The International Labor Organization (ILO) predicts that the Arab world will lose five million jobs in 2009 and that remittances from migrant workers will be significantly reduced, thus placing a burden on the countries sending workers abroad. Even in oil rich Gulf states the shockwaves are being felt, albeit with different degrees of severity. Declining oil prices have led governments to look critically at their budgets. In Bahrain, the government requires oil prices of $75 per barrel to balance its current budget; Kuwait by contrast requires only $30 per barrel. Within the Gulf Cooperation Council (GCC), the United Arab Emirates, Saudi Arabia, and Kuwait have substantial reserves that can allay the worst aspects of the crisis. But in Bahrain, growth projections for 2009 have fallen to 1.9 percent.
Workers in Bahrain are ill placed to withstand the impact of the crisis. The average salary there is equivalent to $814 per month, while 28 percent of workers earn less than $530 per month. No country in the Gulf is more sensitive to job losses than Bahrain, which for many years had double-digit unemployment and frequent protests and riots over the lack of jobs. While overall unemployment had fallen to 4 percent before the crisis, youth unemployment in Bahrain remained over 25 per cent, the highest in the Gulf region.
The construction sector in the GCC states, especially in Dubai, has been hit hard by the crisis. The decline in construction in Bahrain, while less dramatic, has already affected the livelihood of thousands of migrant workers. As projects falters and subcontractors are paid late, those who suffer the full impact are the construction workers who have experienced long delays in wage payments. In response, thousands of workers have engaged in strikes with the support of trade unions. Problems in the construction sector are compounded by the sponsorship system of employment, a key area in which Bahraini employers have argued against a more open system. Recently the Bahraini government proposed to end the sponsorship system but this has not yet been implemented, as employers have responded with a massive appeal to delay the reforms.
Finance is another sector that has experienced shock waves, with the Bahraini government looking to intervene to stabilize markets and preserve employment. Bahrain is a GCC banking hub, with 150 banks employing 14,000 workers. Foreign direct investment has grown twenty-five fold in Bahrain since 1990, with much of the growth being in the financial sector. Banking and financial services generate over a quarter of Bahrain’s national income, and until recently banking has been among the most secure employment sectors. The drop in the unemployment rate before the crisis was due in part to the expansion of the financial services sector.
In May 2009, Minister of Labor Majeed al-Alawi warned employers against using the crisis as an excuse to lay off workers, but banks nonetheless are looking to cut employees. The recent announcement by Gulf International Bank that it would lay off 20 percent of its headquarters staff led to mass demonstrations. Banks in general remain profitable, but the Bank Workers Trade Union fears that investment banks are vulnerable. This is sending shock waves throughout Bahraini society and generating fear that unemployment will return to the previously high levels.
In May 2009, the General Federation of Bahrain Trade Unions (GFBTU) sponsored an international conference on the crisis and its impact on Bahrain and the region. The trade unions in Bahrain, led by the GFBTU, called for damage control measures to reduce the impact on workers and their families, and have demanded a place at the economic decision-making table. The GFBTU called for a changed economic paradigm, one focused on providing employment security and social justice, regulating financial markets, redressing economic inequality, creating environmentally friendly jobs, and promoting global economic reform.
The major conclusion of the recent GFBTU-sponsored conference was that trade unions in Bahrain should play a greater role in strategizing for recovery. The unions see a strong and vibrant public sector as essential to recovery and advocate a model in which worker and human rights are central, with new job opportunities created based on high levels of training and education. The need to invest in human capital is a priority of the trade union activists, who are looking for long-term, sustainable economic recovery.
Laurence Clements is the representative of the Solidarity Center to Bahrain, Kuwait, and Oman.