Ineffective career and education transitions are costing Saudi Arabia as much as SAR 196 bn — or 4.2% of GDP — each year, according to a Pearson’s report on the cost of slow labor market transitions in the Kingdom. When calculating just for Saudi nationals and excluding expats, that figure narrows to 1.34% of GDP (SAR 62 bn) annually.

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Automation-related disruption is responsible for half of the Saudi national-specific losses (SAR 31.64 bn), as 23% of Saudi national-held jobs are at high risk of automation. This figure is of particular concern as sectors including construction, production, transport, and maintenance are the most vulnerable to automation disruption. It is those same sectors that are critical to the 2030 diversification strategy, Pearson notes.

The economy also loses some SAR 16.94 bn because of the long lead time for new market entrants to land a job. It takes an average of 40 weeks for high school and university graduates to secure a job, according to the report. The difficulty stems from a mismatch between education and skill levels, with only 30% of engineering and technology graduates considered qualified for the job market, the report highlights. This problem is compounded by the high demand in the job market for these skills due to their importance in Vision 2030.

The education-to-work transition friction is also highest among women graduates. Despite accounting for 61% of total graduates, only 29% of women — compared to 58% of men — are employed within the first year of graduation.

When looking at job-to-job transitions, displaced Saudi workers face an average of 11.3 months to jump back into the workforce, with almost 40% taking more than a year to rejoin the workforce. Losses from transitioning from one job to another cost SAR 13.59 bn, but most importantly, “these long spells of joblessness represent not only lost earnings but also erosion of skills,” the report states.

Slower transitions pose a challenge for the youth-driven economy, Pearson says. Unemployment among the 15-24 age group stood at a high rate of 14.8% in 1Q in 2025, marking a pressing concern for this demographic, which is projected to grow from 2.69 mn individuals in 2025 to 3.22 mn by 2030.

How can we beat the friction? Pearson suggests five strategies to address these challenges. These include:

  1. Effectively targeting skills development through cooperation between employers and educators to better align education with the job market’s needs;
  2. Entry to the job market can be expedited by making it easier to gain early work experience through internships, apprenticeships, and mentorships;
  3. The gap between theory and practice can be better bridged through early exposure to workplace experience;
  4. Formal and vocational training programs can be developed to reflect skills and competencies in demand in high-growth sectors;
  5. The government is encouraged to invest in labor market data platforms that support the visibility of job openings and skills requirements, which should reduce labor market supply and demand mismatches.
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