Monday, November 26, 2007

UN charter and GCC labor rotation scheme

You might wonder why a country would want to limit the stay of "unskilled" guest workers who are doing a good job and have gained local knowledge that is valuable to their employers. I certainly have.

When economists see firms or households doing something odd we don't immediately discard our model of rational behavior. We look for constraints or incentives that are not immediately apparent to the observer. In the USA, for example, the answer often lies in government regulation or perverse incentives created by taxes.

The Gulf Coast Countries are considering a plan to limit the stay of unskilled guest workers. The Gulf News yesterday:
The 3+3 law proposes a residency cap of six years for unskilled labourers. If the law is passed, then unskilled workers will come to work in a GCC country with a three-year labour contract which can only be renewed once.
However the law would only be applied separately to each country, which means that a labourer could continue to work in the GCC after completing six years but not in the same country.
The last paragraph explains why I've included "labor rotation scheme" in the title.

What rational explanation is there for this plan?

The explanation for this plan can be found a Gulf News article that appeared last month:
Bahraini Minister of Labour, Dr Majeed Al Alawi, told Gulf News ... the residency time ceiling proposed for foreign workers in the Gulf is meant to ensure that unskilled foreign manpower taking part in different development projects do not come to live here for long periods that might entitle them the rights of immigrant workers under the UN conventions.
So, once again, there is a straightforward explanation that comes from regulation -- in this case the UN conventions. The GCC rotation plan dodges the problem of the guest workers being classified as immigrants. Immigrants have rights under the UN conventions, particularly a route to citizenship.

There are other plausible explanations. One is that the longer workers stay the more likely they will be able to organize and achieve collective action -- strikes.

Demographic imbalance is often cited as a reason to limit the number of guest workers. The notion here is that the greater the proportion of the population that is foreign the more that local culture will erode. Limiting the stay would not address demographic imbalance. It would have some cultural effects. For example, consider the family that employs a foreign maid or nannie. They would not be able to keep her beyond six years.

The first article referenced above does also discuss a separate measure to limit the number of unskilled workers. The article states,
The growing number of expatriates in the region has become a matter of grave concern to local governments as unemployment levels have also risen proportionately.
It may be that in some of the poorer GCC countries nationals would take jobs in the unskilled sector. But not in the UAE.

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Anonymous Jaber said...

treatment of unskilled workers in some gulf countries is border line criminal. that being said, the rotation scheme does have benefits in terms of giving more poor unskilled workers a chance to earn a living in wealthy arab gulf countries.

12:48 AM  
Blogger the real nick said...

The consequences are far reaching and I hope the government realizes this. This proposed change affects mostly 70% of the approx. 1 million construction workers who are unskilled.
Contractors are scrutinized by the labour ministry. They generally work within the constraints and comply.
Training unskilled labourers is not unusual. Contractors have to to do this every so often, in fact, every time a new batch arrives form India. Even skilled labourers ad tradesmen have to be trained.
It costs time and money. Salary costs rise as every new batch will work for inflation adjusted wages, plus salaries for supervisors.

Contractors - and it will equally affect all contractors - will simply pass on the additional costs to the Clients and ultimately the consumer. Inflation rises.
Well done, government.

10:09 AM  

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