The Whole World is Watching :: UAE community blog

Posting at the team blog, UAE community blog, i, Bobo provides a nice roundup on the latest Human Rights Watch report on labor abuses in the United Arab Emirates, "Building Towers, Cheating Workers". See also the comments to his post.

I tend to see this more as an equilibrium where the low-wage workers in the UAE know in advance that cheating occurs in the sector so, in effect, they are not cheated. All that happens is the UAE perpetuates its earned reputation for lack of enforcement of its own laws and for shifting the blame to authorities in source countries. Frankly, this has a corrosive effect throughout the society, stymieing trust and promoting cynicism -- which in turn makes all laws difficult to enforce. The cycle of life, such as it is, is complete. It's not a healthy economic atmosphere.

i, Bobo blogs at Bobo of Arabia.

Some companies violating labour law do not exist :: Gulf News

Quote:

Humaid Bin Demas, assistant labour under-secretary, said that there are about 50,000 companies that have violated labour card regulations.

"Around 80 per cent of these companies fall into three categories companies that only exist on paper, companies that mainly sell work permits and businesses that are going through financial crises," said Bin Demas.

Many workers purchasing labour permits from such companies stay in the country illegally after their permit expires. As they stay illegally, they have to survive with low salaries and could claim no rights or compensation if injured.

According to Ministry of Labour statistics, around 90 per cent of the firms violating labour card rules are for people who do not work for the companies sponsoring them.

A colleague calls this "turning workers loose on the local economy." There are companies whose business is, or has become, selling work visas by importing labor and then setting the worker lose in return for an annual payment; they would not exist otherwise. These foreigners are willing to pay a flat fee for the opportunity of finding work on their own. Or the workers are leased to firms that want to hire, but cannot get visas approved.

As long as work visas are rationed, there will be a market for the visas and those who get the visas obtain a rent. The government could, however, wipe out this kind of business by going into the business and selling the visas itself. But since it does not sell permits, if it wants to deny permits to firms that have no purpose except to collect and resell work visas then it has an enforcement problem.

I have a conjecture that the plethora of small businesses on the edge of survival that you see in many cities and towns in the UAE are a variation on this theme. The local owner has in effect sold the business to a foreigner who needs the owner to acquire the work visa and the business license. The foreigner is in effect working for himself.

It would be interesting to know how many of these companies are owned by staff or former staff of the Ministry of Labour.

Key money

Gulf News headline: Key money puts Abu Dhabi rents beyond reach.

Key money - a charge for the transfer of an apartment - occurs when rents are held below the level that would balance supply and demand. When rents are held down - say, by rent control - you create apartment seekers who are willing to pay more for an apartment but cannot find one. That creates the opportunity to collect key money.

Who collects the key money? It may be the apartment owner who charges the legally allowed rent, but then charges an additional fee to transfer the apartment to a new tenant. Or it could be the existing tenant who transfers her contract to a new tenant for a fee.

In the Abu Dhabi case there is no mention of rent control. Rather it appears that the apartments are government owned and the government has chosen to rent at below market rates. Enterprising building supervisors (the watchmen) watch for match-making opportunities between tenants moving out and persons seeking apartments. When a match is made the new tenant pays the key money, and the watchman and the departing tenant split it.

Gulf states: educational reform's real goals :: Arab Reform Bulletin

Ebtisam Al Kitbi (UAE University) writes:

Among the most important changes in the Gulf is increasing reliance on the English language at the university level, despite the fact that English language instruction in elementary and secondary public schools in the region remains weak. The decision to change the language of instruction in the social sciences and humanities to English, although many students lack the required proficiency, has profound implications for education.

It is difficult for students to engage enthusiastically in the detailed discussion required to understand the sophisticated concepts, theories, and debates in the humanities and social sciences when it is clear to them that their English language skills are not up to the task.
. . .
The increasing reliance on English is an example of the sort of proposed changes in educational systems that serve foreign interests more than they serve the societies of the Gulf. The insistence of foreign powers on a change in the educational philosophy in the Arab Gulf region comes within the context of the control and suppression of university youth so that their world view in the future will be compatible with and serve the interests of those powers. . . . Altering the role of higher education neutralizes university students and prevents them from being an effective force for change.

