Oman’s Biggest Economic Challenge
One of the biggest challenges facing the Omani Economy can be explained with this graph.
The graph is known as a population pyramid. To understand why it is a challenge for Oman, we need to understand
What does the population pyramid tell us?
What are the economics consequences associated with different shapes?
Why is this a problem for Oman?
What does the population pyramid tell us?
The population pyramid is a graphical representation of a country's age and gender distribution. It's called a pyramid because it is usually wide at the bottom to represent the larger number of people in younger age groups and is narrow at the top to represent the smaller number of people in older age groups.
What are the economic consequences?
The shape of a population pyramid can have significant economic implications for a country. A youthful pyramid with a larger proportion of people in the working-age groups can indicate a large labor force and potentially high economic growth.
A rapidly aging pyramid with a larger proportion of elderly people can indicate a higher dependency ratio, potentially putting strain on the workforce to support the aging population through pensions and healthcare systems.
Gender imbalances in a population pyramid can also have economic consequences. For example, a population with a significant gender imbalance in favor of males can result in a surplus of unmarried men and potentially lead to social and economic problems.
The population pyramid is an important tool for understanding a country's demographic structure and the potential economic consequences of its aging and gender balances.
Why is this a problem for Oman?
Depending on the sources, Oman's population is around 3.7 million, with a median age of 26.2 years. The country has a relatively high birth rate and a relatively low death rate, contributing to its youthful pyramid.
This youthful structure can be seen as a potential source of economic growth, as a larger working-age population can contribute to the country's labor force and economic development.
This all sounds great. What is the problem? It is also important to consider the challenges that come with a rapidly growing population, such as the need for adequate infrastructure, housing, and employment opportunities. A youthful population is costly and requires investment in human capital. Roughly 40% of Oman’s population is in the education phase of life, and 95% of them under the age of 60. While a younger population means higher productivity, Oman must educate the population first before they can be productive. Investment in education, primary and higher education, is critical to the long-term economic growth.
Also, once the younger population is educated, there has to enough job creation happening to absorb new people entering the labor force. This is one of the biggest issues facing Oman; there is not enough job creation within the economy. Also, there are high frictions in job search that delay employment after graduation. These delays range from 6 months to a couple of years. This lag causes many issues with morale, depreciation of skillsets and knowledge, and leads to reduced productivity when finally employed.
Designing Policies
For Oman, economic opportunity relies heavily on job creation and reducing the time between graduation and employment. Oman must invest in policies that help increase job creation. There are many policy options and considerations, that it requires a video in itself. I discussed some of them in a presentation back in 2020. Also, investments to reduce the search frictions will make Omani youth feel more utilized. Both of these things need to happen simultaneously.
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