Oman has recently adopted a policy of revenue diversification, in which the agricultural sector is expected to contribute prominently. Undistorted factor markets are a perquisite for efficient allocation of resources and growth in production. In 2013, only 16% of Omani households have reported agriculture as the main occupation and 53% have reported nonagricultural government employment as the main occupation, whilst the balance is employed in the private and non-formal sectors. This situation is hypothesized to be related to the labor market; where government legislated higher remuneration in the nonagricultural government sector vis-a-vis agricultural sector, influences Omani farmers to move to nonagricultural employment, causing reduced cultivated area and farm production.
Researchers from Sultan Qaboos University conducted a study to examine the nexus between labor market policies, agricultural employment and sustaining of local production, for food security in the Sultanate of Oman. The study used operations research methods to quantify the impact of labor market policies on agricultural employment, farm gross income and land use intensity (proxy for farm production and food security). The research was carried out by Dr. Hemesiri Kotagama, Assistant Professor, and Hamam Al Farsi, a graduating Student, at the Department of Natural Resource Economics of the College of Agricultural and Marine Sciences at Sultan Qaboos University.
It was found that in an average farm of 0.9 Hectares (2.1 Feddans), with 1.33 persons of family labor available, only 75% land use intensity is achieved, with a gross income of 1061 OR/Year/Household, which is below legislated minimum income from low skilled employment in the nonagricultural government sector (4632 OR/Year/Household). The household gross income would increase to 5304 OR/Year/Household with nonagricultural employment of 1 person and 0.33 persons in agricultural employment, which explains low employment of Omani’s in agriculture. Farm production too decreases with land use intensity decreasing to 61%. Farms of 2.1 Hectares (5 Feddans), with availability of 1.33 family labor earns a gross return of 2502 OR/Year/Household, which is again less than the salary in the nonagricultural government sector and only achieve a land use intensity of 75%. The household income would increase to 5320 OR/Year/Household with 1 person in nonagricultural employment and 0.33 persons in agricultural employment. Farm production too decreases with cropping intensity decreasing to 28%. However, with the current government policy of allowing to hire 1 expatriate laborer per 2.1 Hectares (5 Feddans) and with 1 Omani person in nonagricultural employment and 0.33 family labor in agricultural employment, gross income increases to 6414 OR/Year/Household. If temporary labor hiring is allowed at peak farm labor requirements, gross income could be increased to 6632 OR/Year/Household. The current policy on hiring 1 expatriate labor per 2.1 Hectares along with nonagricultural employment of Omani labor is in the short-run optimal.
The research indicates that income from an average 0.9 Hectare farm that uses family labor is below the national poverty line of a household in Oman, providing strong incentives for farmers to fetch for nonagricultural employment with legislated higher income. Oman has thus been experiencing a movement of labor from agriculture to nonagricultural sector at the cost of reduced land use intensity and thus reduced local food production. On the other hand, relatively larger farms of 2.1 Hectare too do not generate enough income, to be above the poverty line. This is the incentive for family labor to move out of agricultural to the nonagricultural employment to increase household income. As a consequence farmland is abandoned resulting to low land use intensity and reduced local crop production. Thus, the current policy of legislatively allowing employment of 1 expatriate labor per 2.1 Hectares is optimal in terms of increasing Omani household income and agricultural land use intensity. Land use intensity could be further improved by allowing temporary employment of labor during labor peak requirements of the farm. The current government policy intervention in the labor market through legislatively determining wage rates in the nonagricultural sector and the low productivity of the farm sector provides and incentive to Omani farm labor to leave agriculture. As a result, farm production is reduced. The current policy of allowing the employment of 1 expatriate labor per 2.1 Hectare (5 Feddans) farm is optimal with allowing for hiring temporary labor during peak labor demanding periods. The gross income and land use intensity of farms could too be improved with allowing for employment of temporary expatriate labor to substitute the Omani labor that moves to nonagricultural labor. A flexible labor market policy of allowing temporary labor hiring will improve Omani household income and local farm production. However, the implications of non-Omani management of farms and the long-run feasibility of hiring expatriate labor for farming need to be examined to ensure sustainable farming and food security in Oman. A policy of allowing part time employment is beneficial to the agricultural sector. In the long-run both farm productivity need to improve to be competitive with legislated income receivable from nonagricultural employment and ideally labor markets need to operate freely, to enhance food security and assure employment of Omani labor in agriculture.