In 2005 public sector employees in Saudi Arabia were handed a blanket 15% increase in wages. The gift was not dependent on pay scale or performance; with the economy booming the Saudi government reckoned its huge number of civil servants, all Nationals, deserved a slice of the action.
Two years on and inflation in the Kingdom is running at a seven-year high. Rents in August were up a record 12.1%, with food product prices up 6.6%. Puzzled by this, the government has convened a special council to look at ways of tackling inflation. The panel has just recommended a pay rise for both private and public sector workers.
It has to be hoped the panel has some more ideas. Critics point out that the 2005 handouts have helped create inflation; and the ‘print more money’ approach is not indicative of financial control. Meddling in the wage market also caused imbalances as private sector wages did not bump by 15%. The continued peg to the dropping dollar, and its impact on import costs, is a greater concern.
What this does show is Saudi’s sensitivity to the political impact of rising prices. The country’s huge numbers of civil servants have long benefited from easy work conditions and decent wages. They will be aware the country is enjoying bumper oil revenues, and that the economy is opening up. They want their share; the government wants to keep them happy. If their wages are not buying them as much, pay them more, seems to be the plan.
There is no happy end game in this kind of thinking.
No comments:
Post a Comment