Thursday, November 22, 2007

70% pay raise for UAE federal employees

It was announced the other day that employees of the federal government would receive a 70% pay increase.

There's a problem. Pay increases this large, out of line with private sector wage increases, run entirely contrary to the government's expressed desire to see more Emiratis in the private sector. Very few are, and with good reason. Their time would be better spent hounding someone for a job in government. That's a waste from the social perspective. It's a waste because it's effort that just moves money from one pocket to another and produces nothing. It discourages Emiratis from becoming engaged with the private sector and the virtue of merit-based reward. And not least of all the country develops no institutions of its own to foster economic growth.

In short, the country is suffering the curse of resource abundance.

There are better ways to share the plenty of high oil prices with its citizens. Write them a check; unhitch payment from employment in the government sector. Make them owners of the oil that is currently owned by the government. Make it difficult to reverse course -- as happened in Saudi Arabia where so much of the oil revenue now goes to maintaining a large royal family.

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