Sunday, April 30, 2006

Emirates Economist: Unrepentant apologist for UAE

A Daily Dose of Architecture has a nice post on the labor riot at the Burj Dubai worksite in late March. The comments are even more interesting.

But Daily Dose and I are quite far apart on the issue of whether the workers are exploited or in what sense they are exploited. Daily Dose writes:
I have to admit that stuff like this makes me so angry it's hard to facilitate a response. The use and abuse of poorer people in poorer countries by places like Dubai and the United States is just another part of the situation where a few rich people own and get most of the pie.
But workers come to Dubai on their own volition because they believe opportunities here are better than in their home countries. How is that exploitation? It's not.

Daily Dose is in the same camp as those who believe Nike is evil for creating jobs in low-wage countries. I fear I do not have the skill to convince critics of Nike and Dubai to share my perspective. If Nike and Dubai did not exist their employees would be worse off. If you care so much about the employees at Nike and in Dubai, why don't you open up your pocketbook to them?

So I am an unrepentant apologist for Dubai. But I am a critic as well. What is immoral is to attract workers under false pretenses, to not deliver on the terms and conditions that were promised. It appears that this occurs in the UAE on a widespread basis.

Because so many UAE firms so often fail to honor their obligations towards workers this creates a cloud of ambiguity that workers can exploit. How can an observer tell who is telling the truth in a labor dispute? A commenter on the Daily Dose post quotes someone on the scene:
I was on site when things happened. At Laing O'Rourke we have best card punching system with eye scan identification on site. LOR employs legal labor on site with best compensation in industry. Also LOR maintains the best labour camps with all medical facilities. LOR is the only company in Gulf which pays its labourers on time. After the incident the labourers supported the facilities of LOR to labour commissioner.

As we employ a lot of labour force, in the evening time when work is over labourers rush to their buses, everyone of them wants to board the first bus. This places their own safety at risk due to stampede. LOR committed to safety of its employees made arrangements so that workers can come to buses without rushing in safe manner. (Imagine 3000 workers force). Some trouble makers who were identified by police had been trying to mess things and went on rampage.
. . .
I am not saying it because I work in Laing O'Rourke, but as one of few architects who work with contracting firms - I am more aware of workers conditions. Of course these cannot be compared to luxuries enjoyed by white collar jobs of us Architects but one fact is true. Asian workers are best paid with safe & healthy environment with Laing O'Rourke. Our low AFR is much below industry standard.
Thanks to SamuraiSam for drawing my attention to the Daily Dose post and to this particular comment.

Aside: Look at this comment to the same Daily Dose post on "the effect that Dubai's construction industry is having on the international recruitment of experienced construction managers".

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Saturday, April 29, 2006

Gulfnews: Labour needs laws. And fast

More laws? No. More resources to enforce existing contracts? Yes.

Actually, I've argued that what would really help is fewer laws, such as the law that does not allow firms to hire workers from other firms. The core of the problem is too many laws, and lack of effective enforcement of the terms and conditions to which workers and firms (or their recruiting agents) have agreed. If individual workers could change jobs when they were dissatisfied, then they would not be driven to collective action as their only recourse. And if firms could go onto the local market and hire workers, their workers would not be able to grab them by the short and curlies. It works both ways.

The government seems to recognize my point:
Mubarak said the Labour Ministry allowed him to "hire workers from the local market, if necessary, to continue work."

Labour law forbids companies from employing workers they do not sponsor, but officials made an exception because "they did not approve of the sabotage these people intend," he said.

"Dubai's economy will not be damaged by these kinds of people."

He said "foreign workers" also incited the men, without providing details. "Why did these men riot two and a half years after beginning work, as the project was nearing completion?"
Get rid of the law that prevents workers from changing jobs. That would defuse the situation that is threatening - I'm not saying it, the government is - the security of the UAE.

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Gulfnews: Don't shoot the messengers

Bravo, Gulf News:
The recent demonstrations and violence by some labourers in the UAE are alarming and disturbing. They are alarming in that workers have thought it necessary to take recourse to such action. They are disturbing because there are many people officials and media alike apparently in denial that the strikes are spontaneous and motivated by a desire to achieve better [not necessarily better, than promised - JBC] working conditions and pay.

Accusations are being made that a "selfish few" are geared to destroying the good name of Dubai, but it may hold good in only a few cases. For there are too many instances where workers have found it necessary to make representations to the labour ministry or their embassies in an attempt to get what are their undeniable rights.

If an employer is contracted to provide salary, food and accommodation to the workers, then that is what should be provided at a reasonable standard. Expecting labourers, after toiling in the sun for most of the day, to return to their inferior accommodation and be given inadequate meals, and then keep them waiting several months for their pay, is inhuman. And it is only right that the workers should complain.
Read the whole thing.

Just the other day the Gulf News printed a guest op-ed that did display denial. I concluded GN allowed this into print to show the alarming degree of denial that exists. Secret Dubai was suitably alarmed and feared GN had lost its moral compass. Even the right-of-center Tim Newman came out on the side of labor on this one; that's not hard for us right-of-center types to do when the issue is the ability to freely contract. Several UAE community blog denizens also figured something was fishy about the guest op-ed at GN.

I conclude whatever caused the aberration, GN is back on track. Just look at the coverage today:
Protesting labourers still baulk
New workers to replace protesting staff
Facts and figures
Labour protests in 2005

Labour needs laws. And fast
Standing on the shoulders of giants
UAE labour shortage on the horizon?
The organisations and how they responded
Gulf News does not look to me like a newspaper that has lost its nerve.

Friday, April 28, 2006

Spain to let in workers from new EU states :: Gulf News

I congratulate the Gulf News for bringing this AP-Reuters report to its readers. The GCC has issues as a labor-receiving region, and so does Western Europe. Understanding the issues there enhances one's ability to assess of the situation here - despite the obvious differences. Some quotes:
Today, Spain has become wealthy enough to lure foreign workers rather than drive away its own jobless. And on Monday it will take a step that confirms that status: lifting restrictions on the entry of workers from eight poorer new members of the European Union.
. . .
Spain needs foreigners to cover work force shortages in certain sectors and keep the retirement pension system alive, offsetting one of the world's lowest birth rates, said Jose Ramon Pi, a professor of management at the IESE Business School in Madrid. "Either we let in 15,000 Poles or we let in 15,000 sub-Saharan Africans," Pi said, alluding to the waves of destitute Africans who try to sneak into Spain every year by sailing to the mainland or the Canary Islands in overcrowded boats.

EU officials say lifting the curbs is essential to the bloc's ambition of becoming a seamless economic dynamo that can compete with the United States and emerging Asian powers.

. . .
French Interior Minister Nicolas Sarkozy yesterday rejected charges his new immigration Bill was a xenophobic drive for far-right votes ahead of 2007 presidential elections, saying it was a bulwark against racism. The Bill aims to attract a new generation of skilled workers who would embrace French values and traditions, thus improving race relations that hit the headlines during last autumn's riots in poor French suburbs, he said. . . . " Selective immigration is practised by almost all democracies in the world. And in those countries, racism and the extreme right are less strong than here. In short, it is a bulwark against racism," Sarkozy said.
The emphasis is mine.
Labor issues heat up in UAE

There's a long, hot summer in front of us.

In this morning's news:

Labor protest by thousands turns to violence at Dubai Marina construction site: "Government officials said they are prepared to deport all the men if they do not return to work. . . . On Wednesday evening, more than 2,000 labourers blocked the company's construction site at Dubai Marina and smashed buses, company cars and equipment, setting off a four-hour stand off with riot police. ... Workers said the company cut about Dh200 from their wages last November, leaving unskilled helpers with about Dh450 a month. The men said the food was unhygienic and that their rest time was reduced, from 30 minutes to 8 minutes. ... Lt Bilal [member of the Permanent Committee for Labour Affairs in Dubai (PCLAD)] said the company began using punch cards last year, reducing workers' salaries 'because they are being paid for the hours they work.' "

The Khaleej Times report on the same events is here. A second Gulf News article on the protests is here. And here is a report by an Indian newspaper.

