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Three Essays About the Kuwaiti Labor Market: Policies for Labor

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Three Essays About the Kuwaiti Labor Market: Policies for Labor © COPYRIGHT by Ebtesam M H E H A Alansari 2018 ALL RIGHTS RESERVED To my family. THREE ESSAYS ABOUT THE KUWAITI LABOR MARKET: POLICIES FOR LABOR MARKET INTEGRATION AND PAY DIFFERENTIAL BASED ON GENDER AND CITIZENSHIP BY 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. iii 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. v 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 vi 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 .............................................................................
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