Impact of the Domestic Labor Market on Sustainability of Agriculture in Oman

Abstract

Undistorted factor markets are a perquisite for efficient allocation of resources and growth in production. In Oman by 2013, only 16% of households have reported agriculture as the main occupation and 53% have reported nonagricultural government employment as the main occupation. 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. The study uses 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). It is found that the shift of Omani labor from agriculture is influenced by higher wages in the nonagricultural sectors. The agricultural land use intensity is thereby decreased. The policy of allowing hiring of expatriate labor is beneficial in overcoming labor scarcity. However, 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.