Summer heat is on the way. Are we ready? Here's how the Khaleej Times puts it in a editiorial today: "From May end onwards, upto the middle of September, the temperature is above 43 degrees on a daily basis. And the humidity levels. It should make one more concerned about following the best systems and norms. The authorities have made a good gesture by banning construction work during the peak afternoon hours. But, more can be done. ... Dear readers, the reason why I do not speak about other cities in the Gulf, and only Dubai, is that Dubai is taken as the best example for the rest of the region. Dubai can show the way to others."

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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Labor minister: ‘UAE nationals should be the biggest segment in demographic structure’ :: Khaleej Times

UAE nationals should be the biggest segment in the country's demographic structure, according to the UAE Minister of Labour Dr Ali bin Abdullah Al Kaabi. Spelling out this new priority, he said, his ministry will soon task a committee to draft a viable strategy for achieving this purpose by 2015.

"I want UAE nationals to be the biggest segment in the country," he told the opening session of the First Meeting of the Labour Market Committee yesterday at Emirates Palace Hotel.
This goal - UAE nationals should be the biggest segment in the country's demographic structure by 2015 - will not be achieved by 2015. Indeed, I doubt that much will have changed by that time. A goal this unfeasible lacks credibility, undermining the likelihood that much if anything will be achieved. The likelihood of substantial progress will be enhanced by setting achievable goals, and understanding how we came to the present state of affairs.

What are the present state of affairs?

1. Upwards of 80 percent of the population of UAE is nonnational.

2. Citizenship is granted only to the children of fathers who are nationals.

3. Less than 3% of private sector jobs in the UAE are held by nationals.

4. The UAE receives the labor services of foreign expats at wages and working conditions that are close to the source-country wages for those salaries.

5. UAE nationals prefer not to take private sector jobs at these wages. The UAE is a very rich country, and it is generous in making sure all nationals are well off whether they work or not.

6. For the same quality of workers, employers - as with any buyer - choose the lowest-cost alternative. Thus, employers do not willingly offer UAE nationals wages and working conditions that differ from the terms the employers get from expat workers.

7. UAE nationals benefit enormously from low-cost expat labor. Let's begin closest to home and look at domestic servants - maids, drivers, cooks, gardeners. If national families are not willing to give them up, you have a natural national constituency against the achievement of the labour minister's goal.

What about in retail - what will life be like without low-cost labor to staff stores, restaurants, and hotels? Citizens may point out we don't need so many outlets. But a natural political constituency exists to keep expats in those jobs as well: the national business owners whose profits depend on low-cost labor.

Those nationals who have invested in real estate would also be actively engaged in undermining any policy goal that sought to make nationals a majority by 2015. Because the only way to achieve that goal is to send a lot of working expats home.

8. National families are having fewer children today than they were 20 years ago. Children take time to rear, and there are so many things to do with your time today whether it is leisure or work. Reproduction is not going resolve the demographic imbalance.

So what is politically feasible? I suggest that the labour minister place limits on the issuance of new work visas. Even a modest limit will create a lot of complaints from firms that are accustomed to bringing in cheap labor from abroad. Firms that wish to hire would have to turn inwards to look for labor. The source of new workers would be nationals and they would command premium salaries. Firms would also reconfigure their operations and substitute away from labor. We can imagine that these firms would place pressure on the government to make it easier for expats to leave one employer and join another -- a policy I have long advocated.

A limit on work visas would quickly reveal where the political pressure points are, and demonstrate very quickly the degree of resistance there will be to stronger measures to remedy the demographic imbalance.

A fundamental question is: what's wrong with demographic imbalance? My sense is that the true concerns are culture based and are not being aired in public. Usually you can't make progress on a goal unless you are articulate your purpose and make a convincing argument for why a solution needs to be found.

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WTO seeks UAE reforms

Gulf News:
"Several participants noted the absence of competition legislation, importing activities and distribution services could be reserved for exclusive national agents and branches of foreign companies were obliged to recruit a local agent," said the concluding communique issued by its chairperson.
. . .
While praising the UAE's generally liberal and business friendly environment, the report also brought forward some of the pending reform issues, including government ownership of large businesses, telecom liberalisation as well as private sector participation in infrastructure development and management.

"In services, a vibrant, growing sector of the economy, the emirate governments retain control over certain activities, and asked whether, as part of its economic reforms, the UAE intended to separate the regulatory functions of state enterprises from their commercial activities," the report said.

Information was sought about the end of the state monopoly in telecommunications.
Absolutely. Much of what prevents the UAE from being truly competitive is the result of government action or inaction. All these recommendations would enrich the UAE as a whole. Reforms will create winners and losers, but this set of reforms will benefit a wide sweep of consumers and harm firms that have been sheltered from competition.

It's ironic, isn't it, that what economists mean by "business friendly" is vigorous competition that puts pressure on existing business. Existing businesses do not regard these reforms as friendly. The reforms would be friendly to new business by opening doors to existing markets. Business friendly is really consumer friendly.

Note also that consumers include households and businesses. For example, the UAE continues to impoverish itself be limiting competition in telecommunications, making it more costly for firms in global markets to operate from the UAE.

This statement is largely doublespeak:
"In order to protect consumers from unjustified price increases, the government is currently assessing the possibility of introduction of a Competition Law, after evidence surfaced of possible anti-competitive practices," said the UAE Government's trade policy report submitted to the WTO prior to the review meeting.
First, the possibility for anti-competitive practices exists solely because of the government's role - in the variety of ways listed by the WTO - in limiting competition.

Second, recent steep price increases are not the result of an increase in anti-competitive practices. The price increases are demand-driven due to a growth in the UAE economy, growth that is in very large measure the result of an external factor - the increase in the world demand for oil as the result of successful economic liberalization programs in India and China.

If the UAE adopts the WTO recommendations that will make it easier for new firms to enter markets in the UAE bringing prices down. But, again, the increase in prices for goods and services in the UAE was not the result of firms suddenly taking advantage of their government-created shelter from competition. That shelter already was exploited.

Third, the remedy for anti-competitive practices is not price controls. Price controls are creators, not of greater benefits but of greater waste of resources. Let prices alone and let profit opportunities serve as the magnet for new firms to enter the market and drive down prices. That will work like a charm -- If you unleash new firms on the market by removing the government regulations that make entry costly or impossible.

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Workers sweat it out without water and power :: Gulf News

SEWA (Sharjah Electric and Water Authority) needs to get its act together.

The world press and world readership does not make fine distinctions between one emirate and another. This story - if it gets reported more broadly - will taint the reputations of Dubai and the UAE.

I don't know who is responsible. I don't know who has the authority. But I do know who are the ones who are being held to account for the shortcomings of those with authority and responsibility: (1) the workers in these camps where Sharjah public services are failing, and (2) the UAE.
Career Ed dissident shareholder offers turnaround plan :: Crain's Chicago Business

Career Ed owns American Intercontinental University (AIU) the parent of American University in Dubai (AUD). Here's some of the latest on Career Ed:

Career Ed recently received three good pieces of news: the staff of the Securities and Exchange Commission recommended ending a probe of claims that the company overstated enrollment and revenue; a California judge voided the probation of one of the company's schools; and a federal judge for a second time dismissed a class-action investor lawsuit against the company (although the case can be brought one more time).

Career Ed still faces investigations by the Department of Justice, the Department of Education, and California, Texas and New Jersey authorities, as well as lawsuits by current and former students and employees.

