Determinants of unemployment in the UAE

The Main Determinants of Unemployment

Today, the level of unemployment in the UAE is a significant socio-economic problem that needs to be resolved in the near future. Considering the statistics, as of 2011, unemployment among UAE Nationals is estimated at 14%, or nearly 35 thousand unemployed Nationals across UAE (Ministry of Labour, 2011, p. 3). In comparison with the current situation, the same data for the present year reveals that about 20% of the Emirati people are currently unemployed (Makahleh, Badih, & Sabry, 2012). This example illustrates considerable growth of unemployment. Besides, one may rightfully deduce that 1/5 ratio of jobless population is an alarmed sign that proves the vitality of this issue. Unemployment in this country is predefined by the developmental course and accompanying social and demographic trends. For instance, given that the prevailing part of the Emirati labor force consist of young people (up to 30 years old), it becomes clear that unemployment rate increased to over 25% among the youth (Ministry of Labour, 2011, p. 3), which is an alarming sign that needs to be studied to develop effective intervention strategies.

Another peculiarity is that the percentage of Nationals working in the private sector does not exceed 7% of the total National workforce (Ministry of Labour, 2011, p. 3). This statistics suggests that the private sector does not provide job opportunities that would meet the needs of the locals. Undoubtedly, it is an adverse trend because just like other states, the UAE undergoes the process of Neoliberalism that suggests giving greater freedom to businesses. In these conditions, the role of private sector in boosting further economic growth is supposed to grow. Nevertheless, in spite of the considerable expectations assigned to the Emirati private segment, it involves too few natives to become an effective remedy of increasing economic and social prosperity. The fact is that, relying a lot on the offshore labor force may lead to the enhancement of capital outflow. Moreover, the local people should be included in the working process with the purpose of realizing personal and professional ambitions; however, it is obvious that the private sector does not provide such an opportunity. Besides, presently, the government strives to take into consideration the demographics, which suggests that 200 thousand Nationals will attain working age during the coming 10 years which means that not less than 100 thousand of them are expected to enter the labour market (Ministry of Labour, 2011, p. 3). The present research proposal is focused on surveying the main determinants of unemployment that affect socio-economic situation in todays Emirati community and discuss the effectiveness of short- and long-term preventive strategies.

Literature Review

Al-Qudsi (2005) informs that the beginning of the 21st century was characterized with a considerable growth of unemployment in the UAE. Among the main reasons of this adverse trend one should distinguish the abundance of natural resources. Considering the statistics, the GCC possesses nearly 45% of the worlds deposits of oil (Al-Qudsi, 2005). This peculiarity discourages the natives from increasing labor initiatives. Instead, the Emirati citizens may benefit from alternative sources of income. For example, people may accumulate human capital due to a high level of non-wage income, e.g. dividends, social spending and low taxes (Al-Qudsi, 2005, p.1). These conditions have resulted in ambiguous outcomes.

On the one hand, abundance of oil deposits allows enjoying a decent lifestyle by obtaining profits from investments, deposits, and other sources. Moreover, the great opportunities for such enrichment stipulate that one provider is enough to maintain a good level of financial stability of the entire household (Al-Qudsi, 2005). Besides, the aforementioned approaches are effective means of boosting economic growth. Specifically, these strategies ensure sufficient money circulation, which has a strong positive effect on the domestic economy. Similarly, on the individual level, the ways of capital accumulation, other than selling labor, contribute to reducing social issues by enhancing the level and quality of education, healthcare, cultural life, etc.

On the other hand, the affluence of resources reduces the willingness of individuals to maintain constant personal and professional growth. As a result, these individuals are at a risk of becoming less competitive than international employees. Undoubtedly, this tendency is highly adverse for the Emirati nation. Furthermore, relying heavily on international workers implies the enhancement of capital outflow (Al-Qudsi, 2005). This is another negative implication of the high ratio of unemployment among the UAE citizens. To explain the relations between increasing unemployment among the Emirati people and abundance of states resources, Al-Qudsi (2005) reveals a hypothesis that the level of oil prices are inversely associated with unemployment in the GCC economies (p. 29). In other words, the richer this country is in terms of natural deposits, the lesser its citizens need for being employed.

