Dubai, incorporated: hiring and firing

 Dubai laws make it very easy for a company to hire whomever it needs from abroad. There are some attempts at Emiratization, but they are nowhere near as serious as in neighboring Abu Dhabi. In the free zones, in fact, they don’t exist.  Upshot? Dubai is one of the few polities in the world (with Abu Dhabi perhaps being the other) where the conceit of comparing the country to a company actually makes sense.  Non-citizens make up 96% of the labor force, and their residence permits are directly tied to their jobs.

 
The Dubai government charges fees for labor permits, but doesn’t view them as a source of income. The upside for Dubai is obvious. Production and construction costs are more like Shanghai than Seattle. Firms can recruit in a global labor market, and offer salary premiums to skilled workers over what they would get in London or Paris without raising their own labor costs. The resulting growth creates a wonderful cycle: since firms in many industries like to near other firms in the same industry, growth begats growth, and the owners of Dubai real estate (e.g., the ruling family) make a boatload of money.

It gets better. First, Dubai doesn’t pay the costs of educating all those workers; nor does it have to worry about their retirement. They come, do what they do, then go home. Governments in places like the Republic of the Philippines or the United Kingdom subsidized their education and will handle their old age. Second, the labor force drops in downturns. No worries about the social cost of unemployment. For example, the Indian embassy to the UAE reported that 20,000 seats on flights to India had been “bulk-booked” by Dubai employers for March 2010. The workers are flown out the same day they get fired because, in the words of a British construction site manager, “a lot of them commit suicide and we don’t want that on our hands.”

At this point, the answer to Barry’s question is obvious: the work system isn’t messed up at all. An auction of work permits would be the equivalent of a direct tax on labor. It would make as much sense for the Dubai government to auction off work permits as it would for the developer of a suburban business park to charge rents based on the number of employees.

 

Of course, you get some weird results. Consider the Emirate’s population pyramid. The female side resembles a somewhat exaggerated version of many large cities, which show a bulge of childless people in their prime working years. (American cities have high birthrates, and are often exceptions to this pattern. Brooklyn’s pyramid, for example, is a real pyramid.) The male side is just strange, driven by South Asian men working on construction sites and (much less so) Filipinos working as semi-skilled labor. (I have heard more than one Westerner here say flat out, “The Filipinos saved this place.”)

 

About 22% of the population (as of 2005) lives in “collective housing,” e.g., labor camps. They most resemble a dusty version of California-style dingbat apartments with less parking and no graffiti. By law, the employer’s name has to be emblazoned on the side of the building. They are a bit hard to find ... in the sense that you will have to work to convince the average cab driver that you aren’t confused and really want to go. That said, other than the signs proclaiming “Visitors are not allowed in the camp” there is nothing stopping you.

 
Sadly, I can’t find the photograph of the Chili’s logo.

 
The upshot is a development model that really is akin to a real estate development company. The unanswered question is how much that model will have to change. Eventually the construction boom will come to an end, but the social problems from that will be channeled to Bangladesh. Similarly, as other posts have already discussed, the free zone model is also going to come to an end, most likely (I’m told) via the implementation of a VAT. (As oil and real estate returns dwindle, the Emirate will need tax revenue to sustain public services, which the businesses in the free zones rely upon.)

What I do not know is how the model will develop. No American city has ever tried anything like it; only five large metropolitan areas in U.S. history have ever gone above 40% foreign-born: Detroit between 1870 and 1900, New York and Chicago between 1870 and 1920, Miami-Dade after 1980, and Los Angeles after 2000. In fact, no major American city is that high today: for Miami and L.A. you need to cheat, and consider only the central counties ... which to be fair do contain two and ten million people respectively. (Toronto metro went over 40% in 2001, but I do not know the historical figures for Canada. Vancouver did not, in neither 2001 nor 2006. Immigrants, after all, have Canadian babies.) Moreover, the Emirates make getting citizenship almost impossible. 

In other words, they ruthlessly send the jobless home and offer no real path to citizenship. Maybe that can be maintained forever.

 
Or maybe the little cricketeers outside my window will have other ideas. 

Comments

[Doug M.]

It's a key part of the system that unskilled and semiskilled workers should be voiceless, powerless, and vulnerable -- feature, not bug. So, it's hard to compare it to any American city. (Or at least, to any American city of the last 75 years or so.)

Mild to moderate abuse of workers is chronic and almost normal in Dubai. More severe sorts of abuse are clearly quite common, though precisely how much so is hard to say. Again, feature, not bug. So it blurs the comparison to anyplace that has even halfassed sort-of-enforced human and workers' rights regimes.

Doug M.

[Doug M.]

Coming from another perspective: don't forget the role of labor contractors. If you want to open a TGI Fridays in Dubai, you don't go out and find your own workers; you go to a labor contractor. You say "we need X number of cooks and Y number of waiters", there's some back-and-forth -- Filipinos out front, Bangladeshis in the kitchen is the default; do you have a preference? Which slots should be filled by males, by females? Do you need attractive females for particular positions -- greeter, say? And then they go and find your people.

One thing that made Dubai different is that in some other Gulf states, these guys were bigtime rent-seekers. They'd be run by some well-connected locals. And they wouldn't be subject to real competition -- foreign labor contractors would be frozen out, hard. So, at best, they'd be kind of sluggish and not very competent. At worst, they'd be corrupt, evil fucks who would cheerfully screw over both employer and worker, and if you didn't like it? Take it up with my brother, the Emir.

What made Dubai different was that from the git-go, they threw the labor /contractor/ market open. There are some huge contractors -- the sort who employ hundreds of people, bring in tens of thousands, and who will indeed buy a few thousand airplane seats at a time and think nothing of it. And there are dinky little ones that are just a couple of guys in an office somewhere. And everything in between, including some that are very specialized.

The contractor market is open, but it's also regulated. The simple version is, Dubai will not allow labor contractors to screw over employers. Employees, absolutely -- especially employees from poor countries -- but employees, no. If you order 20 experienced short-order cooks from Sri Lanka and you get a couple of dozen Pakistanis who don't know which end of the egg to crack, you can find swift and effective recourse.

I suspect this system has been stressed in interesting ways in the last year or two, but I can't begin to guess how it's playing out.

Doug M.

[Doug M.]

"Dubai doesn’t pay the costs of educating all those workers; nor does it have to worry about their retirement."

On the other hand, a lot of their wages -- how much? There must be figures -- flows right out of Dubai and back to their homelands. So the multiplier effect of those wage payments is much lower than it would be otherwise.

It's pretty clear that Dubai still comes out ahead. Well ahead! But the remittance effect is significant, both for Dubai and for the workers' home countries.

Doug M.

[Noel Maurer]

Balance of payments figures are collected at the UAE level, so it's hard to figure out the value of remittances from Dubai per se. That said, it shouldn't be too hard to get a good estimate.

Agreed about their importance, and the importance of labor contractors. The only real reform has been the requirement that the ultimate employer take responsibility for housing conditions by, for example, putting its logo on the dormitories where its workers live. From what I saw, living conditions were not terrible (note the AC units) albeit overcrowded and without neighborhood
amenities outside the Koran-memorization centers.

Also agreed about the comparison with American cities, but that's why I brought it up. Someplace that's 90% foreign-born and offers no path to citizenship with places that are 40% foreign-born and have a long record of assimilating them. That was my point! Honest question, for my own use: was that point lost, or were you just reiterating?