The SEC news was enough for several analysts to upgrade Career Ed's stock from an "underperform" to a "neutral," including Matthew Litfin, an analyst at William Blair & Co. in Chicago. . . . Career Ed's shares have dropped 47% since hitting a high in April 2004, closing Monday at $37.17, down 26 cents from Friday.
. . .
Hoffman Estates-based Career Ed operates for-profit colleges and trade schools around the U.S., enrolling about 104,000 students. In December, the company's American InterContinental University (AIU) was placed on probation by its accrediting agency, which cited concerns about the integrity of student academic records and accuracy in recruiting and admission practices.
. . .
If Career Ed can't address the accreditor's concerns, AIU could lose its accreditation and its access to federal student loan dollars. Such loans make up 62% of Career Ed's tuition revenue.
. . .
"Their operating costs are way too high," Mr. Bostic says. "When you recruit as many students as they do who don't finish, you spend all that money to bring them into the school and then you have to replace them. The cost of replacement is in the thousands of dollars." Mr. Bostic says Career Ed does not disclose its graduation rate, but he says, "We know that far too many students enter the programs and then leave." A spokeswoman said the company's 60% graduation rate, as of May 2005, is, in fact, publicly reported and is "higher than the aggregated percentage for public schools, is in line with aggregated percentage for private schools, and continues to exceed most of CEC’s competitors in the for-profit sector.


Drivers run dry to beat gas prices :: Yahoo! News

Lujan's 20 trucks roam the busy freeways of Orange and Los Angeles counties as part of a publicly funded patrol that gives a free gallon of gas to drivers who have run out of fuel. . . . Some California drivers are resorting to desperate measures to beat the surge in gas prices at the pump -- deliberately running dry on the state's freeways and simply waiting for rescue.
I suppose that for some people it could be worth it to deliberately run out of gas in order to get gas for free. More generally, running out of gas is often the result of a gamble that you can make it to the next gas station. The increased price of gasoline raises the expected benefit from passing a gas station. That would explain the increase in the number who run out of gas.

Tuesday, April 25, 2006

There's something fishy about the labour protests :: Op-ed in Gulf News

This morning I composed a lengthy rejoinder to this op-ed by Rashid Saleh Al Oraim, a UAE-based columnist for Al Ittihad newspaper, that Gulf News saw fit to publish. You, honored reader, will be spared the tedious details.

Here instead is what I have decided must be true, and necessary to communicate to you: The Gulf News elected to publish this op-ed to show that there exist members of the media who are in complete denial about the facts of the condition of labor in the UAE. Due to that denial they do not comprehend that the attention of the world on the condition of labor in the UAE is not an empty creation of the local and foreign press, but has substance. The remedy is in the hands of the UAE.

As I get back to making my reaction into a post, I see that over at the UAE community blog there has been a vigorous reaction to this op-ed by Rashid Saleh Al Oraim; the views expressed there echo mine. In large measure.

And see also Tim Newman's view of the op-ed at White Sun of the Desert. His writing today positively glows. Tim, I am envious.

Mr. Al Oraim, if I may make a point that has not been clearly made my colleagues out here in virtual reality: one looks small, very small indeed, when he makes claims that someone is "malicious". Very very small when one chooses not to name whom you believe is behaving maliciously. Do you not realize you have besmirched the entire UAE press core? Do you not realize that when you write in this style you utterly devastate your own credibility? Think about it.

Do I really think the Gulf News printed this op-ed to make a point that is opposite of the author's intent? Just look at this article GN published the same day nearby to the op-ed. And, likewise, this article headlined "Eliminate modern version version of slavery" (yes, I am aware the article is not about the UAE, at least not on the surface).

And yet, and yet. It is true, and not only in the unintended ironic way, what the author writes in his final sentence:

There is no country in the world that welcomes foreign workers the way the UAE does.

Workers are not dragged to the UAE unwillingly. They come here because there are opportunities for them and for many others. How many? So many that the citizens of the UAE constitute less that 20 percent of the population. Tell me a country that is more open to foreign workers. I don't think you can.

Is it peculiar that the UAE rarely grants citizenship? Yes. Is it understandable? Yes - few other countries are sitting on such much wealth that is not human created. Would you be willing to open the door of citizenship under circumstances like these, where the incentives for attracting unproductive gold diggers was so strong?

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Grapeshisha interviewed by :: Gridskipper

Grapeshisha is one man’s quest to disseminate unbiased knowledge about Dubai, Abu Dhabi, and the United Arab Emirates. Grapeshisha’s founder, a business consultant and entrepreneur from the UK, has begun to spread the word through his newsletter, website, and blog to the many individuals interested in this new world built in the sandlands.
Read the interview here.

This is a big deal. Gridskipper is listed in Time Magazine 50 Coolest Websites 2005. Time says of Gridskipper:
Its mission: to "scour" the web for juicy tidbits on urban travel, nightlife and culture, "with one eye on sophistication and the other on playful debauchery." Posts point out neighborhoods, restaurants and activities you probably won't read about in other guides, with a healthy mix of the practical and self-indulgent. A typical entry might cover a summer music festival or obscure art exhibit, or link to the World's 100 Sexiest Hotels.

Monday, April 24, 2006

Saudi labor law will shackle women
Law of unintended consequence is always in force

Gulf News:
- The retirement age is 60 for men and 55 for women workers
- Employers should arrange for babysitters to care of the children of workers if there are 50 or more women employees


Sunday, April 23, 2006

The Guardian gives lessons on labor exploitation
The Emirates gets Nike-ed, but squeezing nannies is praised

No no's: 'One of the world's largest construction booms is feeding off impoverished immigrant workers in Dubai, but they're treated as less than human,' said Sarah Leah Whitson, Middle East and North Africa director at Human Rights Watch. A recent report by the group painted a deeply disturbing picture of immigrant lives in the UAE. It claimed that bleak living conditions, combined with long working hours and unacceptably low pay, had led to rising suicide rates among foreign workers in Dubai. In 2005, 80 Indian residents took their lives, up from 67 in 2004. In addition, an estimated 880 foreign workers died in accidents on UAE construction sites.

How to's: If you have two pre-school children (as I once did), it's often cheaper to employ one person in your home than pay for two places in the local nursery. . . . And despite reports of the modern nanny demanding City banker incomes, Newton's experience is that salaries have settled. "The influx of labour from the new European countries has made a difference," he says. "They may not be UK-qualified, but they fulfil the upmarket au pair role. It has capped the wages nannies are demanding, making them slightly more reasonable." . . . It's cheaper still if you share that nanny with friends or a neighbour, as is increasingly happening. An estimated 65% of nannies are now looking after children from more than one family. The internet has made it far easier to chum up. . . . I didn't only have to worry about not having posit on my suit but also having three kids all brushed and washed by 7.30am. With a nanny, your kids can work to their timetable, not yours. The delight of being able to hand them over first thing, still cornflake-encrusted and in their pyjamas, is immeasurable for all concerned. . . . Nannies, too, do far more than childcare. If you are running out of washing powder, you can't ask the nursery assistant to pick up a packet on the way back from the park.

As Atlantic Blog puts it there's "nothing like climbing the career ladder on the back of some poor Eastern European woman."

Atlantic Blog's point is that British families employing nannies from Eastern Europe are offering those women a better life. Same with the Emirates: it offers workers a better life. And so does Nike.

Does the reality of working conditions always match the sales pitch? No, and some workers are deceived. But most low-skilled workers coming to the Emirates know to heavily discount want they are told. They may be lied to, but mostly they are not deceived.

No doubt we could find many nannies in the UK who didn't exactly bargain for all the duties and all the hours they are given once they arrive.
Academics not immune to common human foibles

Dean closes law school library for son's prom party - Well part of the library. The best part. During finals week for law students. At least the dean apologized.

