survey for the project The Impact of Salary Inflation On the Saudi Labor Market in The Technology Sector.

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Literature Review
A crucial aspect of Saudi Arabia’s Vision 2030 involves the establishment of a thriving
technology industry to facilitate economic diversification. Considerable funds have been allocated
towards the development of digital infrastructure and the implementation of incentives to
encourage innovation (Sarabdeen & Alofaysan, 2023). Nevertheless, the swift expansion has
resulted in inflated remuneration for proficient technology experts, giving rise to apprehensions
regarding the long-term viability. There is a need for a thorough examination of the factors,
consequences for organizations, and policy measures in response to the increase in technology
salaries in Saudi Arabia.
The rapid growth of the technology sector has led to a higher need for certain expertise,
such as software development and data science. The emergence of chronic pay inflation, driven by
variables such as workforce nationalization policies and global talent competitiveness, poses a
policy dilemma that has repercussions for firms, employees, and the larger economy. This
literature study examines the current body of research on the rise of wage inflation in Saudi
Arabia’s technology sector. It investigates the effects of this inflation on firm profitability and
operations, as well as its broader ramifications on the economy and labor market dynamics. The
investigation uncovers gaps across different academic disciplines in terms of accurately measuring
the factors that contribute to inflated wage trends. It also investigates the resulting implications on
hiring, turnover, and productivity within technology businesses. Findings from recent research can
provide guidance on balancing the objectives of advancing digital transformation and controlling
personnel expenses.
Technology Sector Growth and Rising Salaries in Saudi Arabia
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In order to facilitate economic diversification, Saudi Arabia has prioritized technological
advancement as a strategic goal under Vision 2030, which has attracted the attention of scholars.
Sarabdeen & Alofaysan (2023) highlight that through infrastructure upgrades, legal reforms,
public-private partnerships and incentive schemes, the sector revenue is projected to reach $44
billion by 2030. Newcombe (2021) traces the rapid growth of technology hubs and innovation
centres across major cities. On the other hand, academics have noted that corporations are engaging
in rigorous bidding processes due to the increased need for advanced digital skills. The wage
inflation trend is scientifically demonstrated by Al-Youbi et al. (2020) using employment data.
They found that average earnings for technical specialists have climbed 15-20% per year, which
is more than the corresponding advances in productivity. Therefore, keeping costs low is still an
issue, even when there is room for expansion.
Effects on Business Profitability
Rapid salary inflation, according to Al-Youbi et al. (2020), constantly erodes profitability,
which, from an organizational standpoint, threatens the financial survival of technological
enterprises. Support in striking a balance between service quality and margin protection may be
necessary for enterprises due to the high cost share of labor. Due to inadequacy in scale and
capacity to bear high pay bills relative to output, smaller firms can face competitive disadvantages.
In an effort to lessen companies’ need on increasingly expensive human capital, researchers have
statistically studied the innovation vs efficiency tradeoffs. Nevertheless, there is a dearth of
research that attempts to put a precise number on the effects of inflation on Saudi Arabia’s budding
IT sector.
Macroeconomic Impacts
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When looking at the big picture, experts warn of dangers caused by pay inflation that is too
high relative to productivity. Using econometric analysis, Blazquez et al. (2021) show that, in
Saudi Arabia, both public and private sectors have seen a widening disparity between wage growth
and production per worker since 2016. The International Monetary Fund (2023) notes that in 2021,
due to citizen welfare programs and labor nationalization attempts, there was a compensation
increase of more than 15%. But academics say that if domestic prices don’t reflect trends in value
creation, external competitiveness could be a problem in the long run. Also, things like
employment freezes and company automation are still possibilities for unforeseen consequences.
While development programs are critical, everyone agrees that wages should be moderate and tied
to production.
Labor Market Dynamics
Samargandi et al. (2019) use sector-specific trends analysis to quantitatively show how
Saudi women are finding more high-skill jobs in the information and communication technology
(ICT) and financial sectors as a result of policy changes. Globalized remote work and overseas
talent competition have further elevated Saudi technology salary inflation, according to Sarabdeen
and Alofaysan (2023), who examine post-pandemic era shifts. On the other hand, academics have
pointed out immigration hurdles, vocational stigma (Aldossari, 2020), and skill development as
labor market obstacles that could stunt the expansion of the tech ecosystem (Mishrif &
Alabduljabbar, 2017). According to Idrovo Carlier et al. (2019), companies’ strategic alternatives
are severely limited due to the scarcity of technical specialists in the market. Hence, to promote a
digital economy that can last, we need a comprehensive policy strategy that takes into account
immigration, social norms, industrial relations, and education.
