Labour Market Reform Options and Dual Labour Market Structure

Abstract

The literature identified for this report discusses labour market policy options with some case studies. Success is rarely claimed and difficult to attribute as a mixture of policies tend to be in place and a combination of policies is recommended. Policies also may take some time to produce results. Barriers to success and recommendations are highlighted in the literature. Dual labour markets are characterised by segregation between jobs with higher and lower levels of security. In Europe, the divide is characterised by fixed-term or short-term contracts. In Gulf countries, the divide is between the security of public sector employment and relative uncertainty associated with private-sector employment (of particular interest for this report). For example, in Oman, around 12 per cent of the private sector workforce are national citizens compared to 53 per cent of the population being national. Public-sector jobs in Gulf countries have historically been secure and comfortable as the government used oil money revenues to look after their citizens. Now the government needs to tighten spending and so want to encourage nationals into the private sector where the working environment is more competitive. This is generally an unfavourable option for locals who are used to the comfort provided by public sector work and the government want to make this transition with minimal social unrest. Private sector firms have a good supply of migrant labour who are happy to work in the conditions that are present. The private sector is important for diversified economies so governments must also maintain good relations and minimise the raising of costs.