Sunday, August 28, 2005

Size of UAE informal economy:: KT

The Khaleej Times reports:

According to recent statistics released by Dr Khalid Mohammed Al Khazraji, Under-Secretary of the Labour Ministry, informal economy in the country accounts for around 60 per cent of the total expat labour force.
. . .
Responding to a question by your favourite No.1 newspaper, Khaleej Times, on why fees imposed on least-educated expatriate employees for sponsorship transfer is high, he said that the new sponsorship transfer system aims to rid the country of informal economy and ensure that highly skilled cadres are retained. “We are targeting qualified cadres. We are eventually keen on providing them with a suitable atmosphere in the local labour market in a way that would enhance the economy,” said Dr Al Kaabi.

Under the new system, less skilled employees have to pay a fee of Dh5,000 and must complete three years in service to have their sponsorship transferred. It is permissible by law for this category to transfer their visa only once in their lifetime. Meanwhile, the law stipulates that masters and doctorate holders can transfer sponsorship after one year of continuous service. A Dh1,500 fee is levied on expatriates in this category. The minister said the main objective of the sponsorship system was to ensure retention of qualified expatriate labour force, lessen restrictions on movement of human capital in the local labour market and curb violations of rules.
I assume that informal workforce in this case means foreigners working in the UAE who do not have a work visa. 60 percent is a very large number, especially if you take into account that 80% of the population of the country are non nationals and that many of them are men without family in the UAE. Is illegal immigration of that magnitude?

A Dh5,000 is the neighborhood of a year's salary for most unskilled non nationals in the UAE. A low-skilled worker who wishes to change employment is likely simply to go outside the formal system; the same holds true for a low-skilled who wants to leave a second employer -- they have little to lose if they are caught. From the article it sounds as if the "new system" implements a more strigent set of rules and fees for changing sponsorship. This will only spur an increase in the proportion of low wage workers going into informal (illegal) employment.

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3 Comments:

Blogger desertblog said...

Well said, I don't think they thought this 'new system' through.

8:10 PM  
Blogger Brn said...

I wonder if part of what is being called the informal economy is expats who are here legal but are earning extra money at something other than their offical job. An example is the janitors are the library. Several of us pay them 100 dhs/month to wash our cars.

8:53 PM  
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