Positive impact: The new policy scraps the longstanding system of tiered wage structures linked to educational qualifications, while retaining the overall minimum wage at RO 325 per month.
Oman’s revamped Minimum Wage policy, which does away with the tiered structure of base salaries linked to educational qualifications, has the potential to spur job growth targeted at Omanis, place a greater premium on experience and skills development, and incentivise businesses to invest in local talent, according to a well-known Omani economist.
Dr Abdullah al Bahrani (pictured) applauded the government’s recent decision to roll back its longstanding policy linking minimum wages for Omanis with their educational qualifications.
The reversal of the policy, he said, is a “good thing” for Omani job-seekers and employers alike, and will have a net positive impact on the overall economy.
Under the old policy, which was rescinded vide a circular issued by the Ministry of Labour last month, the minimum wage was RO 325 per month for Omani high school graduates, RO 425 for college diploma holders and RO 600 for degree holders.
The new policy scraps these wage bands, while retaining the overall minimum wage at RO 325 per month.
Presenting on the topic in his weekly ‘Coffee with Dr A’ series on his YouTube channel, Muscat-based Dr Abdullah said the new measure has the potential to open up more employment opportunities for young Omanis.
“By definition, the minimum wage is the minimum wage that an employer can offer you for a job.
This does not mean that it is the wage you will be offered, but the minimum wage you can earn. You and your employer can agree on a wage that is at, or above, the minimum wage,” he explained.
In his talk, Dr Abdullah warned that multiple minimum wage tiers or high minimum wage reduce the market’s ability to match job-seekers with available jobs, which he referred to as ‘frictional unemployment.
“It’s a situation where jobs and job seekers exist but cannot match due to some friction, which in this example is the ‘minimum wage’.”
To make his point, the economist cited the example of ‘Ahmed’, a job-seeker with a recent university degree.
“Under the old policy, the minimum wage Ahmed would receive is RO 600 per month conditional on meeting the employer’s criteria. Ahmed interviews for the job, but the employer feels his skills qualify him for a salary of RO 550.
Ahmed is willing to accept, but under the old model, the two sides will not be able to match, although both are willing to.
In the old model, Ahmed would not have a job, but in the new model, Ahmed would earn RO 550.”
This flexibility would allow job-seekers like Ahmed to earn a wage under the new policy as opposed to a zero wage under the old policy, he noted.
“The longer Ahmed is unemployed the more difficult it is for him to find a job.
The longer he is unemployed, the more likely his skills will depreciate. By eliminating the minimum wage, it will facilitate connecting Oman’s youth with job opportunities as quickly as possible. It will allow firms to take on Omani employees it wouldn’t have in the past,” Dr Abdullah stressed.
In this regard, he underlined the need for policymakers and other stakeholders to make it possible for local talent to match with the needs of local employers.
Failure to do so, he warned, would invite “long-term consequences” for the economy, notably in the form of “business flight” where companies may choose not to operate any longer in Oman because of wage issues.
“Oman needs private industry now more than ever.
We also need to develop our experience and skillsets in the labour market. The change in the minimum wage policy increases the likelihood that this happens,” he added.
CONRAD PRABHU
@conradprabhu
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