Sunday, October 16, 2005

Earlier today I posted links to newspaper coverage of the last night's majlis in Dubai on the subject of unemployment amongst UAE nationals. Here's a bit of analysis, set up first with some quotes.

From the Gulf News:
Lieutenant General Dahi said the number of unemployed nationals increased from 8,000 in 1995 to 24,000 in 1999 to 30,000 in 2003, and 35,000 in 2005. He said the number of nationals who enter the job market varies between 1,500 to 2000 unemployed nationals every year.

Emiratisation in the federal government is 54 per cent, and in the local government it is 15 per cent, while the percentage of nationals in the private sector is currently one per cent only.
From the Khaleej Times:
Endorsing the sentiments expressed by the top police official, Khaled Al-Qassim, Deputy Director General for Planning Affairs in Dubai Economic Department, pointed out that the Ministry of Labour was engrossed in aspects other than the unemployment dilemma, such as visas and labour issues, which are within the jurisdiction of other establishments like the naturalisation and residency administration.

He stressed the importance of establishing a ministry for workforce to look after the affairs of the nationals and to set forth strategic plans for the labourers as adopted in the developed countries. Such plans, he noted, determine the number of foreign workers needed in the labour market according to the required specializations. In the light of these statistics, the emigration ministries issue visas for the required number of labourers, he added.
. . .
Dr. Najeeb Abdullah Al-Shamsy, Director General of the economic department in RAK, affirmed that unemployment is an international phenomenon and the developed countries are keen to keep it within its normal limits.

He said that a minimum salary ceiling [floor?] for nationals in the private sector must be determined, as there are more than 5000 jobless nationals in RAS [RAK?], though they are university graduates. This necessitates carrying out various projects in the northern emirates and the distant areas to encompass the large number of graduates, he added.
Actually, a minimum salary for nationals, above what the private sector currently offers, would discourage the private sector from employing nationals. I sense that what Dr. Al-Shamsy could have in mind is that nationals are reluctant to accept the salaries that are currently offered in the private sector, and more would be more likely to accept private sector employment if salaries were higher.

But because this minimum salary would make nationals less attractive to the private sector, this will only increase unemployment amongst nationals. This is where Mr. Al-Qassim's suggestion of limiting the number of foreigners workers in each specialization would come into play. If these limits were sufficiently tight, then the private sector would be willing offer positions to nationals at at least the minimum salary. At the same time, however, firms would reduce total employment. Production would fall and the price of nonimported goods would rise - an undesired effect.

The government should think about policy changes that would bring down the wage demands of unemployed nationals. In particular, it should consider reform of social assistance. At present the amount of social assistance you receive declines as your earned income increases. If the amount assistance was independent of income, then unemployed nationals would accept work at lower salaries.

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Blogger strangeloops said...

Regarding your last paragraph - could there be a flaw in your logic? Consider two workers:

Al earns 500 dhs/month, but receives 4500 dhs assistance
Bob earns 5000 dhs/month, but receives 500 dhs assistance

Al is not motivated to seek out higher-paying employment, because he would earn the same amount.


Al earns 500 dhs/month, but receives 2500 dhs assistance
Bob earns 5000 dhs/month, but receives 2500 dhs assistance

In this second case, there's a serious pressure for Al to pursue a higher-paid job.

Was the first example not a case of having the government subsidize low-paid workers, to make their situation more advantageous?

9:57 PM  

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