Unemployment in The United Arab Emirates
Table of Contents
The issue of the study is to prepare overwhelming report for the Gulf Cooperation Council states annual summit with the focus on currently rising problem of unemployment in the United Arab Emirates. Due to the crisis, which has taken place because the oil prices fall, the quantity of working places has reduced. In the UAE, oil and gas companies had to reduce the admission of new employees to work for 20% in 2015. However, according to recent data, despite the fact that all the companies in the UAE are still suffering from the effects of a sharp drop in oil prices, the labor market in the country is now slightly excited. The report focuses on the background of the problem of unemployment in the UAE to prove the Gulf Cooperation Council significance of the issue. Moreover, basing on the background data, the paper is to provide an analysis of the problem and to suggest probable actions to overcome the crisis.
An Overview of the Issue of Unemployment in the UAE
Unemployment is a form of manifestation of macroeconomic instability, because it has not only purely economic but also a social connotation. The unemployment problem in varying degrees affected and continues to affect virtually all developed countries and possible regulation of unemployment rate remains in form of a critical issue of macroeconomic policy. The United Arab Emirates have one of the highest standards of living in the world because of its economic development. However, it is worth mentioning that the UAE gained the status of the richest countries in the world because of a great amount of natural resources, namely oil. All native inhabitants of the country receive lifelong dividends from oil sales, so they have no need to work to make their living. Still, there is a vast majority of jobs and services, usually implemented by foreign workers.
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Population and labor, as a main component of resource and economic potential, are the factors of stable economic growth and development of any country. The population of the United Arab Emirates consists of 80% of the immigrants. In spite of the strict adherence to the traditions of Islam, the prohibition of alcohol and public display of affection between men and women, the UAE is a country that is very tolerant of expats and allows them to enjoy relative freedom.
Solid government’s confidence in the fact that human capital is a major factor of sustainable development has led to an increase in variety and number of educational institutions in the country. More than 40 higher educational institutions of the United Arab Emirates delivered a highly qualified workforce in the labor market. Today, employers can use services of a large number of recent graduates and experienced professionals. Due to location in close proximity to countries providing qualified human resources, the UAE provides unlimited access for necessary personnel to its commercial and industrial companies. Along with such advantages as the ability to access the regional shopping centers, comfortable accommodation and transportation hubs, the UAE can also provide a unique experience that cannot be found elsewhere in the world. Now the country is a mandatory element of resume for many professionals seeking to develop their career in an increasingly globalized world.
Investors opt for the UAE as a country that provides favorable conditions for investment and easy access to vast human resources, coming from neighboring countries with limited employment opportunities. Moreover, with the development of the UAE University education, on the labor market more and more qualified professionals from the Emirates appears, which is a significant alternative to the labor personnel from other countries. Currently, the volume of the national labor market in the UAE is about 330 000 people, and by 2020 this figure will grow to an estimated 450,000 people. It is expected that by 2050 the market volume will increase up to 600 000 people. It is worth mentioning that about 60 percent of the companies in the UAE experienced the need for managers and specialists, with many jobs opened in the first quarter of this year. This fact also indicates that the economy is recovering from the effects of global economic crisis, and there is a need of fresh blood in the field.
For the most part, the UAE government ensures compliance with international standards with respect to labor legislation. In the development and enactment of labor laws, UAE Ministry of Labor puts the focus on the establishment of balance between protection of the fundamental rights of workers and smooth operation of the companies. Ministry of Labor is an authorized government body, which draws on issues related to the opening of the company in the UAE (outside free zones). In turn, on the visa employees of the enterprise, open in the free zone, should be referred to authorities of the free zone.
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Due to the rapid growth of the country’s manufacturing and construction industries, the issue of working with modern housing is becoming increasingly important. In 2006, the Zones Corp Corporation introduced the concept of residential areas in order to ensure a secure and stable environment for workers, maintaining a positive attitude and to stimulate high-quality work. The Ministry of Labor provides support to companies and their employees in consideration of emerging issues and challenges in order to ensure healthy relationships between workers and their employers through the peaceful settlement of disputes.
