Labour Markets – eRutledge | Arabian Gulf Economics

Private Sector Emiratisation

Giving private sector jobs the required significance; only such a dramatic image makeover can attract more UAE nationals to it

by Emilie Rutledge | May 10, 2018

The Federal Authority for Government Human Resources gave research on Emiratisation a boost by launching an annual award for scholarly work on the UAE labour market and human resources. This is a timely incentive because oil prices seem destined to remain some way off on their 2010—14 highs, and comfy government jobs are said to be a thing of the past.

Among the wining studies was one conducted by the UAE University; it was the first large-scale study to investigate the views of UAE nationals working in the private sector and polled 653 individuals. The survey included questions related to job satisfaction and also on context-specific sociocultural sentiments such as the prestige attached to a public sector job.

Indeed the UAE’s labour market’s distortions and segmentations cannot be fully understood, let alone addressed, without such issues being factored into the equation.

The research found that it was “salary and benefits” that most significantly and positively predicted the intention of Emiratis to continue working in the private sector, while “sociocultural influences” — societal attitudes on a given occupation’s prestige and status level — had the most significant negative effect and was likely to deter Emiratis from staying in the private sector.

In other words, money does still talk. However, employee satisfaction isn’t all about money, “training opportunities” and the “nature of job” also writ large. The latter finding is of importance because it implies, at the very least, that today’s graduates do see private sector occupations as more interesting and fulfilling, if compared to the more bureaucratic-style ‘classic’ public sector jobs.

However, as evidenced by the research, it continues to be the case that “classic” public sector positions continue to attract the most status and prestige. This sentiment is even more pronounced among male employees, with male respondents significantly more likely to be adversely affected by sociocultural influences (the pride or prestige attached to public sector positions) and be less happy with the nature (or “environment”) of work in the private sector.

The research has applied policy relevance. The more closely aligned like-for-like public/private sector positions become in terms of salaries, working hours and days of annual leave, the more attractive will be private sector career paths. Such alignment — most likely by way of more extensive subsidies or top-ups for nationals working in the private sector — would help redress the current notion that it is the citizens who’ve secured government jobs that have the higher status. The findings also show that internship programmes — that are now compulsory at some federal universities — are paying dividends and recommends that more interns should be placed in the private sector as about one-third of those surveyed were working for private sector companies where they had completed their internships.

Another revealing find was the fact that almost three-quarters of the sample of UAE nationals employed in the private sector currently had other members of their immediate family working in the same sector. Therefore government policy that champions those Emiratis who take up non-conventional private sector career paths will help change prevailing societal attitudes in relation to what is, and is not, considered a suitable career path for Emiratis.

The study on private sector Emiratisation by Dr Emilie Rutledge and Dr Khaled Al Kaabi recently received the Federal Authority For Government Human Resources Award for the Best Academic Research in HR. Their study is timely in that it considers this topic in an era where comfy government jobs are said to be a thing of the past.^[1] In addition to this, their survey-based research—polling 653 individuals—is the first large-scale one to investigate the sentiments of UAE nationals actually working in the private sector. While basing their research on the notions of the Theory of Planned Behaviour and job satisfaction scales, they also factor in what are termed as context-specific sociocultural sentiments. They make the case that the UAE’s labour market distortions and segmentations cannot be fully understood, let alone addressed, without such issues being factored into the equation. As Dr Rutledge says, “employee satisfaction isn’t all about money, the benefits of even the nature of the work and relations with fellow workers, societal attitudes on a given occupation’s prestige and status levels also writ large.” As evidenced by their findings and analysis, it continues to be the case that ‘classic’ public sector positions continue to attract the most status and prestige. This sentiment is even more pronounced amongst the male survey participants.

Another issue that the study highlights is the difficulty face in defining exactly what constitutes the private sector. In a region who’s labour markets are characterised by being highly distorted and segmented along public/private and national/non-national employee lines, the division between public and private entities is often hard to determine. As Dr Al Kaabi explains, it was necessary for their study to include government-backed entities as quasi-private ones as this is what society considers them to be. While some labour market economists would classify these within the government sphere, in the UAE at least, many in this category are commercially-run and, “really do now manage their human resources as if they were genuine private sector operators.”

