Unemployment Essay: The UAE Region

“Abstract

The private sector plays a more important role in the unemployment levels of the UAE nationals as compared to the public sector. The objective of this paper is to conduct an analysis of the role played by the private sector in overcoming the high rates of unemployment among the UAE nationals. It also aims to examine how the rate of national unemployment relates to the rate of private sector employment. This relationship will be established by conducting a regression analysis of the two variables. The paper concludes that the government ought to work with the private sector to develop ways to create more employment opportunities especially in the private sector, for the nationals. The findings indicate that changes in the employment levels in the private sector impact on the national employment levels. On the other hand, changes in employment levels in the public sector have no relation to the rate of unemployment of the nationals (Trading Economic 27).

Keywords: UAE unemployment, Emiratization, Public Sector, Private Sector

1.0 Introduction

1.1 Background

In the UAE, the private sector, as well as the public sector, has a role to play in the growth of the country’s economy and the rates of unemployment. The private sector is critical in these areas because the public (government) sector cannot employ all of the working population, thus the private sector is left to absorb the remaining portion. This contributes towards reducing the rates of unemployment and increasing the GDP of the country (International Monetary Fund). The unemployment rate is defined as the number of people, out of the total working population, actively seeking for jobs and willing to work at the prevailing wage rates, but cannot find jobs (Trading Economics 23).

In the UAE, their overall unemployment is considered among the lowest worldwide, which was 4.3% at the end of 2011. however, for the nationals, their unemployment rate is more than 19% (AG Reporter). Illegal expatriates are always entering the UAE job market, hence their number is not accounted for in this rate, which implies that the real rate of unemployment especially for the nationals might be higher. In recent times, the problem of unemployment has become acute. There has been a major increase in population attributed to the illegal expatriates (AG Reporter). In addition, the number of the nationals who graduate from high schools and universities has also increased. Recent data shows that the rate of unemployment for the nationals is higher as compared to that of the entire population, which includes the expatriates. According to the National Bureau of Statistics of the UAE, by the end of 2012, 20.8% of the UAE Nationals were jobless. Ali Al Nuaimi, a member of FNC brought up this issue citing that the rate of unemployment has risen from 13%, which was the initial figure for 2011 (AG Reporter).

1.1 The Purpose of the paper

The purpose of this paper is to analyze the relationship between unemployment rate and the rate of employment absorption of locals in both the private and public sector.

1.2 Research Objectives

a) To establish the unemployment rate of locals in the private sector
b) To establish the unemployment rate of locals in the public sector
c) To establish the impact of Emiritization on unemployment rate in the public sector
d) To establish the impact of Emiritization on unemployment rate in the private sector

2.0 Literature Review

2.1. Emiritization Law

The Emiratizition law was established close to a decade ago with the aim of creating sustainable job opportunities for the UAE nationals. The Emiratisition program is implemented nationwide and is a major priority for various private sectors, semi-government and government organizations in the Emirates (Trading Economic 27). It aims to assimilate the national workforce of the UAE into the labor market effectively. Most nationals who graduate at high school and university levels have difficulties landing suitable jobs despite their good education and skills (Trading Economic 27).

The Emiritization program aims at bringing success to any economic plans of the UAE, be it present or in future. This is achieved by an interaction between the government and key stakeholders as a policy for the provision of more employment opportunities for such Emirati graduates, whose number annually increases constantly and fast. With this program, the government aims to create approximately 600,000 jobs over the coming decade based on the 7% to 9% annual economic growth forecast (Al-Ali 367).

2.1 UAE and Emiritization

Emiratization is a decision valuably undertaken by the UAE government, for the welfare of people working in the public and private sector. Its sole aim is unemployment reduction and to ensure the growth of the nation’s labor force. This policy advocates for hiring of locals instead of outsourcing talented and skilled labor force. In this case, the compensation concept is essential as far as human resource management is concerned. Recently, a study undertaken on the attitudes of the private sector revealed that 96.5% of the Abu Dhabi students especially those attending the best colleges in the Middle East look forward to employment after graduation (Abu Dhabi Government n.p). This has resulted to the government and registered companies to open up sites of job vacancies to the job seekers at no cost (Trading Economic 28).

