Be Our Guest [Archives:1999/06/Business & Economy]

February 8 1999

By Riad al Khouri
The Jordanian interior minister’s statement last year that the number of foreign workers in Jordan is equal to the number of Jordanians in the country’s domestic work force should come as no surprise. Myriad Egyptians and others resident in Jordan, including some Yemenis, are simply doing the jobs Jordanians don’t want, a labor market pattern familiar in the Arab world. Traditionally, these “guest workers” from Arab states have been welcome in Amman. The minister talked about Jordan’s usual “openness” with regard to Arab visitors. He added however that Jordan would apply existing laws it had not fully enforced in the past to crack down on illegal workers. However, he insisted that Jordan will “stick to labor-exchange agreements” with other countries and “preserve the rights” of legal workers.
Fair enough: Jordanian rules in this regard are reasonable, and their application was also and continues to be tempered politically. Jordan has always been tolerant when it comes to issues which do not impinge directly on its national security, and I predict that this time was no exception: the kingdom’s Arab guests — and many of its foreign ones as well Ð are still largely be here months after the crisis broke. If on the other hand, members of the non-Jordanian Arab workforce of Amman started to riot to protest Jordan’s relations with a non-Arab state such as, say, Ruritania, they would be expelled before you could say “normalization.” The state’s message to non-Jordanians is clear: stay away from political issues; otherwise, if you don’t actually commit a felony, be our guest. Of course that was a lot easier to say when the economy was booming a decade or two ago, and unemployment was not an issue. The trick of course is to bring down unemployment; once that happens, a lot of the headaches regarding guest workers will disappear.
Now for the tough part: commenting on Jordanian unemployment and the guest worker issue, the prime minister said last year that “bold measures” to combat poverty and unemployment among Jordanians would be taken, and that work would begin to introduce a minimum wage. Alas, this tune is now being played again in Amman, and talk of a minimum wage has surfaced again during the past few days. If this happens in an unemployment crisis like Jordan’s present one, look out. Such a measure would be disastrous if enforced — though it would probably be unenforceable. Most foreigners in Jordan work for far lower wages than Jordanians, thus making businesses run. An argument can be made for Jordan to abandon its cheap-labor economic model, but this will mean massive restructuring, retraining, and retrenchment in the labor market, an elsewhere in the economy. Meanwhile the minimum wage idea is virtually impossible in a country wallowing in economic crisis. Once the economy picks up, through a combination of the right exogenous factors (comprehensive regional peace) and an internal attempt to improve the investment climate (to a considerable extent a function of the Jordanian government’s deregulation of the economy) measures like a minimum wage will have a chance. Whether one should be imposed or not is another question: my point is that it would be impossible to apply under the present circumstances. Till annual GNP growth goes back to the seven percent or so which will allow new entrants to the labor market to be absorbed, a minimum wage applied to Jordan is a bit like prescribing sophisticated organic diets to somebody who is in a coma: he has to be revived first before he can get the fancy medicine. Until then, Jordan and other Arab countries should concentrate more on economic liberalization than on interference with markets, including those for labor.
I say “other Arab countries” because the simultaneous existence of unemployment and guest workers is also present elsewhere in the region. Take for example Saudi Arabia, where that country’s interior minister recently said last year that the country was paying a “high price” for foreign workers and urged Saudis not to shun any job offered to them. The minister, Prince Nayef bin Abdelaziz, told a meeting of Saudi businessmen then that the kingdom was taking steps to ensure more Saudis take up jobs currently held by foreigners and said authorities may soon announce new measures to boost the employment of nationals. “We appreciate those who come to our country and work with us. But, of course, we pay a price for those who come from abroad and it is a very high price,” the minister said. He expressed the hope that Saudi nationals would work in all fields and not shun any job, and explained that if Saudis turned down those jobs, non-Saudis must take them. Saudi Arabia is eager to replace many of its foreign workers Ð still including some Yemenis — with its nationals. The government has told private firms employing more than twenty people to increase their Saudi staff by five percent a year. In my opinion, this would be as unenforceable as a Jordanian minimum wage under the present circumstances. With the Saudi economy still largely dependent on oil, and with petroleum prices stagnating badly, such measures may be difficult to take. Nevertheless, when it comes to expelling non-Saudis, Saudi Arabia has proved a lot tougher than Jordan, especially over the past few months.
The lesson which has yet to be learned by many government officials in the Arab world is that interference with markets is tricky and should be done rarely and very carefully. Minimum wages and statutory employment of nationals are steps which can be undertaken only under certain circumstances, preferably accompanied by other measures which would ease economic distortions instead of aggravating them. Otherwise, the rule must be to leave markets alone: whether in Jordan, Saudi Arabia, or elsewhere, the government’s role in the economy has to shrink, and not to expand through more regulation.