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Emerging wage trends and inflation risks have been examined from multiple dimensions
as part of Saudi Arabia’s plans for technological and industrial expansion. Salary premiums for
Saudi professionals with advanced degrees and years of experience are large, according to
Alsulami (2018). Exaggerated salary expectations have emerged due to the increased need for
highly specialized technical capabilities brought on by digital transformation (Newcombe, 2021).
Al-Youbi et al. (2020) predict that average technology wages will surpass productivity
improvements, highlighting the ongoing importance of effectively managing profitability and
policy choices.
Research by Kumar et al. (2019) on manager views toward automation and AI
dissemination reveals that, in the absence of reskilling initiatives, these technologies are seen as
threats to current employment opportunities. At the same time, Louail and Riache (2019) compare
the recent job market boom due to proactive industrialization initiatives with the negative
unemployment shocks caused by events like the Arab Spring in 2011. Therefore, it is critical to
find a middle ground between absorbing displacements caused by technology and preventing skill
mismatches.
Rausser et al. (2023) examine the topic of public-private digital infrastructure
collaborations via the perspective of external partnerships, specifically looking at how these
partnerships might boost innovation capacities and the competitiveness of technological
ecosystems. Domestic salary expectations are also impacted by global mobility trends, which
promote expatriate assignments and provide local individuals with opportunities to showcase their
skills abroad (Kumar et al., 2019). The digital economy’s long-term viability, according to
researchers (Sarabdeen & Alofaysan, 2023), depends on removing immigration and talent gaps
that have been identified as a result of the current Vision 2030 changes.
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Torosyan et al. (2023) examine parallels between occupational profiles sensitive to
technological change across countries, further assessing global aspects. As a result of their
research, useful practices for reducing high rates of employee turnover and job insecurity can be
shared. As Saudi Arabia strives to compete with the world’s top IT hubs, these kinds of insights
are more important than ever. In conclusion, the current body of research highlights the critical
need for coordinated policy responses that strike a balance between fostering industrial
development and ensuring a stable labor market. We need to shift our attention to how salary
inflation affects financial health, retention rates, and productivity as an organization. Vision 2030
advocates for a robust technology ecosystem, and it is crucial to lay the human capital foundations
to safely optimize this national transformation. To avoid technology job displacement and guide
employment growth, external partnerships in areas like vocational training, global skills mobility,
and responsible automation must be fully utilized.
Emerging trends and inflation risks.
The technology sector of Saudi Arabia has faced a huge obstacle that has led to shifts in
the wage dynamics which depend on different factors and reveal both benefits and pitfalls of
sustainable economic development. One of the factors that is beginning to be well-determined is
the higher demand for technology workers who hold high qualifications, as the nation continues
to implement the Vision 2030 digital transformation strategy (Aldossari, 2020). The areas such
as software development, data analytics, artificial intelligence, and cyber security all require
people with relevant experience. During the process of turning into a regional technological hub,
Saudi Arabia is trying to source these people in high numbers. Intensified demand for niche
technical expertise triggered by corporate rivalry in the market for top talent results in the boost
of wages. Together with the existing programs for entrepreneurship and innovation, the Sarja of
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tech hubs and innovation centers in the large cities of the Kingdom has led to higher labor
competition and wage inflation rates (Aldossari, 2020). So this is the reason that wages for labor
in areas involving technology are growing very quickly these days with wages in this field
increasing faster than in the economy.
Nevertheless, there are serious risks attached to the threat of wage inflation, possibly
through a spike in the prosperity of technology companies, which further is an indication of a
healthy and prosperous labor market. Concretely, smaller enterprises with low budgets to
compensate for rising labor costs may experience their profit margin reduction and financial
viability under threat in the long run due to persistent and high-level wage inflation (Aldossari,
2020). Businesses may find their operating efficiency declining and become disadvantaged in
competition when labor costs go up. This may result in difficulties in innovation and growth for
these organizations. Furthermore, wage inflation in the tech sector may also lead to
microeconomic impacts that can affect the structure of the job market, income distribution, and
the nation’s competitive advantage. Research shows that Saudi Arabia’s wage growth has
recently outpaced productivity progress, raising concerns over the sustainability of wage
inflation patterns. The discrepancy between productivity growth and pay growth may make the
nation less competitive in international markets and result in negative employment effects like
job displacement and automation.