I'm skeptical that English was made the language of learning in universities so as to control and suppress university students. Or that this format of instruction is imposed or insisted upon by foreigners. Very skeptical.

I do believe, however, that it is appropriate to question whether the language of instruction ought to be English. Part of the answer would have to consider what are the barriers to providing a quality university education in Arabic.

Although students have limited options to pursue university level education in Arabic they do have the choice of different university formats including the American style of university education. Many students opt for this format. Why? And why do employers find graduates from American-style universities attractive? (Given that the American style of university education is thriving in the Gulf also leads me to wonder if the paucity of Arab-language universities is a matter of student/parent preference rather a format that is imposed by providers (let alone imposed by foreign powers).)

I believe that the American-style education is one of many styles that work. I do not claim the American system is superior. However, I do believe that any education system is transformative, that is it changes the person's attitudes, beliefs and world view; it does not merely transfer knowledge or build skills. Cultural DNA is transmitted. I often wonder if the Gulf States are aware that the education systems they allow to operate within their borders are likely to change native culture in unexpected if not undesirable ways.

Besix workers turn violent, beat up their colleagues :: Khaleej Times

Quote:

Rashid Bakheet, Member of the Permanent Committee of Labour Affairs, told your favourite No. 1 newspaper, Khaleej Times, yesterday that the committee checked all the documents of the company and visited the labour camp. The company is paying on time and the accommodation is good. The committee is satisfied with the company and it is a well- run company,” he said. “The workers’ demand of an increase in their salary to Dh1,000 and provision of Dh300 for food allowance is not an acceptable demand. They should abide by the labour contract they signed,” he added.

An easy solution for the firm would be to call in replacement workers. The trouble is the UAE labor rules do not allow firms to go onto the local market to hire workers - all ex pat workers in the UAE (over 98% of the private sector workforce) are essentially locked into employment with the employer - that is, they can't change jobs readily.

I've been arguing for a relaxation of the rules that limit or make it costly for firms to hire workers on the local market. I have in mind giving workers greater freedom to change jobs.

It's not what I had in mind, but the recent proposed plan for Worker Cities, where there would be large labor renting companies, would also make it easier for a firm to swap out its workers if it wished. It's not immediately obvious that workers such as those striking at Besix would be better off under the Worker Cities plan.

Central Bank urged to curb offer of easy personal loans :: Gulf News

The Central Bank should curb the phenomenon of easy personal loans offered by banks in the emirate, the National Consultative Council said yesterday.

The Central Bank will be like the man pushing on a string until the Rulers' Courts stop paying off the bad debts nationals have with banks. The National Consultative Council might want to ask that that practice halt. Otherwise banks have every incentive to loan to a national regardless of his or her credit worthiness.

Speaking of credit worthiness, that's pretty difficult to check - there are no credit bureaus in the UAE where borrowers credit histories are kept. There's not been a demand for a credit bureau and there won't be as long as the personal debts of nationals, or certain nationals, are always taken care of by someone. If you want to curb spendthrift borrowing you have to shift the obligation to repay onto - novel idea coming - the borrower and - novel idea coming - leave it up to the lender to collect from the borrower and from someone else. Otherwise the bank and the borrower have no reason to care.

The National Consultative Council

also suggested the Central Bank should hold a bank responsible for a default because of bad assessment when offering the loan, and the transfer of a person's salary to banks to repay a loan should not be made mandatory.

They also called for a new regulation to control personal loans by fixing a ceiling for the interest rate charged for transactions between banks, and cancelling the provision of a cheque as a guarantee in offering a loan.

According to Abu Dhabi Police General Headquarters, 1,748 UAE nationals were reported defaulters from 1999 to 2004 with a total Dh2.727 billion in credits. Regarding bounced cheques, the council was told 35,418 cases involving Dh1.14 billion, had been registered with Abu Dhabi Police between 2002 to 2004.

But an interest ceiling on loans only encourages borrowers to borrow more. Is that what you want?

A crime against humanity

The UAE government makes it quite difficult for foreign workers to leave one employer in the UAE and seek alternative employment with another. This contractual constraint imposed by the government creates an environment where bad employers can (1) abuse their workers, and (2) spoil the reputation of employers as a whole, damaging the majority of firms who keep their commitments to their workers.

