Oman's Private Sector Labor Market Update (July 2024)

Oman’s Private Sector Labor Market Update

Mahmood Sakhi Al Balushi

Board Member of Omani Economic Association

July 2024

The growth in the Omani workforce entering the labor market in recent years has increased pressure on the government's economic and social policies, which aim to provide suitable jobs for all job seekers. It is estimated that over 40,000 Omanis enter the labor market annually, making job provision for these new entrants a core challenge. Recent months have shown notable negative growth in the number of Omanis employed in the private sector, highlighting the critical nature of this issue. It is the first time a significant drop in the Omani workforce in the private sector has been recorded, adding substantial pressure for policies to ensure employment opportunities for Omanis. Despite efforts to diversify the economy and incentivize private sector growth, recent data indicate concerning dynamics within the private sector labor market. This paper aims to shed light on these issues.

Demographic and Economic Context

Oman’s population reached 5,203,674 in June 2024. Understanding the composition and dynamics of the population and workforce sectors is essential for properly analyzing the private sector labor market. As of June 2024, the population comprised 2,955,171 Omanis (56.8%), and 2,248,503 expatriates (43.2%).

Oman’s population is comprised of Omani citizens and expatriates. Nearly all expatriates are part of the workforce. While the Omani population is spread across all parts of the demographic pyramid, expatriates are mostly in the working-age category and typically return to their homeland as they age.

Oman's economy remains heavily dependent on oil revenues, making it vulnerable to fluctuations in oil prices. Thus, any fluctuation in oil prices while production remains constant has a profound impact on the economy, which is heavily dependent on the government’s spending and projects. The period from 2014 to 2020 exemplified the impact of oil price fluctuations on spending and, consequently, on the economy. The government needs to diversify the economic sectors and businesses by incentivizing the private sector to play a larger role in economic growth and in creating suitable job opportunities for Omanis.

Private Sector Workforce Composition and Growth

The role of the private sector in creating suitable jobs for Omanis is becoming increasingly critical, especially in light of the growing number of Omanis entering the labor market. It is estimated that over 40,000 Omanis enter the labor market each year, searching for the right jobs.

Most expatriates (about 79%) are part of the private sector workforce, with a significant portion of expatriates employed as domestic workers, about 18%.

As a developing country, Oman’s private sector workforce continues to be dominated by expatriate workers. Omani workforce has been hovering around 15%. However, in the last three years (post-Covid), expatriate workers increased while Omani workers decreased.

Approximately 82% of the expatriates are from three countries: Bangladesh, India, and Pakistan. The decline in the number of expatriates began in 2017 but deepened in 2020 and 2021 due to the COVID-19 pandemic. The number of expatriates began to recover in 2022, although 2024 shows a declining trend for Indian expatriates. The drop in Bangladeshi expatriates is probably due to the cessation of new visa issuance since last year.

In most years, the absolute number of expatriates shows significant growth compared to the number of Omanis. In 2023 and up to June 2024, the Omani workforce in the private sector showed concerning figures as the only time the growth rate for Omanis turning negative. By the end of 2023, the number of Omani workers had dropped by 4% (over 12,000 workers), and by mid-2024, Omanis further dropped by 7% (over 20,000 workers). By June 2024, expatriate workers had also dropped by 3% (over 43,000). This marked the first time the private sector experienced a significant reduction in Omani workers under normal economic conditions, with a total decrease of 32,000 Oman workers since 2022. This represents more than 10% of the Omani workforce in the private sector.

The government urgently needs to develop more positive and impactful plans that lead to a more productive workforce and competitive economy. The goal should be to enable the private sector and economy to grow and create suitable jobs and remunerative salaries for Omanis.

As of June 2024, Omani workers reached 253,409, and expatriate workers reached 1,404,913 workers in the Private Sector. The majority of Omani and expatriate workers are almost in the following sectors: Construction (18%, 32%), Wholesale/Retail (14%, 19%), Mining (12%, 1%), Manufacturing (12%, 13%), Admin/Support (9%, 8%), Accommodation (4%, 9%), and Transport/Storage (8%, 5%).