The UAE continues to attract labor from India, Southeast Asia and the Middle East, mainly for the position of specialist and managerial positions. In addition, high unemployment and lack of wage growth in Europe and North America greatly facilitated the hiring of Western experts. According to the latest report of the company GulfTalent, many companies are beginning to pay attention to the labor market of China. Due to a growing number of large Chinese corporations in the UAE, a number of workers from China in the region increased significantly. While the UAE seeks to facilitate doing business and to remove all barriers to its development, the country also constantly increases its attractiveness to talented professionals, maintains a flexible approach to labor market regulation and provides a review of the ever-changing requirements of businesses by employees.
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As for the indigenous population, unemployment rate among Emiratis in the UAE is, for the most part, the result of their own choice. Local citizens prefer to work in government organizations and institutions, rather than in the private sector, because of higher wages. That is why they are waiting for a post in the public sector, instead of spending time on a private company. It should be noted that every native of the United Arab Emirates has a number of privileges at birth. It includes a piece of land, expressed in terms of money on bank account of 60 000 dollars, lifelong dividends from the sales of oil, as well as completely free medicine and education (including foreign). Moreover, each native experiences benefits buying real estate, and usually occupies a prestigious position in the management or the public sector.
Today, unemployment rate in the United Arab Emirates among the local population fluctuates at a mark of 14%, which is significantly lower compared to other Arab countries. At the same time, unemployment rate among women is much higher than among men. Most of the indigenous population of the Emirates does not work, lives on the interest and leads the aristocratic lifestyle. Moreover, if someone is up and running, either in the public service, or in a multinational company, they have a salary several times higher salaries of immigrants. Therefore, it is obvious that the country experiences need in the labor workers who would fulfill the vacancies in the private sector.
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Over the past 5 years, companies in the UAE have created more than 1 million jobs for foreigners. This figure is significant, as the population of the country consists of 9 million people. More than 80% of the employed labor force in the country are foreign migrants. The larger amount of working foreigners can only be found in Qatar, where the percentage of foreign workers a little bit higher. However, now the Emirates seek not the great number of migrants, but high quality of their work, their knowledge, experience and loyalty to the UAE as a country-employer. Therefore, since 2009 the UAE has conducted extensive work to improve work and life conditions of migrants. It is notable, that 65% of employees are engaged in the banking sector. Despite the crises of 2015, the UAE is now in high spirits for resolution of existing working places, and even the creation of new ones.
The Analysis of the Data
After the 2008 crisis, the UAE economy has successfully diversified to reduce the impact on its oil revenues, and it is wrong to say that the United Arab Emirates living expense “sale of oil.” The consequences of the 2015 crisis are still vital for the population of the country, as rate of unemployment has risen. Talking about foreigners, they sensed the problem of lack of vacancies and had to move to other countries despite all the privileges migrant workers have in the UAE.
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However, it is significant to underline that the 2016 crisis had a minor impact on the population and migrants because of diversification of the UAE and its low dependency on the oil rates. The rate of oil sales in the GDP of the country had only 29% in 2015, when it was 89% twenty years ago. Initially, in the 70th and 80th, the country did nothing but spend the profit from sale of oil. However, studies have shown that oil definitely will run out in the desert. This could occur perhaps only by 2040 (and even later), but oil would be gone for good. Through diversification, the country had the opportunity to change its economy.
Today, 7% of the population are engaged in agriculture. This number is large enough, as in fact, in many countries with a much more suitable climate, the figure is about three-five per cent higher. Today, Emirates export their own strawberries in general among the leaders in sales of environmentally friendly fruit and vegetables in the EU. The decision to build a “Silicon Oasis” in order to attract specialists, computer scientists from around the world, and the best conditions for business have turned Dubai into the financial center of the Middle East. This decision has its positive and negative consequences for the country and its unemployment issue. The creation of new vacancies in new industries such as agriculture and science provided possibilities for both native inhabitants and migrants. That is why now in the Emirates there are no such difficulties, as in Saudi Arabia or Oman, where due to falling oil prices quickly responds their bloated budget. However, the negative consequence of the decision provides an open market for scientific workers who have the desire to move to the OAE but have a lack of knowledge and confidence. Still, after moving to the country such people give a rise for the quantity of unemployed, and, therefore, this rate is growing.
