Inclusive growth: New efforts focus on boosting Emirati participation in the workforce

As Abu Dhabi seeks to transform itself from a resource-based economy to one in which knowledge-based activity accounts for a far greater share of GDP, its labour market faces a transition point. To date the emirate has, like much of the rest of the GCC, had great success in attracting skilled and unskilled foreign labour to work within its jurisdiction. It has provided financial incentives to private companies, manifold job opportunities for expatriates, formulated one of the world’s most favourable tax regimes and established a raft of support services for white-collar foreign workers.

In turn, its expatriate workforce has helped the local economy to grow rapidly in both size and complexity, providing the high volume of workers needed to develop the emirate’s infrastructure and the leading-edge skills which underpin Abu Dhabi’s success in areas such as financial services and the more challenging aspects of hydrocarbons extraction. The result of this process is a multi-skilled, polyglot workforce which calls the emirate home, yet retains social and economic ties with a multitude of nations, from the US and UK, through to regional population centres such as Egypt and Jordan, other Gulf states like Oman and Kuwait, and eastwards to Bangladesh, Pakistan, India, Malaysia and the Philippines.

Mixed Workforce

The steady influx of highly skilled foreign workers has also allowed the Abu Dhabi government to oversee a process of skills transfer, which in turn has enabled a growing number of the emirate’s citizens to play a direct part in its economic expansion. However, the ease with which the emirate has secured foreign workers has come at a price, and a view has arisen amongst some observers of the economy that the ready availability of foreign labour has caused the domestic workforce to be somewhat overlooked. Labour market data supports this argument.

Increasing the number of Abu Dhabi nationals in the workforce has remained a persistent challenge, despite the growing job opportunities created by the rapidly expanding economy: in 2001, citizens accounted for around 10.6% of the emirate’s labour force of some 676,547 workers, according to the Statistics Centre - Abu Dhabi (SCAD); however, by 2011, the proportion of locals in a significantly expanded labour market of 1.4m had dropped to 9.1% CHALLENGING TASK: As the Abu Dhabi government continues to work to diversify the economy away from a reliance on hydrocarbons activity, it faces what the Competitiveness Office of Abu Dhabi (COAD), a unit that sits within the Abu Dhabi Department of Economic Development, describes as a “stark set of challenges”, centred around the question of establishing employment opportunities for citizens, in particular for women and young people, and equipping them with the skills to transition from the public sector to private sector employment.

The COAD’s recognition of the importance of private sector expansion speaks to a phenomenon that has skewed labour markets across the region: as resource-rich states have poured revenues into developing infrastructure and hiring foreign nationals to implement their strategic plans, the local workforce has tended to view the public sector as a more favourable employment option. Working for the government is perceived as more stable and, thanks to a tradition of high public sector salaries, more financially rewarding than private sector employment.

The sixth “Arab Report on Cultural Development”, compiled by the Arab Thought Foundation and published in late 2013, revealed that only 20% of young people in the GCC believed their educational qualifications suitably equipped them for jobs in the private sector, and that 70% of women between the ages of 19 and 24 were unemployed. Responding to the local press after the report’s publication, Bilal Al Budoor, assistant deputy of arts and culture at the UAE Ministry of Culture, Youth and Community Development, commented that “there is a huge need for improvement”, and that the UAE “must link education with the expectations of the labour market”.

Job Skills

Equipping its youth with the necessary skills to enter the workplace is essential if Abu Dhabi is to shift the local economy towards a more knowledge-based model. Fortunately, the emirate approaches this task from a relatively strong base: according to the COAD, the emirate boasts a high literacy rate by regional standards, of around 92%, and has reached a secondary attainment rate of 88%. The COAD’s inaugural “Abu Dhabi Competitiveness Report”, however, reveals a more mixed picture when it comes to higher education and its ability to meet the demands of employers.

On the positive side of the ledger is the fact that Abu Dhabi’s higher-level institutions have reached out to their international peers in order to enhance the sources of skills and learning in the emirate, most notably in recent times through partnerships with the Paris-Sorbonne University, INSEAD and New York University. While these developments reflect the success of the government’s policy of enhancing the higher education opportunities for its citizens, the COAD identifies two areas, in particular, which might benefit from more attention as the education sector continues to develop.

Higher Education

The COAD identifies the shortage of PhD programmes as an outstanding issue, with only three Abu Dhabi universities providing doctorate degrees. This is recognised as particularly problematic due to the linkages between doctoral programmes and the region’s knowledge output, for example patent registrations, academic journal publications, and research and development (R&D). Therefore, the COAD recommends the creation of a formal R&D programme and the provision of additional advanced degree options.

Initiatives such as these, as well as addressing a shortage of skills at the higher end of the workforce, would also have the more general effect of raising the number of graduates in the population, only around 10% of which currently hold degrees. The COAD report singles out Al Gharbia as most in need of higher education investment, pointing out that young people seeking employment in the petrochemicals industry, which dominates the local economy, often need to travel to Abu Dhabi City or Al Ain to enrol in suitable courses.

Another issue which the COAD has identified as an important challenge related to the emirate’s development of its human capital is that of encouraging new entrants into the workforce. Women account for around 32% of Abu Dhabi’s Emirati workforce, according to the “Statistical Yearbook of Abu Dhabi 2013” released by SCAD. Considering that women make up 48.6% of the emirate’s Emirati population, in the view of COAD, their relatively low labour market participation rate marks an untapped potential of some significance, which might be profitably released through the provision of enough desirable employment opportunities.

Higher Wages

However, according to some observers the provision of better education and the fostering of companies which provide more potential job opportunities for nationals can only go so far. Those of this view hold that regulation is necessary to ensure that Abu Dhabi’s nationals assume their place in the workforce, a principle which is regularly proposed in the form of employment quotas.

While quotas have been a matter of public discussion for years, the issue rose to new prominence in late 2013 when the members of the Federal National Council (FNC) called for stronger measures to provide private sector job opportunities for Emiratis. The calls coincided with the completion of a report by the FNC’s Emiratisation Committee, the details of which will provide the FNC with material to debate over the coming year. The report also includes a number of suggestions as to how to get more Emiratis into the private sector labour market before unemployment at the national level reaches an anticipated 150,000 by 2020.

Perhaps the most significant suggestion is a proposed requirement that companies that hire Emirati employees provide salaries commensurate with public sector pay levels. While this would clearly represent an additional cost for private sector companies, members of the FNC proposed that the salary subsidisation scheme already established through the Khalifa Fund might be expanded into a larger-scale, nationwide programme. Proposals such as these are likely to form part of a wider debate regarding Emirati employment over the coming years at the national level – one which holds significant implications and, potentially opportunities, for Abu Dhabi’s private sector companies.

Going forward, Abu Dhabi is set to continue pursuing a mixed strategy, involving boosting education, fostering job creation and issuing regulatory guidelines. Combined, these factors have the greatest chance of building the emirate’s human capacity.