University president spends hundreds of thousands of dollars on unauthorized personal purchases -
The latest case involves Texas Southern University President Priscilla Slade, who listed fiscal responsibility as a top priority when she was hired in 1999. A $50,000 investigation into her spending habits during the past seven years revealed she spent $650,000 on personal items.
Benjamin Ladner is mentioned.

Does it take a special kind of person to become university president? The sort that has characteristics that often come bundled with hubris, a larcenous streak, and the ability to seduce? Or perhaps it is not a matter of innate characteristics, but of the opportunities that come with the job.

Some of the opportunities may be created by university trustees if they assume that academics are more than human. We're not and that bears monitoring.
The UAE takes action on the labor front

Plan to make firms pay wages on time

Improved labour housing 'across UAE soon'

Reports on unstable labour conditions are unjustifiable - Unstable: there's a euphemism for you. But even in the denials, progress can be seen.

In a related story on the labor front: Labourers incite workers for 'mafia' practices. Where I come from we call these people lawyers. Those are the people you hire if you want your contract enforced, and if they take your case and they win a judgment in your favor you pay them for their efforts.

Where I come from, contract violations are rare because the consequences of violating a contract are sufficiently severe for the party involved. Usually you don't need a lawyer to get your due. Here we see an epidemic of violations. The "punishment" for not paying your workers is to make you pay them. That's pretty much it. The violating firm does little damage to its own reputation with the labor pool back in the subcontinent. Instead, the cumulative news of these violations do get back to the subcontinent and they harm the reputation of all UAE employers.

In other words, when enforcement doesn't function those employers responsible are not held accountable. But there is an accounting, and it falls on the shoulders of every UAE employer. Most employers in the UAE keep their promises. They are suffering in silence as a minority of employers spoils the collective image.

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From Iraq to Oman, the future is female :: Guardian
In the Emirates the women are on rollerblades

Sheikha Lubna al-Qasimi:
If you look at the history of Islam, even the Prophet Muhammad married a businesswoman,' said al-Qasimi, who holds what is regarded as the most important cabinet post in the United Arab Emirates. 'Khadija was her name, she was his boss and she recruited him to work with her,' she smiled, as the likes of Cherie Blair worked the distinctly veil-less crowd.

'The West always looks at the veil as a stigma and I think that's the number one problem,' she added, adjusting her own headscarf. 'They think that if women cover themselves, they cut themselves off from important roles, which isn't correct. In the Emirates, I can tell you, women are on rollerblades. They're moving fast in banking and business.'
Women are seen as key to the process. 'When you put women in the limelight it has a tremendous trickledown effect,' says Professor Assia Alaoui, ambassador-at-large to the King of Morocco. 'We all know that we need to reform but unless you change mindsets and society at large, you can't market reforms, you can't sell them to the people - which is why, from a symbolic point of view, women are so important.'
The word you want is not "symbolic." Perhaps what you meant to say is "We all know that we need to reform but unless you change mindsets and society at large, you can't market reforms, you can't sell them to the people - which is why, from a grassroots point of view, women are so important."

Females have been given equal access to education. The girls have embraced the opportunity with gusto as a way of gaining more control over their lives during their youth. They find satisfaction in learning. And upon graduation from high school they want more, and even if there is resistance in the family most young women manage to convince their families to allow them to go to university. One motivator is that being in school can be a way to defer marriage, but it is not the only motivation.

Education is transforming in ways that the student (and parents) cannot always anticipate. If the educated woman elects to stay at home after university the accumulated transformations in her influence the development of her children. And that woman could support herself financially if it is necessary. That option renegotiates the terms of marriage whether her husband likes it or not.

The rollerblades image is perhaps more powerful than intended. It's not just about moving into the world of work. It's about being able to easily glide there if you choose. Options make a difference even if they are not exercised.

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Saturday, April 22, 2006

Internet spawns a global demolition derby :: WaPo: Before him: photos and descriptions of the smashed cars that attract bids from countries that two years ago he couldn't have imagined bidding against: Ukraine . . . Lebanon . . . the United Arab Emirates . . . Nigeria . . . Bolivia. Bidders from countries such as these have figured out how to buy Washington's damaged cars, ship them overseas, repair them and sell them for a profit.

Friday, April 21, 2006

An economist visits New Orleans :: Slate

Tyler Cowen of Marginal Revolution has the economist's eyes to see what others do not see so readily:
So why have the universities done so much better than the city as a whole?
I won't spoil it for you. Go read the whole thing. Brilliant. - Map & Graph: Countries by Economy > GDP > Nominal (per capita)

Top Arab country? UAE.

Top Muslim country? UAE.

The UAE is #21 out of 184 countries.

And, I know many of you are wondering whether all the low-wage expat workers earning less than $2400 a year are included in the total capita? Yes they are. Just imagine what that means for the per capita income of citizens of the UAE. (Citizens are less than 20% of the population.) It's a big number.

I notice that in Iran (#90) per capita annual income is $2,392.15.

Take note: The UAE is a worker's paradise for foreign workers from much poorer labor exporting countries.


Thursday, April 20, 2006

Victims of hyperinflation: beggars :: The Zimbabwean
No coins to jangle

Zimbabwe, in its sixth year of a severe economic meltdown which has seen inflation shooting beyond 900 percent, has virtually phased out the use of coins as legal tender.But the disappearance of coins from public circulation has also presented new challenges to street beggars who are on the increase due to the economic crisis.“It used to be easier just to rattle the begging bowl containing a few coins. Now I have devised a way of attracting the sympathy and benevolence of the public - I sing as loud as I can,” Mhlope says.
"Economic meltdown" has a double meaning perhaps. The metal in the coins is worth more melted - even accounting for the melting costs - than as tender.

Brother can you spare a dime? I'd like to melt it down.

(Via our friends at



Compounded clash and confusion of cultures :: Khaleej Times
John 3:16 ends up in the wrong place

A customer who visited the Shop No. 44 run by a Chinese seller, said: “I was shocked at the words printed on the underwear. The words read: ‘For God So Love the World that He Gave His Only Begotten Son’. These words should be written on a respectable object, not on underwears.”

She added: “I talked to the salesperson about it and warned her not to sell these underwear, but she brushed me off, saying ‘take it or leave it’. When I told her I will not buy it, she asked me to leave her shop before she calls the security.
. . .
Ghada Gabriel said that there are many people who don’t know how to read English. They would feel bad if they buy the underwear and use it with God and Jesus Christ printed on it. These products which are made in China should immediately be withdrawn from the markets in the country not only from the Al Shaab Club in Sharjah.”
These are the sorts of wacky things that can happen in this country, where English is the language almost everyone communicates with (barely) when they have no other language in common - which is very, very often.

This story begins with a Chinese manufacturer in China seeking to make a product that this attractive to Christians, but lacking even basic cultural knowledge he produced a product that no English-speaking Christian would buy - unless they had a perverse sense of humor.

Now what do you do with a boatload (literally) of stuff that doesn't sell with the intended customer? For some reason a lot of that stuff gets shipped to the entrepot which is the UAE, but does not gets shipped out again. So you end up with some Chinese vendor (yes, we've got all bases covered here in the Emirates) retailing these made-in-China made-for-Christian panties being sold in a local market frequented by Muslims. Very likely the vendor does not have a clue what the words are, they just know that some women seem to prefer cheap panties with words on them.

And then a Muslim customer who can read English comes along and is picking through reams of panties and finds a batch with the words God and Jesus written on them. The customer becomes animated with the shopkeeper (who seems to have assumed the customer is asking for the seller's "best price" (which often involves disparaging the product you are seeking to buy)) and you can see where this is going.

Somehow this reminds me of the jar of local honey I bought when I first arrived in the UAE. Among the health claims printed on the label: good for male importance problems.