For low-wage workers especially the least-cost method of enforcing the contract you have with your employer is to have the option of leaving the employer and taking up work with another. Saying that workers have access to the courts is a vacuous assertion for a worker whose employer will not give him time off from work, who does not have the resources for something as minor as transport to the court, and who lacks the education to understand his or her rights and make arrangements to have his or her case heard.

My recommendation continues to be: give the workers and firms the right to enter into contracts where the worker can change jobs and the firm can replace workers by hiring them from other firms. If that recommendation is stillborn, then the UAE - if it wants to disarm critics who make the case that the UAE is complicit in the abuse of workers - must devote the resources to ensure employers keep their promises.

What does that mean? I think it means a government official has to be present with low-wage workers and witness whether they get paid, whether they are working beyond agreed upon hours, and whether the working conditions and employer-provided living conditions and transport to work are mutually agreed to. That's a lot of resources devoted to monitoring. It would be enormously costly. Allowing workers to change jobs is the low-cost alternative to costly government enforcement of contracts.

Here's the latest report of an employer failing to honor his or her commitments. It's representative of so many such reports. As usual, it is a clear cut story; failure to pay for several months and workers having no real alternative except to continue to work for that employer:

Sharjah: About 120 contracting labourers stopped work on Thursday in a demand for unpaid salaries, police sources told Gulf News.

The Asian labourers who work for Swaidan and Al Nile Contracting Company in Sharjah took to the streets at about 10am. The workers said that they have not been paid for four months and are owed between Dh400 to Dh600. The only solution for them was to stop work because they need the money to send to their families back home.
. . .
Police said they contacted the manager of the company, Mohammad Sulai-man, asking him to solve the problem immediately. The workers left after an assurance from police that they would be paid. The case will be referred tomorrow to the labour department.

Revealed preference suggests the UAE does not find the host of employer breach-of-contract cases embarrassing. Otherwise the problem would be solved by now. It is revealing, I think, what things some would find embarrassing that others do not.

Questions the article fails to address:

>>Will the firm be fined? Is the fine substantial enough to be salient?

>>Will the UAE make sure that this firm's behavior is made know to the villages where it is likely draw to workers in the future?

>>Will the workers be made whole? Paying them back wages is sufficient to make them whole -- what about the loans they probably had to take at terms that are typically much much worse than you and I can obtain.

Annual rate of growth in the expat labor force in the UAE: 17 percent

Gulf News:

The number of expatriate workers in the UAE was 2,738,000 in 2005. The number is a 17 per cent increase over 2004.

That's a big number. It tells you that the Ministry of Labour does not make it difficult for a firm to bring in expat workers.

Demand for labor in the UAE has increased. But the UAE is a small player in the worldwide labor market. So an increase in demand translates into an increase in employment with little if any upward pressure on wages. (Exceptions to the rule would include narrow job categories such as experienced construction managers.)

Translation: The UAE faces a highly elastic, if not perfectly elastic supply of labor from abroad. There is a vast army of workers who would be glad to come to the UAE at terms that represent an improvement over salary and working conditions in their home country.

Thus, if wages and working conditions are to improve in the UAE the laws of economics tell us it will be because wages and working conditions improve in the countries where the UAE recruits labor. This is happening in places like India where economic liberalization has triggered a growing economy. But it is not in other countries. The UAE has other countries to turn to for cheap labor.

Ironically, the Indian miracle has also contributed to the growth in the world demand for oil that has resulted in the increase in the UAE's oil revenues.

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%.

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

Quote:

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.

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.'

Geopolitics:

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.

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.

Discontent in Dubai :: BBC

Quote:

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.

TAGS: BBC, Tim Mansel, UAE, indentured, Labor

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.

Groups inciting worker protests :: Gulf News

Quote:

Dubai: The Permanent Committee of Labour Affairs in Dubai warned that an organised section of workers is deliberately provoking fellow workers to protest against their conditions even though such issues can be resolved through other means, says Emirates Centre for Strategic Studies and Research (ECSSR).
. . .
It seems that an organised systematic method of provocation exists.

You know what? This analysis is off target. Consider:

1. "such issues can be resolved through other means" if there is the government will to do so. That will has been lacking. Laws without enforcement are meaningless.