This premise suggests that the fluctuation of oil prices in the world is a crucial determinant that defines the level of unemployment in this country. What is more, this suggestion implies a significant insight: to a great extent, the unemployment in the UAE is voluntary (Al-Qudsi, 2005). In this regard, Al-Qudsi (2005) assumes that unemployed GCC citizens choose joblessness rather than accept low-paying jobs (p. 2). This situation is complicated by the fact that private sector mostly provides low-wage jobs (Makahleh et al., 2012; Ministry of Labour, 2011). Undoubtedly, the natives do not want to agree to the employment that they consider being unsatisfactory. As a result, businesses are supposed to recruit international workers; however, this tendency inhibits the states aspiration to involve more nationals into working in the private sector. It means that low wages that are paid in the private segment are the cause of the insignificant level of the natives deployment in this area. This phenomenon of refusing to work in the private sector is another determinant of the growing level of unemployment in the UAE. To understand the magnitude of the gap between private and public sectors in terms of work compensation, work conditions, and social benefits, one should refer to Table 1 (Al-Qudsi, 2005).

It is evident that there is considerable disparity in salaries, which means that working in the pubic area is much more profitable and, thus, it is positively related to the notion of employee satisfaction. Apart from the disparity in wages, one can observe the greater amount of days off and paid sick leaves in the public sector of the UAE (Makahleh et al., 2012; Al-Qudsi, 2005). At the same time, performance-based culture of the private segment means that workers are expected to do their best to be praised (Al-Qudsi, 2005). Without a doubt, this peculiarity makes working environment even more challenging. Therefore, liberated labor policies in the private sector may be considered as another determinant of growing level of unemployment among the natives. In this regard, one should stress the ambiguity of this situation. In particular, it is obvious that the private sector should be enhanced and developed further and Neoliberalism is known to be a workable approach to achieving this goal. On the other hand, the unattractive working conditions in this area predefine low employee satisfaction among the Emirati citizens. As a result, the discussed public-private sector disparity in the working conditions stipulates the increase of voluntary unemployment among the locals.

Despite the fact that the Emirati private sector remains poorly developed and provides fewer advantages for the nationals, it has certain benefits. For instance, Abdulrhman and Katsaiti (2015) claim that private sector tends to have more stable jobs than the governmental and semi-governmental sector, since an employee tends to rotate a lot in the public sector than in the private sector(p. 11). Undoubtedly, the frequency of rotation is associated with the notion of job satisfaction. Hence, in the case with the rotations in the public segment of the UAE, it means that well-educated employees with a high level of experience tend to seek for better working conditions. Considering the rationale, highly qualified employees tend to move more frequently and in different departments and organizations in the public sector (Abdulrhman & Katsaiti, 2015, p. 11). In other words, it happens because this category of employees constantly enhances their career ambitions and demands for occupations, and their professional credentials are related to greater mobility. In this regard, it is appropriate to indicate that the older workers tend to have experienced a higher mobility, which is natural to their period in the job market (Abdulrhman & Katsaiti, 2015, p. 11). This fact partially explains lower level of joblessness among older generation.

Taking into account that the level of unemployment among the Emirati youth increases considerably (Makahleh et al., 2012; Ministry of Labour, 2011), it is possible to assume that this tendency may be related to voluntary unemployment caused by the fact that well-educated youth from financially prosperous households refuses to take low-paid and challenging occupations offered by the private sector. Similarly, increased unemployment rates among the youth may be connected to demographic characteristics of the population growth (Ministry of Labour, 2011). In other words, age is an important variable that contributes to unemployment.

