COVID-19 and Migant Laborers in Kuwait

This article is part of the series on “COVID-19 in the Middle East and Asia: Impacts and Responses”. Read more ...

The 2020 COVID-19 pandemic has made Kuwait less welcoming for the 70% of the country’s population and the overwhelming majority of its private sector work force that are expatriates.[1] In addition to COVID-19 related job losses, low-education expatriates face active pressure from the government and Kuwait’s National Assembly (parliament) to reduce the demographic imbalance. These measures, combined with xenophobic remarks by some Kuwaiti parliamentarians and citizens also make the country an unwelcoming environment for the kinds of high-skilled workers Kuwaitis claim to want.[2]

While Kuwait’s actions and economic pressure might have a short-term impact, more permanent, substantial changes to its demographics will only come if the country also changes incentives to encourage Kuwaitis to work in the private sector.  

The Demographic Imbalance is Long-Standing and Resistant to Change

Kuwait’s demographic imbalance is not new: Kuwaitis have been a minority in their own country for half a century or longer.[3] This is due both to the small national population and the result of active government policies. After the Second World War, the government encouraged the import of foreign labor to help manage an oil-fueled development boom. The Kuwaiti population was too small — under 169,000 people in 1965 — and lacked the skills and education to support the country’s rapid economic development.[4]  Although Kuwait has made significant educational strides, many Kuwaitis still lack the broad skills needed to succeed in a private sector economy.[5] There are also some “low status” jobs — domestic work or manual labor, for instance — that Kuwaitis generally are reluctant to do.[6] There were over 700,000 expatriate domestic workers in the country in 2018, jobs Kuwaitis are highly unlikely to take.[7]  

Kuwait is also unwilling to change citizenship laws limiting the transmission of Kuwaiti citizenship. For example, unlike their male counterparts, Kuwaiti women married to foreigners are unable to pass citizenship to either their husbands or their children. The country also has a large population of stateless Arabs, the Bidoon, who have no clear path to citizenship.[8] Given those limitations, Kuwait is even less likely to grant expatriate workers citizenship. 

The government spreads the country’s oil wealth to citizens through generous subsidies, public sector wage benefits, and rules requiring Kuwaiti partners for foreign companies and sponsors for foreign workers. Given the financial benefits of being a Kuwaiti citizen, Kuwait’s National Assembly is likely to resist any efforts to broaden the franchise of fear of diluting these benefits. Hence, Kuwait is, and is likely to remain, an “illiberal migration state” — a state that receives migrants, but refuses them citizenship. Therefore, naturalization is unlikely to change the balance to any significant extent.[9] 

Although the legal system is supposed to encourage short-term migrant labor, incentives and standard practices do the opposite, promoting long term foreign residence in Kuwait. For instance, Kuwaiti firms pay to recruit and train foreign workers and thus have incentive keep them rather than paying again to replace them. For their part, expatriate workers have little incentive to leave. Most would face lower wages at home and have incurred costs to navigate the recruitment process. Why leave Kuwait and incur those costs again?[10]  

Are expatriates a problem?

Although Kuwait, like its GCC neighbors, has faced a demographic imbalance for decades, having large numbers of low-paid, low-skilled expatriate workers is increasingly untenable. The system discourages the private sector from employing Kuwaitis, who are seen as expensive and high maintenance. Large numbers of expatriates with no real stake in a country might pose a security risk. Finally, the kafala system, where expatriates’ residence permits are tied to their employers/sponsors, is also vulnerable to abuse, with some workers essentially subject to indentured servitude. 

