Unemployment in the United Arab Emirates among Locals

Abstract

The present research paper investigates the problem of unemployment in the United Arab Emirates among locals. The paper is focused on its causes, peculiarities, effects, risks, and governmental policies that should combat this severe economic and social phenomenon. Relevant literature review, accurate data, economic indices, and profound analysis of the research problem provide a genuine understanding of the UAE’s existing situation.

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The UAE is the largest exporter of gas and oil in the world trade. However, the natural wealth of the state has the other side of the coin. Liberal political course and diversified economy, accompanied by the world financial crisis, speed up the process of the economic decline. Unemployment became the side effect of the state policy that orients on foreign investments and profitable expatriate labor that decrease the job opportunities for the local population.

Economic, educational, and social backgrounds alleviated the problem. The high unemployment level has a destructive effect, expressed in negative macroeconomic indices, high prices, low quality of life, the risk for crimes, and terrorism. Nevertheless, the paper contains some recommendations and strategies that may help to decrease the unemployment level through special policy instruments on the labor market, administrative measures for the expatriates, and overall improvement of social system. The present research paper possesses a certain scientific value and may inspire further investigation of the mentioned problem.

Introduction

Human civilization has generated many problems that influence the economy of most of the countries. One of the common problems that affect state economic is unemployment. The present paper is interested in the problem of unemployment in the United Arab Emirates (UAE). The paper is based upon certain general and economic concepts, numerical data, and statistical information concerning the mentioned problem.

Purpose

The problem of unemployment among the population is one of the most burnings in the modern world. All countries are vulnerable to a high level of unemployment; the UAE is not an exception. The problem of the paper is inseparably connected with poverty, the illegal population, and other economic and social problems caused by this phenomenon. Moreover, it inevitably reflects on the state economy. As this research paper is focused on the mentioned problem, it is of high interest and value for those who want to understand the aspects of unemployment in the UAE in details (its causes, effects, risks, governmental policy, male and female indices, etc.), and continue the research further.

The more profound the research is, the clearer one will imagine the state of things concerning unemployment in the UAE among locals. In the paper, the interrelation between the unemployment level and the state economy will be revealed. The discussed points will show how exactly unemployment affects the economy and society of the UAE. As this problem is of a global scale for the modern UAE, its consequences may influence even the world economy. For this reason, the value of the paper grows. Moreover, the target points of this paper will capture the reader’s attention, deepen his/her knowledge, and widen general erudition.

In the present paper, one may find the central ideas and results of those researchers who investigated this problem; the collected statistic data and tables show the situation with unemployment of the UAE for a certain lapsed period. Hence, it will give an opportunity to analyze the factors that affect the further deepening and aggravation of the problem. Consequently, the purpose of this project is to understand such a global phenomenon for the modern UAE as unemployment among local and all the aspects that cover this problem through detailed investigation.

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Background Information

The background of the problem is connected with the researched fields of the study and the nature of the problem itself. The researchers investigated the issue of illegal immigration profoundly; the results of their research make a notable contribution to the development of this topical and urgent question. For example, Al-Qudsi (2005) revealed the nature and effects of unemployment evolution peculiar to the Gulf Cooperation Council (GCC). Gonzalez (2008) described the phenomenon of unemployment in the UAE as one of the most severe human challenges for the UAE locals who graduated from the educational establishments and faced the problem of the labor market in the XXI cent. International Monetary Fund (2003) presented statistical information and showed its influence on the economic indices of the country.

The roots of the unemployment problem of the UAE are hidden in the financial world crises that started in 2008 and still can be felt even now. The crises caused a global recession that decreased global economic indices. Gradually, the crisis of the subprime hypothecary credit in the USA transformed into the financial one that touched the majority of the countries; the UAE was not an exception. Moreover, most of the companies faced severe problems with the placement of securities that promised unprofitable business and the risk of becoming bankrupt. Also, world stock markets faced downturns. By the beginning of 2008, the crisis assumed the global character and became to show itself in production volume decrease, decrease in demand, and price for raw material (including oil), high unemployment rate.

The UAE is famous for its oil; it is the major exporter of oil in the world that makes many countries depend on it. Owing to agflation (agricultural inflation), prices for oil and food reached the highest point that caused severe economic damage. The price for oil was too high; however, later, the prices for oil notably dropped. Food and fuel crises resulted in job reduction, financial difficulties of most people, and low levels of economic and social life. The UAE faced the consequences of the crisis in its own way.

The markets of all countries of GCC suffered the crises most of all. The oil market guaranteed economic stability for them, but the world financial crises shook this stability. The UAE had to curtail oil production that reflected on the local economy. The local population experienced difficult times: the UAE faced unemployment. For this reason, the present paper is interested in the nature of this economic and social phenomenon. At the same time, the profound analysis and prognosis for the future of the UAE seem to be essential.

Brief Description of Report Contents

The research paper consists of an introduction, literature review, results of discussion, conclusion, works cited, and appendices. The content of the main structural parts of the paper creates favorable conditions for the problem research. However, it is essential to make a synopsis of the sequencing material.