Furthermore, wage inflation may put more pressure on government resources and worsen
income inequality, especially if salary increases are not matched by increases in productivity and
value creation (Aldossari, 2020). To guarantee that the advantages of economic progress are
distributed fairly throughout society, controlling wage inflation in the technology sector becomes
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essential as the government works to foster economic diversification and inclusive growth under
Vision 2030.
Technological disruptions and job displacement.
About job displacement and labor market dynamics, the increased adoption of technology
and automation presents substantial concerns for Saudi Arabia as it intensifies its efforts toward
digital transformation under Vision 2030 (ALZYADAT, & ALMUSLAMANI, 2021).
Technological developments can lead to increased production, improved efficiency, and
creativity, but they also carry a danger of job displacement and skill mismatches, especially for
low-skilled individuals and those employed in conventional industries.
An important factor contributing to technology disruption is the growing automation of
jobs and procedures in many different economic sectors. Businesses can now automate repetitive
and routine processes, increasing productivity and reducing costs, thanks to developments in
artificial intelligence, robotics, and machine learning (Kumar et al., 2019). Concerns concerning
the potential loss of jobs and the displacement of human labor are also raised by the growing
deployment of automation technology, especially in industries that rely significantly on manual
labor.
The move toward automation and digitization presents serious issues for workers in
conventional industries like oil and gas, which have historically employed large numbers of
people in Saudi Arabia. Workers who cannot adjust to the shifting demands of the labor market
run the danger of losing their jobs as companies engage in automation technology to increase
productivity and cut costs (Alkhathlan, Alkahteeb, Mahmood, & Bindabel, 2020). Furthermore,
workers may not be able to retrain or upskill quickly enough to keep up with the high speed of
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technological innovation and change, which would increase the risk of underemployment and
unemployment.
Moreover, rising sectors like the technology industry itself are impacted by technological
disruption in addition to established ones. The technology industry provides issues in terms of
talent mismatches and skill shortages, but it also presents possibilities for highly qualified people
with experience in fields like software development and data analysis (Torosyan et al., 2023).
The danger of pay inflation and skills shortages appears in the business world when it is hard to
stand against the world where all companies want to acquire and keep talented employees, and
the competitiveness of the tech sector may suffer.
Collaboration between policymakers, companies, and educational institutions is vital to a
proactive and well-prioritized approach to avert issues of technological disruptions and
employment displacement. A strategy may be to move money into projects for workforce
development which would train employees in the skills they require to be successful in the
digital market. This might involve programs like apprenticeships, lifelong learning opportunities,
and vocational training that help workers learn new skills and adjust to changing workplace
requirements (Rausser et al., 2023).
Furthermore, by enacting laws that support entrepreneurship, job creation, and economic
diversification, politicians can significantly contribute to the ease of transitions for displaced
workers. Creating new chances for displaced workers to reenter the labor market may involve
promoting the development of emerging industries and creating a supportive atmosphere for
innovation and entrepreneurship (Samargandi et al., 2019). Additionally, governments can work
with companies and academic institutions to pinpoint developing skill gaps and create industryrelevant training programs.
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Public-private partnerships.
Public-private partnerships are the key to the realization of Vision 2030 because they
stimulate economic growth, encourage innovation, and foster sustainable development
(ALZYADAT and ALMUSLAMANI, 2021). These works exemplify the uniting of the
capabilities, expertise, and capital of private and government institutions to solve public
problems and utilize the opportunities that are in critical areas like infrastructure, technology,
and human expertise.
Public-private partnerships in Saudi Arabia take on the challenge of using Private Sector
Investment and Innovation to drive the country’s digital transformation process. This mechanism
also provides the government with a means to raise private sector capital and expertise for the
construction and expansion of technology infrastructure while it tries to diversify its economy
from dependency on oil revenues. This also covers the cost of digital infrastructure which is
crucial to maintain the growth of the digital economy and the equipment required like the data
centers, broadband networks, and smart cities (Rausser et al., 2023). This joint venture between
the public and private sectors helps them all work towards nurturing the culture of innovation
and entrepreneurship in Saudi Arabia. A government that wishes to create systems for
developing technology and commercializing new solutions can do this through close
collaboration with technology startups, research institutes, and companies. All these are
encompassed in programs like technology parks, incubators, and accelerators whose aim is to
provide cash, resources, and mentorship to innovators and entrepreneurs. The public-private
partnerships are the main pillars behind closing the skills gap and promoting workforce
development in Saudi Arabia. Governments could join forces with academics, learning centers,
and trade unions to establish and implement programs that could help people gain the necessary
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knowledge and skills to succeed in the digital economy. Programs that can assist people get the
relevant skills and certifications through apprenticeships, lifelong learning opportunities, and
vocational training may also fall into this category (Samargandi et al., 2019).
Public-private partnerships are not limited to stimulating economic growth and
innovation but contribute to accelerating social integration and Progress in Saudi Arabia.
Through partnerships with civil organizations, non-profit institutions, and local communities, the
government can design programs that battle social problems and encourage social harmony
(Alkhathlan, Alkahteeb, Mahmood, & Bindabel, 2020). This could involve initiatives that enable
people and communities to fully engage in the digital era, like training in digital literacy, access
to technological resources, and assistance for marginalized communities (Sarabdeen &
Alofaysan, 2023). This cooperation is a strong modality towards Saudi Arabia’s goals of Vision
2030 as it includes sustainable development, innovation, and economic diversification. PPPs
provide for a substantial change in the priority fields such as infrastructure, technology, and
human capital development by merging socio-economic and technical features of the public and
private sectors (Aldosari, 2020). Developing partnerships is still strategic and vital in broadening
the horizons, tackling the intricate problems in the digital era, and in the quest to turn the country
into a knowledge-based economy and an information technology leader on a global scale.
Global mobility trends.
In an era of globalization and interconnected economies, global mobility trends are
becoming increasingly relevant to Saudi Arabia’s economic diversification goals and talent
development under Vision 2030. These trends include cross-border mobility, knowledge, and
people’s skills made possible by developments in communication, transportation, and technology
(ALZYADAT & ALMUSLAMANI, 2021). To hire and retain the best talents, cultivate
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innovation, and secure the rightful place for Saudi Arabia in the digital economy, the country
must understand and benefit from the above key trends. The rise of transnational skilled workers’
and professionals’ migration between countries is one of the characteristic trends of global
mobility. Businesses need access to a diverse group of individuals with specific skills as they
look to grow globally and into new markets. As a result, professionals in industries including
technology, engineering, finance, and healthcare are moving across borders more frequently to
pursue possibilities for professional and personal development (Kumar et al., 2019).
Global mobility patterns offer Saudi Arabia possibilities and challenges in its endeavors
to cultivate a skilled labor force and propel economic progress. Global mobility, on the one hand,
makes it possible for Saudi Arabia to draw in highly skilled individuals from all over the world
who can support the nation’s innovation environment and knowledge economy. Saudi Arabia can
establish itself as a desirable destination for international talent, especially in developing
industries like technology and digital innovation, by providing competitive salaries, alluring
perks, and a positive work atmosphere (Sarabdeen & Alofaysan, 2023).
Furthermore, through work and study abroad programs, Saudi citizens can broaden their
professional networks, learn new skills, and be exposed to foreign best practices thanks to trends
in global mobility. The government can create a globally competitive workforce that can propel
innovation and economic progress in Saudi Arabia by funding initiatives that encourage
international interchange and collaboration (Samargandi et al., 2019). Global mobility patterns,
however, also present difficulties for talent retention and brain drain. There is a risk of losing
human capital and experience as qualified professionals seek opportunities abroad, particularly in
critical industries such as technology and healthcare. To overcome this barrier, Saudi Arabia
needs to formulate policies that support the country’s development and motivate skilled people to
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remain in the country. Developing a climate-friendly ecosystem that fosters entrepreneurship,
innovation and the creation of startups and technology-based entrepreneurship is one
intermediary action that can be taken. By making available the means of implementation and
fostering conditions such as funding, access to capital, and regulatory frameworks that promote
innovation and research, Saudi Arabia can contribute to the realization of entrepreneurship
aspirations and help to achieve economic diversification goals. (Rosser et al., 2023). In addition
to this, Saudi Arabia can sponsor programs that will make its workforce competent in their skills
and knowledge to compete in the global market. The government helps reshape the economy
matching the needs of the changing work market by providing programs, extending professional
advancement opportunities, and incentives for lifelong learning (Torosyan et al., 2023).
