As the Arabian Gulf countries look to generate private sector job opportunities for nationals, a common complaint among jobseekers is that the wages in many occupations are unacceptably low.
Certainly, earnings from working as a fast-food server, a janitor, or a furniture salesperson do not meet the expectations set by decades of cushy public sector jobs, which is a primary reason why these low-skilled positions are almost exclusively staffed by migrant workers in the Gulf.
Similar to their western counterparts, many of the Gulf’s jobseekers go on to argue that the solution lies in restricting the intake of low-skilled foreign workers, invoking the law of supply and demand: less competition means higher wages.
But is it that simple? The US’ experience with Mexican guest workers suggests that making it harder to hire foreigners can have a negligible effect on the wages and employment levels of nationals.
Before we explore the reasons why, it is worth addressing misconceptions regarding the willingness of Gulf nationals to perform low-status jobs. Prior to the oil-fuelled migration booms of the latter half of the 20th Century, Gulf nationals would perform all jobs commonly found in a western economy – and even worse ones, such as the physically arduous occupation of pearl diving.
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Read more:
The economics of succeeding at university
Should the Arabian Gulf tweak its migrant worker system?
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Rapidly increasing incomes allowed governments to offer their citizens a far more pleasant alternatives – public sector jobs. Any human would prefer a 7am to 2pm air-conditioned desk job to toiling in a field, especially if it pays multiple times the salary. New cultural norms appeared, reinforcing the desirability of white-collar jobs, but such norms are not fixed. In fact today, in Bahrain and Saudi Arabia in particular, simple economics has made ordinary citizens – and society – willing to perform jobs such as clothes retaiersl or telephone customer support. In all societies, for the most part, economic considerations swamp others, and cultural factors are ephemeral.
Therefore, in the present context, raising the wages of low-skilled jobs in the Gulf is likely to increase their uptake among nationals; can impeding competition from them help achieve that goal?
In a recent paper, Michael Clemens (Center for Global Development), Ethan Lewis (Dartmouth College) and Hannah Postel (Princeton University), seek to answer this question by analysing the US government’s 1964 decision to exclude half a million seasonally-employed Mexican guest workers from the labour force. It was a way to enhance both the wages and employment of US citizens who felt that their labour market earnings were being hurt by competition from foreign workers. The researchers gathered data on the wages and employment of nationals before and after the 1964 decision and examined how the evolution of these two outcome variables differed in two dimensions.
First, across counties, as some areas were heavily affected by the reduction in guest workers, while others were barely exposed. Second, across crops, as some, such as tomatoes, offered mechanisation alternatives to manual labour, while others, such as strawberries, were highly reliant upon human hands.
The researchers’ primary finding was that across all counties there was no discernible effect on the wages or employment of US citizens, contrary to the predictions derived from a rudimentary model of supply and demand. Therefore, if the goal was to improve the earnings of nationals who felt that foreigners were undermining their livelihoods, then the policy was a complete failure.
In particular, the study showed that in the crops where mechanisation was available, farms responded to the labour shortage not by raising wages, but by simply adopting capital-intensive technologies that economised the need for labour. And in the remaining crops, higher wages would have rendered the enterprise unprofitable, and so farmers responded to lower labour supply by simply lowering production.
While the US-Mexico 1964 ruling is only one example, a glance at the Gulf’s labour markets at present suggests that policymakers should be very wary of similar results if crude quotas are introduced for low-skilled migrant workers. Automation continues to reduce the need for human hands in many of the sectors dominated by foreign labour, such as retail or construction. Moreover, it would be unsurprising to see employers respond to decreased labour supply with parallel decreases in output, similar to their US counterparts.
It is natural to seek legislative shortcuts, such as immigration restrictions and minimum wages, for higher wages. However, decades of work by labour economists suggest that such interventions are typically ineffective. Instead, there is no substitute for improving the latent productivity of the workforce. Rather than trying to make it harder for Indians and Filippinos to compete with Gulf citizens, Gulf policymakers should focus on enhancing the education, training and experience of their nationals.
Omar Al Ubaydli is programme director for international and geopolitical studies at the Bahrain Center for Strategic, International and Energy Studies, and an affiliated associate professor of economics at George Mason University.
We welcome economics questions from our readers via email (omar@omar.ec) or tweet (@omareconomics).
