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Qatar wage hikes: Et tu, Qatar? 7, September 2011

Posted by thegulfblog.com in Qatar, Random.
Tags: , ,

Qatar has raised the basic salary for Government employees by 60% and for Armed Forces employees by 120%. Pensions and social allowances have also been hiked up. Qataris have the Crown Prince, Tamim bin Hamad Al Thani to thank for this.

It is disappointing to see Qatar follow the terrified GCC crowd on this topic. The Qatari leaders have nothing to fear from their citizens. Unlike some government in the region that need to buy them off, the Qatari elite are, generally, a popular bunch.

So why have they done this given that it will:

  • Hike up inflation, which is already showing signs of being a problem.
  • Arguably create the expectation in the future of similar rises as part of the basic ruled-ruler bargain, which, at some point, Qatar will not be able to afford.
  • Decimate any notion of succeeding with Qatarization. Private companies will have a nightmare¬† – more of a nightmare – in attracting well qualified Qataris if they have stratospheric pay in the public sector to compete with. Either Qataris will simply work for the public sector, that notorious bastion of efficiency, or private companies will have to hike their pay, slashing their margins and further bumping up inflation.

So why then?

  • Reward for the armed forces for their involvement in the Libyan crisis. And the public sector have been rewarded with half as much because it’s difficult to give to one and not the other.
  • To kill off grumblings in Qatar? Sure, some people have not been wildly happy about Qatar’s involvement in Libya while others bitterly complain about the state of roads in Doha or that Education City is a waste of money or that there’s not enough fruit in the local supermarket…of course there are grumblings, there always are. But these are – unless I’m missing something huge – not serious at all.
  • The Crown Prince wants some gratitude. He gave out the cash, he will receive the plaudits. But again, he’s not an unpopular fellow and it is a potentially dangerous path to follow to link one’s popularity with wage hikes or something of this nature.

The key problem with these hikes is that they reinforce the rentier nature of Qatar. All Gulf countries are fighting the difficult battle whereby productivity and work more generally is just not related to wages. The link between the labor and the fruits thereof is bust.

Encouraging the private sector is meant to help alleviate the worst of this rentier problem. Why Qatar is so catastrophically undercutting this goal is a mystery. Methinks it is partly due to the nature of decision making in Qatar and the Gulf – at the elite level, perhaps with not that much consultation – and partly because there are no real consequences to ponder right now. The difficulty with this whole rentier question comes as oil and gas rents pare down, which is not for some time yet.