Oman Makes Changes to Minimum Wage Structure
Recently, Oman changed its minimum wage laws. In this video, I discuss the change, and how it impacts employment in Oman. Release on September 26th at 330pm Oman time.
Eliminating minimum wage by education level is one of the best things to happen to the Omani labor market. This provides one basic minimum wage of 335 Oman rials per month.
Previous wage structure
High school diploma holder 325 R.O per month ( 1 Rial= 2.6 Dollars)
College diploma 450 R.O per month
University Degree 600 R.O per month
Current minimum wage structure
Minimum wage is 325 R.O
Labor market is more flexible and able to adjust now. It should increase employment opportunities, allowing youth to find jobs and build their skills through experience. Private sector should be willing to take more chances by hiring recent graduates. Employers need to recognize that they are part of the skill development process.
Great move by ministry of labor. You have this economist’s full support. Now let’s talk market expectations. All signs are indicative of deflationary pressure on the Omani economy. For wages to come down, people have to be willing to receive lower pay. It is not clear if this will happen. Money illusion makes wages sticky in Oman. Strong family safety nets make reservation wages higher. We must communicate the reasons why wages are decreasing clearly. Economic education is important to maintain public sentiment.
Speaking about deflation. This has its own issues and we must be prepared for it. Rents are decreasing, wages are decreasing, prices (of domestic products)are decreasing, outstanding debt values are not. Import prices are not decreasing yet either. Something to keep in mind.
UPDATE
I am seeing some discussions about how the elimination of minimum wage by education level will reduce the incentive to seek education. Let’s talk about why this is not necessarily the case.
First, it assumes that the free market will not price wages of college graduates at a higher rate than non degree holders. That is an assumption that deviates from all economic evidence. The college premium exists in the majority of free labor markets.
Second, it neglects that the wage of a college graduate that can’t find a job is zero. I would argue that if Omanis sought higher degrees when many of the job seekers couldn’t find jobs, they will be more likely to seek a degree now if it leads to employment.
Each hypothesis is testable and I hope that we have economic researchers working on collecting data and investigating the impact of these policies on labor markets and overall economy. Economists are needed in Oman more than ever. Evidence-based policy and analysis
Original Twitter Thread!