The study found that it was ‘salary and benefits’ that most significantly and positively predicted continuance intentions (β = .399, p < .001) while ‘sociocultural influences’ most significantly and negatively predicted continuance intentions (β = -.423, p < .001). In other words, money does still talk. These observations also suggest that the more closely aligned like-for-like public/private sector positions become in terms of salaries, working hours and days of annual leave, the more attractive will be the private sector career paths. The authors of this study both contend that such alignment—most likely by ay of public sector pay freezes than pay cuts—would help redress the current notion that it is the citizens who’ve secured government jobs that have the higher status. Other job satisfaction related constructs that had a significant impact on the degree to which individuals planned to continue working in the private sector were: ‘training opportunities’ were a positive factor (β = .163, p < .001) and interestingly, the ‘nature of job’ (β = .072, p .009). The latter finding is of importance because it implies, at the very least, that today’s graduates do see private sector occupations as more interesting and fulfilling (if compared to the more bureaucratic-style ‘classic’ public sector jobs).

In terms of differences between the genders, male respondents were significantly more likely to be adversely affected by sociocultural influences pride (or “prestige) and were significantly less happy with the nature (or “environment”) of work in the private sector. With regard to age, the younger the respondent, the less likely they will be to intend to continue working in the private sector. The study’s authors argue that younger members of society are significantly more influenced by sociocultural barriers and least satisfied with the professional development opportunities on offer. They suggest that this may be due to the fact that they have relatively junior positions at the given private sector organisation. With regard to education, the higher one’s qualification is the more likely it will be that they intend to remain in the private sector. This ties in with the age-related differences, it follows that within the private sector the positions that require post-graduate qualifications will not only pay more but will also have attached to them more status.

Of perhaps most note and applied policy relevance are the following observations. Firstly, no less than one-third of those surveyed were working for private sector entities that they had actually competed their internships with. This suggests that the internship programs that are now compulsory at some federal universities in the UAE are paying dividends. The second observation is that almost three-quarters of the sample (that is UAE nationals employed in the private sector) currently have other members of their immediate family working in the same sector. As Dr Rutledge says, “any government policy that champions those individuals who take up non-conventional career paths will help change prevailing societal attitudes and norms in relation to what are and are not suitable career paths.”

[1] Al Nowais, S. (2017, March 7). Sheikh Abdullah tells UAE youth to think beyond ‘comfortable’ jobs, The National. Retrieved from https://www.thenational.ae/uae/government/sheikh-abdullah-tells-uae-youth-to-think-beyond-comfortable-jobs-1.41511

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This is the website of Dr Emilie J. Rutledge. An academic with over a decade’s worth of experience in designing, managing and delivering economics courses at both undergraduate and post-graduate levels (see: Courses). Emilie has published over a dozen peer-reviewed papers (see: Publications) and is the author of “Monetary Union in the Gulf”. Her current research interests include the Arabian Gulf’s economic diversification and labour market reform agendas. Emilie also provides academic consultancy services — specialising in the developing of interactive university-level courses — alongside analytical and research expertise focusing on the economies of the oil-rich Arabian Gulf.
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Changes in the Kingdom

The world should push the crown prince to reform Saudi Arabia, not wreck it

The Economist | November 9th, 2017

In a kingdom where change comes only slowly, if at all, the drama of recent days in Saudi Arabia is astounding. Scores of princes, ministers and officials have been arrested or sacked, mostly accused of corruption. Many of those arrested are being held in the splendour of the Ritz-Carlton hotel in Riyadh. About $800bn-worth of assets may have been frozen. At the same time a missile fired from Yemen was intercepted near Riyadh, prompting Saudi Arabia to accuse Iran of an “act of war”.

Upheaval at home and threats of war abroad make a worrying mix in a country that has, hitherto, held firm amid the violent breakdown of the Middle East. The world can ill afford instability in the biggest oil exporter, the largest Arab economy and the home of Islam’s two holiest sites.