Although Kuwaiti unemployment is relatively low, demographic pressures put a premium on job creation. 44% of the population is under the age of 20, and as of 2015, over half the working age Kuwaiti population including almost 61% of the female population were outside the labor force.[11] Public sector wages and benefits make up one-third of the government budget.[12] So far, however, government efforts to encourage Kuwaitis to work in the private sector have largely failed. In fact, despite calls to nationalize the private sector work force, the trend is moving in the other direction — over 11,000 nationals moved from private sector to public sector jobs between 2015-2017.[13]    

Some Kuwaiti parliamentarians have warned against having any particular demographic group dominate Kuwait the way Palestinians did before the 1990 Iraqi invasion of Kuwait.[14] Currently Indians and Egyptians are the dominant expatriate population. Indians in Kuwait roughly equal, or are even slightly larger than, the national population.[15] Egyptians, the largest non-Kuwaiti Arab population, potentially make up half the number of Kuwaitis.[16] Some of the efforts taken by government and parliament to change those demographics are seen through an “anti-Egyptian” lens. As one Kuwaiti businessman noted as early as 2018, “we got rid of the Palestinians, now they want to get rid of the Egyptians.”[17]

Kuwait’s kafala sponsorship system is also vulnerable to abuse. Expatriate residence permits are tied to specific sponsors. Expatriate workers, particularly unskilled workers, have very limited workplace mobility, generally requiring the permission of their current employer in order to change jobs.[18] Sponsors can bring in more workers than they need for particular projects and push excess workers off to informal labor markets. Although sponsors are legally required to cover the costs of importing expatriate workers, they can and do pass on those costs to expatriate workers, or turn recruitment into a profit center. One recent investigation filed cases against 300 companies for bringing in around 30,000 workers illegally between 2018 and 2019, charging them just under $5,000 per residence permit.[19] In the worst cases, expatriate workers are vulnerable to forced labor and debt bondage to pay off huge debts incurred to obtain visas from agents in their home countries and/or brokers in Kuwait.

Targeting COVID-19 and Expatriates

Migrant workers in Kuwait are especially vulnerable to both the virus and to the Kuwaiti government’s efforts to contain it. One study of COVID-19 in Kuwait, using data from February to April 2020, determined that expatriates were twice as likely to need hospital intensive care unit (ICU) admissions as Kuwaiti patients, and the government quickly locked down expatriate neighborhoods in an effort to control outbreaks.[20] Some Kuwaitis also unfairly blamed expatriates for the outbreak.[21]

Expatriates are also vulnerable to COVID-19’s economic impact. Expatriate workers have few protections against layoffs, and most are not covered by Kuwait’s unemployment insurance program.[22] Residency permits are tied to employment, meaning that workers who lost jobs risked losing their residency, becoming subject to deportation. The government did extend residency permits several times in order for workers to resolve their residency status, recognizing the challenges posed by large scale shut downs.[23] The closing of bus and taxi networks also significantly hampered mobility for low-income foreign workers, but had little impact on Kuwaitis who do not rely on them for transportation.[24]    

Kuwait’s government and National Assembly (parliament) seized the opportunity to start reducing the foreign worker population on a more permanent basis. In June 2020, Prime Minister Sheikh Sabah Al-Khaled Al Sabah argued for changing the demographic balance over time so that “Kuwaitis account for 70% [of the population] and non-Kuwaitis 30%.”[25]  By August, the National Assembly was considering at least seven bills sponsored by individual parliamentarians that proposed among other ideas: taxing worker remittances; setting strict quotas for overrepresented nationalities (Indians and Egyptians), and reducing the number of unskilled foreign workers.[26] According to the head of the National Assembly’s Human Resources Committee, the proposals could affect 360,000 expatriates in the short term, among them individuals over the age of 60, “marginal workers” (i.e., low skilled), and illegal residents.[27] On September 22, the National Assembly issued a draft bill on September 22 that would reduce the number of Kuwaitis over a five year period.[28]

For its part, the government announced steps to lay off about half of the expatriates working in the public sector, while preventing them from finding private sector employment.[29] More controversially, the government also decided to stop issuing work permits to expatriates who are over 60 years of age and lack university degrees. Under the current plan, these expatriates have until December 2020 to bring their affairs in order and leave the country. Some Kuwaitis have sharply criticized the decision as a violation of Kuwaiti law and the constitution, but so far, the government has not changed its position.[30]

