Labour Policy and Determinants of Employment and Wages in a Developing Economy with Labour Shortage

Abstract

Using data from a sample of 1,099 workers, this paper investigates the determinants of employment and wages for workers in the United Arab Emirates. The paper further examines the wage distribution and the decomposition of the wage gap between the public and the private sectors. Results of the study are consistent with the dual labour market theory and indicate that the labour market in the United Arab Emirates is segmented based on sectors (public versus private) and types of workers (nationals versus non-nationals). The study concludes with a discussion of the implication of these findings for the effectiveness of labour and economic policy. Copyright 2010 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd.

Gender-based differences in employment conditions of local and expatriate workers in the GCC context

“…Because of relatively inferior working conditions in the private sector, the local workers are concentrated in the public sector where they enjoy an attractive income and favorable working conditions among which are job security, generous retirement plans, and other welfare benefits (Abdalla et al, 2010;Al-Waqfi and Forstenlechner, 2012). This has resulted in the segmentation of the labor market in most GCC countries -including the United Arab Emirates -with a public vs private and national vs non-national division.…”

“…Table V also indicates that male workers with college/university level of education have the same employment chances as male workers with secondary level of education or below (the reference group) in both the public and the private sectors. The absence of a significant difference might generally reflect the labor intensive nature of the UAE labor market which favors male workers (Abdalla et al, 2010). It seems that in a male-dominated labor intensive market such as the UAE labor market, employers do prefer low cost and adequately educated workers.…”

“…Moreover, most citizens in the GCC region, including the UAE, work in the public sector where they enjoy attractive income and favorable working conditions such as job security, generous retirement plan, and other welfare benefits (Abdalla et al, 2010). Also, public policy measures such as quotas are applied to support citizens' employment in the private sector despite their relatively high reservation wage compared to foreign workers.…”

“…Apart from prevailing social and cultural norms, another important institutional factor in the GCC context is related to the unique composition and distribution of the workforce in the labor market with a sizable percentage of foreign workers mainly employed in the private sector. The segmentation of the labor market in the UAE by 401 Gender-based differences in employment sector (public vs private) and nationality of workers (citizens vs expatriates) (Abdalla et al, 2010) is likely to influence the obstacles facing women in the labor market. As indicated above, the public sector in the UAE (and other GCC countries) is the preferred sector of employment as it offers better pay and working conditions than the private sector.…”

“…In order to support the growth and development of its economy, the UAE -similar to other GCC countries -allowed employers to freely recruit foreign workers due to a severe shortage in local human resources over the past few decades. The labor policy with regard to foreign workers in the GCC countries follows the "guest worker" or "contract worker" model where foreign workers are hired on a temporary basis and are concentrated in jobs and economic sectors where local skills and expertise are lacking or the type of work is unattractive to nationals for various reasons (Abdalla et al, 2010).…”