The adverse reaction of businesses to the proposal made by the National Workers’ Committee to increase the minimum wage of Saudi nationals in the private sector to SR 6,000 was quite natural, as that would gravely impact their profits. The committee has recommended or determined the minimum wage on the basis of the amounts required by an individual to lead a decent life and did not give any consideration to other important factors such as overall demand and supply of manpower, qualifications and skill factor and its impact on profitability of businesses.

Firstly, the countries which have enacted laws or policies related to minimum wages are largely applicable to the workers engaged in the low-paid or menial jobs and are not applicable to employees who are engaged in technical or white collar jobs. Secondly, in the United States, several empirical studies have demonstrated that a substantial increase in minimum wages invariably results in higher unemployment rate and it especially affects the workers who lack qualifications and skills as the employers would then prefer to recruit skilled workers by paying a little higher.

It is interesting to note that a study conducted by Global Al Jazirah Academy claims that more than 86 percent of the expatriates in Saudi Arabia are paid less than SR 2,000 a month. In this scenario, it will be well nigh impossible to force businesses to pay minimum wages in the range of SR 6,000 as they will continue their dependence on foreign workers.

I think the minimum wage policy should be formulated in a more pragmatic manner, restricting it to the unqualified and unskilled sectors, while allowing the market forces to determine the wages. - Safi H. Jannaty, Dammam