The current crisis should be revealed by the end of 2016 together with the introduction of the United Arab Emirates number of bills aimed at regulating inflation, economic diversification, and others. Experts believe that the economy of the UAE, despite the difficulties, will grow in 2017. Bloovo.com, social platform for recruitment, conducted a survey of 54 major companies throughout the UAE. 63% of employers said that they are going to hire a few people to positions in various departments, 12% are actively hiring employees, and 15% hire people only for replacement. 17% of companies admitted that they had to reduce the number of jobs at the beginning of 2016. Most of the lay-offs were performed in companies associated with oil and gas industry and in the banking sector.
Despite the rather dismal beginning of 2016, the majority of companies in the UAE are optimistic and believe in the development of the region. Currently, new staff is actively hiring companies of the following sectors: information and communication technology, consumer goods and retail. Moreover, the government has launched the variety of rules for establishment of worthy working conditions for the migrants.
UAE authorities believe that migrants should have extensive rights and freedom of choice of the employer. Currently, whole sectors of the economy are developed, where only workers are employed. They should be given an opportunity to defend their rights in the event of a labor dispute with an employer. To do this, the UAE Ministry of Labor established standing committees for collective labor disputes, which include representatives of both employers and migrant workers. Committees make decisions on disputes within two weeks, and in the Court of Appeal Committee decision can be appealed within 30 days.
The UAE government introduces strict compliance with conditions of migrant worker’s schedule, where the working day may not exceed 8 hours. Migrants, who are carrying out work on the street, are required to have a longer lunch break during the summer months – 2.5 hours. The Ministry of Labor launches a working group of inspectors who check in the summer both employers and workers themselves of monitoring the observance of their rights. In addition, all employers are required to place ads prominently on the new rights of hired employees and provide them with free water. Companies with a non-stop cycle of work shall be provided with first aid as well. Companies that fail to comply with the new conditions of employment and residence of migrant workers, are threatened with deprivation of the license and a fine of $4,000 for each detected violation. The support of migrants is the positive side of the initiative of the government, but too much comfort provides the possibility of low quality of work. Therefore, the government should pay more attention not only to the memorandum of the rights of migrant workers, but also should focus on outlining their obligations.
The UAE started to operate system guarantees of getting the salary – Wage Protection System – WPS, which was developed jointly by the Ministry of Labor and the Central Bank of the country. Its main task is to ensure a migrant’s receipt of funds even in case of dishonest behavior of the employer in relation to it. The WPS is a kind of authorization and clearing center that receives all the information about existing financial relationships between employers and employees. It is a demand of the central bank that all of the workers receive their salaries using transparent system of government. It allows them to master financial literacy and to gain control over their income. The system should unite both public and private companies, using three phases of launching. It is expected that after this act will significantly strengthen the cooperation between banks and migrants, most of whom still work in the shadows. The positive feature of the initiative is that it opens up new opportunities for banks to attract migrant workers to the service. However, lack of financial knowledge and understanding of the system could make potential labor workers afraid to take the jobs in the UAE. Therefore, the system should be very simple for understanding in order not to affect the potential of labor vacancies.
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Recommendation for the Gulf Cooperation Council
In order to develop effective employment policies, it is necessary to stay focused on the regulation of structural unemployment. Special attention should be paid to the redistribution of labor by industry, areas, and types of employment in the interests of labor efficiency growth. It has been two years since the fall in oil prices, and some countries such as the UAE and Qatar will continue to develop and grow having diverse economy and large cash reserves. Thus, the multi-faceted development of the UAE economy that is less dependent on oil than the economy’s neighbors will restore and increase by 2.8% in 2017. In comparison, the economic growth has slowed down and amounted to approximately 2.2% in 2016.
After having studied the activity of the state, which is aimed at redressing the situation on, there is a number of recommendations to create a more comfortable labor market in the UAE. Hence training in the country at a high level, it is necessary to provide enough freedom for graduates in matters of creating their own business and its development. Thus, the country will get new jobs, not wasting administrative resources. However, it is crucial to create a favorable investment climate for young professionals, as it is essential for the council to support the creation of a stable network of contacts between employers, institutions of vocational education, and the state.