According to Al-Qudsi (2005) the GCC unemployment is characterized by five key dimensions of heterogeneity: an age differential, an education differential, a gender differential, a disability differential and a spatial differential (p. 8). The presence of this heterogeneity means that unemployment in the UAE is a multifaceted issue. In terms of the age variable, it is estimated that about 75% of unemployed individuals comprise of the Emirati youth. The age category of this group of individuals is under the age of 30 years. Furthermore, in terms of education, it has been revealed that the contribution of education to unemployment has been minimal since the 1990s, mainly due to the inadequacy of the education system to prepare a productively employable workforce (Al-Qudsi, 2005, p. 9). This insight means that the educational needs should be improved to meet the realities of the current business sector; only in this case the determinant of education can be utilized as a remedy to reduce the level of unemployment among the Emirati youth.

What is more, a gender factor suggests that there are more unemployed males than females. In addition, there is a disparity between the level of education and gender. For example, the percent of unemployed women with higher education degrees is slightly higher than for the same category of men (Al-Qudsi, 2005; Makahleh et al., 2012). Another important determinant of unemployment in the UAE is the level of disability. This level is believed to be rather high according to the following statistics: the percentage of the disabled natives ranges between 8 and 10% (Al-Qudsi, 2005, p. 10). Besides, Al-Qudsi informs there is such a phenomenon as hidden disability in the Emirati society that is predefined by a biased attitude at the workplace and during recruitment, as well during other kinds of social interactions. Finally, in terms of spatial variable, the UAE spatial unemployment rates ranged between 1.4 to 5.8 percent in Abu Dhabi and Umm al-Qaiwan respectively (Al-Qudsi, 2005, p. 11). This determinant resonates with the locations of business centers, which means that the opportunities for satisfactory employment are quite unequal within this state.

To address the issue of unemployment, the government of the UAE launched Emirates Nationals Development Programme in 2005. This states initiative is aimed at increasing the involvement of the citizens in financial, banking, and other private, government, and mixed sectors. According to this program, the needs of the youth should be taken into consideration while creating the new job positions that would provide satisfactory working conditions (Makahleh et al., 2012). Moreover, short-term interventions include providing free training to employees prior to and within a short period of time after they are employed in order to ensure that the workers credentials and expectations are in compliance with the realities at the workplace. In addition, the nationals may enjoy financial support in the form of unemployment insurance or an additional percent to the salary that is paid by a state to increase job satisfaction of workers (Ministry of Labour, 2011).

At the same time, the Emirati government elaborates long-time interventions against joblessness that are mostly focused on involving private and financial sectors in collaborative activities. Working together, these establishments are expected to enhance prestige and promote the benevolence of working in the private segment. In practice, this approach is suggested to minimize foreign labour in-flow, reduce dependence on expatriate workers, especially unskilled, and encourage labour market mobility (UAE Ministry of Labour, 2011, p. 10). What is more, financial organizations are encouraged to fund both short- and long-terms interventions to help the state increase salaries and social benefits for the natives, and this is supposed to be an effective way to mitigate voluntary unemployment. To comprehend the level of effectiveness short- and long-term interventions established by the UAE, it is appropriate to monitor the patterns of unemployment in this country. Specifically, one should detect the changes in the above-discussed determinants of joblessness.

Hypothesis Development

Hypothesis 1: Voluntary unemployment is decreased as a result of states financial support and free training initiatives.

Hypothesis 2: Voluntary unemployment continues to grow because of the unemployment insurance.

Hypothesis 3: Increased mobility in employment enhances the ratio of temporal unemployment.

Hypothesis 4: Reduction of the international workforce increases employment of the nationals in the private sector, but makes political and social environment more challenging for both domestic and multinational businesses.

Hypothesis 5: Encouraging financial organizations and private sector to deploy the Emirati youth is a workable remedy to address the problem of unemployment in the short run.

