Oman’s Recent Labor Market Regulation

The Ministry of Labor has introduced several regulations aimed at increasing the employment of Omanis in the labor market. These include the following measures:

• Excluding companies that do not comply with Omanization ratios mandated by the government from public contracts of ministries, public authorities, and state-owned enterprises.
• Adding 30 new job categories to the fully Omanized category, with the exclusion of expatriate workers from these positions.
• Requiring all private sector entities to employ at least one Omani in a suitable position within the organization.
• Providing funding for employment programs designed to improve Omanization rates, administered by the Ministry of Labor.
• Revising work permit fees to incentivize compliance among private establishments and doubling fees for non-compliant establishments.
• Increasing the frequency of compliance checks and site visits by the ministry.

Demographic Facts

These regulation changes come at a time when the number of job seekers was estimated to be more than 100,000, of which 80% are first-time entrants.

Oman’s population 23 July 2024 5,213,791 (NCSI)

56.75% Omani 2,958,835

43.25% Non-Omani 2,254,956

Labor Market (June 2024)

Omanis 841,386 (32% of total employed)

Non-Omanis 1,777,227

Job Seekers (June 2024)

Unemployment rate 3.6%

• Estimated Job Seekers 94,270
• Highest rates ages 15-24
• Diploma and Bachelor degree Holders

The urgency of creating jobs for Omanis is a continuous concern for the Omani government. The cornerstone policy for job creation has been the Omanization (Nationalization) of vocations and quotas for private establishments to comply with. With a host of other policies, including minimum wage for Omanis, wage protection systems, wage subsidies, and training programs, the number of job seekers remains persistently high among youth.

The demographic dynamics of the Omani population make a major contribution to the job seeker pool. According to official statistics, the total Oman population in January 2024 was recorded at 2.9 Million, of which 46.4% were 19 years old or younger. This significant portion of the population is expected to enter the labor market in the short to medium term.

Labor Market Developments

The labor market has experienced a rebound after the COVID-19 pandemic, growing to exceed 2.6 million. The growth of the recovery of the labor market has been driven by both Omani and non-Omani employment; however, the latter grew faster.

Despite the positive increases in numbers of Omani absorption into the labor market, there remains a challenge for first time and laid off workers to find employment. During the same period the growth rate of employed by occupation showed improved Omani absorption in the labor market.

The Challenge

Despite the positive increase in the number of Omanis entering the labor market, there still exists a challenge for first-time and laid-off workers to find employment. The proposed regulatory changes will undoubtedly impact both employment and businesses in the short to medium term. However, they will not address the structural issues of the Omani labor market. The employability of Omani youth remains a major challenge for a number of reasons. First, there is a lack of opportunities for them to develop much-needed skills on the job. Second, there are negative perceptions about the work ethic of youth job seekers. Lastly, and perhaps most importantly, the types of jobs created by the existing private sector establishments may not be desirable for some job seekers.

The new regulation places the responsibility on private establishments to meet the specified quotas for each economic sector. Failing to secure public contracts may pose a significant challenge to the sustainability of businesses. Official statistics show that small and micro businesses are the largest employers, followed by large establishments. Although employment numbers vary based on the business size, it is evident that small businesses are the primary employers. The new regulation will require existing businesses to hire more Omani employees to fulfill Omanization quotas. These new jobs are likely to replace existing non-Omani positions. Failure to meet the quotas may result in increased work permit fees. While this may encourage businesses to hire more Omanis, they will need to consider their requirements and costs carefully.

Final Thoughts

The regulation announcement did not identify an implementation or grace period. More details are expected and much needed to provide clarification. Labor market interventions in the past have had mixed results, especially with respect to creating job opportunities for youth. The challenge still remains, how to infuse much-needed labor market flexibility while creating jobs for young Omanis.