2. It's not easy to organize large groups to work for the common good of the group. You have to really motivate them to become a coalition. Consider the serfs of Russia as an example. Or the Iraqi people under Saddam.

3. You can't provoke unless the perception of injustice exists, and it is easiest to create the perception of injustice if injustice is the reality. Provocation (symptom) is being confused with the illness.

So what has motivated the workers to act as one? What "groups" are really "provoking" them?
Answer: Their malfeasant employers:

Item, same day's Gulf News: 'Construction companies flouting health and safety regulations'

Item, next day's Gulf News: Worker wages battle for years to get wages

The UAE's decades long failure to create effective enforcement of labor contracts has planted the seeds. Here is the bitter fruit, facilitated by having masses of workers sleep in worker enclaves:

"the huge worker accommodation have been producing leaderships that can speak on their behalf and can incite them to protest, whenever needed," said ECSSR.

"This is not confined to a particular company but has become a phenomenon in many companies, which could be due to the emergence of labour organisations working behind the scenes," said ECSSR.

"Such a scenario can be dangerous, if it surfaces, which we hope will never happen," it said.

Yes, let's hope. Hope solves problems.

Speaking of problems, several of you have asked why The Emirates Economist has not opined on the news that the UAE will have a 3,000 dirham per month minimum wage for nationals who have dropped out of high school. I've been slow to post on the subject because, unlike other labor stories (see above) this one has no consequences. None. Even if the government enforces the minimum wage. Unemployed nationals already are unemployed because they have declined to accept job offers that exceed 3,000 dirhams a month; going on government welfare or the welfare of your extended family is simply too tempting.

Note, I am not even taking the classical economics position that raising the minimum wage causes firm to reduce employment. Even if firms are forced to make nationals offers you'll find few nationals will accept offers at 3,000 dirhams a month.

I may be proved wrong, but I don't see this minimum wage having any effect at all. It's a diversion. It's a sop. It's all more Emiratization talk, but not action.

Get back to me when the minimum wage is raised to 10,000 dirhams per month and I will tell you what I think then. That will have consequences and they won't be pretty. If your problem is that your people are not taking education seriously, why would you want to confirm to them that they can get ahead without education?

You don't say?
Inference by process of elimination

Item: Gulfnews: Drunken youths rape and assault women

Item: Gulfnews: drunk driver kills workers on break

The ladies and gentlemen of the UAE journalism community are, I infer, well aware that omission can be a very effective means of telegraphing what you mean and still stay within bounds of the defamation code. Simply always report nationality unless a UAE national is involved.

Ergo, the unidentified delinquent raping drunk driver person is very likely to be of the nationality that is one that is almost always omitted when it would be shameful or embarrassing. It is a sign of progress, but adds no other information, that sometimes it is expressly stated that the suspect is a UAE national; the first item above is one example. Now if we can only get rid of initials and name names of rapists, alleged or convicted, and not just the names of their victims.

This signaling equilibrium stuff ain't as hard as economists make it out to be is it? Sometimes it's pretty costless to tell the goats from the sheep. Especially when everybody knows that everybody knows that everybody knows how this game is played.

On the power of common knowledge: There are three persons. There are three hats on their three heads. Hats may be either white or black. No one knows their hat color. I say to all three, raise your hand if you see a white hat. Everyone raises their hand. Then I say to all three, raise your hand if you know the color of your hat. There is a pause. Finally, one raises his hand. What color is his hat? Hint: common knowledge is created when the three see the responses to the first question, "do you see a white hat?"

The Produce of Polygyny

What does polygyny produce? Is it bare branches or is it low-hanging fruit?

Jonathan Rauch writing in Reason, "One Man, Many Wives, Big Problems: The social consequences of polygamy are bigger than you think", puts himself in the shoes of the man who can't find a wife because some men have several wives. That man is classified as a bare branch: no fruit of his loins.

Rauch even suggests, darkly, that polygyny produces bitter lonelyboys who ripen into Jihadists. Perhaps. Perhaps he should wonder what he is implying about the rage of black women in the U.S. whose most likelies are behind bars.

As we have posted on before, Tim Harford (Undercover Economist) takes a look at polygyny from the perspective of the woman. When one guy can marry several Anna Nicole Smiths, that leaves lots of marriageable guys for the remaining women. Looked at through the lens of supply and demand, polygyny is good for the disstaff side.

