Why the Gulf should not emulate Europe's ban on unpaid internships

Ruya UAE National Career Fair at the World Trade Centre in Dubai. Chris Whiteoak / The National

The EU’s move to ban unpaid internships may appear to Gulf societies to be a step towards improving the fortunes of those gaining valuable workplace experience. However, labour markets in countries such as Saudi Arabia and the UAE are very different to those in France and Germany. In fact, unpaid internships can play a positive role in Gulf countries’ economic development.

Few topics incite controversy, globally, as much as the minimum wage and other measures that govern the earnings of those entering the labour market. Part of the reason for the persistent failure to forge a consensus on the issue is the incompatible lenses through which people view it.

The left-leaning camp, which can be traced back to the German philosopher Karl Marx and is associated with a variety of 21st-century movements such as Occupy Wall Street and Black Lives Matter, views the relationship between employer and worker as being fundamentally unequal. There must be a powerful oppressor – the employer – and a weak, oppressed party – the worker. Accordingly, it is society’s responsibility to use regulatory and fiscal instruments to rebalance this exploitative relationship.

In the case of entry-level jobs, that means imposing a minimum wage.

The EU believes this intervention has spawned a nefarious workaround in the form of unpaid internships: employers evade the requirement to pay a decent wage by classifying the hire as an intern whose reward is the skills they acquire through their professional experience. Thus, the move to ban unpaid internships can be seen as an effort to close this loophole in the labour market.

Economists analyse labour markets using a fundamentally different model, known as demand and supply. They view low earnings – including the possibility of unpaid internships – for labour market entrants as being the result of their limited skills; they, therefore, emphasise formal and on-the-job training as the most effective path to earning a decent wage. They view the minimum wage as a distortive intervention that risks backfiring, as it drives employers to hire fewer workers and to adopt more labour-saving technologies.

It is important for Gulf policymakers to understand that unpaid internships that target young citizens are not part of a giant scam to perpetuate inequalities

In almost all the Gulf countries, the priority for economic policy is creating decent-paying jobs for young citizens. In this regard, they have much in common with European countries, yet the structure of Gulf labour markets is distinct, paving the way for a fundamentally different approach to worker empowerment.

In the Gulf economies, migrant workers account for at least half of the labour force (it is about 90 per cent in Qatar and the UAE). Accordingly, the governments’ focus is on creating attractive jobs for a small minority: young citizens entering the labour market. Generally speaking, for this group the Marxist-inspired lens of labour market exploitation is not the right one through which to view the relationship between employers and workers.

First, while young citizens in the Gulf looking for jobs do face hardships, they remain in a favourable position compared to most of the labour force, owing to the openness of labour markets to expatriate workers. Migrants work longer hours for modest wages, and with minimal job security. Moreover, citizens are supported by a variety of interventions including nationalisation quotas, wage subsidies, free education and so on. Accordingly, it is difficult to conceive of young citizens entering the labour market in the Gulf as being an exploited underclass, despite the economic challenges they may be facing.

Second, when employers are asked about their demonstrated preference for hiring expatriate workers, certain uncomfortable truths are sometimes revealed. It is tempting to imagine that it is merely an artefact of migrant workers’ willingness to accept low wages, and that the openness of Gulf labour markets is an ingenious ploy to create a race-to-the-bottom in worker earnings. Yet ethnographic evidence suggests that many Gulf employers have a strong desire to employ their young compatriots, stemming from a mixture of patriotism, compassion and recognition of their unique talents.

A worker at one of Strata Manufacturing's facilities at the Nibras Al Ain Aerospace Park. Strata Manufacturing

A barrier cited, however, is their lack of preparedness for the labour market, especially early in their careers. Sometimes, this skills gap centres on hard elements of the spectrum, such as workers’ technical and analytical abilities, including basic English-language skills. Other times, employers talk about a lack of soft skills, with diligence, initiative and self-motivation levels falling short of employer expectations.

This might sound like the doublespeak of capitalist overlords keeping the masses down. However, the credibility of employers’ claims is enhanced by what happens when the same young people who feel economically disenfranchised start their own businesses: they invariably hire migrant workers for exactly the same reasons cited above.

With this in mind, it is important for Gulf policymakers to understand that unpaid internships that target young citizens are not part of a giant scam to perpetuate inequalities. Instead, they represent a genuine effort to transform these young people into more effective workers by exposing them to a real workplace, and by giving them the opportunity to acquire skills that a university cannot hope to teach.

Forcing companies to pay substantive wages to the people they are training will probably result in a decline in the availability of such opportunities, and a steepening of the slope that young citizens must scale to reach labour market independence.

A more feasible alternative would be for the Gulf public sector centrally funded wage subsidy programmes to ensure that young interns earn a living wage while they navigate a tough labour market. Societies must assist those with limited means, but they should not require an arbitrarily designated minority – those willing to take on young interns – to pay most of the cost due to a misapplication of the Marxist intellectual paradigm.

However successful a European ban on unpaid internships ends up being, the Gulf countries must forge their labour market policies based on a scientific understanding of their own peculiarities.