Thursday, April 27, 2006

UAE nationals in the workforce - views aired

Khaleej Times reports. The indented material below is from the article.
Interestingly, some businessmen remain critical of the current emiratisation process alleging that a large number of UAE nationals are not serious about doing the jobs offered to them.
. . .
Raja Al Gurg, Chairperson of Dubai Businesswomen Council, ... said, "We need to chalk out a mechanism to encourage nationals to be serious when it comes to taking up jobs. Large numbers of nationals are not serious at all...they take up a job and then simply quit few days later."
Nationals are wealthier than expats. Under standard economic assumptions about human preferences, when you are wealthier you will have a higher reservation wage - that is, you demand a larger reward for joining the labor force. Employers are motivated by profit, and for workers of the same quality employers will offer the same nondiscriminatory pay. The compensation offered attracts the number of workers the firm requires. As it happens it is below the reservation wage of most nationals.
There was also some similar criticisms at yesterday's meeting dealing with the country's 'educational output' — not being compatible with the requirements of the labour market.
True. The output of government schools for nationals needs improvement, and, in general, it is inferior to the output of private schools. In my judgment, government expenditure per pupil is sufficient. The trouble comes from two major factors.

The first is that schools are mismanaged and/or have are subject to government rules and regulations that often make the job of school principles and teachers more difficult.

The second factor is weak incentives. Too often a young national's future has little connection to merit, to how well he or she does in school. This is not a problem schools can solve, but it does constrain what schools can achieve with the raw material - students - they are given.
Brigadier Saeed bin Beleilah, Director-General of Dubai Naturalisation and Residency Department (DNRD), said: "As long as employment directors at banks are not UAE nationals, the emiratisation process will remain a cosmetic one; nationals are given jobs with low salaries or the percentage of nationals employed would be tampered with in league with some companies that are assigned to carry out certain jobs".
That's a long sentence. Let's start with the last bit, "percentage of nationals employed would be tampered with in league with some companies that are assigned to carry out certain jobs." He is referring to one of the ways that employers game requirements to have a certain minimum percentage of their employees be nationals. One way to get around the rules is to take some tasks that would have been insourced and to outsource them. Would requiring firms to have HR Directors who were nationals create an effective policing mechanism to prevent gaming of the emiratization rules? I doubt it.

Requiring firms to have HR directors who were nationals would not mean nationals would be offered higher salaries. Senior management still sets salaries, not the HR director, and senior management defines what authority the HR director has. In the extreme case the formal HR director position would become a token, and the company would have a shadow HR director running the show. Besides, all private employers in the UAE have majority national ownership. That is a convenient fact to omit. If the owner is a national what difference will it make if the HR director is a national? Especially if the HR director is a member of the family.
Obaid Al Jaber, Chairman of the Board of Directors of Al Jaber Group, highlighted the problem of nationals' employment and their inclination to switch to other companies after getting the necessary training. Unlike expatriates who find it difficult to change their sponsorships, nationals can switch jobs easily.
Mr. Al Jaber echoes a point of view I have frequently expressed here at The Emirates Economist. The inequality of job change rights between nationals and expats works to the disadvantage of nationals. For the same compensation and same quality of work, employers will prefer to hire the worker who has less freedom to walk away from his or her contract with the employer. It is the government that has created the preference firms have for expats.
Reacting to criticism voiced during the meeting against the skyrocketing fees imposed by the ministry last year, the Labour Minister said only erring firms felt the pinch. "Companies committed to the rules concerning nationalities and nationalisation do not actually pay high fees and are exempt from the bank guarantee," he stated. He said the number of violations was "shocking". Fines collected, he pointed out, amounted to Dh153 million last year.
Part of the reason for the large amount of fines collected is that there was a change in enforcement of existing rules. Firms were accustomed to violating the rules and did so. They were surprised when the ministry began to enforce its own rules. We can expect firms to adjust by finding ways around the rules.

What this last quote also points to is that there are a load of rules and regulations regarding labor. Too many to have a vibrant labor market. But not enough, evidently, to prevent private sector employment from being over 95% expat. Indeed, as I pointed out above, the rules are part of the explanation of the 95%.

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