Cultural misunderstanding is so common here in the Emirates that my sense is that most reasonable people of all cultures have adopted a generous policy of "give the benefit of the doubt" when offense might be taken but likely was not intended. Looking for the humor in the clash is a constructive approach.

Cross-posted at The New Virginia Church Man.

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US immigration debate: Let's go to the economics :: New Economist

Doh! I should have gone straight to New Economist in search of the best and most thorough roundup of the economics of immigration surrounding the US immigration debate. It's all there, all neatly outlined and hyperlinked.

Go read the whole thing.

And New Economist also has excellent recent posts on other labor market topics:

The young: More on China's demographic trends

The old: The rise of the older worker

The restless?: A guide to womenomics


Beyond Bullet Points

Saving Power Point from itself.

$1 million per slide payoff.

Read the whole thing.

Here's the book.
Piracy may be good for the intellectual property owner :: Los Angeles Times

At least on the right margins. Selective enforcement.

Get them addicted. Then bring in the pirate cops. Entrenchment by stealth.

Where an open source rival threatens to create an open sore, go easy in enforcing your property rights. It deters entry and reduces the chance the cancer will grow into a mutually reinforcing networked community of open source users.

Economist and professor of information Management, Hal Varian, is quoted.

"Microsoft benefits from piracy, then says, 'If you think prices are high, blame the Chinese, because they are the thieves,' " said Ariel Katz, a law professor at the University of Toronto and an expert on the economics of piracy.
''We wanted workers, we got people."

If that is your issue, take a page out of the immigration manuals used by GCC countries. If you earn less than a certain income your family cannot join you. Meanwhile, your whereabouts are monitored by the company that brought you, and you cannot change employers. The government holds your employer accountable for what you do and where you go.
Mexico wants migrant rights in U.S., but is harsh to undocumented Central Americans: The hundreds of thousands of undocumented Central American migrants in Mexico suffer mostly in silence. Considered felons by the Mexican government, they fear detention, rape and robbery. Police and soldiers hunt them down at railroads, bus stations and fleabag hotels. Sometimes they are deported; more often officers simply take all their money. While Mexico demands the humane treatment of its citizens who migrate to the U.S., it appears to be unable to guarantee similar rights for Central American migrants to this country.
Bush's approval: it's a gas :: Heavy Lifting

Graphic shows Bush's approval rating tracks the timepath of gas prices.


Advantage, Instapundit. There's an awful amount of smoke and mutual loathing floating about. But when it all clears it is, in my opinion, Glenn Reynolds who wins this debate about war.
The ties that bind, through thick and thin

The Kanoo Group, or the House of Kanoo, is a highly successful Arabian family business. No doubt the success of its business model has to do with how it has made family work in its favor.

Mishal Kanoo writes recently in ITP Business about one of the downsides of family business:
Here is the moral dilemma. My family member doesn’t do anything yet gets the same benefits as I do. What do I do? This is a serious problem many family businesses face at one time or another.

The question that imposes itself on our morality and ethical behavior is how does one approach this delicate subject without causing ripples that could have far reaching consequences within a family and community? What about the cultural and social repercussions of this action? How about the psychological ones? How does a senior member of the family even take such an action?
It is revealing that he so emphatically frames the question as a moral or ethical question when through my economist's lenses I see the dilemma as one of efficiency for the organization. Why do I say revealing?

A successful family business leverages the opportunity that only families have to mold their future employees, to raise them up with preferences which are family-oriented rather than self-centered. With family-oriented preferences your incentives are aligned with the organization's goal: maximize the joint profit of the group.

Not everyone is the same by nature, and some are born resistant to the family's nurture. The lesson these members of the family take from their upbringing is that the family is ripe for plucking. A family that places a high value on taking care of each other creates a moral hazard that invites the bad eggs to take advantage by free-riding on the efforts of the rest of the family.

Notice that the bad egg need not even reveal his selfish intent. By feigning incompetence he will be assigned less and less work to do. Legions of husbands have demonstrated that this is an effective strategy for dodging housework. Feigning incompetence also has proved effective in group projects at school, and in all sorts of organizations, not just families.

See also:
Taxing Families - Marginal Revolution
Rhodesian family ties - Fish, bananas, old pajamas

So why do family businesses survive, and indeed thrive in some places like Arabia? Part of the reason, I think, is that they substitute for contracts. Contracts can be difficult to enforce. This may be especially true in countries with weak legal systems, or systems that are not good at respecting and enforcing voluntary agreements between employee and employer.

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Social changes led married women into the labor force :: St. Louis Fed

Kristie M. Engemann and Michael T. Owyang provide a nice review of the reasons behind the growth in the labor force participation of married women in the U.S., from less than 30% in 1955 to over 60% today.

The reasons:

1. Housework gets done faster: Economists Jeremy Greenwood, Ananth Seshadri and Mehmet Yorukoglu have argued that married women could not enter the labor force in large numbers until housework had become less time-consuming. Specifically, the authors focused on widespread adoption of advanced technology—e.g., washing machines, vacuums and dishwashers—that greatly reduced the time needed for housework.

2. Wanting to marry a woman just like dear old mom. Growing demand for wives that work outside the home: After controlling for some background characteristics, Fernández, Fogli and Olivetti found that the probability that a married woman worked full-time (at the time of the survey) was 32 percentage points higher if her husband’s mother worked for at least one year when he was young. . . . Surprisingly, after controlling for other variables, the wife’s work decision was unaffected by her own mother’s labor force status. As with the first survey, the probability that the wife worked full-time increased by 24 percentage points if her husband’s mother worked “all the time.”

3. The Pill: A 2002 study by economists Claudia Goldin and Lawrence Katz focuses on the birth control pill as a factor in women’s increased LFP because it altered the timing of marriage and pregnancy. The pill was first made available, primarily for married women, in 1960. Widespread adoption among young, unmarried women, however, varied by state.

(Link via: Economist's View.)

In a related note, I don't put much stock in this survey:

Over 93pc of women want to quit jobs - ABU DHABI — More than 93 per cent of female employees in the country wish to quit their jobs for not being able to compromise between their job obligations and their families, revealed Attorney Abdulqadir Al Haythamy.
There's a reason they call it work, and there's a reason you get paid to do it. The wrong question is being asked (or answered), that is, would you quit if got paid the same for staying at home? Silly question designed, I suspect, to elicit a high rate of affirmative responses by someone with an agenda (that agenda being a woman's place is in the home).

Almost as silly saying we should tax women who get educated, but then stay at home. That recommendation is also agenda driven (that agenda being if some women voluntarily stay at home that undercuts feminism).

My agenda is women should be free to choose between working at home and working outside the home.


Tuesday, April 18, 2006

Hillary and Dubai, just a few steps removed :: New York Observer


Bill and Hillary Clinton seem to have the Dubai port controversy covered 10 ways from Sunday.

Sen. Clinton is bashing the White House deal that would have the oil-rich United Arab Emirates - through the government-owned Dubai Ports World - running half a dozen major U.S. ports. Former President Clinton, however, is praising Dubai as an enlightened Arab nation and "a critical ally in the war on terror."

Does Bill have a less than altruistic reason to be pro-Dubai? Yesterday I asked his office if he helped recruit Dubai into a potentially lucrative partnership with Democratic fund-raiser Ron Burkle's private investment firm, Yucaipa.

The former President is a frequent visitor to Dubai, possibly on Burkle's 757 jet, is an occasional high-dollar lecturer there ($300,000 for a single speech), and serves on Yucaipa's board of directors.

A knowledgeable source speculates that billionaire Burkle pays his close friend seven figures - and possibly even an equity stake - for his advice and hard work. That might take the pressure off Hillary to support the Clintons' households.