The introduction identifies the problem itself, research purpose, and background information. Besides, the reason for the present research is clearly stated here. The background information gives an opportunity to deepen into the roots of the problem and see some researchers’ results concerning the unemployment in the UAE among locals. The introductory part facilitates the perception of the research material.

In the literature review, it seems to be necessary to examine some key points of unemployment in the UAE, its relation to the economy, and examine the problem in the context of the Middle East to achieve the purpose of the research paper. The researchers’ results about social and economic aspects of the problem, its effects on the state economy, government policy, and future prognosis will be discussed. It will give an opportunity to use this base for further analysis of the problem.

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Results of discussion are based on the information mentioned in the literature review, and additional research data that will help to achieve the purpose of the present paper. The valuable findings of the research may inspire further research of the problem. Also, this part of the paper contains the analysis of the figures that reflect the level of unemployment in the UAE, charts, and illustrations of the appendices that show various aspects of the research problem.

Conclusion will summarize the research findings mentioned in the previous structural part of the paper. Conclusion will prove the achievement of the purpose with the help of certain pieces of evidence of the problem, show it in the global economic and social context, and provide with some expectations concerning further development o unemployment in the Middle East (and the UAE, in particular). This essential part of the paper allows us to understand the problem of unemployment in the UAE as the multifaceted phenomenon that affects the economic and social aspects of the country.

Literature Review

The problem of unemployment in the UAE among locals has been discussed by many researchers. However, it seems to be necessary to use the theory of unemployment as the background for the present research paper. One of the recent researchers who described this theory through the investigation of the labour market was Pissarides (2000). He dedicated the book to the macroeconomic “equilibrium unemployment theory” (Pissarides 16).

It is based on a long-run growth that supposes “the existence of a constant unemployment rate and constant vacancy rate, in a growing economy that is also characterized by the other conventional stylized facts of balanced growth” (Pissarides 16). Besides, the author pays attention to the interests of people. According to him, the interests of the employed and unemployed people differ; on-the-job search activity contributes to this idea. Also, the author considers that high unemployment rate in the equilibrium is the result of the workers’ rejection to have low-waged jobs. The author believes that

“Unemployment persists in the steady state because during the matching the matching process and before all unmatched job-worker pairs meet, some of the existing jobs break up, providing a flow into unemployment” (Pissarides 5).

Consequently, all countries have a certain acceptable unemployment level characterized by steadiness and persistence. In general, Pissarides’ equilibrium unemployment theory “analyzes unemployment as a search-and-match-mediated equilibrium of flows through the labour market, set in motion by job destruction and job creation” (Pissarides back cover). Proceeding form the book, one thing is evident: flows of the labour market influence macroeconomic indices that determine certain conditions that facilitate or complicate the job-search process for people.

However, Keynes’ (1937) theory seems to be more applicable within the framework of this paper. The general theory of employment of the English economist that appeared in the 1930s of the last century became popular because it explains the reasons for unemployment. According to Keynes, unemployment is a reverse function of aggregate demand. Employment volume is tightly connected with effective demand volume. Insufficient effective demand volume conditions languor of the investment process, and thus, impossibility of employment that leads to unemployment increase. One of the effective way-out is to increases the role of state in aggregate demand formation process at the cost of state expenditure (primarily, the researcher means investment goods) (Keynes 110).

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Keynes did not support the idea of a low wage. He thought that wage reduction can not result not in employment increase, but redistribution of gains in favour of a business owner. Moreover, workers’ consumer demand decrease is not compensated with demand increase of other groups of the population. According to his general theory of employment, it is possible to reach general equilibrium with partial employment.

Apart form voluntary and frictional, there is involuntary unemployment (Keynes 110). The economist claimed that wage reduction does not make the employed to leave work; under this condition, the unemployed do not reduce workforce supply. Thus, real wage depends on demand for work, so far as it is limited, there are involuntary unemployed. Proceeding form Keynes’ ideas, investment stimulation leads to the unemployment rate decrease.

As the research paper is interested in unemployment in the UAE among locals, it is necessary to describe the unemployment situation in the particular context. First, it is essential to define the country’s geographical and political aspects, and deepen into its demographic indicators. The UAE is located in the South-Western Asia, in the Eastern part of the Arabian peninsular, on the southern Arabian Gulf. It borders upon Saudi Arabia and Oman. The total population is almost 5 million. The UAE has rich oil reserves; the national gross domestic product (GDP) relies on its export. Unfortunately, owing to the economic diversification, the part of the oil and gas sector has become shorter. Nevertheless, the UAE has been sustained by its natural wealth.

Even before oil and gas were discovered and exploited, the traditional economy had been powerful regardless of limited water and resources supply and sandy soil. The population of the UAE has been engaged in fishing, pearling, agriculture, rising of livestock, falconry, boat building and other productive activities; it has been able to survive either in deserts or mountains (Abed & Hellyer 98). The UAE potential for economic prosperity lies not only in natural resources, but in the native population itself.

