Tuesday, May 02, 2006

The seen and unseen in Jordan

Under popular pressure, the government today agreed to raise the minimum wage in the country to 110 JD per month. Supposedly, the 15 dinar increase will help cover the shortfall created by increasing fuel prices. In a notable exception, the raise will not cover workers in the clothing industry, as their raises have been deferred until the beginning of next year.

Owners of clothing factories take advantage of preferential treatment in US markets because of a free trade agreement between Jordan and the United States as well as a Qualified Industrial Zone agreement requiring input from both Israel and Jordan in the final product. Such factories typically gravitate towards countries which have very cheap labor. However, do to quota restrictions, are limited in their ability to sell in the US. So, they set up shop in Jordan where they have better access to the large markets, and import labor from China and other Asian countries. Local labor consists of young women who need income, no matter how small. Thousands of jobs are available in these factories, but owners are finding difficulty in enticing people to work there, largely due to the low salaries.

Zuhair Kayed, head of the higher council for population says that 733000 people in Jordan are living on less than a dinar a day. So, the dilemma is whether low paying jobs in sweatshops are better than not offering any economic opportunities for the poor at all. The implication is that the factories can easily be relocated to other countries with cheaper labor. Given the alternative, I would grudgingly go for providing choice for people. Fahed Fanek suggests that the owners of the clothing factories are overplaying their hand, and that they can afford to raise the wages of their workers in the country. If his math is correct, I don't see why the government went along with deferring raising of wages in these factories.

On the other end of the spectrum, agents who recruit domestic help from southern Asia organized a demonstration today. They are claiming that the government is placing limits and obstacles in the way of bringing in Sri Lankan and Indonesian domestic workers. According to ministry of labor numbers, there are about 70000 foreign domestic workers in the country. Assuming that each one of these ladies is working for one family, then one would conclude that 7% (1 in 14) families in Jordan have a foreign live-in maid. Now, not being judgmental, and realizing that in some cases (where the family is old or one of the members is infirm) live in help is needed, one wonders how much of this workforce is actually necessary, as opposed to factors such as laziness and jealousy being the reason behind such a large population of domestic help.

According to Zuhair Kayed again, there are 170000 births and 137000 deaths in the country every year. This averages out to 375 deaths per day. Reading the obituaries daily, one would have the impression that there are about 20 deaths per day. As the ex-editor in chief of Al Rai, Mahmoud Kayed, once said, one is not really dead in Jordan unless his obituary appears in Al Rai.

Another saying in Jordan goes like this "Ithnain ma btidri anha ilnass; sharmatat il ghani wa mout il faqir". Rough translation: Two things go unnoticed; the whoring of the rich and the death of the poor.


At 8:03 PM, Anonymous Anonymous said...

Interesting topic indeed.
I've heard about that Al-Rai obituary thing when I went with my project group two days ago to the newspaper. I was like, hey this could be Al-Rai's new idea for an advertising campaign. NOT!

I wonder how come we have such high rates of poverty, I've always thought that these people don't usually exist in Amman, most of them are located in rural areas. But why not migrate to Amman? Why not replace these Far East Asian workers? People can do a million things with their life, but they tend to make excuses.

I'm not being snobbish or anything, but poverty wouldn't exist in the first place with just a little bit of effort.

We still have this tradition where women aren't supposed to work, and men only would want to work in the field or in an office. It's pathetic really. Happiness is a choice I guess.

I still don't believe that ++110JDs can be sufficient to support a family, this minimum wage policy should be categorized based on the size of the family.

It's a shame that in Jordan, most families have one supporter, students don't work, and girls and women don't work either. If you had a family of let's say eight, and each one earned ++150JDs per month, then their situation would be much better.

(I like your blog. Very economics and business related. Good job).

At 8:23 PM, Blogger Khalaf said...

Hello Phiras: welcome to my blog.

I agree that unemployment and poverty are partially products of negative attitudes towards work (the domestic worker phenomenon is the same). I would add that large families certainly don't help the situation.

On the other hand, it is important to note that investments in Jordan are not creating enough quality jobs. In quality I refer to salary levels and not absence of physical activity. I think that more should be done to encourage investment outside Amman that actually creates jobs that people would compete for.

I disagree that the attitude towards working women still exists. On the contrary. Many young men actively seek wives who have a job. This, of course, is out of economic necessity. But the result is liberating all the same.

At 11:26 PM, Anonymous Anonymous said...

Economics being an economics major in my 3rd year, I think the issue of minimum wage is completely irrelevant with regards to Jordan. It is the wrong question to be asked.

The neo-classical theory stipulates that an increase in minimum wage should have a negative effect on unemployment levels given that everything else remains constant. Empirically the theory has a lot of shortfalls as it has not been proven to be the case. and all major econometric studies are based on developed or highly developed economies.

I think that an increase in minimum wage will increase unemployment in Jordan in the long run due to a lack of liquidity and an underdeveloped banking sector, coupled with the fact that productivity in these industries are not very high and there few monopsonisticv (monopolistic) employers in the country.

The problem with Jordan in terms of the labour market is this. People simply don't want to take what they beleive are demeaning jobs. Why should a coutnry with almost 15-20% unemployment be importing workers!!! It is completely ridiculous,

If an individual has no education or very little and has no technical skills, they are not going to land the nice jobs, its just not going to happen. That's why people stay at home and hope to get a good job instead of going out and getting a job at a factory.

This is a cultural issue that needs to be addressed as soon as possible


At 1:22 AM, Anonymous Anonymous said...


Fahed Il Fanek's economic analysis has been for a long time now severely outdated. I don't know when he got his PhD but it seems since then he hasn't been in tune with the rest of academic economic world.

an 11th grader IB Economics student would have more economic inight than Fahed il Fanek

At 6:50 AM, Blogger Khalaf said...

Hello Khaled: Welcome to my blog.

I am not a specialist in economics, but I would venture to say that employers hire labor because they need them. A marginal increase such as the new minimum wage level is not going to either make them fire workers (because they hire only enough people they need in the first place) nor is it going to stop them from hiring new employees when they are needed. On the longer run, as you suggest, industries that count on dirt-cheap labor might not want to start up in the first place. People argue back and forth as to whether we should envourage such industries any way.

Economic analysis always tends to assume that people behave in more or less rational ways. In Jordan, there are many examples that suggest that this doesn't really hold true, as the example you cite suggest. On the other hand, indutrial workers with only specific speciallized training can meke a decent living in an industrialized economy. People expect Jordanians to jump at jobs that barely allow them to buy a sandwitch and a pack of cigarettes every day. It may be mostly social, as you say. On the other hand, if these "demeaning" jobs paid more, I would suspect that people would be more interested in them.

At 10:06 PM, Anonymous Anonymous said...

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