We are instead encouraging market forces to increase the rates, but there will be no legal minimum wage. There will be no minimum wage in our lifetime. If you apply a minimum wage, then by international law we have to pay expatriates and Bahrainis the same and that will cause a big problem for many companies,” says al-Alawai.

“The problem of unemployment is not caused by the lack of job opportunities available here. We don’t have real unemployment, so having a [minimum wage] will allow us to address the issue of low wages, which is the main problem,” he says.

Regional rethink. Bahrain’s decision may have implications not just for its own citizens and expatriates, but also for the rest of the Gulf. Qatar has set up a committee to look into scrapping the sponsorship system. Saudi Arabia, a country that hosts over eight million foreign workers, is doing the same. So there are major implications for business.

Results of a report conducted by the Riyadh Economic Forum into the state of the kingdom’s economy, claim that the sponsorship system for expatriate workers curtails competitiveness and hampers human resource development.

The report, which was submitted to King Abdallah, added that Saudi Arabia’s immigration regulations and recruitment policies were not attracting outstanding and competent workers; instead, the sponsorship system promoted the employment of low-productivity job seekers.

In effect, the study concluded that the sponsorship system requires radical reform. Already, Saudi business leaders have begun to discuss the subject in public and many are urging the Saudi government not to follow Bahrain’s lead.

“[Labor reform] is a very serious issue and the media should not stir up the labor market by attacking and criticizing businessmen and entrepreneurs who have the right to protect their business interests,” says Abdul Mohsen Al-Moushegah, chairman of the Al-Moushegah Group of Companies, a Saudi construction and engineering conglomerate.

“Many of us have invested huge amounts of money in hiring and training foreign workers. We pay them well, and treat them as equals. We cannot just allow them to jump from one job to another,” he says.

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