Saudi Arabia Could Rewrite Its Record on Labor Mobility by Ending Kafala

Saudi Arabia, for decades, has been a symbol of the dangers facing migrants, while simultaneously being responsible for vast poverty reduction in migrant families. 

To understand migration to Saudi Arabia, imagine you’re a domestic laborer, or factory worker, seeking employment overseas. In most cases, the state hosting you controls your immigration status; while employer sponsorship is often critical to this status, employers themselves have a limited set of rights and responsibilities related to migration. But in the Gulf Cooperation Council (GCC) countries, your migration status is tied to your employer, not to the state, and the employer has much wider rein in its control of your status—including whether you can switch jobs, travel within your new country, or even visit home or leave the country.

The system that binds these migrant workers directly to their employer (sponsor) is called kafala. Introduced in the 1950s, kafala is only recently seeing reforms. Under kafala, a worker’s immigration status is legally bound to their sponsor (kafeel). Famously, kafeels have been known to confiscate passports and exploit laborers. But in Saudi Arabia, where kafala has been considered most binding and has drawn significant international attention, things might actually be about to change.

The duality of migration in Saudi Arabia

In the last few years, the dominant narrative in migration policy circles has been one of fatalism. As populist movements have gained strength and Europe and the United States have closed their doors, positive progress on migration policy has seemed nearly impossible. And yet when you look outside the US and EU, historic and positive strides towards “more and better” mobility are being made.

Japan, once viewed as completely closed to foreign workers, announced that it will recruit 500,000 workers by 2025. In 2019, Colombia opened its doors and offered work permits to hundreds of thousands of displaced Venezuelans. Australia scaled its Pacific Labor Scheme from a pilot to an official program. And now Saudi Arabia is expected to announce that its kafala system, once seen as an immovable fixture in the migration policy realm, will be abolished.

It would be difficult to overstate the importance of this shift. With 13.1 million migrants, Saudi Arabia has long been home to one of the largest migrant populations in the world (coming in third after the US and Russia). Though unsung, this migration has had a significant impact on global poverty. As of 2017, Saudi Arabia was the third-highest source of remittances, with workers sending $36.1 billion back to families in countries across Asia and Africa. These remittances have been the main reason for significant declines in poverty in key origin countries, and have allowed families to put kids through school, afford lifesaving medical treatments, build houses, and start businesses. Glen Weyl, founder of RadicalXChange and author of “The Openness-Equality Trade-Off in Global Redistribution” estimates that migration to the GCC countries has done much more to reduce global inequality than all welfare states and transfers in the more egalitarian OECD countries.

But the positive impact of Saudi’s openness to migrants has always been plagued by the unavoidable fact that migrants suffer significant abuses in the process. Much of this is related directly to the kafala system, binding migrant workers in a direct relationship with their private sponsoring recruiters or employers to a particular job for a specific period of time. Under the kafala system, the migrant worker cannot enter the country, change jobs, or leave the country for any reason without obtaining permission from the kafeel. Because workers are dependent on their employer for their ability to remain in Saudi, employers are known to use threats of wage withholding and deportation to prevent workers from leaving abusive workplace environments. This is particularly effective as workers also often arrive heavily indebted from paying recruitment agents to find them a sponsor, and therefore need to stay in Saudi Arabia in order to be able to pay off their debts.

The kafala system is particularly impactful for women: 31.4 percent (or 4.1 million) of the migrants in Saudi are female, with an estimated one million working as domestic workers. These women are uniquely vulnerable under the kafala system. Being tied to the employer also ties them to their home, so there is little to no oversight of working or living conditions in the domestic sphere, and these women are not able to leave to seek outside help. This results in excessive working hours, physical and sexual abuse, and, in the most severe cases, death.

So how might abolishing the kafala system address these issues for workers? Loosening ties between workers and employers can reduce workers’ vulnerabilities, strengthen their wages, and incentivize workers to develop their skills. Evidence suggests that when foreign workers are allowed to change employers, there are lower levels of reported abuse and higher reported wages. One study found employer-tied workers had equal to worse employment outcomes than migrants working on no visa at all. Similar results have been seen in the United Arab Emirates (UAE); a 2011 policy reform loosening kafala restrictions by allowing migrant workers to change employers without prior approval after their initial work contracts expired was found to increase real earnings by more than 10 percent.

Allowing foreign workers to move employers is better for host country society workers and employers as well. Employers can also expect to see increased productivity; short contracts, flat wages, and the lack of occupational mobility means workers on employer-specific visas often have little incentive to acquire and deploy new skills . In Dubai, this resulted in inefficiencies totaling 6.6 percent of total costs and 11 percent of profits on average.

The impact of abolishing kafala will depend on what abolition looks like

When the UAE reformed its kafala system, it removed the requirements for kafeel approval on entrance into and exit from the country and allowed workers to change jobs without approval from their employer. However, visa status is still tied to employer sponsorship (as it is in many Western countries). Similarly, Bahrain announced it would dismantle its kafala system in 2009, and to date reforms include allowing workers to enter and exit without employer permission, change jobs without written consent of the current employer (after one year of employment), and seek new employment while remaining in the country. The reforms in both the UAE and Bahrain make important strides towards improving worker mobility, but also retain essential elements of the kafala system.

In order to truly abolish the kafala system, Saudi Arabia will need to answer difficult questions relating to the terms under which workers may enter and exit the country, the conditions under which a worker may leave a job, and the conditions under which they may enter new employment (including when there is a gap between these two events and how it is tied to their immigration status), and who bears which costs of migration. Each of these dimensions is not only theoretically difficult from a policy angle, but also operationally complex from an implementation angle This requires the creation and monitoring of government entities that manage and execute these policy responsibilities, as they are currently the role of the employer.

Truly abolishing kafala would be a significant step towards legitimizing Saudi’s migration flows and making them rights-respecting, while also making them more productive and responsive to needs of employers by reducing labor market frictions. This move could be a step towards demonstrating how societies can accept a migrant workforce at scale while also ensuring an adequate baseline of rights and protection. But simply declaring kafala abolished is not enough; what matters is what replaces it.