'Munich: The Edge of War'
Director: Christian Schwochow
Starring: George MacKay, Jannis Niewohner, Jeremy Irons
Rating: 3/5
Results
%3Cp%3E%3Cstrong%3EStage%207%3A%3C%2Fstrong%3E%3Cbr%3E1.%20Adam%20Yates%20(GBR)%20UAE%20Team%20Emirates%20%E2%80%93%203hrs%2029min%2042ses%3Cbr%3E2.%20Remco%20Evenepoel%20(BEL)%20Soudal%20Quick-Step%20%E2%80%93%2010sec%3Cbr%3E3.%20Geoffrey%20Bouchard%20(FRA)%20AG2R%20Citroen%20Team%20%E2%80%93%2042sec%3Cbr%3E%3Cstrong%3EGeneral%20Classification%3A%3C%2Fstrong%3E%3Cbr%3E1.%20Remco%20Evenepoel%20(BEL)%20Soudal%20Quick-Step%3Cbr%3E2.%20Lucas%20Plapp%20(AUS)%20Ineos%20Grenaders%20%E2%80%93%2059se%3Cbr%3E3.%20Adam%20Yates%20(GBR)%20UAE%20Team%20Emirates%20%E2%80%9360sec%3Cbr%3ERed%20Jersey%20(General%20Classification)%3A%20Remco%20Evenepoel%20(BEL)%20Soudal%20Quick-Step%3Cbr%3EGreen%20Jersey%20(Points%20Classification)%3A%20Tim%20Merlier%20(BEL)%20Soudal%20Quick-Step%3Cbr%3EWhite%20Jersey%20(Young%20Rider%20Classification)%3A%20Remco%20Evenepoel%20(BEL)%20Soudal%20Quick-Step%3Cbr%3EBlack%20Jersey%20(Intermediate%20Sprint%20Classification)%3A%20Edward%20Planckaert%20(FRA)%20Alpecin-Deceuninck%3C%2Fp%3E%0A
SERIE A FIXTURES
All times UAE ( 4 GMT)
Saturday
Roma v Udinese (5pm)
SPAL v Napoli (8pm)
Juventus v Torino (10.45pm)
Sunday
Sampdoria v AC Milan (2.30pm)
Inter Milan v Genoa (5pm)
Crotone v Benevento (5pm)
Verona v Lazio (5pm)
Cagliari v Chievo (5pm)
Sassuolo v Bologna (8pm)
Fiorentina v Atalanta (10.45pm)
WITHIN%20SAND
%3Cp%3EDirector%3A%20Moe%20Alatawi%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Ra%E2%80%99ed%20Alshammari%2C%20Adwa%20Fahd%2C%20Muhand%20Alsaleh%3C%2Fp%3E%0A%3Cp%3ERating%3A%203%2F5%3C%2Fp%3E%0A
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
MATCH INFO
BRIGHTON 0
MANCHESTER UNITED 3
McTominay 44'
Mata 73'
Pogba 80'
EGYPT SQUAD
Goalkeepers: Ahmed El Shennawy, Mohamed El Shennawy, Mohamed Abou-Gabal, Mahmoud Abdel Rehem "Genesh"
Defenders: Ahmed Elmohamady, Ahmed Hegazi, Omar Gaber, Ali Gazal, Ayman Ahsraf, Mahmoud Hamdy, Baher Elmohamady, Ahmed Ayman Mansour, Mahmoud Alaa, Ahmed Abou-Elfotouh
Midfielders: Walid Soliman, Abdallah El Said, Mohamed Elneny, Tarek Hamed, Mahmoud “Trezeguet” Hassan, Amr Warda, Nabil Emad
Forwards: Ahmed Ali, Mohamed Salah, Marwan Mohsen, Ahmed "Kouka" Hassan.
Which products are to be taxed?
To be taxed:
Flavoured water, long-life fruit juice concentrates, pre-packaged sweetened coffee drinks fall under the ‘sweetened drink’ category
Not taxed
Freshly squeezed fruit juices, ground coffee beans, tea leaves and pre-prepared flavoured milkshakes do not come under the ‘sweetened drink’ band.
Products excluded from the ‘sweetened drink’ category would contain at least 75 per cent milk in a ready-to-drink form or as a milk substitute, baby formula, follow-up formula or baby food, beverages consumed for medicinal use and special dietary needs determined as per GCC Standardisation Organisation rules
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Director: Jon Favreau
Starring: Donald Glover, Seth Rogen, John Oliver
Rating: 2 out of 5 stars
UAE currency: the story behind the money in your pockets
Villains
Queens of the Stone Age
Matador
Company%20Profile
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UAE currency: the story behind the money in your pockets
Result
Arsenal 4
Monreal (51'), Ramsey (82'), Lacazette 85', 89')
West Ham United 1
Arnautovic (64')
The%20specs
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The specs: 2018 BMW X2 and X3
Price, as tested: Dh255,150 (X2); Dh383,250 (X3)
Engine: 2.0-litre turbocharged inline four-cylinder (X2); 3.0-litre twin-turbo inline six-cylinder (X3)
Power 192hp @ 5,000rpm (X2); 355hp @ 5,500rpm (X3)
Torque: 280Nm @ 1,350rpm (X2); 500Nm @ 1,520rpm (X3)
Transmission: Seven-speed automatic (X2); Eight-speed automatic (X3)
Fuel consumption, combined: 5.7L / 100km (X2); 8.3L / 100km (X3)
WE%20NO%20LONGER%20PREFER%20MOUNTAINS
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Racecard
7pm: Abu Dhabi - Conditions (PA) Dh 80,000 (Dirt) 1,600m
7.30pm: Dubai - Maiden (TB) Dh82,500 (D) 1,400m
8pm: Sharjah - Maiden (TB) Dh82,500 (D) 1,600m
8.30pm: Ajman - Handicap (TB) Dh82,500 (D) 2,200m
9pm: Umm Al Quwain - The Entisar - Listed (TB) Dh132,500 (D) 2,000m
9.30pm: Ras Al Khaimah - Rated Conditions (TB) Dh95,000 (D) 1,600m
10pm: Fujairah - Handicap (TB) Dh87,500 (D) 1,200m
Killing of Qassem Suleimani
The biog
Name: Timothy Husband
Nationality: New Zealand
Education: Degree in zoology at The University of Sydney
Favourite book: Lemurs of Madagascar by Russell A Mittermeier
Favourite music: Billy Joel
Weekends and holidays: Talking about animals or visiting his farm in Australia
The results of the first round are as follows:
Qais Saied (Independent): 18.4 per cent
Nabil Karoui (Qalb Tounes): 15.58 per cent
Abdelfattah Mourou (Ennahdha party): 12.88 per cent
Abdelkarim Zbidi (two-time defence minister backed by Nidaa Tounes party): 10.7 per cent
Youssef Chahed (former prime minister, leader of Long Live Tunisia): 7.3 per cent
THE TWIN BIO
Their favourite city: Dubai
Their favourite food: Khaleeji
Their favourite past-time : walking on the beach
Their favorite quote: ‘we rise by lifting others’ by Robert Ingersoll
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills