The hands that build the UAE for just $7.60 a day

zoom

Minimum wage has been a heated issue in the GCC for some time, with little response from some governments. Assistant editor Jamie Stewart uncovers the costs involved.

The GCC's marketing on the global stage is an example to the world. Gleaming towers stand triumphantly in photographs, and artist's renditions of forthcoming projects attract business and investment from around the world.

The value of the hands that build the GCC to the respective governments is beyond calculation. Without the manhours, without the sweat and commitment of the expatriate labour force, there would be no gleaming towers to photograph.

There may be artist's renditions, but they would remain creations of a computer program, no more than graphics spread across glossy brochure pages.

So it may come as some surprise to learn the financial value of the workforce, as governments benefit through their own refusal to adopt a minimum wage.

The methodology behind putting a value on a construction contract is convoluted. There is no set value behind the cost of labour within a project, due to the fluxuation of various other factors. However, David Savage, managing director of Al-Habtoor Leighton, one of the region's biggest contractors, provides a rough guide.

"As a rule of thumb, labour costs cover about 7 - 8% of the cost of a contract. There are also many associated costs, such as transport and accommodation. It is not just the wages. The 7 - 8% is inclusive of everything."

Quite a telling sum. A few simple mathematics present a guide as to how far the value of a contract would rise, if a liveable minimum wage was introduced.

Taking the UAE as an example, the average monthly wage of an unskilled labourer employed by a multi-national construction company is US $163 (AED600).

Assuming that the average labourer works a six day week, although many will work seven, this sets the average daily wage at around US $7 a day. This figure is in the same vein as labourers' wages on the Burj Dubai, who rioted in March 2006 over poor pay. One worker was quoted by the NGO Human Rights Watch (HRW) as saying that new workers were paid $7.60 daily.

If you define a liveable wage as one that covers the cost of living an independent life in the locality of the place of work, accounting for minimal rent and other basic expenditures, then the minimum wage would need to be set around $800 a month, or $33 a day in the UAE.

Take, for example, a hypothetical construction contract worth $100 million. If 7% of this covered labour cost, and a liveable minimum wage of $800 a month was set for the labour force, the cost of the contract would inflate to $128 million. A very substantial rise. Even more so when you bear in mind that not one dollar would constitute profit for any of the firms involved.

A minimum wage can be imposed by the home nation of the worker concerned, as India has imposed a minimum wage covering its domestic maids employed in the UAE, and the Philippines has done the same for its construction workers.

So what would be the ramifications if India was to impose a minimum wage covering its workers in the UAE? "We have looked at introducing a minimum wage for construction workers," says Venu Rajamony, the consul general of India. "But we have not taken any decisions yet. Any such move would have serious repercussions in commerce and industry."

It certainly would. The "serious repercussions" being that multinational companies, which would have been expending $100 million on a contract, would be looking at an additional outlay of $28 million, with no additional profit.

Print | Email | Discuss this article |

USER COMMENTS (6 COMMENTS)

POST A COMMENT

No calculation error
Posted by Jamie Stewart, Dubai, UAE on 28 July 2008 at 16:59 UAE time


Please note the error in Ernie's comment below.
He has mistaken AEDs for US$, listing the desired wage increase at 33.3%
The article states that the desired wage is US $800 /mth, NOT AED 800 /mth, as Ernie has wrongly stated.
THUS the desired wage increase, allowing for currency fluctuations, is around 500%.
The article is therefore correct.

Calculation Error??? (The hands that build the UAE for just $7.60 a day)
Posted by ernie on 28 July 2008 at 13:30 UAE time


Based on the figures quoted in the article, the actual increase in total building cost as a result of the desired increase in labour wages should be far less than AED 28 million quoted in the article:

current wage = AED 600 /mth
desired wage = AED 800 /mth
THUS, desired increase = 33.33%
total current cost = AED 100,000,000
labour cost as % of total cost = 7%
THUS, labour component = AED 7,000,000
Desired increase = 33.33% x 7,000,000 = AED 2,333,333 !

Total cost after increase = AED 102,333,333 (rather than the AED 128,000,000 stated in the article!)

The above calculation assumes that the labour component consists for 100% of wages (which according to this article, is not the case), so the actual increase in total construction cost would be even less than the AED 2.3M calculated above.

Legal rights of labourers
Posted by carl dcosta, Abu dhabi, UAE on 27 July 2008 at 07:12 UAE time

It is plugging exploitation more than minimum wage legislation which should be encouraged.The majority of expat labour are not aware of labour laws in the country they work in.Savvy Legal firms should encourage Embassies of these workers to publicise their services to book errant employers and ensure their rights are claimed successfully in the labour courts.Charging a bare 10% of any monies recovered through the legal process would guarantee a very successful business.

Save the hands that build
Posted by Ajay Naik, Dubai, UAE on 26 July 2008 at 17:06 UAE time


We can only hope somebody in the higher authority in this country and in India take note of this aricle.

Appreciate good analysis
Posted by Raj, Dubai, UAE on 21 July 2008 at 11:24 UAE time


Appreciate good analysis and fact-finding article by Mr. Jamie Stewart.

Minimum Wage
Posted by Fariduddin Ahmed Siddiqui, Riyadh, Saudi Arabia on 21 July 2008 at 10:14 UAE time

Consideration must be made for workers living conditions, accommodation, better food, healthcare insurance, welfare, and social and moral involvement after work hours for relaxation.

SHOW ALL COMMENTS

CLICK HERE TO POST A COMMENT

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.