The labor market in the digital era: What matters for the Gulf Cooperation Council countries?

Abstract

Digital transformation affects all organizations, large and small. Waves of technological change are frequent and accelerating, requiring constant adaptation by companies and their employees. Artificial intelligence, automation, and digital tools are changing the traditional organizational structure and ways of working. After the COVID-19 pandemic, the labor market has to move toward an inclusive digital transformation that braces the business systems. This paper is an attempt to explore the effect of digitalization on employment in Gulf Cooperation Council (GCC) countries and compare them to some selected advanced countries. The methodology focuses on the second-generation unit root tests and the Auto Regressive Distributed Lagged model for the period 2000-2020. The findings show a negative and significant impact of ICT on employment in the industrial and services sectors for GCC countries with a moderate adjustment speed toward the long-run equilibrium. This result is explained by the shortage of skilled workers in GCC countries compared to advanced countries, where the findings show a positive and significant effect of ICT technologies on total employment, especially in the industrial sector. The adjustment speed toward the long run is significantly higher in advanced countries than in GCC countries.