Since last fall, according to news accounts, Yucaipa and government-owned Dubai Investments have jointly bid on the commodities broker Refco, Inc., and the Albertson's grocery chain. No deals yet.

Spokesmen for Yucaipa and the Clintons refused to comment on the Clinton-Dubai connection, and the former President's office pointed me toward Hillary's Senate financial disclosure statements - with the relevant one expected to be filed in a couple of months.
Let's keep the no-downside cattle futures story alive.

And there's this:

In October, 2005, Yucaipa, working with the Dubai Investment Group—owned by the Dubai government—made a $828 million bid for Refco, the firm that caused Ms. Clinton a headache when she was accused of having a conflict of interest when she invested in cattle-futures in 1979. Mr. Clinton was cleared of any wrongdoing, but the firm was fined.

Mr. Burkle has also wielded his influence at home. He acted as finance chair of Senator Dianne Feinstein's reelection campaign, and has become a favorite moneyman for Democratic candidates, including Hillary Clinton.

"Mr. Burkle is a well known Democratic fundraiser and we appreciate his strong support of Senator Clinton," said Howard Wolfson, a spokesman for Senator Hillary Clinton.

Mr. Burkle hired Mr. Clinton in April 2002 as "senior adviser" to two Yucaipa investment funds which specialize in developing low-income-area businesses.


Corkery, in his March 8 column, reports that Clinton is Yucaipa's chief marketing guy. Burkle pays him $10 million a year, Corkery's says, for services which are mostly to drum up money in Dubai. Corkery reports that Clinton flies so often to Dubai on Burkle's Boeing 757 that he calls it "Air Ron."

Burkle's relationship with the Rev. Jackson goes back to the 1990s. The Chicago Tribune, in an April 8, 2001 story, reported that Burkle gave Karin Stanford a job and helped her with a home mortgage after she gave birth to the married civil rights leader's child in 1999. The Tribune also alleged that Burkle helped Jackson's two adult sons obtain an Anheuser-Busch distributorship in Chicago. Shortly after the deal, Jesse Jackson dropped his 15-year boycott against the company's beers.
Did I mention I love to witness the exposure of hypocrisy in high places? Democrats must wonder, if they are not stupid, why - with Bill and Hillary and Jesse around - they need enemies.

It's great to bring to the attention of the next generation that it is Hillary who it the most ethically-challenged person in her marriage bed. It's even greater when it is she who saves others the trouble of drawing attention to the skeletons in her closet.


UPDATE: Welcome readers of Pajamas Media and Belmont Club.

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Sunday, April 16, 2006

Peak oil? Whether you're worried or not, the is worth giving a gander.

Giving credit where credit is due, I must confess that I found this from my number one source of news,



Saturday, April 15, 2006

It should never be done :: Woman proposes to tax women's work :: Chequer-Board of Nights and Days

Expatica news reports that Dutch MP Sharon Dijksma proposes fining women with college degrees who choose to stay at home instead of entering the paid workforce. Dijksma explains: "A highly-educated woman who chooses to stay at home and not to work -- that is destruction of capital. If you receive the benefit of an expensive education at the cost of society, you should not be allowed to throw away that knowledge unpunished."
A gift is a gift. If society gives away education why should it have any moral authority to say how it should be used?

And besides, women who stay at home are making the best use of their time. Don't they know the highest and best use of their time?

After all these years of disparaging the omission of the value housework in measures of GNP we are now faced with the irony of a female MP saying those never should have apologized for leaving out the value of housework - it has no value.

There's an even more fundamental error of economic logic being made: Ms. Dijksma seems to think that society gets an external benefit from your private sale of your labor services to an employer. Wrong. There is no externality, and therefore there is no national duty to get educated and go to work.

Luddites - workers who destroy machines because they believe the machines will replace them - destroy capital. Workers who choose to apply their human capital at home are simply deploying capital to its best use, not destroying it.
Private Tuition :: Khaleej Times

The primary and secondary-aged children of ex pats in the UAE go to private schools. The tuition is paid by the parents, or - perhaps more often - by the parent's employer.

There is a wide range of schools to choose from and there are large differences in tuition rates. The highest of those exceed those at private universities in the UAE:
Fees at the most expensive of the higher education institutions in the UAE such as the American University in Dubai and the American University of Sharjah are fixed at around Dh48,000 annually, whereas a number of upmarket private schools catering to the top bracket of the society fall between Dh40,000 and Dh50,000 annually.
In addition, tuition increases in recent years have been steep. In demand and supply terms, both growing but supply has not caught up with the growth in demand over the last five years or so. The question is, why not? Several possibilities come to mind. Immigration to the UAE continues to push the population growth rate into the double digits annually, and not only in fast-growing Dubai. You might expect that growth in school facilities (and hiring of teachers) could keep pace if the growth was anticipated and there was confidence that the economy of Dubai was not subject to collapse. Thus, the relatively slow pace of growth in schools probably indicates some lack of confidence that the economy of Dubai going to grow as it has and some lack of confidence that the economy is viable and is immune to adverse and unpredictable factors like another war in the Gulf or a major terrorist attack.

There are cost push factors, too, of course. There is a massive building boom across the UAE and building costs are up as a result. It costs more to build a school. Housing costs are up, too, so it becomes more costly to recruit teachers to migrate to the region - whether you cover their housing costs as an allowance or compensate them through a higher salary.

Finally, it is conceivable that there are regulatory barriers to entry. Perhaps there are numerous government procedures that slow the expansion and/or government review cannot cope with the rate of expansion and falls behind in granting licenses. If there are entry barriers, this creates short-run profits for existing schools as tuition gets bid higher for the few places available. This could create a lack of competition:
Elias Bou Saab, Vice-President Admission at the American University in Dubai (AUD), explains the healthiest way to keep tuition fees low and affordable is by allowing competition. “Higher education institutions in the country are faced with stiff competition,” he said, pointing out to the mushrooming of universities and colleges from across the globe setting up branch campuses in various emirates are offering programmes at competitive prices.
Parents wonder about what may be a revealing inconsistency:
“Most school managements charging high tuition fees, or, having raised their fees recently, attribute the high tuition fees to increasing costs of land, building rentals, service charges, fuel costs, and high salary packages paid to teachers and staff to maintain the quality of education. But if the universities can offer education at competitive rates, despite, faced with similar problems and increasing retention packages of faculty members, why can’t schools contain their fee structures and make it affordable for many,” a number of parents point out.
That's a good question. Perhaps the answer is that universities are in an international market for students whereas parents of primary and secondary children are less likely to send them abroad. In this case, the primary and secondary school markets do not have the safety valve of studying abroad; surges in demand have to be absorbed locally and price runups will be steeper.

The KT article contains a couple of pleas for government regulation of tuition at new schools. That will have exactly the opposite of the desired effect: it will discourage investment in new schools. Better to figure out what can be done to make it easier to open new schools. Yes, making schools easier to open might make it easier to cheat parents becasu. It is up to parents to do a better job of determining for themselves if a school is fly-by-night or not. Now the presumption is that the government is taking care of that - and when the government is unable to keep up with accreditation that creates an opportunity for schools to cheat parents on the quality of education. The solution is for parents to take the responsibility upon themselves to ensure that the school is offering what it claims to be offering.