For 40 years, the UAE is an independent federative state that consists of seven emirates; each of them presents a micro-state with absolute monarchy. The UAE include Abu Dhabi, Dubai, Sharja, Ajman, Umm al Qaywayn, Ra’s al Khaymah, and Fujairah. Abu Dhabi (see fig. 1) is the capital of the UAE federation. It is estimated, that nearly 4 millions of people live in Abu Dhabi (total population: males – 67, 8%; females – 32,2%). The most part of oil is produced in this emirate; however, Dubai and other produces contribute to this sector of the national industry (“United Arab Emirates: Unemployment” 1).

Most of the UAE population is Sunni Muslims. People speak both the Arabian and English languages. About 98 % of the population is educated (according to 2005 census). There are 19 universities in the UAE; approximately half a million of students is graduated every year. Before the recent financial crises (2008-2011), the UAE had the low unemployment rate in the whole world. For example, in 2001, the labour force constituted 2 million that successfully entered the labour market (it consists nearly 60 % of the working population). Constantly, the labour market faces the illegal workers. The researchers show the following evidence:

“due to the increase in population and expansion in the number of national graduates from universities and high schools, unemployment among nationals became an acute problem in recent years” ((“United Arab Emirates: Unemployment” 3).

Naturally, this tendency influences the state economy. The roots of the problem are in common unemployment evolution among the countries of the GCC (oman, Kuwait, Bahrain, etc.). Al-Qudsi (2005) dedicated his article to the mentioned phenomenon, based on profound investigation and detailed research of the problem in a global microeconomic context. The author takes the following idea into consideration:

“the abundance of natural resources could itself reduce growth potential and increases unemployment by reducing private and public incentives to accumulate human capital due to a high level of non-wage income, e.g. dividends, social spending and low taxes” (Al-Qudsi 1).

Oil wealth of the GCC, their economies passed a challangeable way from the economic boom to the bust. However, the economic policy of these countries made the UAE active and passive job searches to find themselves in “out-of-labour force” category (Al-Qudsi 2). It is clear that strong oil and gas income can not provide with low unemployment rate (Rehman 48). The global financial crisis promised hard times especially for the young population who had graduated from the universities.

First, the overcrowded public sector (by the natives) demanded incensement of governmental expenditures. Benefit packages and subsidies made the population to take longer vacations, and work shorter hours. The governments tried to attract the foreign labour force that led to the underemployment of the locals. The economic policy caused the phenomenon of segmented labour market, where the natives worked on the low-skill jobs with shorter hours in the public sector, and the foreigners who worked on the more demanding jobs with longer hours in the private sector.

Second, economic slow-down, vagaries of the oil market, and three regional wars of the 90-ies reduced the GCC potential economic growth. These factors reduced the ability of the GCC governments to provide public sector with sufficient employment. Mainly, Bahrain, Saudi Arabia and Oman faced budget deficits, economic downturns and slowdowns, deceleration of consumer prices; the foreign workers’ condition of these countries is more beneficial (Al-Qudsi 6).

Gonzalez (2008) researched education and labour market initiatives in Qatar, Oman and other countries. The young Qatar population faced challenges in transition from school to work. In 2001, nearly 30% of females aged from 20 to 29 were unemployed; the index for males is 13%. In 2004, the unemployment rate for Oman constituted 15 % of the total population. According to Gonzalez, there are many dropouts who “do not have post-secondary educations or professional and technical skills that allow them to find work in a labour market that rewards higher education and professional skills” (Gonzalez 164).

In the context of unemployment rates, many age groups can be found, but the group aged 15-19 is the most vulnerable to be unemployed. In 2001, its index was 27 %. In general, high youth unemployment rates can be explained by the absence of high educated people, insufficient experience, low female labour force participation rate, economically passive job seekers, and other factors (Gonzalez 109).

Handoussa and Tzannatos (2002) dedicated their book to the social protection and employment creation in the Middle East and Northern Africa (MENA) region (see fig. 3). According to these researchers, the Middle East and Northern Africa have much in common. In the context of the changing world (owing to new requirements of the world economy, globalization, quality standards, etc.), the MENA countries have different potential for social and economic development.

Most of the countries of the MENA region (including the UAE) have created the necessary prerequisites for social well-being and raising economic productivity. For example, Kogan (2004) states that nearly 95 % of the labour force (nearly 40 % of female workers are employed) has a high literacy rate (Kogan 28). Nevertheless, MENA countries lacks quality educated and trained workers that make the unemployment rate to increase. The authors of the book believe that

“sustainable development and competitive capacity largely depends upon building a broad base of flexible, educated and technologically skilled workers equipped with marketable knowledge, skills, attitudes, and competencies ” (Handoussa & Tzannatos 3).

