Sunday, February 27, 2005

Call for a workable emiratisation policy for private sector - Gulf News

Opening of this opinion piece:
By S S A Zaidi, Special to Gulf News

A recent study conducted by the Media International Centre claims emiratisation efforts have not solved the problem of unemployment among UAE nationals.

One problem highlighted is the lack of will on the part of the private sector to recruit UAE nationals, who make up 1 per cent of its total workforce. This state of affairs calls for developing a workable emiratisation policy for the private sector.

Resolutions issued by the Minister of Labour and Social Affairs stipulate trading companies with 50 or more employees should ensure at least 2 per cent of their workforce consists of UAE nationals. Insurance companies should make sure at least 5 per cent of their workforce consists of UAE nationals; for banks, it is 4 per cent.

His conclusion:

The emiratisation policy can thus have two prongs:

One part of the policy should be to enforce the employment quota system across all sectors, prescribing an annual increase of the percentage of sectoral workforces that must be UAE nationals.

The other prong requires all financial institutions and other private sector firms, the Department of Economic Development and the Shaikh Mohammad Bin Rashid Establishment to join together to ensure UAE nationals have many opportunities to set up their own businesses.

My take: Private sector firms do recruit nationals. There is little unemployment in the usual sense. The gap that exists is a gap between the wages and working conditions that nationals seek, and those that employers are willing to provide.

And nationals are disadvantaged because the contract terms over which they cannot negotiate, but expats can. First, nationals cannot negotiate away their rights to contest termination by the employer, but expats can. Second, nationals cannot negotiate away their right to change jobs, but expats can (under UAE law the default for expats is that they cannot change jobs in the UAE without their employer's permission).

It is also sometimes said there is a Catch 22 -- that employers demand all hires have experience. It's true that employers can always find someone experienced by recruiting an expat. But it cannot be claimed that there is discrimination against the unexperienced. If the unexperienced are saying they are willing to take a job if only they are paid the salary for an experienced person, this is not unemployment. This unwillingness to accept the employer's offer.

(As far as small business goes, the points are similar. When nationals are competing against non-nationals profitability will be determined by the return non-nationals are willing to accept. If nationals in small business demand a higher return, they will have to be subsidized in perpetuity, or be given protection from competition.)

Remedies. If the objective is to increase employment of nationals in the private sector, then quotas are one answer. So far quotas have not been strictly enforced. Thus we have not seen their likely consequences: increased costs that will manifest themselves in higher consumer prices and business closures (or a slowing of their expansion). Strict enforcement of quotas would slow the growth of the non-oil sector of the economy.

The alternative to quotas is a mix of policies such as: subsidies to employers who hire nationals, quotas on importing labor, freedom for expats to change jobs, and equal treatment of nationals and expats with respect to inalienable rights at termination.

Such an alternative would also benefit the children of expats who have grown up in the UAE and want to start their own livelihood here. This segment of the population has received little examination or attention, but they think of the UAE as home. What this means for the future of the UAE is something to be pondered further.

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2 Comments:

Blogger LocalExpat said...

Exactly what I have been thinking about for years! ;-)

“ Such an alternative would also benefit the children of ex pats ….This segment of the population has received little examination or attention, but they think of the UAE as home”
I couldn’t have said it better myself. I have experienced this first had. Having returned home from university abroad I noticed that graduates are extremely disadvantaged as a group within the labour market.

10:23 PM  
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12:20 PM  

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