Changing the Incentive Structure

The current system of government patronage encourages Kuwaitis to seek public sector employment and to rely on large numbers of low-skilled foreign workers in the private sector.[31] Generous subsidies, and public sector wages and benefits, discourage Kuwaitis from private sector work.[32] Kuwait’s constitution guarantees the right and duty of citizens to work, and requires the state to endeavor to make employment available to citizens.[33] In 2015, fewer than 8% of Kuwaitis worked in the private sector, while over 86% worked for the government. In contrast, around 90% of non-Kuwaitis worked in the private sector, including as household domestic workers.[34]

The kafala sponsorship system limits worker mobility contributing to a highly segmented and rigid labor market, artificially depressing the cost of labor in the private sector.[35] Artificially low labor costs incentivize the use of low-skilled labor rather than investments into more efficient, but higher cost capital equipment. Government contracting rules awarding tenders on the basis of lowest price, once technical compliance has been met, reinforce this incentive.[36]   

The International Monetary Fund (IMF) has recommended trying to contain public sector wage and benefit growth to make public sector jobs less attractive and to “incentivize Kuwaitis to seek opportunities in the private sector.” The IMF and the government also agreed that efforts to reduce the government’s role as the preferred employer should be accompanied by efforts to produce private sector opportunities.[37] One challenge to this approach is that Kuwait’s parliament is likely to resist efforts to cut public sector wages and benefits for Kuwaitis, who are after all, their constituents.

A second challenge is that private sector opportunities for Kuwaitis are partially limited by artificially low expatriate labor costs. Raising these costs to a fair market value should both incentivize Kuwaitis to seek private sector jobs and make them more competitive for these jobs. Parliamentary proposals to increase the cost of work permits or to tax remittances punish expatriates but don’t make for a more welcoming private sector work environment for Kuwaitis, nor do they encourage the high skilled expatriate workforce that Kuwait still needs.

Increasing expatriate labor mobility by modifying or cancelling the kafala system would help resolve artificially low private sector wages. Workers would be able to seek better paying positions or leave abusive work environments, which would bid up the cost of expatriate labor.  Worker mobility would also increase incentives for Kuwaiti companies to invest in capital, which could provide further incentives for Kuwaiti workers. While Kuwaiti workers might be unwilling to take low-skilled manual labor jobs, they might be willing and able to take on higher skilled blue-collar jobs. Other Gulf Arabs have been willing to work as taxi drivers and fork-lift operators, for example.

Over the years, some Kuwaitis have called for modifying or cancelling the kafala system as outdated, ineffective, and exposing Kuwait to international opprobrium.[38] As recently as this August, a prominent Kuwaiti economist argued that repealing the kafala system  would address distortions in the labor market by raising expatriate salaries to their true cost, would eliminate residency trade and reduce violations, improve economic efficiency and motivate citizens to work in the private sector. It would also improve Kuwait’s international image.[39] 

Abolishing the kafala system would be an important first step toward addressing Kuwait’s demographic imbalance. There are other steps Kuwait could take as well. Allowing Kuwaiti women to transmit citizenship to their children, a longstanding demand of those married to foreigners, would be consistent with the principles of equality and family that are core Kuwaiti constitutional rights, as well as contribute to developing a workforce with family ties to the country.[40] Earlier in 2020, Kuwait’s National Assembly, while not addressing women’s rights to pass on citizenship, acknowledged that non-citizen children of Kuwaiti mothers were preferable to  “stranger” expatriates for government jobs.[41] Kuwait could also naturalize more of the substantial bidoon population, who also have longer ties to the country than expatriate workers. 

These steps are necessary to address the country’s long term demographic imbalance. They are also key to developing Kuwait’s private sector as an engine for growth, which will be critical as the country moves to a post-pandemic and, indeed, a post-oil future.