Reforms raising cost of foreign labour in Bahrain

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Bahrain is reforming its labour market to drive up the cost of foreign labour, mostly unskilled workers from Asia, and improve the competitiveness of its own population.

“We have seen a growth in the cost, not that significant, but it shows that the trends start moving up,” Ali Radhi, chief executive of the Labour Market Regulatory Authority (LMRA), said in an interview.

Bahrain’s progress in reforming its labour market is being closely watched by policy makers in the Gulf Arab region who have to balance business demand for cheap Asian labour against providing jobs to young local people. Many policy makers are business owners themselves. The island kingdom, whose population is about 1.3 million, has introduced a monthly fee of 10 Bahraini dinars ($ 26.5) paid by employers for each foreign worker to finance training for locals.

Last August, it allowed employees to change employers without the consent of their employers, hoping that by increasing foreign workers’ rights it will improve their ability to bargain for higher wages and thus make local workers more attractive.

The number of workers seeking to change their employer rose to about 1,500 in December, from around 350 in August, according to LMRA data. The data also show that the gap between the salaries of locals and foreigners has decreased by 15 percent in selected sectors such as construction.

Radhi said the effect will be stronger when existing work contracts expire and employers choose between foreigners and locals under the new regulations for the first time.

The next step in the reform process will be ceilings that cap the number of foreign workers per sector. “If you try to control the inflow, then people will think more about the productivity and quality of the people they bring, and this is part of the reform’s objectives,” he said.

Radhi said the ceiling would be a moving target adapted to the growth of the economy and individual industries.

He declined to say when the ceilings might be introduced but said LMRA had finished its studies on the matter and submitted them to LMRA’s board for a final decision.

Other Gulf Arab countries such as Saudi Arabia and the United Arab Emirates have taken a top-down approach to the labour market by forcing companies to employ nationals and to fire foreigners first during the current economic slowdown.

 

 

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