Inflation bites deep for private sector employees

Thousands of workers in the private sector feel the pinch as inflation in Oman is starting to bite deep into their pay packets as cost of living rises. Inflation is not a problem for the civil servants, the government has well compensated them by adjusting their salaries, but employees in the private companies are struggling to cope with household bills.
According to the National Centre for Statistics and Information (NCSI), the numbers show that inflation in the last quarter of last year increased by 2.4 per cent, compared to the same period in 2016. The hike was caused by rises in food prices and petrol.
Over the last five years, workers in the government’s ministries received an average pay rise of 25 per cent, far outstripping the inflation rate. In comparison, the employees in the private sector are still lagging behind in terms of pay rise.
The division between the two sectors is wider than ever in pay structures with those in the private companies struggling to make ends meet while their counterparts in the government are comfortable.
The Central Bank of Oman’s latest report suggests that the private sector’s employees will continue to rely on borrowings to sustain their spending habits in the absence of pay increase. To help them out, the Central Bank may need to consider reducing interest rates so that consumers are not hurt as they try to cope with their normal expenditures.
The Central Bank also expects no real economic gain in the wake of the government pay rise since only 37 per cent of Oman’s total workforce has benefited. Out of 1.8 million workers in the Sultanate, both Omanis and expatriates, a majority are in the private sector. With a steady two to three per cent annual inflation, the private sector seems to draw the short straw in the pay scale distribution.
Given the fragility of the situation, most people would have to rely on cheap food and inferior accommodation to maintain just basic spending habits.
The government would then need to follow the example of our neighbour of subsidising food and accommodation for the nationals working in the private sector to keep them afloat. However, the effort will erode the state’s coffers as expenditures have been stretched to the limit already.
As for the expatriates, they will simply leave to look for better wages somewhere else. It is a different situation for nationals in the private sector. Thousands of Omani graduates will be looking for jobs at the end of this summer and the private sector will not be their first priority.
With the reluctance of Omanis to join the private sector together with the steady flow of expatriates leaving their jobs, companies will struggle to find quality replacements.
Of course, the civil service cannot be blamed for increasing the standard of living of its employees though the action is creating a consumer imbalance likely to be felt at a substantial scale in the market.
To say that the private sector must do something about it is not an exaggeration. Companies maintain that they cannot afford to match pay rise as much as the government has increased it in case of civil servants. Their profitability will take a dive if they do. What they cannot see is that profitability is linked to better remunerations of the workers.
To keep up with the steady rise of inflation, employees must be compensated to increase their productivity and quality of their work. Higher pay package is an investment the private sector cannot do without. Employers must simply put in more money as an incentive, not only to keep their talent on board but to attract skills they currently do not have in their repertoire.
The huge imbalance of pay between the public and private sector, if not corrected, will drive back the economy towards stagnation, not forward. With nearly a million workers still receiving the same pay they started with is not going to help the country in its push towards economic diversification.