Because of its open labour markets, the UAE’s contribution to economic growth in developing countries packs a considerably greater punch than the average OECD country’s contribution. Pawan Singh / The National
Because of its open labour markets, the UAE’s contribution to economic growth in developing countries packs a considerably greater punch than the average OECD country’s contribution. Pawan Singh / TheShow more

UAE labour mobility reforms create winners and losers



In 2011, the UAE dramatically reformed its kafala system by allowing migrant workers with expiring contracts to change employers without the initial sponsor’s permission.

The government wisely worked with a team of experts to evaluate the results. Five years on, an interesting analogy with traditional labour union activity has emerged, in which the interests of “insiders” (migrant workers already in the UAE) clash with those of “outsiders” (prospective migrant workers). The research reinforces the need to exercise caution with labour market interventions, as they sometimes backfire.

International migration is a politically charged topic, which sometimes obscures the basic economic facts of UAE labour markets. The pre-oil UAE was as poor and sparsely populated as one would expect from a desert climate. Seizing the opportunities presented by oil (an achievement given the dysfunction of many oil-rich states) required importing large amounts of labour, and to this day migrant workers constitute about 85 per cent of the UAE labour force.

Because of its open labour markets, the UAE’s contribution to economic growth in developing countries packs a considerably greater punch than the average OECD country’s contribution: in 2010, total remittances per resident were US$1,900 in the UAE (eighth in the world), compared to $355 in the United States (36th) and $335 in the United Kingdom (39th).

As with all immigration destinations, racketeers sometimes abuse the UAE’s labour markets. However, the persistent flow of migrants to the UAE confirms what the remittance data suggests, which is that the average worker benefits tremendously from coming to the UAE.

Thus when the UAE embarked upon its reform, the goal was to work on the flaws of a generally good system, rather than to fix a terrible one.

Before 2011, upon the expiration of a migrant worker’s contract, the sponsor could veto any choice by the worker except the worker’s return home, making the sponsor a monopsonist (many sellers competing for one buyer’s demand). This was partially motivated by a desire to protect the sponsor’s investment, both in screening prospective workers and in building their skills during their two-year relationship.

However, in light of the essentially arbitrary nature of many details, the UAE considered affording the worker greater flexibility and in 2011 the government removed the sponsor’s veto on the worker switching to a different employer, weakening the monopsony.

A rudimentary analysis of the consequences would focus on two sets of stakeholders – UAE firms and citizens on the one hand, and migrant workers on the other hand. Fortunately, the Emirati government co-operated with a group of leading economists to produce a technically proficient evaluation.

In a paper titled "Monopsony power in migrant labour markets: Evidence from the UAE", forthcoming in the Journal of Political Economy, Suresh Naidu (Columbia University), Yaw Nyarko (New York University Abu Dhabi) and Shing-yi Wang (University of Pennsylvania) were careful to distinguish between two sets of migrant workers – those already in the UAE (incumbents), and those seeking to enter (potentials).

The authors observed a 10 per cent increase in the earnings of incumbents resulting from the 2011 rule change, coupled with a significant rise in worker retention by original sponsors. The latter, counter-intuitive development reflected a combination of increased worker switching because of the rule change that was swamped by an even larger increase in the rate at which workers would stay in the UAE with their original sponsor. (What diminished is the proportion of workers who chose to leave the country. The exit rate fell to 3.3 per cent after the reform from 4.8 per cent before.)

Potential workers did not fare so well, experiencing a decline in hiring and in initial earnings upon being hired. The reason was that the change in employers’ market power when hiring was focused on incumbents, rather than potentials. Thus, from the perspective of migrant workers as a whole, it is unclear whether they benefited from the rule change.

Such ambivalence is typical of many labour market policies, and decades of OECD union activity provide similar examples. In particular, unions – which advance the interests of those who actually have jobs in certain industries, rather than those looking for jobs – often lobby for worker benefits such as minimum wages, bans on redundancy and generous pensions. While workers rejoice when union lobbying efforts bear fruit, some of the biggest losers are often unemployed workers, as hiring becomes much more expensive for firms. Several European countries such as Italy and Spain are characterised by high worker benefits and high unemployment.

Returning to the UAE’s experiment, assessing the impact on businesses and consumers is more challenging. While wages have nominally increased, the increased retention potentially means higher average skill levels, meaning more productive workers. The downstream consequences on prices and quality are very difficult to measure because so many goods are affected, but that should not dissuade the government from continuing to cooperate with top researchers on analysing the available data.