Policy implications.
The discussion provides insightful information about the intricate dynamics of Saudi
Arabia’s technological salary inflation and its effects on labor market dynamics, organizational
sustainability, and economic development. Drawing from these observations, several policy
recommendations can be made to mitigate the effects of wage inflation and optimize the
advantages of the technology industry’s expansion in line with Vision 2030 (Alkhathlan,
Alkahteeb, Mahmood, & Bindabel, 2020). First, to address the underlying causes of Saudi
Arabia’s technology salary inflation, certain regulations and measures are required. This includes
steps to increase the number of highly qualified technology workers in the country by funding
workforce development, education, and training initiatives. This discussion focuses on the
relation of the race-inflation aspect to the labor market of the technological field in the context of
Saudi Arabia’s 2030 vision strategy. In this way to become a priority strategic objective its
Government pursues Vision 2030 development of Saudi Arabia’s digital technology sector
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enormously and receives huge taxes from infrastructure extension and legislation changes. This
has unfortunately led to a high increase in average wages, especially the IT, which poses a tough
test for employers, employees, and political leaders.
To overcome the skills gap and support the growth of a competent workforce, policies
that encourage increased collaboration between the public and commercial sectors are also
necessary. This could involve collaborations between governmental organizations, academic
institutions, and business partners to create and carry out training initiatives that are in line with
the demands of the technology sector. Stakeholders may guarantee that the workforce is flexible
and responsive to technological change by collaborating to identify skill gaps and create focused
training programs (Samargandi et al., 2019). Furthermore, measures to lower regulatory hurdles
and improve the business climate can assist technology companies become more competitive and
foster long-term growth. Reforms to improve the protection of intellectual property rights,
simplify tax laws, and expedite business registration procedures could all fall under this
category. Saudi Arabia can attract international direct investment and encourage domestic
entrepreneurship, resulting in job creation and economic diversification, by fostering a climate
that is more conducive to technology investment and innovation (Sarabdeen & Alofaysan, 2023).
Policies that support social inclusion and deal with differences in access to opportunities
associated with technology are also necessary. Initiatives that boost broadband internet access,
raise digital literacy and encourage the involvement of underrepresented groups in the
technology workforce—like women and young people may fall under this category. Saudi
Arabia can fully utilize its human capital and foster inclusive growth by guaranteeing that all
societal segments possess the necessary skills and resources to engage in the digital economy
(Blazquez et al., 2021).
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A comprehensive policy response that tackles the underlying causes of pay pressures
while optimizing the advantages of technological innovation and entrepreneurship is necessary to
solve the problems presented by technology compensation inflation in Saudi Arabia
(ALZYADAT, & ALMUSLAMANI, 2021). Saudi Arabia can establish a dynamic and
sustainable technology ecosystem that propels economic growth, generates employment
opportunities, and improves the standard of living for its entire population by allocating
resources towards education, training, and workforce development, encouraging innovation and
cooperation, enhancing the business environment, and cultivating social inclusion.
Research Gaps
In conclusion, research has mostly concentrated on recording the rise in Saudi technology
salaries and the potential implications on organizations, but there is a lack of statistical analysis
about the exact causes and the subsequent repercussions on hiring, turnover, and productivity. The
majority of research has focused on the potential macroeconomic dangers of unrelated wage
increases across the economy. There seems to be a lack of collaboration amongst disciplines when
it comes to combining micro and macro factors in order to formulate well-informed policy
responses that strike a balance between industrial development, company competitiveness, and
stability in the labor market. This is an area where the planned study will add anything new.
Furthermore, current research highlights the need for comprehensive policy solutions that
strike a balance between economic advancement and stable labor markets. We need to shift our
attention to how salary inflation affects financial health, retention rates, and productivity as an
organization. To control employment development and avoid tech-induced job losses, it is
important to fully use external collaborations in areas such as vocational training, global skills
mobility, and responsible automation. Laying the human capital foundations to achieve such
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national change securely is a crucial objective. Vision 2030 advocates for robust technological
ecosystem expansion.