Sample Selection

This survey requires gathering the primary and recent data about the determinants of unemployment and the implementation of the UAEs short- and long-terms interventions. Thus, the survey should start with retrieving and analyzing the corresponding policies that are currently in action in the areas of Emirati employment, recruitment, and training initiatives. This primary theoretical information should be synthesized with the data about joblessness determinants that are connected to the demographics (gender, age, education, disability, and spatial variables). Moreover, it is necessary to survey the recent fluctuations of oil prices, which may help in drawing a complete picture of the situation in relation to voluntary unemployment. For the same purposes, one may consider collecting the recent data about the financial prosperity of an average household in the UAE. In addition, it is appropriate to define the ratio of financial prosperity at an individual level. To ensure that the obtained statistics is relevant, the sample will be limited to the official Emirati-based and global organizations. Furthermore, to guarantee that information is up-to-day, the sample will be limited to the data released during the past 5 years. This approach should help in understanding the patterns of unemployment from a larger perspective taking into account the independent variables.

The second part of this research requires collecting the primary practical knowledge about the effectiveness of the launched preventive strategies. To succeed in this activity, it is necessary to interview the HR managers who currently work in private, semi-private, and public spheres. Besides, given that the problem of unemployment mostly affects young people, it is appropriate to learn the aspirations of the natives who study in the educational establishments of the UAE. In this way, it is possible to understand how to better address the needs and expectations of the youth that is going to become the labor force in a couple of years.

Variables Definition

Unemployment is a dependent variable. At the same time, the dimensions of heterogeneity of unemployment in the UAE such as age, education, gender, disability and spatial determinants are independent variables. Moreover, the success of interventions is a dependent variable, which is positively related to the ratio of joblessness.

Methodology

This study is a qualitative research. In particular, it is aimed at collecting primary and recent theoretical and practical information about the determinants of unemployment and discussing the success of the proposed interventions. Thereafter, the acquired findings will be synthesized with the goal of elaborating the patterns in employment, recruitment, and training that predefine job success, career choices, and financial prosperity of the todays Emirati youth. The results are expected to be useful for defining the effectiveness of short- and long-term intervention strategies. Besides, the findings can be utilized to correct the future intervention initiatives. Moreover, the research is aimed at providing the insights that are valuable for the youth that is going to enter the labor market in the near future, as well as for their potential employers in both public and private sectors.

To ensure that the present research is conducted in the framework of academic ethics, the sample should be informed about the purpose of the study, methodology, and outcomes of this research. The consent to obtain and use the testimony of the interviewed HR managers and students must be obtained prior to the beginning of the experiment. The design of the study suggests that it will consist of the three major research parts: collection of theoretical data, acquisition of practical knowledge revealed by sample, and synthesis of the findings.

Defining the limitations of this study, it is important to stress that not much data is available on the practical implications of the intervention strategies. Thus, collecting sufficient amount of information may be difficult. Moreover, given the multifaceted determinants of unemployment, it may be difficult to construct patterns that reflect the connection between independent variables and dependent ones. Blending theoretical and practical data should help eliminate the possibility of making conclusions on the basis of biased findings.

Summary

Private sector generates a lot of low paid job positions; therefore, it does not help reduce the high level of unemployment. Among the natives low wages are known as the main reason of refusal to apply for a certain job position. In this regard, the increased education of the nation does not help in addressing the issue of unemployment. The question is how to align education with the demands of the private sector, and how to find jobs for the Emirati youth that is supposed to reach the age of employment in the near 10 years. Another significant consideration is how to deal with the fact that jobs do not always satisfy the needs of the older generation (above 30 years old). Moreover, the growing demand for unskilled and low-skilled employees is not in compliance with the average increase of the level of education among the Emirati nation. Thus, the phenomenon of voluntary unemployment continues to evolve. That is why to decrease the level of unemployment in the UAE, it is necessary to elaborate short- and long-term interventions that are aimed at mitigating the existing adverse socio-economic tendency.