Omani’s Wage Ranges

Due to work conditions, low wages, and limited benefits in the private sector, Omanis continue to prefer working in the public sector, which offers greater stability, more favorable working hours, and better access to banking facilities.

A significant proportion of Omanis in the private sector earn low wages. Approximately 39% of Omanis get below R.O. 500 per month. About 62% get less than R.O. 700 per month. Only about 9% of Omanis get over R.O. 2,000 per month. In the last six months, the overall percentage drop of Omanis in the private sector was 7% (over 20,000 workers). The biggest drop was about 29% among those in the salary range between R.O. 325 to 400.

Omani Unemployment (Job Seekers)

In June 2024, the overall unemployment rate reached 3.6%, with rates of 10.3% for females and 2.0% for men. The rate is derived from the actual job seekers who actively register as job seekers. Most regions (7 out of 11 regions) have unemployment rates of over 4%.

The unemployment rate by age shows that 14.8% of job seekers are below the age of 24. Unemployment rates by education level are 8.9% for general diploma holders, 8.9% for higher diploma holders, and 7.7% for bachelor’s degree holders.

The majority of the job seekers are under the age of 29. The overall unemployment rate is tending to rise. This indicates that strategies and policies need to be reviewed and adjusted in order to have positive impacts on creating suitable jobs for job seekers.

In terms of regions, the highest unemployment rates (over 10%) are in Sharqiya South, Batinah North, Batinah South, Dhakhliya, Musandam, Buraimi, and Dhahirah. The government should set new plans and implement more development projects for these regions. These projects would help create new job opportunities and spur economic growth. This will help promote social stability and sustainability in these regions.

In terms of qualifications, the most unemployed are among those with general diplomas (33%), higher diplomas (33%), and bachelor degrees (29%). These figures show the importance of focusing on developing jobs that are suitable for diploma and bachelor degree holders.

Most regions experience high unemployment rates. Almost all governorates have about unemployment rate of 4% or more.

Legislative and Policy Interventions

To address the unemployment and layoff issues and to create more job opportunities for Omanis, the government has issued new laws and regulations in this regard. These include the issuance of the new Omani Labor Law, the Social Protection Law, the lists that state the sectors and jobs that must be 100% Omanized, and the increase of Omanization percentages in a number of sectors and jobs over the coming years. However, the effectiveness of these policies and regulations remains limited, calling for a review to assess their role in the economic slowdown and decline in the number of Omanis in the private sector.

Challenges and the Future

The challenge is twofold: to provide enough suitable jobs for Omanis in the private sector and to provide work-ready graduates with good work ethics and attitudes. For that, the government needs to reform the labor market by assessing the current laws and regulations that organize the labor market, leading to economic growth, and creating more job opportunities for Omanis in the private sector.

The mismatch between the skills of Omanis and the labor market demands of the private sector, particularly in terms of work conditions and wages, further complicates the efforts to increase the number of Omanis in the private sector. Low wages in the private sector, limited job opportunities for higher-wage jobs, and less accessibility to banking facilities make private sector jobs less appealing to Omanis.

To overcome most of these challenges, the government needs to adopt strategies that lead to positive impacts on the development and competitiveness of the private sector. This calls for comprehensive strategies, robust policies, and clear regulations. It also calls for an urgent need to reform current laws and regulations to help the private sector grow, expand, and provide suitable job opportunities for Omanis.

Furthermore, Oman’s population pyramid needs to be analyzed for future planning and policy development. Currently, over 38% of the population is in the education phase (pre-primary, primary, and tertiary stages). Another aspect that needs to be given good attention is the skill gap. This can be overcome by improving the education curriculum and aligning higher education specializations with the current and future job market needs, which are very easy to know.

As market dynamics continue to evolve, the challenges continue to persist. The real challenge is how the government manages the labor market dynamics that help create suitable job opportunities for the local Omanis across all regions while sustaining economic development and growth to meet current and future demands.

Source of data: NCSI