Under pressure from lower oil prices, the Gulf Coast country
of Qatar is increasing pay for a range of government employees.
A Nov. 7 press release shows the government is poised to
make substantial increases, even doubling some government salaries.
The move comes after a series of cutbacks and layoffs in the
country within the last couple of years, including the downsizing of 1,000
foreign workers at Qatar Petroleum.
What is the context for the current salary increase, and how
is it meant to impact the country’s economy?
Viju Joseph is the manager of investment research and analytics at research firm Aranca. He tracks equities in the
GCC/MEA region.
“Much to the delight of Qatari
citizens, the government is set to raise the wages of government employees in
2017 such that certain employees would receive a hike of nearly 100 percent,” Joseph recently told Gulf News Journal. “This is an anomaly compared with regional
trends, wherein GCC countries have attempted to curb spending by adapting
stringent austerity measures, such as reducing government wages.”
Joseph said a lot of the changes
in government salaries have more to do with social conditions than pure
economics.
“Qatar’s previous salary growth was during the Arab Spring in 2011,
when citizens were offered a raise of 60 percent largely to uplift sentiment and
maintain political stability,” Joseph said. “Hence, the current move to
increase government salaries by almost 100 percent has raised eyebrows, especially
when other GCC countries seek austerity measures to cut government expenditure
due to low energy prices.”
As for the overall economic impact of the salary increases, Joseph
said it’s not likely to be significant given the 15 percent of the total workforce that
government workers account for.
“In the near term, such a wage upgrade is expected to drive household spending and consumer demand,” he said. “However, this is likely to
further pressure inflation, which has already increased to 2.6 percent in September
2016 from an average 1.8 percent in 2015. The banking sector is also expected to
witness the salary hike’s impact in terms of increase in deposit inflows, as
household savings improve.”
Joseph pointed out that, since government workers already tend
to earn more than others in the private sector, the salary increases will in
some ways exacerbate an income gap that can cause problems of its own.
Nevertheless, although it may strain the social fabric in some ways — barring a
coordinated move upward in private sector salaries — Joseph said the public
sector salary increases do mesh with some previously stated national goals.
“With regard to the development plans under Qatar National Vision
2030 (QNV 2030), strengthening institutional capacity (public sector) for services
is vital for the long-term success and the wage hike move can be viewed as
steps into that direction,” Joseph said.
In short, while neighboring Saudi Arabia has cut some salaries for
government workers, Qatar seems to be going the other way, in order to beat the
austerity blues.
