Should Oman introduce minimum wage for expats?

The question in debate now is whether Oman should introduce a minimum wage for its expatriate workers. In 2013, the government increased the minimum wage for Omanis to RO 325 from RO 200 per month. The decision was hailed by many nationals who were paid less than their work contribution.

However, critics then urged that the private sector had to dig deeper into their coffers to come up with the difference.

The corporate houses would make the same noise now if the government decides to put a threshold on the minimum wage to expatriates. In a tight market weighed down with competition, directors in the private companies would not want to take a bigger slice off their revenues. The argument will be centred on earnings and the reduction of profitability.

Then they will be a question of how much should be fixed as minimum wage for expatriates. Should it be the same as Omanis or lower? Certainly it would not be higher what the nationals get now. Statistics could be a good indicator of setting up the minimum wage for expatriates. The official figures show that there are 1.86 million expatriates working in the private sector compared to less than 300,000 Omanis in the same sector. That is a big discrepancy.

The argument would grind on the sheer number of expatriates against a minute number of Omanis working in the private sector. Again, the private companies, which the bulk of their employees are expatriates, would resist it on the grounds of reduction of income. However, there is a second dimension to the argument, which the private sector would ignore. Higher payment may translate to better efficiency and loyalty.

The return from efficiency and loyalty is higher profit and performance. At the moment, we have expatriates who are paid as low as RO 80 a month. This is what most housemaids get paid.

This is where a genuine complication would come up. If a minimum wage is established for expatriates, should it not be applied to housemaids? What about construction labourers who get paid the same wages as housemaids? The official statistics also show that housemaids and labourers make up 55 per cent of all expatriates in the country.

Interesting enough, some might note that Qatar earlier this month set up a $200 minimum wage for its expatriates. It is not much but symbolic and perhaps a step towards the right direction. $200 minimum wage of Qatar is what normally paid to the lowest rung in the expatriates’ ladder of employees.

Increasing the minimum wage may affect the retail business, too. The market makes its own forces and it may be unhealthy to assert an external force that would strict its expansion.

The retailers, on the other hand, will see as an excuse to increase the food prices and other products if expatriates minimum wage is introduced. The catalyst of the price hike is higher wage bill and consumers have to pay for it. Inflation will crop its head again and take away any advantage the minimum wagers had in the first place.

It is a vicious cycle that would have no end. If businesses keep prices constant, the action will eat away their profitability and restrict growth. Soon, they might argue that employers will not be able to afford to offer jobs to anyone.

But having said that, the question of whether expatriates should be paid a minimum wage or not, is what the government needs to think carefully. It might opt, to please both sides, the workers and employers, to follow the steps of Qatar.

The threshold can be what is already accepted by many. But Oman has already moved a step closer to minimum wage for expatriates.

Last month, The Sultanate has changed the minimum wage limit of RO 600 and reduced it to RO 300 for expatriates wishing to get family visa.

This decision, according to justification from the government “will have economic and social effects.”