Dubai-based GEMS Group on Saturday announced that it is applying to the Ministry of Education to authorise school fee increases above 20 per cent across 11 of its Central Board of Secondary School Education (CBSE) and Indian School Certificate (ISC) schools in the UAE. The increases are effective as of April 1.
. . .
Hugh McPherson, Chief Operating Officer of GEMS Schools, said the current Ministry of Education ceiling of 20 per cent tuition fee increase every three years is "not adequate to cover the schools' rapidly escalating operating costs."
. . .
Officials at the Education Zone and the Ministry of Education confirmed the news and said that a fee hike was "justifiable" if the schools provided additional quality services to the pupils. Mona Al Lootah, head of the zone, told Gulf News on Saturday that there are 15 more schools waiting for approval to increase their tution fees.
Let's be clear. What we are being told is if a school wants to increase its tuition because of escalating costs it can do so only if it offers additional quality services. How small can those additional quality services be? If it's they can be small this is window dressing meant to allow tuition increases. And if the additional quality services have to be substantial, that's perverse. Because if something becomes more expensive the rational thing to do is usually to substitute away from it not to add to it.

Notice it is the rules of the regulation that create this perversity. The schools cannot go to the parents and say let's find a way to economize on some of the extras we offer that are not central to education. Instead they have to add more extras in order to get permission from the regulators to increase fees. That inflates costs rather than trimming them.

My recommendation is the same as always. Government should not be in business of regulating prices nor should it be in the business of regulating the frequency with which buyers and sellers can renegotiate terms. If parents want schools to enter into contracts that say tuition does not change except every three years, that is their business, not the business of government. If schools want to enter into contracts that allow them to adjust tuition mid-year under extraordinary circumstances, that is their business.

When it is government regulation that freezes tuition from changing for three years you essentially have a price ceiling. In an environment where costs are rising and, like the UAE, demand is growing, that ceiling can become binding if it is not binding from the start. Newly arriving parents will find it difficult to get that school to accept their child. They will find their choices limited to new schools whose tuition reflects the higher cost environment - and perhaps also reflect reduced competition as the only schools available for new students are new schools. And investors' enthusiasm for investing in schools will dampened because they fear price controls, slowing entry and prolonging the period of high prices due to accelerating demand.

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Capacity limits :: Khaleej Times

Sharjah Municipality has not been able to keep up with the rapid pace of development. The result is rationing by denying some units access to public utilities:
According to real estate agents, over 300 newly constructed buildings located in different areas were still awaiting power and water connections since the end of last year.
Even with rationing, reserves for system emergencies are being used routinely an official stated:
“Two additional water units are present to tackle emergency situation and a reservoir with a capacity of seven million gallons is already operating, though it should only operate during any sudden breakdown."
. . .
He also suggested that owners of residential buildings should ensure that the water tanks are big enough to store extra water for 24 hours.
Thus, if there is an emergency, such as the breakdown of a desalination plant, Sharjah may not be able to respond to the emergency because its own reserves are being used for everyday consumption. The official is quite right to inform the public and encourage them to create their own reserves (private water tanks). Has your building owner taken these precautions?

He also said that in order to meet the demands of the mushrooming population, Sewa has recently signed a mutual agreement with the Abu Dhabi Electricity and Water Authority and according to the accord, Sewa will be supplied with 10 million gallons per day through the transmission main or water main which is passing through Sharjah boundary near Shawka area.
It's good to see Abu Dhabi and Sharjah cooperating. (I note that Dubai lies between Abu Dhabi and Sharjah.) But why not locate more desalination in Sharjah rather piping water a distance the Abu Dhabi emirate? One reason might be that interconnection allows both systems to come to the others aid if one faces a breakdown. But then the question becomes why not interconnect the neighboring systems in Dubai and Sharjah? Is it rivalry, and, if so, is the rivalry economic or political?

Friday, April 14, 2006

Buyer beware :: Khaleej Times
DUBAI – About 200 workers of Al Khoori Marine Contracting staged a protest at the labour camp in Al Aweer yesterday morning, demanding the payment of their salaries — overdue for the past three months.
. . .
"It seems that the delay in salary payments might be due to the change of ownership from one businessman to another," he noted.

"The new employer, Matar Rashid A Jabiri, expressed his readiness to instantly pay the salary arrears," said the official adding, "The new employer will do so on Saturday."

According to the rules, the former and present employers are both jointly responsible for honouring all the financial commitments of a company, even when it involves a change of ownership."
When you buy a company, you typically buy its assets and its liabilities. In the case cited, the workers of the company were found to be owed three months wages. The new owner has promised to pay tomorrow.

How did it happen that the workers had to demand their back pay? Here are the possibilities that I can think of: (1) the old owner did not inform the new owner about this unpaid wage bill, (2) the new owner was told but failed to pay either because the new owner (a) was hoping for a ruling that said he would not have to pay, (b) had trouble setting up a system to pay the workers, or (c) did not have the funds to pay the workers on time.

When there is ambiguity there is a chance to pull a fast one. (Making the old and new owner jointly responsible doesn't help.) And in the UAE there is fair degree of ambiguity over whether workers have been paid because of the frequency with which employers fail in their obligations to workers. And that is because the workers lack the ability to change jobs and so do not have a credible means of punishing the firm for failure to honor its promises.

Gulf News also carries a story today of a group of workers claiming they have not been paid for five months.

If you have two blackeyes in one day is that all you can get?

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Instapundit is a bulldog who won't let go of a good point, but will make it over and over. The latest instance bears repeating, again:
WE CAN'T DISRESPECT RELIGION, CAN WE? Not the ones that might behead TV executives, anyway. But won't there be more of those with this attitude? I guess this is a test case on whether people respond to incentives, or have overriding moral principles.
In the same post Instapundit quotes Moussaoui. It shouldn't have to be, but it is: Muslims need to forcefully and collectively repudiate the views expressed by Mr. Moussaoui which he says represent true Islam. Silence in this case is affirmation.
Earthly rewards on the road to the kingdom of heaven, or hell :: FT

Chris Giles, of The Financial Times, does a nice job of reviewing what economists who study religion are up to. It's a wide variety of things.

Two quotes of particular interest to the general Emirates Economist reader in search of "economic analysis of events in the United Arab Emirates and the Gulf":
It is very hard to discern a link between religion and a country's economic performance, once the starting position of an economy, education levels and other important factors have been taken into account. "Backwardness" among Muslim nations, in particular, is a myth. Marcus Noland, a senior fellow of the Institute for International Economics, found that if you looked at the proportion of a population that was Muslim, either across countries or within countries with large regionally concentrated Muslim populations, it was almost impossible to find a statistically significant negative effect of Islam on economic growth. "If anything, Islam promotes growth," Mr Noland concluded.
Robert Barro and Rachel McCleary of Harvard University found, not surprisingly, that countries with high church attendance had high levels of belief in God and hell.

But where two countries had similar levels of church attendance, economic performance was superior in the one where belief in hell was stronger. In the same vein, countries with high church attendance had a worse economic performance than less observant countries with similar levels of belief in God or hell.

Belief matters more than belonging, they concluded. The threat of hell stops people cheating and increases trust, a valuable public good. But actually attending church wastes time ...
Emphasis added. "Church" in the above quote is generic for place of worship irrespective of the religion. Thanks to grapeshisha for emailing me the link.

Thursday, April 13, 2006

Nice article in The Chronicle of Higher Education, Universities for Women Push Borders in Persian Gulf, that paints an accurate portrayal of what's going on here. (Thanks to the Canadian Countertenor for sending the link.)


Discontent in Dubai :: BBC

There's little that workers in the United Arab Emirates can do to improve their lot. Strikes are illegal, although there have been several recently. And because there is no right of association, there are no trade unions.

The Burj Dubai tower is expected to be completed in 2008
So when, for example, pay is late, there is little the men can do about it.

The lack of redress also means that smaller grievances - like having to wait an hour at the end of the day to clock off - can suddenly boil over into violence.

However things look as though they might be about to change.
But some things never change. Like attitudes of journalists towards unions. The reporter believes "there is little the men can do about" their grievances with employers because they have not been allowed to form unions. But the real source of the problem is that employers are prohibited by UAE law from entering into contracts that allow the worker to change jobs if the worker becomes dissatisfied. That's one step from indentured servitude. I'm all for voluntary indentured servitude as one option between consenting adults in their right minds. What I am arguing is that government should not prohibit either form of contract: indentured servitude or at-will (where the firm or the work can end the contract at any time).

