Labor market solution ‘could be painful’

The labor market is suffering from grave cumulative errors that gave expatriate workers a competitive edge over Saudi workers, creating an environment that makes it impossible for the Ministry of Labor to solve the problems on its own, Ministry of Labor officials said yesterday.
Mansour Al-Shatri, chairman of the human resources commission, said there were also many anomalies in the procedures that were intended to fix the situation. Al-Shatri made his remarks at a Jeddah social dialogue workshop on policies and wage levels in the private sector.
Al-Shatri also said that expat workers received higher salaries than Saudis and were available in far larger numbers, giving them a significant advantage in the workplace.
“I expect that there will be solutions that may harm many parties,” Al-Shatri said. “We must change the structure, in order to prudently use labor and to be able to pay them. Employers alone cannot change this behavior. Not even with the cooperation of the Ministry of Labor. If we want to change the work environment, we need more concerted and coordinated effort with more agencies.”
Al-Shatri’s remarks on the current status of the labor market is a dramatic acknowledgment of the work that lies ahead to get private companies to change the way they hire cheap labor.
Labor Minister Adel Fakeih said: “Obviously any decision must have adverse effects regardless of how rigorously it was crafted. But we are working on this. In the future we should be able to make sounder, highly positive, decisions with much less adverse effects. This is certainly in our best interest.”
Al-Shatri said the private sector is still beset with the behavior of importing cheap labor because government procurement system still awards the operation of public facilities to the contractor with the lowest price.
“The contractor who quotes the lowest price gets the contract,” he said. “This practice makes employers tend to hire expat workers, simply because they are cheaper.”
Al-Shatri said Saudis are now working in an open market, and there is competition coming from imported products.
“Because of this, employers find they cannot get higher profit margins, which in turn made them pay lower wages. As a result, Saudi workers are reluctant to work for them because of the lower wages,” he said.
Deputy Minister of Labor Ahmad Al-Humaidan said the ministry is disappointed with the wage level of Saudi workers in the private sector.
“We are working on the question of raising wages,” Al-Humaidan said. “But we are doing this within the framework of a social dialogue with the business sector. We need to find a mechanism to improve the wage structure.”
He added: “We must not forget that it is the market that sets the wage levels. This is a fact of economics. But there are instances that imposed certain wage levels. We will be talking about this with the labor commissions and the employers, in order to come out with a wage mechanism that is commensurate with the standards of living.”
Fakeih said the minimum wage issue is under review. “We will study examples from the experience of the Arab countries that have been using such a system,” Fakeih said.
“We will study where it is best applied, and on what professions, and in what sectors, and we will opt for the option that will maximize the employment of the Saudi youth and minimize expat labor.”
The minister said that under Nitaqat initiative more than 600,000 jobs have been nationalized.
He also said that ministry prefers to base its decisions on dialogue. “In addition to dialogue, we will be following another method, the details of which will be announced in due time,” he said. “The penultimate drafts of the minister’s decisions will be posted online, for feedback.”