Gulf Countries Experience Dramatic Rise in Salaries :: Gulf Talent

The latest wage survey numbers are out from the recruitment agency Gulf Talent. Some may be surprised that salaries are not up by 25 per cent in the UAE over the last 12 months. Nationals working in government received 25 per cent, but the average in the UAE amongst professionals in the private sector was 6.5 percent.

Quoting Gulf Talent:

The report entitled "Gulf Compensation Trends 2005" reveals an average Gulf-wide salary increase of 7.0% over the one-year period to August 2005. Qatar leads the group with a 7.9% increase, followed by Saudi Arabia with a 7.4% increase, Kuwait with 6.9%, UAE with 6.5%, Bahrain with 6.3% and Oman with a 5.9% increase.
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With higher income from oil exports, several GCC governments have taken the lead in increasing salary levels, which has put increased pressure on the private sector to follow suit.

In April of this year the UAE government announced a major salary increase of 15-25% for its employees. Similar moves followed from the governments of Kuwait, Bahrain and Saudi Arabia. The Saudi increase of 15% for its employees marked the Kingdom's first across-the-board shift in pay scale in more than two decades.

All these developments have sent HR managers across the region into what the report characterizes as 'a frenzy of activity' as human resource departments rush to calculate appropriate pay increase levels for their organisations.
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While the overall trend in pay rises across the GCC reflects fundamental similarities between their economies, there were some differences. Rises in the overheated UAE economy have been fueled by high inflation resulting from a dramatic and sudden rise in rents and basic amenities. The same is true in Qatar and to some extent in Kuwait. On the other hand Saudi Arabia, Bahrain and Oman have had low inflation rates with pay rises in those markets driven primarily by increased competition for a limited supply of qualified talent.

According to GulfTalent.com's report, sectors enjoying the highest pay rise across the Gulf were banking & finance, construction and real estate. The lowest pay rises were reported in healthcare and education.

Within the UAE, Dubai had the highest average salary increase with 7.4%, followed by Abu Dhabi at 6.1% and Sharjah lagging behind with just 3.0%.

Just why increases in the government sector salaries should "put pressure on the private sector to follow suit" is not clear unless the UAE government employment is rising. There are no reports of any sizeable increase in government employment.

The construction boom in the country has increased the demand for labor. Even so, this would have little effect on salaries because the UAE labor supply is imported. Only those professions where local knowledge is an important job skill would you see sizeable demand driven increases in private sector wages.

It is true that the cost of living in the UAE has increased, eroding the attractiveness of UAE salaries for foreign professionals who have the alternative of going elsewhere for work. Thus, it is not surprising to see salary offers increase to keep pace with the cost of living.

The summary of the report from which I quoted is available here. You can enter a request for a free download of the full report here. See also 7DAYS' coverage of the report here.