UAE National Day: the next generation

The UAE has made great strides in its 40 years, but its biggest challenge remains Emirati employment
UAE National Day: the next generation
The UAE is looking to the private sector to generate jobs for its youth population
By Joanne Bladd
Thu 01 Dec 2011 12:15 PM

Never mind the global financial crisis: the UAE has bigger problems. That was the message from the Gulf state’s Saqr Ghobash during a G20 summit of labour ministers in September.

While ministers from the US and Europe mewed over the impact of a looming second credit crunch on their already floundering economies, Ghobash was eyeing a crisis closer to home.

“Our priorities have less to do with dealing with the fallout of the global economic downturn and more to do with labour and unemployment challenges,” he told the Paris meeting.

“The overwhelming majority of UAE nationals are employed by the public sector [and] it is approaching saturation.”

The numbers don’t lie. Emiratisation or, more plainly, the UAE’s bid to push more nationals into the private sector, is facing challenges. Less than eight percent of Emiratis are employed by private companies, while joblessness among citizens hovers at an estimated 14 percent.

The Gulf state must generate 20,000 jobs a year over the next decade to soak up its young people, or risk creating a ticking timebomb of youth unemployment.

“High unemployment among Emiratis is not good for the stability of this country, in light of what is happening in the region,” says Abdulkhaleq Abdulla, professor of political science at UAE University. “[Fixing this] is in the best interests of everybody – government and the private sector; whoever is concerned about the stability of this place.”

So what is behind this failure to launch? As with most political hot potatoes, the root cause depends on who you ask. One recruitment consultant, who counts a mix of private and state-linked firms among her clients, says companies struggle to compete with the cushy jobs offered by the government. Bankrolled by the UAE’s petrodollars, the public sector often offers a tempting mix of  bigger salaries, shorter worker hours and longer holidays to staff.

The UAE has tried to level the playing field by rolling out quotas for Emirati employees, and offering visa perks and other incentives to private-sector firms that hire nationals. A number have resorting to fixing their books to fall in line with government quotas.

“They create ghost jobs, where Emiratis are employed on paper only,” the consultant says. “They are paid a salary but don’t come into work. It’s not that the companies don’t want to hire nationals, it’s just that they can’t pay enough to match the government salaries.”

Companies are also fighting against the clutch of subsidies netted by Emiratis in the form of housing grants, free healthcare and utilities. These benefits, used by the UAE to distribute its oil wealth, can strip away the economic need to work – a conundrum Ghobash alluded to in May when he said that unemployment, for Emiratis, was “optional”.

Article continues on next page…

“One of the reasons the culture is as it is, is because of the numerous subsidies that Emiratis receive,” says Ayesha Sabavala, UAE economist with the Economist Intelligence Unit.

“They are very well-cared for by the government, which is very good at distributing its oil income by subsidising houses, electricity, education. And this has developed this sense of laziness among some Emiratis – it has proved a disincentive [to private sector employment].”

But the view from the UAE’s classrooms is quite different. For Abdulla, a university lecturer for more than 20 years, the blame lies squarely with foreign companies that buy into the myth that nationals are lazy and spoilt and refuse to hire them.

‘They don’t have trust in Emirati labour, in Emirati skills – in Emiratis period,” he says frankly. “They look at them as inferior, that they are spoiled, that our graduates are not fit for the job. There is a fundamental bias against Emiratis in the private sector.”

This bias has seen ranks of qualified Emiratis graduates left on the fringes of the UAE’s job market as a beauty parade of expatriates pick off the choicest jobs, he says.

“[The private sector] is tilted against them, and favours foreigners. If they go there, they are intimidated because the boss is suspicious about their capabilities - it’s very intimidating.

‘The private sector is just too strong and it is stronger than the government in deciding on the fate of nationalisation in the private sector. The government must develop some teeth.”

It’s a difficult situation that threatens to alienate the UAE’s next generation. A report by Aon Hewitt this month found half of Gulf nationals admit to being disengaged in the workplace, or unwilling to contribute more than necessary to their job. Of the poll of citizens in five GCC states, Emiratis reported the lowest level of engagement.

But Abdulla doesn’t deny the next wave of Emirati talent has specific requests – namely, good wages, and working hours and holidays that match those in the government. While critics argue the onus is on young nationals to get in step with working practices that dominate the rest of the world, Abdulla says it’s the foreign companies growing fat on their tax-free profits that must bend.

“[Emiratis] cost more, they have needs, legitimate needs and these have to be taken into consideration,” he says. “In terms of leave, in terms of their work hours – these have to be taken into consideration.