Why should workers be forced into a collective agreement when alternative means of grievance resolution does a better job and has not been tried? The journalist's bias is to rely on a union. My economist's bias is to rely on individual action. Last time I checked, I was happy my compensation was not determined by a collective agreement, but was determined based on individual merit. Probably you are too, unless you studied economics in France or something.

Allowing workers to change jobs is a low-cost means of enforcement of contract that is based upon each individual worker's action. I assert that many firms would offer such contracts because it would make them more attractive to potential employees. And if you do, then you can offer lower wages or attract better quality workers.

Meanwhile, I have doubts that unions in the UAE will resemble the unions the BBC reporter has in mind.

IRONY ALERT. The BBC article came to me by email in the same Google news alert as this:

UAE to provide more jobs

Gorkhapatra - Kathmandu, Nepal... The agreement to this effect was expressed during the audience His Highness Sheikh Mohammad bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme ...

In other words, world criticism of the UAE labor market is a (phony) criticism that exists only because the UAE is giving people better opportunities than they can find in their own countries. Last time I checked, the BBC was not offering these people jobs, let alone offering them jobs with BBC style wages and conditions. Until it does, I suggest these criticisms are misguided and irrelevant. And get this - are BBC workers forced into unions? And if they are, do they not at least have the option of leaving the BBC for another employer?

I don't have plans to nominate either the UAE or Nike as the next Mother Theresa. It's not as if their motives are humanitarian. But the results of their economic initiative to seek out poorly-paid workers elsewhere and attract them to the UAE by giving them a better job than the can get at home is a benefit to humanity. They are on the side of the good; the interests of the UAE and Nike are aligned with The Good.

Unions are one more form of utopianism, and that can put you on The Road to Serfdom. Good intentions can and do produce evil. Something about the best being the enemy of the good.

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Tuesday, April 11, 2006

Insecure French students inspire good writing about basic economics, arrogant ignorance, and base motives

Reform will actually offer much greater “security” to young French men and women, because it gives companies an incentive to hire more young workers. That alone could reduce the current average unemployment rate that now stands at 10%. “I want to buy things on credit; I want to be able to rent a good house; I want an indefinite contract in order to lead a quiet and secure life”, said an 18-year old girl during one of the demonstrations, according to the Spanish daily El País. That, precisely, is what the social model she is fervently defending is denying her.
-- Alvaro Vargas Llosa via Publius Pundit

Half a million French youths on the barricades of their privileged entitlements, united in an unembarrassed, indeed self-righteous, defense of economic stagnation, have given me much needed perspective. Young Princetonians, I take it all back and beg your pardons. Compared with your French counterparts, you are all mini-Magellans and micro-Mother Teresas. French protestors carried a huge banner: "We Will Never Surrender" (in English, especially for CNN). Bracket the fact that surrender has been France's national outdoor sport for two centuries. What are they refusing to surrender to — apart from common sense, I mean?
-- John V. Fleming via TigerHawk

Nor are the current riots about equality. On the contrary. Their effect would be to enforce inequality. The unemployment rate in France is 10%. For young people under 26 it is 23%, and almost 1 in 10 kids who leave high school don't have a job five years after taking the baccalaureate. Much of that unemployment encompasses those of the alienated immigrant underclass, who are less educated, less acculturated and less likely ever to be hired than the mostly native student rioters. And these young rioters want to keep things just that way--to rely not just on their advantages of class, education and ethnicity but also on an absolute guarantee from the state that their very first job will be for life, with no one to challenge them for it.
-- Charles Krauthammer via Instapundit
Pajamas Media: French Etudiants win

They win for being losers, for doing a good job of shooting themselves in the foot.

I am basking in a schadenfreude glow at the moment. And it's only enhanced because these students don't even know they've created misery for themselves.

Monday, April 10, 2006

A for-profit college is under investigation for pumping up enrollment while skimping on education :: Chronicle of Higher Education: 1/13/2006

See also the conversation thread at RipOffReport.

In the United States. Not the United Arab Emirates.

Appalling that an institution, American Intercontinental University of Atlanta, would care more about whether students STARTED than whether ever they graduated. But such were the perverse incentives in places - and no doubt those can be traced back somehow to poorly designed/administered US and state government financial aid/loan programs.

Perhaps the parent, AIU, should be bought out by the affiliate, American University in Dubai which holds its US accreditation through AIU. It wouldn't be the first time such a purchase of US universities occured to The Emirates Economist. Everything is for sale at the right price. Right?

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Burning their bridges - no exit

Expat workers in the UAE have no exit. Once you have signed on with an employer it is next to impossible - particularly in the low-wage sector - to legally change jobs. You can quit, but quitting has little purpose if you have no where else to market your talents except to go back to where you came from - assuming you have the resources to pay for the ticket home.

Thus, if your employer does not live up to his or her side of the contract with you, then you are likely to stay with them anyway in the hope that you will eventually get your due. In contrast, if you could easily change jobs then you would change employers if your current employer failed to respect the contract. Meaning, your employer has every incentive to treat you well if you can credibly threaten to leave. Which explains why so many employers in the UAE fail in their responsibilities to pay their workers on time or to provide them the living and working conditions they promised.

One of the ways that unions might be a positive force for employers is to give workers voice. When workers have voice employers get advance notice that workers may be about to exit for better job opportunities that have arisen in the labor market either because wages in the market have increased or the firm is unwittingly doing something that makes work there relatively unattractive.

In the case of the UAE labor market institutions - no exit by individuals - voice and collective action are all low-wage workers have, if they have anything. Thus, it is not surprising that they are driven to take collective action.

Recently the UAE announced that unions would be formed: Labourers will be allowed to form unions. Quote,
We’re going to have one union, with separate representatives for the construction, fishing, agriculture and other industries,” Labour Minister Ali Al Kaabi told The Associated Press. . . . “The law will control how strikes will be conducted. It will outline rights, the do’s and don’ts. There will be a labour representative who will be our point of contact. It will make contact with the labourers much easier.”
I believe that's what you call a company union. This move may be window dressing. Or it may be part of a pattern of central control of labor movements (in both senses of that phrase). UAE workers don't need a collective labor movement. They need individual job mobility. But that would involve trusting the Invisible Hand. Too scary.

Here's the latest on what the workers are working on: Taipei Times - archives. Some quotes:
The construction workers, packed together inside the tiny hut in one of Dubai's harsh desert labor camps, are breaking the most fundamental of all the draconian laws governing immigrants within the United Arab Emirates (UAE) -- they are holding a union meeting, a practice that is banned in all but one of the Gulf States.
. . .
According to 36-year-old Kamal (not his real name), who spearheaded the Burj Dubai protest, more needs to be done.

"These protests received attention in the press and were forgotten about, we need to do more. I was involved in a sit-down protest on the motorway last month, but the police came along with sticks and beat us on the backs and head. Many of my friends were hospitalized and deported," he said.

"The riot got a lot of attention, but things haven't improved for us. We already know what we have to do next, we take our protests into the malls and to the beaches," Kamal said.

"Our situation needs international attention and only by unsettling tourists can we achieve this. They need to see how desperate we really are," he said.
Kamal certainly knows how to identify the soft underbelly that feeds Dubai. A real economic savant.

A classic stratagem to increase your ferocity in battle and intimidate your opponent into concession is to burn your bridges behind you so can't exit and you have to stand and fight. Ironically, it's not the workers that have done the conflagration honors, it is the UAE government labor policies that have driven the workers to collective action. No exit.

For the Taipei Time link thanks go to Axonsax posting at UAE community blog.

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