Can what is good for half of humankind be bad for society as a whole? I suggest Rauch at least give this some thought.

Probably what polygynous societies do produce on the male side is the same thing single gender prisons produce. Seed that falls on fallow ground.

Via: Fark, of course.

TAGS: farkonomics, polygyny, bare branches, Big Love

UAE: Address Abuse of Migrant Workers (Human Rights Watch, 29-3-2006)

Quote:

Human Rights Watch recently conducted a fact-finding mission on the conditions of migrant workers in the UAE and will be releasing its full findings in the next few months.

There is much in this report that is accurate. There is much in this report that is embarrassing to the UAE. But much of what is embarrassing is only embarrassing because many good-intentioned people believe the UAE should be ashamed of the way it treats low-skilled immigrant workers while in fact the workers like it that way.

If those people could carry out their good intentions many of the workers they intend to help would in fact either lose their jobs or see some of their salaries diverted to be spent on things they would rather not buy like better living conditions or safer working conditions.

There is a reason that the UAE has the highest net immigration in the world: it is the land of opportunity for many impoverished people who prefer working to being trapped in their home country, and who would prefer to trade higher wages to better living and working conditions. It's revealed preference - no one is forcing them to come the UAE, and if workers really did prefer better living conditions innovative firms could offer better conditions at lower salaries and hire workers for a lower total cost than existing firms.

There is a direct parallel in the working conditions of the grandfathers and great grandfathers of the citizens of the UAE today. Many of those men worked in the pearl diving industry and lived in squalid conditions at sea for months, not seeing their families, and eating retched food. In the profit-sharing arrangement of that time those awful conditions were the choice of the workers collective.

Just as in the time when pearl diving thrived what was most difficult to enforce was payment of what was due to the workers. With pearl diving you might be able to verify the catch by opening the pearl bearing oysters together. But there remained the problem of the unfaithful agent who sold the pearls and may have taken a hidden side payment from a pearl buyer cheating the divers out of some of their share of the revenue.*

Likewise, today, we hear frequent stories of workers not being paid when promised and in some cases not being paid at all. In a country that does not allow workers to change jobs to protect themselves from dishonest or incompetent employers, 80 labor inspectors for something like 2,000,000 expatriate workers is a ridiculously small number. Either increase the number of inspectors considerably and give them significant enforcement power, or - better - let workers change jobs. Do one or the other or both. But don't do virtually nothing.

samuraisam draws our attention to this quote:

"To link what happened [protests] to the construction boom in the country - which represents a sign of progress in the region - or to negotiations on free trade is really devious, illogical and insane," labor minister Ali Al Kaabi told the Al Khaleej daily.

As the reader will infer, I agree with the labor minister that report contains much that is illogical. Labeling it "insane" is too strong, especially when there is some truth to the abuses enumerated.

*Ironically, the stories of these heroic men are best told in a book that is banned in the UAE, Shaikhdoms of Eastern Arabia by Peter Lienhardt. Probably it is banned because of a few lines in the author's acknowledgments that is interpreted as defaming a royal. Or perhaps it is the discussion of piracy in the early 20th century. If you are interested you can probably read some of those bits by following the link above and then going to explore.

Desperate labourers seek death on roads :: Gulf News

Bravo to the Gulf News, and the state that moderates it, for having the guts to run stories such as this.

One thing that low-skilled workers arriving in the workers' paradise which is the UAE discover is that their dormitories are not convenient to shopping or banking, etc. Often it is an 8 lane limited access highway that lies between them and the market. The cost of a taxi can easily exceed a day's wages. Walking safely means going miles out of your way. Many therefore take their chances crossing the Emirates Highway or the Sheik Zayed Road thick with traffic going 120 kph or more.

The expected cost of crossing in this way is not as high as you might think: under Shariah, you or your relatives collect blood money from the driver if you are hit. The Gulf News confirms my suspicions: for some crossing a busy highway is their livelihood. Quote (emphasis and hyperlink added):

Dubai: Labourers desperate to make a fast buck are quite literally playing with their lives: they rush into speeding traffic on busy roads hoping their dependants will inherit the diya (blood money) if they are knocked down.