The authors’ study, as well as proposals for enhanced flexibility, was discussed in the May session of the Abu Dhabi Dialogue this year. Several groups representing the interests of migrant workers participated, including global human rights organisations and the ministries of labour of the source countries. Listening to their arguments, I was struck by how often they lobbied for a change that could potentially backfire. Most examples followed the European template of demanding greater worker benefits on moral grounds (despite the UAE’s exceptional engagement with the developing world), without any apparent acknowledgement of the fact that securing such benefits would undoubtedly diminish the number of migrant workers allowed entry into the UAE.

It may be that the trade-off is worthwhile and I am confident that those demanding greater benefits during the dialogue were actually trying to represent all workers, and not just the lucky incumbents. Ultimately, the fruitful discussions served to underscore the importance of careful research and data gathering. “The greatest enemy of knowledge is not ignorance,” remarked the American historian Daniel Boorstin. “It is the illusion of knowledge.”

Omar Al Ubaydli is the 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.

business@thenational.ae

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Keep it fun and engaging

Stuart Ritchie, director of wealth advice at AES International, says children cannot learn something overnight, so it helps to have a fun routine that keeps them engaged and interested.

“I explain to my daughter that the money I draw from an ATM or the money on my bank card doesn’t just magically appear – it’s money I have earned from my job. I show her how this works by giving her little chores around the house so she can earn pocket money,” says Mr Ritchie.

His daughter is allowed to spend half of her pocket money, while the other half goes into a bank account. When this money hits a certain milestone, Mr Ritchie rewards his daughter with a small lump sum.

He also recommends books that teach the importance of money management for children, such as The Squirrel Manifesto by Ric Edelman and Jean Edelman.

CHINESE GRAND PRIX STARTING GRID

1st row 
Sebastian Vettel (Ferrari)
Kimi Raikkonen (Ferrari)

2nd row 
Valtteri Bottas (Mercedes-GP)
Lewis Hamilton (Mercedes-GP)

3rd row 
Max Verstappen (Red Bull Racing)
Daniel Ricciardo (Red Bull Racing)

4th row 
Nico Hulkenberg (Renault)
Sergio Perez (Force India)

5th row 
Carlos Sainz Jr (Renault)
Romain Grosjean (Haas)

6th row 
Kevin Magnussen (Haas)
Esteban Ocon (Force India)

7th row 
Fernando Alonso (McLaren)
Stoffel Vandoorne (McLaren)

8th row 
Brendon Hartley (Toro Rosso)
Sergey Sirotkin (Williams)

9th row 
Pierre Gasly (Toro Rosso)
Lance Stroll (Williams)

10th row 
Charles Leclerc (Sauber)
arcus Ericsson (Sauber)

EMIRATES'S REVISED A350 DEPLOYMENT SCHEDULE

Edinburgh: November 4 (unchanged)

Bahrain: November 15 (from September 15); second daily service from January 1

Kuwait: November 15 (from September 16)

Mumbai: January 1 (from October 27)

Ahmedabad: January 1 (from October 27)

Colombo: January 2 (from January 1)

Muscat: March 1 (from December 1)

Lyon: March 1 (from December 1)

Bologna: March 1 (from December 1)

Source: Emirates

Tales of Yusuf Tadros

Adel Esmat (translated by Mandy McClure)

Hoopoe

RESULTS

1.45pm: Maiden Dh75,000 1,400m
Winner: Dirilis Ertugrul, Fabrice Veron (jockey), Ismail Mohammed (trainer)
2.15pm: Handicap Dh90,000 1,400m
Winner: Kidd Malibu, Sandro Paiva, Musabah Al Muhairi
2.45pm: Maiden Dh75,000 1,000m
Winner: Raakezz, Tadhg O’Shea, Nicholas Bachalard
3.15pm: Handicap Dh105,000 1,200m
Winner: Au Couer, Sean Kirrane, Satish Seemar
3.45pm: Maiden Dh75,000 1,600m
Winner: Rayig, Pat Dobbs, Doug Watson
4.15pm: Handicap Dh105,000 1,600m
Winner: Chiefdom, Royston Ffrench, Salem bin Ghadayer
4.45pm: Handicap Dh80,000 1,800m
Winner: King’s Shadow, Richard Mullen, Satish Seemar

All you need to know about Formula E in Saudi Arabia

What The Saudia Ad Diriyah E-Prix

When Saturday

Where Diriyah in Saudi Arabia

What time Qualifying takes place from 11.50am UAE time through until the Super Pole session, which is due to end at 12.55pm. The race, which will last for 45 minutes, starts at 4.05pm.