At the centre of the whirlwind stands the impetuous crown prince, Muhammad bin Salman, son of the aged King Salman. The prince has staged a palace coup—or perhaps a counter-coup against opponents seeking to block his sweeping changes (see article). Either way, at the age of just 32, he has become the most powerful man in Saudi Arabia since King Abdel-Aziz bin Saud, who founded the state. All this may be the precursor to profound reforms that the country needs. The danger is that it will just lead to another failed one-man Arab dictatorship.

Casting himself as a champion of the young, Prince Muhammad (known as MBS) understands that his country must reinvent itself to deal with the end of the oil boom, a burgeoning and indolent population, and a puritanical Wahhabi religious ideology that has been a Petri dish for jihadism. He has set out ambitious plans to harness private firms to reform the state and wean the country off oil. He has also eased some social strictures, promising to end the ban on women drivers and restraining the religious police. He speaks of returning to a “moderate Islam open to the world and all religions”.

All this is welcome. But the way the prince is going about enacting change is worrying. One reason is that his ambition too often turns to rashness. He led an Arab coalition into an unwinnable war in Yemen against the Houthis, a Shia militia, creating a humanitarian disaster. He has also sought to isolate Qatar, a gas-rich neighbour, succeeding only in wrecking the Gulf Co-operation Council and pushing Qatar towards Iran. With fewer constraints, he could become still more reckless. He is rattling the sabre at Iran over the war in Yemen, and may be challenging it in Lebanon. During a visit to Riyadh, the Saudi-backed Lebanese prime minister, Saad Hariri, announced that he would step down, and denounced interference by Iran and its client militia, Hizbullah (see article). What precisely the Saudis intend to do in Lebanon is unclear. But many worry about a return to violence in a country scarred by civil war and conflicts between Hizbullah and Israel.

Another concern is the economy. Prince Muhammad’s plan for transformation relies in part on luring foreign investors. But they will be reluctant to commit much money when someone like Alwaleed bin Talal, a prince and global investor, can be arrested on the crown prince’s say-so (see article). Last month Prince Muhammad made a pitch to foreign investors for a new high-tech city filled with robots, NEOM. The glitzy event took place in the same hotel complex that is now a prison.

A third cause for disquiet is the stability of the monarchy. Saudi rule has hitherto rested on three pillars: consensus and a balance of power across the sprawling royal family; the blessing of Wahhabi clerics; and a cradle-to-grave system of benefits for citizens. Prince Muhammad is weakening all three by concentrating power in his own hands, pushing for social freedoms, and imposing austerity and privatisation.

Much of this had to change. He could seek new legitimacy by moving towards greater debate and consultation. Instead, space for dissent is disappearing and executions are rising. The anti-corruption campaign is being carried out with little or no due process to determine who is guilty of what. Many ordinary Saudis are cheering for now. But the arrests look like Xi Jinping’s purges in China, not the rule of law. As he meets resistance and his base narrows, the crown prince may rely increasingly on the security apparatus to silence critics. That would only repeat the mistakes of republican Arab strongmen: socially quite liberal, but repressive and ultimately a failure.

Many have predicted the fall of the House of Saud, only to be proved wrong. The most likely alternative to its rule, flawed as it is, is not democracy but chaos. The country would fragment and, in the scramble for its riches, Iran would extend its power, jihadists would gain a new lease of life and foreign powers would feel compelled to intervene.

The world must fervently hope that Prince Muhammad’s good reforms succeed, while urging restraint on his bad impulses. President Donald Trump is wrong to cheer the purge on. The West should instead counsel the prince to act with caution, avoid escalation with Iran and free political life at home. Prince Muhammad may be heeding the dictum of Niccolò Machiavelli that it is better for a prince to be feared than loved. But this advice comes with a rider: he should not be hated.

Economic reform in the Gulf

If Gulf citizens are to keep enjoying rich-world standards of living, they will increasingly have to find productive work in the private sector. That means overhauling labour markets that keep too many of the region’s citizens idle.

The Economist (2016). Time to sheikh it up. The Economist, 420(9006): 11-12.

THE people of Saudi Arabia have for decades enjoyed the munificence of their royal family: no taxes; free education and health care; subsidised water, electricity and fuel; undemanding jobs in the civil service; scholarships to study abroad; and much more. This easy life has been sustained by gushers of petrodollars and an army of foreign workers. The only thing asked of subjects is public observance of Islamic strictures and acquiescence in the absolute power of the sprawling Al Saud dynasty.

