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A 70 Percent Pay Rise That’s a 100 Percent Bad Idea

Published on: January 2010​
Genre: Governance/Public Sector Management​ Category: Op eds​

Those who are on the receiving end will certainly have welcomed the announcement that federal government employees are to receive a 70 per cent pay increase in their basic salaries. This increase does not apply to non-national government employees – but that is not why I think it’s not such a great idea.

The fact is that the Government has already been facing challenges in encouraging UAE nationals to join the private sector. They have just increased these challenges by more than two thirds.

According to official statistics provided by the Abu Dhabi Department of Economic Development, and other reports, the number of Emiratis in the private sector ranges from 0.3 per cent to 1 per cent, with a high estimate of 40,000 nationals in a sector that employs four million. Additionally, the National Human Resources Development and Recruitment Authority (Tanmia) estimates that 13 per cent of nationals, or 40,000, are unemployed – which is the highest level in the UAE’s 38-year history.

Asian workers constitute 88 per cent of the workforce, while Arab and other nationalities make up 10 per cent in this country of six million inhabitants. The International Association of Money Transfer Networks places the UAE as the world’s third-largest source of remittances, because of its large expatriate population.

The responsibility for the low national employment figures in the private sector does not rest solely on the shoulders of those expatriates. Many Emirati nationals also bear a large part of the responsibility; and it may be that federal and local government policies are unintentionally impeding nationals from entering the private sector.

The federal and local government goals should be to encourage more people to look not only to the large private sector for employment, but also to become entrepreneurs by taking advantage of government initiatives such as the Sheikh Khalifa Fund and the Sheikh Mohammed Establishment for Small and Medium Size Enterprises in Abu Dhabi and Dubai respectively.

It’s going to be a tough challenge, though, as there are numerous advantages to working in the public sector, such as the considerably shorter working hours and the ridiculously large number of holidays. In addition, jobs in the government sector are generally considered to be secure; managers do not have as much scope to dismiss under-performing subordinates as do their counterparts in the private sector.

Then there are the emotional “expert” views that make this already difficult situation even worse. In an ill-advised move last February, the Ministry of Labour approved a suggestion by Tanmia that makes it almost impossible to sack Emiratis in the private sector. This shortsighted move discourages the private sector from hiring nationals in the first place, and reinforces stereotypes about Emiratis in the workforce.

Ideally the Government should invest in vocational training for nationals according to the requirements of the job market. Also, rather than going about widening the pay and salary gap between the generous public sector and the more market-force driven rationale in the private sector, the Government should start levelling the playing field for nationals in the public and private sector. This can be done by a combination of subsidising the salaries of nationals who join the private sector and reducing the public sector perks.

Recently, an Arab friend of mine who works for one of the big four consultancy firms was seeking to employ 20 nationals, and asked me to come up with some suggestions. Apparently they had been trying to reach that figure for quite some time but their efforts had not met with any success.

“The problem is that we are ready to invest a great deal in hiring nationals,” my friend said, “but as soon as they learn of our gradual, performance-based pay system, they opt for the more lucrative and less time-consuming government jobs.”

He told me that when he first joined the company in Canada his salary was quite low, but because he persevered he was able to make it to the high position of partner in the firm, which allows him to share in its global profit. Even though his salary was low at the beginning, in the long term he is making much more than his government sector peers.

It is high time the Government finally realised that levelling the playing field for national job seekers would be beneficial for all sides. The Government would be less of a nanny state concerned with securing jobs for its nationals, allowing them instead to find their own way. The foreign investor would benefit from having local market expertise, and UAE nationals would be trained in valuable skills. The 70 per cent hike in salaries has just made it that much more difficult for the private sector to hire nationals.

Sultan Sooud Al-Qassemi is a non-resident fellow at the Dubai School of Government.

This was originally published in The National. It can be accessed here

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