public 5.8 5.4 4.2 0.8 4.4 1 Households 0 0 18.7 17 1.7 14.4 Other 0.3 0.1 0.2 0.2 0.2 0.2 Note: Public Sector refers to Government-Owned Establishment ; Source: Kuwaiti LFS 2008, 2014 and 2015.

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Table A-8: Education Level of Economically Active Population (%)

Kuwaiti Non-Kuwaiti Total Education Level and Gender 2007* 2008 2014 2015 2007* 2008 2014 2015 2014 2015 Males Primary and Below 38.3 0.7 1.4 1.4 61.8 40.4 36.3 41.9 31.3 36.6 Secondary 27.9 2.1 21.5 18.4 20.4 5 35.2 36.5 33.3 34.2 High School 18 27.7 22.2 23.7 10.4 17.5 11.8 12.3 3.3 13.8 Diploma 7.4 41.5 17.1 18.5 2.7 22.8 3.6 1.5 5.5 3.7 University and above 8.3 28 37.8 38 4.7 14.3 13.1 7.8 16.5 11.7 Females Primary and Below 41.9 0 0.5 0.2 63.4 56.6 31.5 28.7 24.8 22.5 Secondary 19 0 10.2 7.5 18.6 3.3 24.9 29.5 21.6 24.7 High School 16.5 9 16.3 15.4 10.8 6.5 20 11.7 19.2 12.5 Diploma 9.1 43.4 23.3 23.4 2.3 18.1 4.6 3.9 8.7 8.1 University and above 13.5 47.3 49.7 53.5 4.8 15.5 19 26.2 25.7 32.2 Total (M & F) Primary and Below 1.1 0.9 34.9 38.7 29.3 32.1 Secondary 16.7 13.6 32.1 34.6 29.5 31.1 High School 19.7 20.1 14.3 12.1 15.2 13.4 Diploma 19.7 20.6 3.9 2.2 6.5 5.1 University and above 42.8 44.8 14.8 13.2 19.5 18.2 Source: Kuwaiti LFS 2008, 2014 and 2015 for Ages 15+, * Shah (2007) for ages 10+. Note: Diploma refers to a degree Above High School and Below University

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Table A-9: Percent of Total Workers in Selected Occupations

Occupation and Gender Kuwaiti Non-Kuwaiti Total Male 2007 2014 2015 2007 2014 2015 2014 2015 Legislators, senior officials & managers 2.5 35.9 38.6 1.5 4.6 2.2 9 6.9 Professionals 22.6 24.2 6.9 8.8 9.1 7.1 18.9 6.5 Technicians & associates 16.2 22.2 3.8 4.8 5.6 61 Clerks 56.4 14.9 10 9.5 3.7 1.6 5.3 2.8 Service, shop & market workers 10 4.5 2.2 22.4 16 10.6 14.4 9.4 Skilled agricultural & fishery workers 0.1 0 0 1.4 0.2 0.3 0.2 0.3 Craft and related trade workers 3.9 2.3 26 20 22.8 4.8 Plant & machine operators & assemblers 1.3 0.5 14 12.2 12.2 15 }6.7 }53.9 Elementary occupations 0.7 0 24.8 39.7 21.4 27.6 Not Specified 5.4 - - 4.8 - - - - Total 100 100 100 100 100 100 100 100 Female 2007 2014 2015 2007 2014 2015 2014 2015 Legislators, senior officials & managers 0.6 7.1 8.7 0.3 1.4 1.3 2.6 2.9 Professionals 37.1 43 12.2 19.2 17.6 24.4 37.6 8.6 Technicians & associates 1.4 28.3 11 7.5 11.7 11.9 Clerks 48.5 37.3 17.3 5.9 4.5 1.3 11.7 4.7 Service, shop & market workers 2.3 3.3 2.6 74.5 18.9 11 15.5 9.2 Skilled agricultural & fishery workers 0 0 0 0 0 0 0 0 Craft and related trade workers 0 0.1 0.7 0.1 0.7 0.1 Plant & machine operators & assemblers 0.6 0 0.3 0.1 0.3 0.1 1.1 3.1 Elementary occupations } 0.1 0 } 51 59.5 39.9 46.7 Not Specified 9.9 - - 7.6 - - - - Total 100 100 100 100 100 100 100 100

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Table A-9 (Continues): Percent of Total Workers in Selected Occupations