Similar arrangements hold in the other countries of the Gulf Co-operation Council (GCC), a six-member club of oil monarchies. But these compacts are breaking down. The price of oil has fallen sharply since 2014, and the number of young Gulf citizens entering the job market is growing fast. The maliks and emirs can no longer afford huge giveaways, or to pay ever more subjects to snooze in air-conditioned government offices. The monarchs know it. They say they are seeking to diversify their economies away from oil rents; they are also whittling away generous subsidies and plan a new value-added tax across the GCC.

But reforms have to go further. If Gulf citizens are to keep enjoying rich-world standards of living, they will increasingly have to find productive work in the private sector. That means overhauling labour markets that keep too many of the region’s citizens idle.

The pampering of Gulf citizens has made them expensive for firms to hire (see “Labour laws in the Gulf: From oil to toil”). By contrast, the third-class legal status of many migrant workers makes them extra-cheap (see “Migration in the Gulf: Open doors but different laws”) and puts them at the mercy of their employers. Given the choice between a hardworking foreigner and a costly local, private firms have long preferred the foreigner.

In response Gulf governments have imposed ever more stringent quotas on foreign companies to employ locals, especially in desirable white-dishdasha jobs. In Bahrain 50% of workers in banks must be Bahrainis; but only 5% of those in construction need be. (It’s awfully hot on building sites.) Quotas reduce the incentive for Gulf citizens to do a job well: why bother, when your employer has little choice but to keep you on? Firms often regard hiring locals as a sort of tax. Some pay them to stay at home.

The best policy would be to phase out quotas entirely, while also slimming the bureaucracy and making it clear that civil-service jobs are no longer a birthright. In Saudi Arabia two-thirds of citizens are employed by the state. Public-sector wages account for 12% of GDP in the Gulf and Algeria, compared with an average of 5% across emerging economies.

The way migrant labourers are treated needs to change, too. Gulf states deserve credit for letting in far more immigrants than almost all Western countries, relative to their populations. (In many cases, foreigners outnumber locals.) Migrants gain from earning far higher wages than they could back in India or Pakistan. But the coercive parts of the kafala system of sponsoring foreign workers should be dismantled. Migrant workers should not need their employers’ permission to leave the country. After a while, they should be allowed to switch jobs. Contracts should be clear and enforced by local courts. Long-term foreign workers should be able to earn permanent residence; ultimately those who wish to should have the opportunity to become citizens.

These reforms–less pampering for locals and more rights for migrants–would reshape the labour market. More locals would have to do real work. Migrants would be better treated, though inevitably fewer would be hired. Some new ideas are being tested. Bahrain is allowing firms to ignore quotas by paying a fee for each foreign worker they employ. As part of its ambitious economic agenda, Saudi Arabia is talking of issuing green cards to some migrants.

A new social contract
At a time of bloody turmoil across the Arab world, many royals fear undoing the social compact that has kept them in power. But cheap oil makes change unavoidable; doing nothing merely postpones the reckoning. Economic transformation should nudge Gulf states towards political reform. Perhaps, as their citizens are asked to do more to earn their living, they will demand that rulers do more to earn their consent.

‘Incentives needed to increase Emiratisation in private sector’

Emiratisation must address the inequity between the working conditions of the private and public sectors, according to new research.

Melanie Swan | November 16, 2015

James Christopher Ryan from the College of Business and Economics at the UAE University pointed to the discrepancy in number of holiday days, working hours and salaries.

He said standardisation between the two was the way to make the private sector more attractive to Emiratis.

“Looking at ensuring that experience and qualification requirements for comparable work are the same across sectors and aligning salaries for comparable work between sectors” should also be considered, Dr Ryan said.

He also said that more needed to be done to change the mindset of Emiratis to help them find work in the private sector.

“Historical evidence suggests Emiratisation has not been a success thus far,” he said.

“Also, my continuing interaction with UAE national students still offers clear evidence of their preference to work for public sector organisations. Once we have established a culture where the citizenry come to expect employment in government positions it can be very difficult to move successfully away from that expectation.”