The following theories can be developed from the literature review:
1. Above-average wage inflation for technical positions in Saudi Arabia is highly correlated
with the rapid growth of the technology industry and the high demand for trained
individuals (Newcombe, 2021; Al-Youbi et al., 2020).
2. Saudi Arabian technology businesses’ profit margins and long-term financial viability will
be significantly affected by persistent and excessive salary inflation (Al-Youbi et al., 2020;
Sarabdeen & Alofaysan, 2023).
3. To offset rising human capital costs from salary inflation, technology firms will resort to
increased workforce automation, organizational restructuring, and a reduction in overall
hiring activity (Kumar et al., 2019; Torosyan et al., 2023).
4. High and escalating technology wage bills pose relatively more significant competitive
threats for more minor, early-stage technology firms in Saudi Arabia due to insufficient
economies of scale (Sarabdeen & Alofaysan, 2023).
5. Approaches like global skills mobility, public-private partnerships and vocational training
programs will have significant positive moderating effects in absorbing technology-linked
Saudi labour market shocks (Rausser et al., 2023; Louail & Riache, 2019).
6. Realizing Vision 2030 goals of robust, sustainable technology ecosystem growth entails
integrated solid policy responses to manage wage inflation pressures on businesses while
expanding employment opportunities.
The above hypotheses establish testable linkages between dimensions such as rising
compensation trends, firm profitability and hiring decisions, external labour market factors, and
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macroeconomic Vision 2030 objectives. The causal relationships can be examined empirically
through appropriate statistical analysis.
Conclusion.
In the context of Saudi Arabia’s Vision 2030 plan, this article addresses the race-inflation
impact effects on the country’s technology labor market. Through this highlighted strategic
objective the Vision 2030 Government aims to realize rapid development of Saudi Arabia’s
technology sector, ensuring huge revenue from the digital infrastructure expansion and
legislation changes. This growth has however resulted in average wage hikes, particularly in the
IT sector, which provides challenges to employers, employees, and political leaders. The
literature review reveals that the rise of the technology sector impacts salary inflation in Saudi
Arabia. Technical experts are now paid more due to the growth of technological hubs and
innovation centers, and the increased demand for specialized skills like software development
and data science. Al-Youbi et al. (2020) have raised concerns over the long-term viability of
corporate operations because this trend has surpassed gains in labor productivity.
The literature review also emphasizes how salary inflation hurts businesses’
competitiveness and profitability. Unchecked wage inflation can reduce profit margins,
especially for startups and smaller businesses that cannot absorb growing labor expenses. This
may cause disadvantages in the marketplace and impede the expansion of the technology
industry (Sarabdeen & Alofaysan, 2023). Wage inflation may have more significant effects on
the economy at the macroeconomic level, such as difficulties relating to productivity growth and
competitiveness internationally. Incomes have increased due to government programs to improve
citizen welfare and encourage economic transformation, but excessive pay growth runs the
danger of eroding competitiveness and productivity over time (Blazquez et al., 2021).
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The influence of wage inflation on labor market dynamics, such as effects on workforce
participation, recruitment activity, and employee turnover, is also included in the literature
review. While increased pay may draw people to the technology industry, there may be problems
with talent retention and increased turnover rates. This emphasizes how crucial it is to put
policies in place to close skills gaps, advance workforce development, and encourage the
involvement of underrepresented groups in the technology industry (Samargandi et al., 2019).
The problem of wage inflation is made more complex by emerging trends like globalization and
technology disruption, which impact talent mobility, job displacement, and skill development. A
concerted policy response that integrates initiatives to strengthen social inclusion, business
environment, innovation and entrepreneurship, education and training, and business environment
will be necessary to address these difficulties (Rausser et al., 2023).
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Reference
Aldossari, A. S. (2020). Vision 2030 and reducing the stigma of vocational and technical training
among Saudi Arabian students. Empirical Research in Vocational Education and Training,
12(1). https://doi.org/10.1186/s40461-020-00089-6
Aldossari, A. S. (2020). Vision 2030 and reducing the stigma of vocational and technical training
among Saudi Arabian students. Empirical Research in Vocational Education and
Training, 12(1), 1-24.
Alkhathlan, K. A., Alkahteeb, T. T., Mahmood, H., & Binda