Why isn’t enforcing a minimum wage a superior alternative to the proposed reforms?
Posted on 03 June 2014 09:08 AM

A minimum wage would be very costly for Bahrain, and would be ineffective in reducing unemployment among low-skill Bahrainis. 

  • If Bahrain were to enforce a standard minimum wage across both Bahrainis and expats, 80% of the proceeds of the wage increase would accrue to expats.
  •  A differential minimum wage – one for Bahrainis and a lower one for expats – would simply entrench the existing cost differential between Bahrainis and expats, further hampering the ability of low-skill Bahrainis to compete with expats for private sector jobs. Consequently, Bahrainisation targets would become even more important to securing Bahraini employment, but would be increasingly difficult to enforce. Bahraini unemployment would not be improved.

It is true that many successful economies use a minimum wage. However, those economies have far fewer expats in their labour markets. In addition, the minimum wage tends to be set at a level that provides a safety net for only a small percentage of the labour force (an average of 7% across several OECD countries) rather than as a means of improving the welfare of a large portion of workers.

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