Following complaints about reckless pedestrians in certain areas in Dubai, Gulf News

The labourers were seen crisscrossing the roads.
...
Motiram, who was bold enough to reveal his story, said: "We are trying to get knocked down."

Motiram, an illegal Indian who is part of the floating labour population, added, "There is no point living in such a pathetic state. I had come here on a visit visa paying a large sum to an agent in India. I was unsuccessful in finding a good job and have been living hand-to-mouth for the last several months.

"The last time I spoke to my family was some three months ago."

Motiram said he learnt about the blood money rule from his colleagues while working as a daily wage earner.

The choices by Motiram and his co-workers give a whole new meaning to "livelihood" and "occupational safety." Talk about moving along the hedonic wage function, making the risk-return tradeoff!

The Burj Dubai Labor Riot: Tuesday 21 Mar 2006

At the cusp of this blog's recent Yemeni hiatus a riot broke out at the site of the construction site of what is projected to be the tallest building in the world. If you've arrived here looking for coverage of the story, I direct you to this post at DM Blog where BD is on the case. It's link rich with newspaper accounts. And BD adds his own excellent analysis. He's also provided an extensive amount of background on the unskilled labor sector in the UAE.

BD asks, why the Burj Dubai, where the workers are comparatively better paid and are provided better working and living conditions. His answer:

This unrest was, therefore, not about the usual issue of workers not receiving salaries for months or intolerable living conditions. Why then did the protest erupt in violence? On the face of it, it is rather ironic. It appears in fact, that the uprising was more spontaneous than planned. I would speculate that there was in essence a high degree of frustration over the transport and security issues which was ignited on account of the large numbers involved. I would surmise that this was the critical factor. What was unique in this instance was the combination of both a high level of frustration and large numbers gathered at the massive construction site. It does not represent a typical scenario.

My thoughts, too, ran quickly to why this site and not others. Probably BD is on to something in focusing on the scale of the project and the numbers involved. Most mobs are not far from being unruly because there is safety in numbers. Are there ring leaders to be singled out for punishment? Perhaps. But it is not in the interest of the owners to punish all the protesters - this simply converts a costly work stoppage initiated by the workers into a stoppage prolonged by the prosecutors.

It is in the owner's interest to see work resume by those workers. And why those workers? First by virtue of the sheer size of the project the workers cannot be replaced wholesale. Second, as they work on the project floor to floor the workers are gaining skills in doing the work faster and better.

The workers know this. The maximum the owner is willing to pay the workers is rising. A worker's protest is a way for the workers to extract more from the firm.

As BD wrote "this does not represent a typical scenario." In the typical situation in the Gulf, if workers strike to gain some of the economic rents flowing to the employer, the employer can rather costlessly replace the worker.

UPDATE - I see I'm getting visitors via this link: Pajamas Media: The other immigrant scene. The title of that post is a reference to what has become a hot political issue in the U.S., illegal immigration (see this coverage). If you conclude from this that the U.S. has a recent history of being tight-assed about immigration, consider this amazing world map showing net immigration by country. The U.S. remains the land of opportunity in both the demand (people wish to come to America) and supply (an open door policy) senses.

UPDATE 2 - See, also, Migrants and the Middle East - Welcome to the other side of Dubai which gets to the nub of the workers' issues. It's not clear who is expropriating who:

The interior ministry began negotiations with the labourers but were left somewhat bewildered by this very un-Dubai mood of militancy. "They have no right to continue this strike. I don't know why they don't realise that," said Lieutenant-Colonel Rashid Bakhit Al Jumairi, a ministry investigator.

"They came back to the site, but they still refuse to work. The workers are demanding overtime pay, better medical care and humane treatment from their foremen. The companies have agreed to some of the demands. But the workers agreed to their employment conditions when they signed."

A carpenter from Andhra Pradesh in India, Mangal Prasad, said the action was taken as a last resort. "We just want to be treated like human beings. The way some of foremen behave towards us is very bad. If we complain they say we will get sent back. This is wrong," he said.
"We have also got to work much longer hours than we were contracted to because they want everything finished quickly. So why shouldn't we get overtime pay? That's what happens everywhere else. Most of us aren't saving money at all. We are still paying back the loan we took to get here."

Thanks to the Canadian Expat Countertenor for the link.

UPDATE 3 - Welcome to Instapundit readers. Glad to have you drop in.