View of part of the Fujairah Corniche and the Hajar Mountains in the Background

Friday, November 23, 2007

Biggest Pay Rise in UAE History

The UAE government ordered this week (20 November 2007) the highest salary increase rate in the history of the UAE Federation in which all federal government employees, including civilians and security personnel of the interior ministry, will get a 70 per cent salary hike with effect from January 2008.

The euphoria and hype evoked by the news of this presidential patronage and the lack of specific details have created a fog that has blanketed the truth about who gets this increase and who doesn’t.

What is the rationale for the salary increase?

Does this enormous increase mean that salary rates have been below standard for quite some time?

Is a back pay in order?

Is the new salary level in keeping with the current prices and cost of living or will this enormous salary increase hike the cost of commodities and services?

Is the UAE government providing leadership to the private sector and saying that this portion of the employment pie should necessarily follow suit?

What is the expected impact of this salary increase on other aspects of the economy such as inflation and Emiratisation?

John Chilton in The Emirates Economist has sounded one salutary warning in saying:

“There's a problem. Pay increases this large, out of line with private sector wage increases, run entirely contrary to the government's expressed desire to see more Emiratis in the private sector. Very few are, and with good reason. Their time would be better spent hounding someone for a job in government. That's a waste from the social perspective. It's a waste because it's effort that just moves money from one pocket to another and produces nothing. It discourages Emiratis from becoming engaged with the private sector and meritocracy. And not least of all the country develops no institutions of its own to foster economic growth.”

Source: ‘UAE Federal Government employees get 70 per cent pay hike’, Gulf News, 20 Nov 2007

Dr Geoff Pound