There is a perception that Abu Dhabi economies are characterized with limited competitiveness. This is due to challenges like unemployment of the nation’s workforce, future and current demographic structures. This has resulted to the implementation of government subsidies for the organization and workers, which will lead to significant attraction of locals in private sectors (Randeree 67).

2.2 Private Sector Emiritization Process

Private companies are faced with challenges of recruiting suitable candidates due to unrealistic expectations by employees in terms of promotions and pay (ICoS 10). The government aims at bridging the gap between the private and public sectors. The UAE simply aims at ensuring that quality is maintained in governance, which calls for proper compensation (UAE Government). Emiritization also advocates for the quota system, which requires the employment of a certain Emirati percentage. However, many students prefer working in the public sector as compared to the private sector Kherfi 98). The replacement of foreign employees present challenges for the government and makes it hard for job opportunities to be created. Retaining and attracting affordable and qualified people becomes difficult due to the challenges presented. This calls for organizations to maintain and enhance their reputation and introduce a powerful talent management system. The most significant aspect that companies operating in Abu Dhabi have is a system of talent management due to the challenges and opportunities they encounter today (Kherfi 104).

2.3. Public sectors’ Emiritization Process

This process is almost similar to the private sector only that there is an integration of compensation in the process. Executing and developing a compensation plan is a critical challenge affecting human resource professionals. These challenges are because of the upward pressure that nationals experience like salaries due to talent competition, inflation among others. Additionally, expatriates’ compensation complexities and the need for non-cash benefits and development needs for long-term incentives need to be addressed. These are basically internal issues with external issues involving competitors’ pay level or prevailing economic conditions (Al-Ali 372).

3.0 Methodology

3.1 Regression Method Used

The technique used is the least squared method (OLS) because it results in straightforward results after computation, and is conceptually simple. This method can be used in the analysis of both observational and experimental data. Regression analysis in statistics refers to the estimation process aimed at establishing how the relevant variables relate (Toffalis 526). The process includes the analysis and modeling of several variable techniques. The aim of the analysis is to focus on the relationship between the independent variables and dependent variables. Regression analysis is mostly used in forecasting and making predictions where a substantial overlap in field machine learning is likely to occur. It is mostly used in casual-infer relationships. The most familiar regression methods are the least ordinary square and the linear regression methods, which are parametric in nature. On the other hand, non-parametric methods of regression have a function specifically tailored to perform infinite dimension functions. The regression analysis’ performance is dependent on the data generation process (Toffalis 529)

Regression analysis methods are used in predicting the Y variable values given that the X variable values are known. The prediction of the range of values used in model-fitting in a data set, which is within the range, is informally known as interpolation. This prediction of the range is referred to as extrapolation. Extrapolation performance strongly relies on classical regression assumptions. As the extrapolation gets out of the data range, the chances of model failure become higher. This is a result of the differences between true values or sample data and the assumptions. It is advisable to accompany the estimated value together with the predicted uncertainty level (Toffalis 528).

When this exogeneity assumption holds in the ordinary least square method, the variables are referred to as exogenous. On the other hand, when the assumption does not hold, then the error correlated or regressed is known as endogenous rendering the OLS theory invalid. In such a scenario, the “method of instrumental variables” results in carrying out of inference (Toffalis 530). The regression analysis for this scenario will critically analyze identically distributed and independent variables. This regression is based on the classical assumption of one being a representative sample of population with inference prediction. There is a random variable where there exists a conditional zero mean. On the other hand, independent variables are free of miscalculations upon measurement. However, another technique like “errors-in-variables” model and the predictors’ variable are linearly independent. Another assumption is uncorrelated errors, which are simply a variance-covariance matrix of errors having non-zero elements and diagonals, which are error variance (Toffalis 529).

There is a classification of variables. For example, the rate of hiring of local employees in the private sector can be classified as a limited dependent variable, which is used econometrically and statistically for constrained and categorical variables. The variable response can be non-continuous, which is limited to real line subset (Long 76).

In a binary variable scenario, like this one, the analysis of regression proceeds linear least squares’ regression, a model referred to as linear probability. On the other hand, a nonlinear regression model is for dependent binary variables, which include the legit and probity model. The multivariate model is a standard estimating method that joins relationships between independent variables and dependent binary variables (Long 79). There is another type of variable known as the categorical variables, which consist of two or more values referred to as multinomial legit…”

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