Thus, education is responsible for the employment future of the country’s population. Governmental investment and overall education programms in education that should be spread among the locals may contribute to the policy directed to reduce the unemployment rate. Besides, modern labour force should be able to use and manage innovative technologies. Consequently, the education in the MENA region should contain an accessible technologically innovated component. It is evident that the governments of the countries faced the necessity to increase their expenditures on the education.

For example, in 1996, more than 5 % of the Gross National Product of MENA countries were devoted to education. However, some of the countries (Kuwait, Egypt, etc.) faced maldistribution of resources across the country’s education sector. In addition, lack of labour mobility and heavy reliance on public sector, poor quality of education, and workers’ limited opportunities complicate the process of employment improvement. Moreover, there is a general tendency in MENA countries: “unemployment is more acute in the educated, young, fast-time job-seekers, the unskilled, and the poor” (Handoussa & Tzannatos 5). In this context, the UAE also needs structural education reforms and training systems that provide the country with sustainable work force.

According to Kogan, public sector is the biggest employer for MENA countries. There are many sectors with the employed population. Community, social and personal services remains the most employed sector (nearly 25 %); mining and quarrying sector show the lowest indices (0, 2 %). However, the unemployment rate grows. In 2002, MENA countries had approximately 30 % of unemployed population. Mainly, it is extremely spread in the large cities among the young locals (under 20 years) (Kogan 47).

Naturally, governmental policy should implement anti-unemployment models that decrease the unemployment rate in the UAE. However, it is necessary to understand what economical, political and investment environment is peculiar to the modern UAE. International Monetary Fund (2003) analyzed the UAE economic diversification, and outlined those main pieces of evidence that can either facilitate or complicated the unemployment situation among the locals.

Transformation of the country economy was marked by reduction in oil dependency. This way, a loose confederation of states with traditional rural and trading background transformed into the united regional economic hub. The UAE has a prudent fiscal policy that creates favourible conditions for the further development. Its success of the non-oil sector lies in trade facilitation, openness to trade, and positive business environment that stimulated country trade and trade-related services. Besides, the UAE has one of the lowest tariff in the world that enhances non-oil trade (information and communication technologies, finance services, tourism, etc.), and thus, international relationships (owing to the free trade zones) (International Monetary Fund 10).

According to the researchers’ data, the UAE is characterized by policy uncertainty (owing to coexistence of market-oriented policy and non-oil economic interests), macro stability, favourable tax rate (that encourages businesses), access to finance (owing to Dubai successful commercial and financial activity), difficulties in labour and administrative regulations, etc. The flexible labour policy contributes to the non-oil economy. In the book, one may see the following evidence:

“about 90 percent of the labour force in the UAE are expatriates and work mainly in the private sector. This labour policy has been a key contributor to maintaining the competitiveness of the non-oil economy” (International Monetary Fund 14).

In spite of the mentioned pieces of evidence of favourible economic, political and investment base, the unemployment among the nationals remains one of the complex economical and social challenges for the UAE population. In 2004, the unemployment rate was 11, 4 % (nearly 30, 000 of the total population). At the same time, unemployment among female nationals was twice that of males. In this context, the governmental policy became to implement unemployment benefits for the nationals engaged in the private sector to lower the risk of unemployment. In general, labour policies follow the strategies to enhance competitiveness of country economy, and create favourible environment for potential national work force (International Monetary Fund 29).

Fasano (2004) and other researchers believe that “unemployment pressures among nationals have been restrained until recently because most GCC governments have been acting as employers of first and last resort” (Fasano et al. 3). Thus, strains on the GCC labour markets are evident, and the author of the book proves this evidence. New jobs are created in private non-oil sector that demands low skills, and may offer only low wages.

As it was mentioned, the young nationals are the most vulnerable group of the GCC workforce. For this reason, nationalization of the workforce in the GCC countries has become a wide-spread practice to involve non-workers to the labour markets. It allow potential workforce to meet market requirements owing to the following policy instruments: creation of special job opportunities (support, training, etc.), encouragement by means of market-based measures (fees, benefits, etc.) and administrative measures (bans and quotas concerning illegal immigrants and expatriates) (Fasano 17).

Results of discussion

All the data and researchers’ results give an opportunity to make the following analysis inferences. Taking into consideration all the information mentioned above, one may present the corresponding research findings. In this part of the paper, the problematic aspects of the research questions will be discussed and revealed, including the overall impact of unemployment on the UAE economy, and the detailed discussion of other aspects of the problem: governmental policy, future prognosis, etc ; in addition, the objective of the research paper will be achieved.

Nature of Unemployment in the UAE: Causes and Peculiarities

The phenomenon of the UAE unemployment is inseparably connected with its economy and policy. As it was mentioned, the state economy is based on oil (over 2 million barrels daily) and gas production (see fig. 4). According to the presented distribution of petroleum resource between the four states, Abu Dhabi is considered the most profitable emirate. Established in 1971, the Abu Dhabi National Oil Company has worked for the benefit of the UAE state economy for a long time. Besides, the free trading zone gives an opportunity to take advantage of the international trade and foreign investment. The UAE is a leading member of the Organization of Petroleum Exporting Countries. It tightly cooperates with the GCC countries (Albuainain 1).