Occupation and Gender Kuwaiti Non-Kuwaiti Total Total (Male and Female) 2007 2014 2015 2007 2014 2015 2014 2015 Legislators, senior officials & managers 24 25.6 3.6 2 7 5.7 Professionals 28.6 32.4 8.5 8.8 11.8 12.4 Technicians & associates 15.5 24.8 5.9 4.8 7.5 7.9 Clerks 24.2 13.2 4 1.6 7.3 3.4 Service, shop & market workers 4 2.4 16.9 10.6 14.7 9.3 Skilled agricultural & fishery workers 0 0 0.1 0.3 0.1 0.2 Craft and related trade workers 0.5 1.3 1.5 20 15.9 17.1 Plant & machine operators & assemblers 0.8 0.3 10 12.2 8.5 10.4 Elementary occupations 0.4 0 32.5 39.7 27.2 33.6 Total 100 100 100 100 100 100 Note: for 2007, Shah has 6 occupations: Professionals, Technicians & associates, Legislators, senior officials & managers, Clerks, Sales Workers, Services Workers, Skilled Agricultural & Fishery Workers, Production Workers and Laborers and Not specified.; Source: Kuwait LFS report (2014 & 2015) and Shah (2007).

Table A-10: Percentage distribution of working population by Economic Activity

Kuwaitis Non-Kuwaitis Total (K & NK) Type of activity 1965 1975 2014 1965 1975 2014 1965 1975 2014 Agriculture 1.4 4.5 0.2 1.6 1.7 0.9 1.6 2.5 0.8 Mining & Quarrying 3.4 2 3.3 4 1.5 9.7 3.9 1.6 8.6 Manufacturing 4.6 2.6 1.9 11 9.4 8.5 9.5 8.2 7.4 Building & Construction 3.1 2.2 1.8 18.8 14.4 13.7 16.1 10.8 11.8 Electricity, Gas, & Water 4.1 2.3 0.6 3.9 2.5 0.4 3.9 2.4 0.4 Commerce 12.8 7.3 2.1 12.9 15.7 8.2 12.9 13.3 7.2

Transport, Storage, & Communication 6.5 5.3 1.6 5.3 5.3 6.6 5.6 5.3 5.8

Miscellaneous services* 64.1 73.8 88.5 41.5 48.5 52.0 46.5 55.9 58.0 Source: Al-Qudsi (1985) and Kuwait LFS report (2014); * including government.

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Table A-11: Mean Monthly Wages in KWD* by Education Level and Citizenship

1977-1979 2014 % Change in Education Degree & (NK/K) (1977 Year Kuwaiti Non-Kuwaiti NK/K Kuwaiti Non-Kuwaiti NK/K and 2014) Primary and Below 230 184 0.80 962 118 0.12 -84.67 Secondary 263 208 0.79 1077 151 0.14 -82.27 High School 305 269 0.88 1080 230 0.21 -75.85 Diploma N/A N/A N/A 1103 411 0.37 University and above 421 368 0.87 1452 546 0.38 -56.98 Source: Al-Quisi (1984) and Kuwait LFS report (2014) * On Average, 1 KWD == 3 US Dollars. Table A-12: Mean Monthly Wages in KWD* by Sector of Employment

Government Private Private/Government Year Kuwaiti Non-Kuwaiti NK/ K Kuwaiti Non-Kuwaiti NK/ K Kuwaiti Non-Kuwaiti 1983 400 295 0.74 474 215 0.45 1.185 0.73 2015 1,462 699 0.48 1,041 254 0.24 0.71 0.36 Source: (Al-Qudsi 1989) and Kuwait LFS report (2015). * On Average, 1 KWD == 3 US dollars

Table A-13: Mean Monthly Wages in KWD* by Gender, Citizenship and Sector in 2015

Nationality Kuwaiti Non-Kuwaiti Non-Kuwaiti / Kuwaiti Gender Males Females Total Males Females Total Males Females Total Overall** 1,645 1,158 1,376 261 424 278 0.16 0.37 0.20 Private 1,326 770 1,041 246 345 254 0.19 0.45 0.24 Government 1,737 1,249 1,462 730 665 699 0.42 0.53 0.48 Source: Kuwait LFS report (2015). On Average, 1 KWD == 3 US dollars. ** Both Sectors together.

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A.3. Kuwaiti Labor Market Pay Differential Studies

