Wages 'just one issue' for UAE

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Debate over the decision by the UAE government to grant employees a massive pay raise represents just one facet of the natural uncertainty of an emerging economy in its infancy, according to one presenter at the DIFC Week conference in Dubai.

The government of the UAE yesterday announced a 70% increase for government employees as part of its 2008 budget in an effort to combat inflationary pressure on low- and middle-income families.

At $9.5 billion (34.9 billion dirhams) the federal government's budget is the largest ever and represents the biggest increase year-over-year, up 20% from the 2007 number.

Many have lauded the drastic measures taken by the government as a welcome and much needed alleviation from the rising costs of living in the emirate.

"The kind gesture, which superseded the previous pay hikes over the past years, was a big incentive and token of appreciation for the efforts of employees in all ministries and federal government departments," Humaid Al Qutami, Minister for Health was quoted as saying in the Khaleej Times yesterday.

Others were more cautious concerning the move, warning that ambitious augmentations of the wage market will have broader implications.

"If you're going to inflate wages, you're going to end up with another ripple on effect throughout the economy," said Joseph A. Fields, one of the keynote speakers at this year's Dubai International Finance Center (DIFC) Week conference.

For Fields, the UAE is a rapidly expanding, though relatively inchoate economy still figuring out the best way to manage its healthy endowment of natural resources and the record surplus of foreign reserves that derives from it.

"For me, [the UAE] is kind of an economic laboratory. This is the testing ground and it's just fascinating," Fields told Arabian Business on the sidelines of the conference.

In an increasingly transient world, one that attracts workers from corner to corner, competitive wages are an issue that the UAE certainly needs to be aware of, particularly in its early stages, he said.

"If you want to train your people here, that's a very good idea," said Fields, "but there are always going to be foreign workers because the world demands the best in breed. And I think Sheikh Mohammed will always veer towards the best in breed."

The pay increase, commencing in January, will affect federal government employees, including civilians and security personnel of the interior ministry, according to an official report by WAM news agency.

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