Modern UAE state economy is characterized by liberalization and diversification. Mainly, it specializes on hydrocarbon resources production, international trade and expansion in the non-oil sector of the economy. Economic diversification attracted foreign labour force that reduced the nationals’ employment opportunities. However, to understand the causes of the unemployment problem, it is necessary to deepen into the historical background of the UAE economy. The oil price boom of the 1970s guaranteed high oil revenue that gave the government an opportunity to invest infrastructure, job creation and education.

That time, the UAE faced the shortage of national labour that was mainly employed in the public sector. In the 1980s, oil prices fell. In its turn, it caused non-national workers to decline; at the same time, the number of the national job seekers increased. Active foreign policy and encouragement of foreign work force by the government attracted new non-national workers. At the same time, a great number of illegal expatriates entered the UAE labour market on a constant basis. A high unemployment rate has been peculiar to the nationals (Albuainain 1).

The Abed’s book presents the UAE economic sectors (see fig. 5). As one can see, in 2002-2004, such non-financial enterprises sector as construction and building proved to be one of the most employed and profitable economic sectors. Wholesale and retail trade also greatly contributes to this sector. However, there are few national workers engaged in it.

The UAE economic wealth has been highly dependant on gas and oil production for more than 60 years, international oil market, and foreign investments. However, the UAE economy is also based on manufacturing, construction and real estate, wholesale retail trade, fisheries, agriculture, IT, and tourism. At the same time, political and economic peculiarities led to the high unemployment rate in the country (Abed & Hellyer 252). The UAE is an urbanized country, and the mentioned economic and social problem is more peculiar to cities.

According to Abed and Hellyer, “the labour market is dominated by expatriates who accounted for more than 91 per cent of total employment in 1998” (Abed & Hellyer 202). Expatriates are considered as cheaper and more productive work force (Chartouni 2). At present, the problem of unemployment concerns the nationals, mainly. The researchers’ data show evidence of the high unemployment rate among the total population. 2003 year data (see fig. 2) indicates that the unemployment rate among the nationals is more than 10 %; the total unemployment rate is 2, 8%. According to the table, the female population is more vulnerable to be unemployed (more than 16 %).

However, Abu Dhabi has the lowest unemployment rate among both expatriates and nationals due to its extremely developed labour force infrastructure (“United Arab Emirates: Unemployment” 3). The researchers’ results show that the unemployment rate is higher in case of women (16, 5% compared with the male index 8, 4% in Abu Dhabi). Moreover, it is spread among the youth (more than 50 % of the total unemployed population) because they have a low level of skills and intermediate level of education (Albuainain 2).

The unemployment problem is rooted not only in the global financial crisis and segmented labour market, but in rising population, as well. By 2005, the total population of the UAE constituted 5 million. Moreover, the population is expected to increase by 2020 (it is estimated that Dubai population will be nearly 1, 25 million) (Abed et al. 173). However, there are the case of voluntary unemployment, when the UAE nationals refuse to work. According to the book,

“one reason for the reluctance of nationals to work in the private sector is the unsociable working hours in the two-shift, six-day regime favoured by private sector employment” (Abed 223).

In addition, some nationals can not use the English language in job. Besides, they do not have technical skills, and lack of working experience, required by their employer. According to the Department of Human Resources in Sharjah, nationals may have irrelevant qualifications that do not match the demands of labour market.

According to Abu Dhabi survey, the unemployment rate increases for many reasons: increased number of graduates (owing to increased total population in the UAE), insufficient quality of education that does not meet the labour market demands, unfavorable working environment in the private sector (owing to long working hours and close performance measurements) that does not attract the locals. For example, if one look at the fig. 6, it is possible to note that the UAE have one of the lowest indices of private sector contribution to GDP among the Arabian countries (nearly 47% in 2001 in comparison with 87 % in 2000 in Palestine) (“Current Unemployment Rates in Arab Economies” 13).

Unfortunately, the nationals do not accept certain jobs owing to traditions or absence of social appealingness. In addition, the cost of employing the locals in the private sector is high (compared to the expatriates). Finally, many of the nationals choose administrative jobs of the private sector (for job security reason) that does not decrease the level of unemployment (Albuinain 2).

The economic prognosis seems to be essential, as it is relevant to the unemployment situation. Owing to diversification, the state government has encouraged non-oil sectors. For example, real estate became a highly growing and invested business: “the sector is expected to see the total value of developments rise to more than US$50 billion by the year 2010” (Abed et al. 107). Moreover, this sector is opened to innovations: for example, cooling buildings are the existing proof of innovative technologies in the building sphere. However, one may agree with the researchers’ prognosis, made in 2006:

“diversification of the UAE’s economy will continue to play a vital role in maintaining growth and stabilizing the impact of oil production or price fluctuations. Continued efforts will be made to attract foreign direct investment, and indications are that these efforts will continue to bear fruit, becoming increasingly significant contributors to economic growth” (Abed et al. 86).

