SHAFAQNA (Shia International News Association)- Halwani Bros, a Saudi food producer, seems to think it has a recipe for labour market transformation – beyond the dense, sesame halawa dessert, for which it is famous. The 60-year-old, Riyadh-listed company has set a minimum wage of SAR3,000 ($800) per month for Saudi employees, according to a report in Arab News.
The move may only benefit 80 nationals employed at food production plants across the kingdom, as well as 50 more that the company plans to hire – but the decision could have far-reaching ramifications for other Saudis.
Persuading nationals to take worse paid, less prestigious, and generally tougher jobs in the private sector is perhaps the greatest challenge facing the Arab world’s largest economy, as well as its Gulf neighbours.
With unemployment officially above 10 per cent, and even higher among youths, job creation is an imperative for a country that is throwing money at its potentially restive population.
A state spending programme of $100bn was launched last year as the government sought to defuse the conditions that were triggering revolutions around the region.
The kingdom has largely avoided big demonstrations, despite some isolated protests that have broken out over socio-economic issues. The country’s Shia minority – emboldened by protests in neighbouring Bahrain – has also held demonstrations in the oil-rich eastern province.
The government has already commissioned a study – which will report its conclusions within months – on setting a minimum wage for the private sector.
Private companies prefer to hire cheaper Asian labourers for most clerical, retail and manual jobs. Over 90 per cent of the workforce comes from the kingdom’s 8m expatriate population. Monthly salaries for expatriates are often less than the monthly unemployment benefit of SAR2,000 granted to an estimated 1m nationals since the revolts swept the region.
In the wake of unrest in neighbouring Oman last year, the sultanate raised unemployment benefit and the private sector minimum wage for nationals as it sought to blunt unrest. The newly-empowered parliament in Muscat has also been agitating for a higher minimum wage.
Bahrain, before ongoing Shia-led unrest damaged its economic outlook, was one of the few regional states to experiment with labour market reform. The reforms, suspended since the unrest, saw the government taxing the private sector for each expatriate employee, channelling the funds into training for Bahrainis to make them more employable.
Laying more costs onto the private sector is never popular in the Gulf, as elsewhere, but some form of experimentation around labour market reform is surely needed to defuse the region’s social time-bomb: youth unemployment.
Source : FT