Any moves to follow Oman in raising pay for national workers in the Gulf private sector could be detrimental, say economists.
Oman raises minimum wage for nationals
Oman has raised minimum wages for national workers in the private sector.
The extra cash is intended to improve living standards in the country but economists warn that such moves could also undermine efforts to boost local participation in business.
The government increased the minimum salary by 43 per cent to 200 rials (Dh1,907) per month, saying it hoped to improve living standards, the country's official Oman News Agency said. The move followed a jump in inflation, with consumer prices in December rising at their fastest pace in four months.
Governments across the region have rolled out plans to support their populations in the wake of upheavals in Egypt and Tunisia, and protests elsewhere.
Bahrain's King Hamad bin Isa Al Khalifa last week promised a grant of 1,000 rials to each Bahraini family, after Kuwait handed US$3,500 (Dh12,855) to each of its citizens this month.
Further steps to improve the financial position of Gulf nationals could follow, say economists.
More than half of the Gulf's working population did not receive a pay rise last year, but wages are expected to increase by an average of 6.3 per cent in the UAE this year, according to a recent survey.
"Governments are keen to make the standard of living better for nationals," said Giyas Gokkent, the chief economist of National Bank of Abu Dhabi.
"But they have to be careful not to create more disincentives for the recruitment of nationals in the private sector."
Finding jobs for citizens in the private sector is a linchpin of several Gulf governments' policy to reduce their people's reliance on public spending.
Unemployment among nationals runs at more than 10 per cent in several countries. Among young people the situation is bleaker, with 39 per cent of Saudis aged 20 to 24 out of work.
The number of national workers in private business is low, however, despite targets for greater participation.
Omani participation in the private sector is estimated at 19 per cent, higher than the UAE and most other Gulf states.
Economists say a bigger priority for governments than pay increases should be improvements in education. "Concern over whether the education system is arming students with relevant technical skills for the workforce is paramount since only one out of every 10 employees working for a Saudi private company is a Saudi citizen," John Sfakianakis, the chief economist of Banque Saudi Fransi, wrote in a report published yesterday.
Unemployment was one of the catalysts of the unrest in Egypt and Tunisia. Young graduates also staged a demonstration in Saudi Arabia last month over a lack of job opportunities.
Omani officials say the decision to increase national workers' pay was aimed at helping them to keep up with rising living costs.
Food price inflation in the region has been creeping up in recent months as the prices of everything from wheat to rice has shot up. Inflation accelerated to 4.2 per cent in December compared with the same month a year earlier.