“Every country has its own culture that must be accommodated. This is true in America, in Britain – everywhere. And we have to adjust to others rather than others adjust to us? The private companies that come here and make profits without paying tax on them, they have to adjust to our culture, our rules and regulations – and to the needs of the people of the UAE. And they are not. And we are allowing them to get away with it. The obligation is on them.”

The flaw in the argument is that it is rarely Emirati graduates that struggle for job offers. Indeed, skilled local talent is a prized commodity. Recruitment consultancy Hay Group in September said UAE graduates pocketed salaries up to 80 percent higher than their expat rivals, as firms bolstered wage packets in a bid to attract talent.

Even non-graduates netted an astonishing 33 percent premium over the general market, the firm said.

Instead, the real battle is finding work for the non-skilled nationals in a market that has built its foundations on dirt-cheap, blue-collar labour. With unskilled Indian expats earning as little as AED600 a month, according to the Indian Embassy, Abu Dhabi, it’s an impossible task to then expect to tempt nationals from the charmed circle of subsidies or the public sector.

There is, says Aon Hewitt, an urgent need to “professionalise blue-collar work and afford it the status it receives elsewhere as a craft” to avoid a job spectrum split between high-paying jobs that many Emiratis aren't qualified for and low-paying jobs that most don’t want.

Article continues on next page...

“The government also has to pay attention… to changing the mindset of Emiratis so they take the jobs that are available,” says Sabavala. “Not just the high-profile jobs. In spite of having all this [oil wealth], they need to be able to participate in their country’s diversification, no matter in what industry or sector.”

Moves such as setting a minimum wage, or upgrading the salary and status of bluecollar jobs demands a cash injection that – in the thorny economic climate – private sector firms are reluctant to give. Equally, the UAE dare not press too hard for fear of hurting businesses and curbing its push to diversify its petrodollar-led economy.

So what is the answer? For the government, it is closing the gap between the public and private sector. The Gulf state is toying with the idea of subsidising the wages of Emiratis in private sector roles, in a bid to bolster take-up. Perhaps counterintuitively, Abu Dhabi is also trimming back the expat fat in government bodies and state-linked entities, to clear jobs for its citizens. The oil-rich emirate saw a wave of job cuts this year at bodies such as the Department of Transport, Abu Dhabi Culture and Heritage and Masdar.

But Sabavala warns that wage subsidies are no magic bullet for the Emiratisation crisis.

“If you subsidise wages you are essentially saying that the government should pay private sector companies money to take on Emiratis,” she says. “And that is just as much a box-ticking exercise as an Emiratisation quota is – it’s not a long-term solution.”

It’s also at odds with Abu Dhabi’s apparent efforts to shave down its spending. As economic woes in the US and Europe threaten, the oil-rich emirate has delayed billions of dollars-worth of projects including

its planned Louvre and Guggenheim museums, and Masdar’s cutting-edge headquarters building.

“[Increasing subsidies] isn’t sustainable for the government,” says Sabavala. “We’re expecting oil prices to stay for the next five years, on our estimates, at about $100 a barrel, but if it drops to $70, the UAE will find it hard going. Oil exports may not be as high. “Worldwide, governments are trying to control spending. You can’t subsidise everything.”

A partial answer may involve a closer look at the mismatch between the UAE’s education sector and its job industry. As hard lessons in Iran and Egypt have shown, churning out newly-minted graduates is no help if their skills don’t match those needed in the workplace.

Morphing the education system into a diploma mill is not always the right answer, says Sabavala.

“You have tons of Emiratis in the banking sector, in investment houses. But you talk about nursing, for example, or the hotel industry, and you won’t find many there,” she says.

Article continues on next page...

“You have the UAE’s efforts to diversify into aeronautics, the semi-conductor industry, but where are the Emiratis graduating with technical degrees? This is a situation that needs to change.”

Another fix may be the rollout of privatesector apprentice- or internships, to help grease the transition from learning to doing. Many Emiratis have limited workplace experience at school-leaving age, thanks to shortage of the part-time jobs popular among students in other markets.

There is no surefire cure for the UAE’s Emiratisation woes. The answer is likely a complicated mix of government and private-sector reforms and education overhauls.

But for Prof. Abdulla, the only clear-cut solution is a tough line on private companies, to force recruiters past the stereotypes and into hiring the UAE’s youth – regardless of the cost.

“Take Emiratis seriously and pay the price for it,” he says. “When the private sector has a need for jobs, the first thing the government should do is go to locals first and exhaust that, and then look to expat labour.

“I cannot be any more candid. I have an Emirati right now who could take your job.”

For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.