Tuesday, May 05, 2009

Bahrain allows labor mobility

Bravo Bahrain!

The Nation reports:
Bahrain will implement a new labour law that allows foreign workers to switch jobs without the consent of their employer, Majeed al Alawi, the minister of labour, said yesterday.
He said the law would help to bring an end to the trend in which Bahrainis sponsor several, sometimes hundreds of foreigners, and charge them a “visa fee” to work with another employer. The workers, mostly from the Indian subcontinent, are not allowed to change jobs without the permission of their sponsor.
“The end of the sponsor system is the most important aspect of this law because in my opinion that phenomena does not differ much from the system of slavery and it is not something suitable for a modernised country like Bahrain,” said Mr al Alawi, who is also chairman of the Labour Market Regulatory Authority.
“The new law will also help revitalise the labour market in the country, raise wages and improve the overall work atmosphere for everyone, including citizens,” Mr al Awari said.
As I have long argued at The Emirates Economist, the sponsorship system in the Gulf States has some large downsides. One is that it places the government in the impossible position of policing employer abuse of foreigner workers. It is far better to give workers job mobility; they can leave and find another job if they get taken advantage of by the current employer. To avoid this the employer keeps compensation in line with the competition.

Another big plus is that the sponsorship system works to the disadvantage of citizens seeking employment in the private sector. The reason goes back to mobility. Citizens were "protected" and could change jobs at will. From the perspective of employers that made them less desirable than foreigners. The reform levels the playing field.

I encourage all Gulf countries to monitor the Bahraini labor market, and implement similar reforms or improvements on them should the evidence warrant.

See last month's post on other reforms in the Bahraini labor market. Bahrain is implementing many of the sorts of reforms suggest in a report prepared c. 2005 for the Bahrain government by McKinsey & Company. At one time that report was posted at the Bahrain Economic Development Board.

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