Consequently, one may see the following paradox: the UAE has quite successful state economy; but mainly, it is relied on the expatriates. Behind the prosperous front of the state, there is the other side of the coin: there are many unemployed nationals that suffer the side-effects of the economic success that is dependant on foreign investments and foreign workers. The mentioned causes of unemployment among the locals should be taken into consideration, as well.

Unemployment in the Context of the State Economy: Effects and Risks

Naturally, unemployment in the UAE has a negative effect on the state economic and society, as well. Political pressure results in higher expenditures on social benefits. Unstable economy is accompanied with misallocated resources. In case of Abu Dhabi, the unemployment rate here is officially 6,5% (nonofficial index is 16 %). If practical actions are not made by the government, and if education is not reformed, the situation will be worse: “on the individual basis, the nationals will lose their earnings and self esteem and will accumulate debts or reduce their spending power” (Albuinain 2).

Unemployment, poverty and economic instability displease the UAE society that may provoke dissatisfaction with the government, and such dangerous social phenomena as religious extremism and terrorist attack. The locals are obsessed with money earning; they become distrustful, greedy, cunning, etc. (Rehman 64). However, social effects differ from that of economic.

The UAE state economy does not show evidence of economic equilibrium. The unemployment rate will grow until practical and reasonable actions are not made. This severe problem is “a push factor” that causes various phenomena that may negatively influence the state economy, for example, labour force migration, poverty of the national population, economic dependence on the expatriates, conflict of economic interests between national and foreign workers, etc. In their turn, these consequences of unemployment lead to macroeconomic destabilization of the UAE federation (International Organization for Migration 72). Moreover, the migration of the nationals makes the government to substitute them for the Asian workers who arrive to the UAE. However, some researchers see in the Arab migration a positive effect:

“Arab migrants in the region contribute to the economies of their countries of origin by circulating financial, social and human capital and reducing unemployment rates and sustaining migrants’ families, simultaneously fostering progress in countries of destination through provision of skills and capacities that are not readily available on the national labour market” (International Organization for Migration 34).

As it was mentioned, unemployment has a certain relation to the tourism that may affect both social and economic aspects of the country. Linden (2006) considers terrorism the logic response of society to the high unemployment rate that pose a threat to social well-being. In its turn, the Arabian terrorism may transform into the global terroristic war that will involve international forces in this bloody and destructive phenomenon that may damage state economy, and bring away millions of lives (Linden 1). For this reason, unemployment is dangerous for economic and social wealth of any state.

A cyclic unemployment is a serious macroeconomic problem that causes microeconomic instability, and aggravates underemployment of the population. The Arabian countries, especially the UAE, are not an exception (Kanaan et al. 1997). Unemployment affects both a person who lost a job, or can not find a job, and a state economy. On the individual level, unemployment may lead to psychological stress, despair, nervous and cardio-vascular diseases, family destruction, and even suicide. It may drive people to crimes (theft, murder, etc.) and asocial behaviour.

Besides, an unemployed person may lose professional qualification that will decrease chances to find a new profitable job. On the general social level, social tensions among the unemployed may lead to revolution movement. In addition unemployment increases morbidity, mortality, and criminal rates in the country. On the state economic level, unemployment means insufficient use of resources. Economic consequences of unemployment worsen GDP; it results in economic global decline. Consequently, the modern UAE economic indices leave much to be desired.

Naturally, unemployment makes nationals suffer poverty. Officially, there are only 19. 5 % of the UAE total population who live below the poverty line (USA International Business Publications 15). However, real state of things is more horrible; real economic indices are used to be hidden by official surveys. Poverty is complicated with possible rise in food price that may lead to famine among the locals (United Nations Human Settlements Programme 2009).

In addition, Winckler (2005) notes that “one of the most devastating consequences of the large-scale disguised unemployment in the public sectors of the Arab countries is their low labour productivity” (Winckler 105). It happens, because stable and secure position of public sector jobs makes workers not to use their potential in full.

In general, unemployment weakens the state economic and social potential, demoralize its society, and increase overall instability. According to some researchers, unemployment locks employment potential of the MENA region countries, including the UAE. It slows down progress, and has destructive consequences. Moreover, it leads to skills degradation, and lack of work experience. The growing unemployment among the national women and youth “may limit the opportunities of disadvantaged groups to emerge from poverty” (World Bank 140). Moreover, it is the most challengeable obstacle on the way of the state healthy economic and social development (Organization for Economic Co-operation and Development et al. 77).

Governmental Policy: Regulation and Reduction of Unemployment

According to the 2001 census (see fig. 7), the first-time job seekers of the Arabian countries show high indices. In 2000, there were nearly 65 % of first-time job seekers in the UAE. However, Egypt shows the highest index: nearly 97% (“Current Unemployment Rates in Arab Economies” 2). Nevertheless, the reason to improve the condition of the unemployed is evident. It is obvious that the UAE government should concentrate on the problem of unemployment (United Nations 88).