Who is competing There are 22 drivers, from 11 teams, on the grid, with each vehicle run solely on electronic power.

THE JERSEYS

Red Jersey
General Classification, sponsored by Fatima bint Mubarak Ladies Academy: Worn daily, starting from Stage 2, by the leader of the General Classification.
Green Jersey
Points Classification, sponsored by Bike Abu Dhabi: Worn daily, starting from Stage 2, by the fastest sprinter.
White Jersey
Young Rider Classification, sponsored by Abu Dhabi 360: Worn daily, starting from Stage 2, by the best young rider (U25).
Black Jersey
Intermediate Sprint Classification, sponsored by Experience Abu Dhabi: Worn daily, starting from Stage 2, by the rider who has gained most Intermediate sprint points.

THE LOWDOWN

Photograph

Rating: 4/5

Produced by: Poetic License Motion Pictures; RSVP Movies

Director: Ritesh Batra

Cast: Nawazuddin Siddiqui, Sanya Malhotra, Farrukh Jaffar, Deepak Chauhan, Vijay Raaz

Company profile

Name: Tabby
Founded: August 2019; platform went live in February 2020
Founder/CEO: Hosam Arab, co-founder: Daniil Barkalov
Based: Dubai, UAE
Sector: Payments
Size: 40-50 employees
Stage: Series A
Investors: Arbor Ventures, Mubadala Capital, Wamda Capital, STV, Raed Ventures, Global Founders Capital, JIMCO, Global Ventures, Venture Souq, Outliers VC, MSA Capital, HOF and AB Accelerator.

UAE jiu-jitsu squad

Men: Hamad Nawad and Khalid Al Balushi (56kg), Omar Al Fadhli and Saeed Al Mazroui (62kg), Taleb Al Kirbi and Humaid Al Kaabi (69kg), Mohammed Al Qubaisi and Saud Al Hammadi (70kg), Khalfan Belhol and Mohammad Haitham Radhi (85kg), Faisal Al Ketbi and Zayed Al Kaabi (94kg)

Women: Wadima Al Yafei and Mahra Al Hanaei (49kg), Bashayer Al Matrooshi and Hessa Al Shamsi (62kg)

The specs: 2018 Jeep Compass

Price, base: Dh100,000 (estimate)

Engine: 2.4L four-cylinder

Transmission: Nine-speed automatic

Power: 184bhp at 6,400rpm

Torque: 237Nm at 3,900rpm

Fuel economy, combined: 9.4L / 100km

MATCH INFO

Chelsea 0

Liverpool 2 (Mane 50', 54')

Red card: Andreas Christensen (Chelsea)

Man of the match: Sadio Mane (Liverpool)

Aayan’s records

Youngest UAE men’s cricketer
When he debuted against Bangladesh aged 16 years and 314 days, he became the youngest ever to play for the men’s senior team. He broke the record set by his World Cup squad-mate, Alishan Sharafu, of 17 years and 44 days.

Youngest wicket-taker
After taking the wicket of Bangladesh’s Litton Das on debut in Dubai, Aayan became the youngest male cricketer to take a wicket against a Full Member nation in a T20 international.

Youngest in T20 World Cup history?
Aayan does not turn 17 until November 15 – which is two days after the T20 World Cup final at the MCG. If he does play in the competition, he will be its youngest ever player. Pakistan’s Mohammed Amir, who was 17 years and 55 days when he played in 2009, currently holds the record.

Our legal advisor

Rasmi Ragy is a senior counsel at Charles Russell Speechlys, a law firm headquartered in London with offices in Europe, the Middle East and Hong Kong.

Experience: Prosecutor in Egypt with more than 40 years experience across the GCC.

Education: Ain Shams University, Egypt, in 1978.

Teri Baaton Mein Aisa Uljha Jiya

Directors: Amit Joshi and Aradhana Sah

Cast: Shahid Kapoor, Kriti Sanon, Dharmendra, Dimple Kapadia, Rakesh Bedi

Rating: 4/5

Specs: 2024 McLaren Artura Spider

Engine: 3.0-litre twin-turbo V6 and electric motor
Max power: 700hp at 7,500rpm
Max torque: 720Nm at 2,250rpm
Transmission: Eight-speed dual-clutch auto
0-100km/h: 3.0sec
Top speed: 330kph
Price: From Dh1.14 million ($311,000)
On sale: Now

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