The push for Emiratisation in the private sector has been slow when compared to its government counterparts, he said.

“To date Emiratisation in the government sector, that is replacing expatriate expertise with local expertise, has had success,” he said.

“However within the private sector there is not enough sustained improvement in UAE national employment to determine if we have any real success yet.”

Dr Ryan’s research was published in the Journal of Business Research.

“Successful Emiratisation will require a better balance between the conditions and rewards offered in the public and private sectors for UAE nationals. Any steps we can take to reduce the imbalance are steps in the right direction.”

Dr Emilie Rutledge, associate professor of economics at UAE University, undertook research of her own on Emiratisation that supports Dr Ryan’s observations. “In the long run, fully integrating Emiratis into the labour market is crucial for economic prosperity and social inclusion,” she said.

“Unemployment rates have been high among the Emirati population in recent years, with estimates in double digit figures, much of which is structural unemployment and can be attributed to strong public sector preferences.

“It is essential to address the paradox in pay and working hours if more Emiratis are to be willing to enter private sector employment.”

In Abu Dhabi she said only about 4 per cent of private sector employees were Emirati. Incentives were needed, such as aligning benefits and working hours, if this was to be reversed.

She said sociocultural barriers also remained an obstacle to Emiratis entering the private sector. “Several vocations in the private sector are not considered socially or culturally appropriate for nationals, and there is still a certain amount of prestige attached to attaining a public sector post.”

Arabian Gulf Labour Markets: Women are ‘underutilised’

A recent study suggests that although women are better skilled than men, it is harder for them to find work.

https://www.thenational.ae/uae/women-are-underutilised-1.422350

Bana Qabbani | The National | February 1, 2011

“Female nationals are a valuable human capital resource in the UAE – one that is significantly underutilised,” said Dr Emilie Rutledge, assistant professor of economics at UAE University.

“Existing evidence suggests females find it much harder to find employment than their male national counterparts, yet paradoxically they typically have much higher levels of educational attainment,” she said.

She said officials should implement more gender-aware labour policies to correct the imbalance.

“While labour nationalisation policies have acted to increase female labour force participation, many more gender-aware policies need to be implemented,” she said.

A paper to which Dr Rutledge contributed, titled “Women, labour market nationalisation policies and human resource development in the Arab Gulf States,” will be published in the peer-reviewed journal Human Resource Development International in April.

Four researchers, including three in the UAE and one in Saudi Arabia, collaborated on the paper and interviewed policy makers who are directly involved in the Emiratisation and Saudisation processes.

Dr Rutledge said Emirati women need to be more willing to travel in order to take full advantage of their employment opportunities.

Other notions that need addressing involve family constraints, such as parents who frown on their daughters’ working in a mixed-gender environment, or the perception that women who work in the private sector only do so because they do not have adequate wasta (connections), explained Dr Rutledge.

“Some private-sector employers are unwilling to recruit from [among women], either because they believe it might be costly in infrastructural terms or because it would be costly if the newly recruited national female employee was to be ‘offended’ in some way by an incumbent non-national employee,” Dr Rutledge said.

The study stresses that labour nationalisation bodies need to improve their monitoring and evaluation of the consequence of policies in a gender-sensitive way.

Political reforms that have resulted in women being appointed to senior positions can broadly be seen as part of the process to “normalise” the role of women in the workplace, the researchers state.

“Increasing women’s participation will depend not only on their motivation, but also on the ability of society to accept new roles for women and remove existing barriers to economic integration,” said fellow researcher Dr Fatima al Shamsi, secretary general at UAE University and faculty member at the Economics Department.

Dr al Shamsi, who has also served as a consultant to the UAE National Human Resource Development and Employment Authority, added, “Above all, women should not shy away from the kind of work that was previously reserved for men, and they should impose their skills and education on the labour market, and not let the market impose the marginal and secondary positions on them.”

Interviewees also said conditions in the private sector – like a lack of child care, flexible working hours and length of maternity leave – were also contributing factors that needed to be tackled to increase female participation.

“There is over-representation of women in lower-paid and non-decision making positions,” Dr al Shamsi said.