In the context of the interests of the modern UAE economy, the foreign labour has become the main source of the skilled workers. The UAE labour market has been heavily occupied by expatriates that limited nationals’ opportunity to enter the labour market, and be employed. In 2006, the UAE nationals, engaged in the private sector, accounted only 2 % of the total work force (Abed et al. 218).

Solution of the unemployment problem is connected with the Federal Government policy. One of the successful embodiment of the strategies oriented to social progress, was the establishment of the National Human Resource Development and Employment Authority – Tanmia. Its main objective is to provide the nationals with jobs through creating favourible conditions to enter the UAE labour market. Moreover, Tanmia enhances productivity and skills of the national work force, and reduces the unemployment ratio.

Besides, Tanmia provided labour market with special quota systems that encourages nationals to work in the private sector. Moreover, job seekers are offered to attend training courses that prepare them for the professional future. By 2006, the organization helped 26,000 nationals to find a job. One of the successful emiratisation strategy, intended to train job seekers, is implemented by the Centre for Labour Market Research and Information. It trains job seekers, developing their technical and English language skills, and providing them with initial working experience and pre-employment training (Abed et al. 220).

Deficient in professional skills and job-oriented training are also obvious. The mentioned job seekers’ problems suggest the idea that education needs a reform. Abed’s book underlines: “the country requires a revolution in school curricular. A strong science orientation should be inculcated from the early stages of schooling” (Abed 223). Hence, the curriculum should orient to the modern labour market, as more and more jobs are opened in the private sector.

The education sphere should ensure that the youth of the UAE are ready to face challenges of the XXI cent. labour market and workplace. One of the main tasks of governmental policy in terms of reduction of unemployment is to eliminate stagnation in education, and increase educational performance that influence growing unemployment (World Economic Forum 10). Besides, it is necessary for the UAE universities to establish reliable links and alliance with worldwide educational centers of academic excellence (Ramady 416).

Traditionally, the UAE men and women worked for the economic benefit of the state, but the role of women used to be narrowed ideologically and culturally. Nevertheless, their essential role in society can not be underestimated. For centuries, the Arabian women have worked tirelessly in the agricultural sector (in mountains or desert oases), fishing and pearling. As it was mentioned, the UAE women are more vulnerable to unemployment. For this reason, they should be encouraged and involved in the labour market. Sheikh Zayed said: “like men, women deserve the right to occupy high positions, according to their capabilities and qualifications” (Abed et al. 236).

With this reason in mind, he appointed Sheikha Lubna al-Qasimi as the first female Minister of Economy and Planning. In general, female employment in the UAE deserves special attention. In 1995, there were only 5 % of the UAE women engaged in the labour market. Today, women constitute 66 % of the total workforce in the government sector; 30 % are in decision-making position. They are highly appreciated in IT, finance, medicine, arts, engineering, and even the army and police forces (Abed et al. 243). However, none of the national women works in the UAE parliament (“United Arab Emirates” 1).

A new labour policy of the government may be expressed in placing the nationals in both public and private sector jobs. Stimulation of private sector is necessary, because equilibrium in the labour market leads to positive economic effect (private and public sectors should have more or less equal labour force distribution) (Chartouni 22).

According to Albuinain, the finance sector is the best sector for the nationalization. Moreover, state educational institutions should provide the graduated with necessary practical and specialized training to close the gap between academic programs and the labour market (Albuainain 3). Proceeding form the article of some researchers, the UAE government should improve and strengthen labour market institutions; otherwise, they may alleviate the unemployment problem (Suliman & Nabi 8).

According to some researchers, public sector seems to be more attractive for the locals because it may offer higher wages, shorter working hours and nonwage benefits; it is less demanded, and low skills are required. For this reason, the governmental policy should focus on increasing the nationals’ employment in the private sector. There are the following policy strategies to achieve this aim: job placement programmes and special training to meet private sector needs; job counseling and awareness programmes provided in secondary schools and higher educational establishments; enactment of a pension plan for private sector national workers; entrepreneurship programmes that provide the locals with opportunities to start up their own business; increasing the cost of expatriate labour by means of fees, including higher visa charge; emiratization through special quotas for the nationals in trade, banking, insurance, and other targeted sectors, etc. (International Monetary Fund 21)

According to Nelson (2004), the estimated participation of Abu Dhabi population in 2001 shows a horrible picture especially for the Arabian women: nearly 14 thousand women work out of 148 thousand of the female national population (see fig. 8). Thus, a nationals’ desire to work should be materialized in practice in both male and female cases. It should be taken into consideration in the elaboration of social programmes (Nelson 6)

However, it seems to be necessary to improve the UAE policy to decrease the level of unemployment, as well. World Economic Forum (2007) believes that it is essential for the government to avoid fractures in the federal work and skewed income distribution to improve economic and social situation. Moreover, it is necessary to overcome crisis in federal integration (World Economic Forum 2). In addition, it is clear that emiratization may help to ease unemployment; this government initiative means to employ the UAE nationals in an efficient and meaningful manner in the private sector, mainly (Ramady 354). Besides, it is necessary to increase the nationals’ interest in economically active work life, and encourage their participation in labour force.

