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Kuwait’s Public Wages Bill Predicament

For seven consecutive years, Kuwait has run a budget deficit, with public salaries, subsidies and grants amounting to 71% of the government’s total expenditure. Attempts to address the deficit have failed, despite the Ministry of Finance’s 2016 “Estidama” economic reform program which had targeted reforms and initiated a restructuring of the labor market. By the summer of 2020, well into the COVID-19 pandemic, the former Minister of Finance Barrak Al-Shitan announced that the government would not be able to pay salaries beyond October, while the current minister declared that by April 2021 the government would face insolvency. In February, rumors began circulating around borrowing from the Future Generations Fund (FGF) to fund the deficit, as the public debt bill remains on hold by the parliament. However, earlier this month, sources in the government expressed their relief to secure salaries as oil prices rose to nearly $70 per barrel, averting the need for drastic action.

Neither of the aforementioned scenarios will resolve the public wage predicament. Nor have the previous initiatives like “Estidama” or other reforms listed in the National Development Plans brought any tangible difference. In fact, the public wage predicament has snowballed to the point where any reform will mean a major sacrifice in the relationship between the government and the citizens. In Kuwait’s current turbulent political climate, this sacrifice is extremely risky.

Amidst this mayhem, an alternative wealth reform recommendation has been suggested as a wealth redistribution reform solution for GCC countries. However, scholarly discourse on the issue of a universal cash grant (UCG) fails to take into consideration several structural factors regarding the nature of Kuwait’s public and private sector employment.

A Universal Cash Grant (UCG)

‘Reforming Wealth Distribution in Kuwait: Estimating Costs and Impacts’ by Dr. Steffen Hertog is the most recent released publication by the London School of Economics Middle East Centre Kuwait Programme Series. Factoring in the unsustainable situation of public wages and its distortion of the economy, Hertog proposes an alternative social safety net and wealth sharing solution by the provision of an unconditional cash grant (UCG) to all Kuwaitis irrespective of age, economic and social status. Unlike UCG policies and proposals elsewhere which are funded by taxes, Hertog suggests these grants should come from revenue gained from energy tariffs.

While Hertog’s paper is commendable in that it offers a new route to reform, I found myself troubled by the framing, analysis and data used to portray his argument. My issue was with the figures that were used to show the average wages earned in the public sector per educational level, which were not entirely correct and could be misleading.

Instead of offering a critique specifically of a UCG, I will use the issues I found in the paper to clarify the misconceptions around public sector wages and present a more elaborate portrait of the challenges any policymaker will face if they attempt to reform the labor market without understanding the reality on the ground.

Dissecting the Public Sector – The Hegemonic Civil Service Commission

Kuwait’s national economic plans have long emphasized the importance of private-sector development. Despite this emphasis, the private sector, even with its advantages in flexibility and innovation, has steadily lagged behind the public sector. Even though the private sector is ostensibly autonomous, the state’s direct intervention in the Kuwaiti economy has made it the private sector’s primary financier, inhibiting its independent development.  Until this structural problem is addressed, the idea that the shift to the private sector will magically reform the economy and society through the creation of jobs for nationals is a fantasy.

In my opinion and from my experience, the reason why reforms in the labor market were futile in the past is because researchers and policymakers rarely examine the structural root cause of the myriad problems in the Kuwaiti labor market: namely, the Civil Service Commission (CSC). The CSC was founded as the primary channel whereby a share of oil wealth is redistributed to citizens with the intention of ensuring a minimum level of equitable income distribution among the social classes. This philosophy itself justifies that remuneration in the public sector is correlated with neither productivity nor production output.

Today, the CSC is the largest employer of Kuwaiti nationals, hiring almost 50% of the queued graduate job seekers annually. The CSC gives preferential hiring to university graduates, but the jobs they end up occupying do not match their educational level. With the exception of technical job categories such as health, education and engineering, the majority of jobs performed rarely require intelligence or creativity but basic skills such as reading, writing, and the ability to operate a computer to carry out daily bureaucratic requirements.

The data that Hertog relied on from the Central Statistics Bureau’s 2018 labour market survey to argue that public sector wages are high in comparison to the private sector are inaccurate. The data based the average wage on educational level and came up with a general average figure for all sectors. However, this measurement overlooks a crucial factor; the CSC does not tie remuneration to educational level alone. The wage system is much more complex and is broken down into basic salary, job allowance, task allowance and social allowance and these figures fluctuate as per five main categories: an employee’s tenure and age, grade and cadre, type of job, degree received, and gender and social status.

Moreover, promotion in the public sector is primarily time-based rather than meritocratic. This is what many researchers miss: while public sector wages may seem higher on the outset, private sector remuneration, when combined with the Da’am Al-Amala subsidy, becomes much higher over time; because promotion is competency based, workers in the private sector can leapfrog up the career-ladder as opposed to their peers in the public sector.

UCG is Not a Sufficient Solution

Although I do not disagree with Hertog with regard to how public sector jobs are compensated for unproductive idle time, I do not see UCG incentivizing nationals to migrate to the private sector or invest their time in acquiring new skills. To understand why, it is necessary to pivot from economics to the socio-cultural dynamics of Kuwaiti nationals. Even though Hertog attempted to reconcile with introducing a UCG that guarantees a similar standard of living and lifestyle, it will probably be impossible to achieve. For one, if the CSC limits recruitment, the current private sector will not have the capacity to absorb the influx of graduate job seekers. Furthermore, Hertog suggested that women were more likely to ‘leave the government employment for a UCG’ and he goes on to say that ‘not being in a gainful employment is not generally considered a social problem for Kuwaiti women.’ This claim entrenches gender norms and unhealthy prejudices already present in the labor market . Finally, despite the fact that government jobs are generally unproductive in comparison to private-sector ones, there is still the element of citizen participation and engagement by being an active member of the labor market, something a UCG will not provide.

 

Shaikha Al-Hashem is a writer and researcher from Kuwait focusing on women, migrant workers and political economy. Shaikha is also a PhD Candidate in The European Graduate School, in the Philosophy, Art and Critical Theory (PACT) Program. Her specialization is in women and gender studies. She tweets at @AlHashemShaikha.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.

Issue: Economy & Innovation
Country: Kuwait

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Shaikha Al-Hashem is a writer and researcher from Kuwait focusing on women, migrant workers and the political economy. Shaikha is also a PhD Candidate at The European Graduate School, in the Philosophy, Art and Critical Theory (PACT) Program. Her specialization is in women and gender studies.


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