Table A-14:Summary of Kuwaiti Labor Market Pay Differential Studies

Size of % of Wage Gap Data Source Reference Dependent the Study Method Sample Size Workers' groups &Year Group Variable Wage Explained Unexplained Gap Kuwait KWT: 273 Human Capital Wage & AL-Qudsi Model (Mincer, Family Budget Non KWT: KWT Salary K vs NK 26% -23.00% 49.00% (1979) 1974) & Oaxaca- Survey (1972, 448 Income Blinder Model 1977) K vs NK 0.02 -0.28 0.3 KWT: 1253 Public Sector 0.096 -0.3 0.4 Palestinian: Private Sector -0.524 -0.62 0.1 Human Capital Kuwait 1034 Ln Al-Quisi Model (Mincer, Family Budget Other Arab: KWT (Monthly White Collar Jobs 0.012 -0.28 0.29 (1984)a 1974) & Oaxaca- Survey 701 Wage) Blinder Model (1977-1979) Non-Arab: Blue Collar Jobs 0.16 -0.19 0.35 171 K vs Palestinians -0.1 -0.27 0.26 K vs Other Arab -0.14 -0.24 0.1 Kuwait Total: 721 Human Capital Demographic Variance Al-Qudsi Model (Mincer, K: 273 & Budget KWT (log Wage K vs NK (1985) 1974) & Oaxaca- 26% -23.00% 49.00% Blinder Model Survey NK:448 or Salary) (1972/73) KM vs KF 79 KWD -20.00% 120.00% Human Capital Kuwait KM: 2332 Hosni & Al- 178 Model (Mincer, National KF: 535 Ln(Monthly KM vs AF -31.00% 131.00% Qudsi KWT M KWD 1974) & Oaxaca- Labor Survey AF: 651 Wages) (1988) 225 Blinder Model (1983) NAF: 159 KM vs NAF -9.30% 109.30% KWD

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Table A-14 (Continues): Summary of Kuwaiti Labor Market Pay Differential Studies

Data Source Reference Dependent Workers' Size of the % of Wage Gap Study Method Sample Size &Year Group Variable groups Wage Gap Explained Unexplained Public Public Sector: Sector KWT: 2792 K vs NK 133 KWD -36.10% 136.10% NK: 3128 K vs Arab 131 KWD -36.90% 136.00% K vs Non- Kuwaiti Arab: 2622 122 KWD -42.60% 142.60% Human Capital Arab Labor Force Ln Al-Qudsi Model (Mincer, Non-Arab: 505 Survey KWT (Monthly (1989) 1974) & Oaxaca- Sample Private Sector: Wage) Blinder Model Private (1983) KWT: 100 Sector NK: 6050 K vs NK 224 KWD 34.90% 65.10% Arab: 2774 K vs Arab 151 KWD 38.00% 62.00% K vs Non- Non-Arab: 3275 264 KWD 34.70% 65.30% Arab Population KWT M: 2024 Censuses KWT F: 537 KM vs KF 77 KWD 5.19% 94.80% Human Capital Shah & (1980-1985) Ln Model (Mincer, Arab F: 652 KM vs AF 176 KWD -32.38% 132.38% Al-Qudsi & Kuwait KWT M (Monthly 1974) & Oaxaca- (1990) Labor Force Earnings) Blinder Model Survey Non-Arab F: 160 KM vs NAF 222 KWD -19.37% 119.37% (1983)

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Table A-14 (Continues): Summary of Kuwaiti Labor Market Pay Differential Studies Size of % of Wage Gap Data Source Reference Dependent the Study Method Sample Size Workers' groups &Year Group Variable Wage Explained Unexplained Gap KM vs Male only: Palestinian/Jordanian 0.212 -97.00% 197%% M Total: 9511 KM vs Egyptian M 0.071 4.50% 95.50% KWT M: KM vs 0.319 14.00% 86.00% Kuwaiti 5374 Syrian/Lebanese M Al-Qudsi Chiswicks' Ln National Labor & Shah Model& KWT M (Monthly KM vs Iraqi M 0.454 4.00% 96.00% Force Survey (1991)a Oaxaca-Blinder Earnings) KM vs Indian M 0.82 2.90% 97.10% Sample (1983) Model KM vs Pakistani M 0.667 14.60% 85.40% KM vs Bangladeshi 1.238 17.30% 82.70% M KM vs Iranian M 0.55 44.40% 55.60% KM vs Other M 0.42 -11.40% 111.40% Government Sector Returns to Education (Coefficient for Sample: Gender Dummy Variable, =1 for Male) Kuwait Civil M: 86,394 Commission Services F: 60,504 Government Sector Total: KWT M > KWT F (1997) 0.204 146,897 by Human Capital M (KWT El-Toni KWT: Non KWT M < Non Model (Mincer, and Non Ln ( Wage ) 0.0335 (2004)a 104,278 KWT F by 1974) Private KWT) Sector Kuwait Sample: Ministry of Non KWT: Private Sector (only

Social Affairs 520,888 Non KWT) & Labor Non KWT M > Non M: 488,547 0.09462 (1998) KWT F by F: 32,343 a Gap in logarithmic Points; Note: K: Kuwaiti; NK: Non-Kuwaiti, KM: Kuwaiti Male; KF: Kuwaiti Female; A: Arab; NA: Non-Arab; AF: Arab Female; NAF: Non-Arab

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