Conclusions

All mentioned above gives an opportunity to make some general conclusions about the problem under research. Unemployment in the GCC and the MENA region has become one of the typical tendencies; the UAE are not an exception. The related literature concerning the research problem and the analysis made on the basis of the researchers’ result give an opportunity to outline the main causes and peculiarities of the UAE unemployment, its effects and risk for the state economic and social wellbeing, and also provide the paper with corresponding governmental policy intended to regulate and reduce the unemployment rate among the locals.

The causes of the UAE unemployment can be explained by political, economic, and social factors. Unfavorable political, economic and social climate conditioned labour market opportunities for the locals and high unemployment rate that exists in the federation among the population. First of all, it is necessary to say that unemployment is a widely spread phenomenon among the UAE youth, women, and those who have insufficient education, low skills and lack of working experience.

Behind the visible oil and gas wealth of the UAE, there are numerous unemployed nationals who unsuccessfully search for jobs, or those who do not interested in economic and working activity. For certain historical reasons, the UAE is full of foreign workers who obtain more attractive positions in private sectors. Limited working opportunities for the nationals, low quality education that does not meet labour market demands, insufficient knowledge, lower professional skills and working experience in comparison with expatriates alleviate the research problem for the UAE locals. Private sector is the most vulnerable economic sector owing to longer working hours, lower wages and absence of certain benefits. Instead, the public sector is overcrowded.

Economic and political conditions lock the nationals’ employment potential. Liberalization and diversification (focus on non-oil sector) allowed the expatriates to enter labour market, and exclude the national work force. Naturally, foreign investments are made for the benefit of the expatriates, and the UAE government that should distribute resources in an appropriate way. Unfortunately, the evident causes of the high unemployment rate among the UAE locals complicate the solution of the situation. One of the main causes of the unemployment in the UAE are the following ones: the global financial crisis that injured the economies of most of the world countries (since 2008), the UAE segmented-labour market, rising population and the numbers of the graduated, a gap between curriculum programme and labour market, etc.

It is clear that like all social and economic phenomena in the world, unemployment has its own effects and risks that threaten the healthy state development. The UAE unemployment may harm both economic and social wellbeing. The consequences of unemployment worsen the macroeconomic indices of the state economy (especially, GDP and incorrect distribution of resources); it leads to poverty, migration, degradation of the local population. Moreover, it lowers professionalism and self-esteem of the unemployed people. Besides, it may increase criminal level, risk of terrorism, suicides; destroy career, families, and social order.

In spite of the complexity of the UAE problem, there are some possible strategies that may help to overcome unemployment, and decrease its level among the locals. Special organizations provide the graduated with necessary pre-work experience, training, technical knowledge and skills, making them correspond to the high standards of the labour market. In addition, educational and labour market reforms may contribute to the solution of the research problem. Competent policy in this context means emiratisation, increased job opportunities for the nationals, special quotas for the expatriates, and other effective measures. In general, the UAE have a considerable employment potential owing to the national human resources and powerful economic base that may create favourable conditions for the further elimination of the unemployment problem.

Appendices

Geographical Map of UAE.
Fig. 1. Geographical Map of UAE. Source: “United Arab Emirates: Unemployment.” Country Profile (2008).
The MENA region.
Fig. 2. The MENA region. Source: Kogan Page. Middle East Review. London, UK: Kogan Page Publishers, 2004.
2003 Data: Unemployment Rate by Gender and Nationality in the UAE
Fig. 3. 2003 Data: Unemployment Rate by Gender and Nationality in the UAE. Source: “United Arab Emirates: Unemployment.” Country Profile (2008).
Oil and Gas Production (1997)
Fig. 4. Oil and Gas Production (1997). Source: Abed, Ibrahim, and Peter Hellyer. United Arab Emirates: a New Perspective. London, UK: Trident Press Ltd, 2001.
The UAE Economic Sectors 2002-2004.
Fig. 5. The UAE Economic Sectors 2002-2004.
Private Sector Contribution to GDP in Arab Countries.
Fig. 6. Private Sector Contribution to GDP in Arab Countries. Source: “Current Unemployment Rates in Arab Economies” Online Maps (n. d.).
First-Time Job Seekers as a Proportion of Total Unemployed of the Arabian countries.
Fig. 7. First-Time Job Seekers as a Proportion of Total Unemployed of the Arabian countries. Source: “Current Unemployment Rates in Arab Economies” Online Maps (n. d.).
Population and Labour Force of Abu Dhabi (2001).
Fig. 8. Population and Labour Force of Abu Dhabi (2001). Source: Nelson, Caren. “UAE National Women at Work in the Private Sector: Conditions and Constraints.” Labour Market Study 20 (2004).

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