Introduction
Unemployment is a macroeconomic factor that affects the performance of any nation’s economy. It is an adequate measure of the performance of any financial system. Nations spend considerable proportions of their resources trying to address the problem. Some financial analysts use the level of unemployment when reporting on the health of the economy. Various studies have concluded that there is a correlation between the level of unemployment in the country and the strength of the economy (Jabeen and Katsioloudes 57). In the wake of the global economic crisis that occurred in 2007, many countries reported increased levels of unemployment.
This observation was a source of concern for economists (Jabeen and Katsioloudes 57). The United Arab Emirates has one of the lowest unemployment rates in the world. Its resilience in the global economy means that it was not affected significantly by the crisis. Although the UAE has a generally low unemployment rate, the rate varies among the emirates. This essay compares the unemployment rate for two Emirates, namely Abu Dhabi and Dubai. However, it begins by looking at unemployment in the UAE in general. The study will target to answer some questions. What is the unemployment rate in the Dubai and Abu Dhabi? What contributes to the unemployment rates observed for the two emirates? How does the unemployment rate compare for the two emirates? The other questions that will be answered include the causes of unemployment in these Emirates, the observed trends, likely future trends, and measures in place to address this macroeconomic factor.
The UAE Background
The United Arab Emirates is a conglomerate of territories that are commonly referred to as emirates. The seven Emirates include Abu Dhabi, Ajman, Al Fajayrah, Dubai, Ras al Khaymah, Sharjah, and Umm al Qaywayn (Jabeen and Katsioloudes 57). These regions share common geopolitical characteristics. They have a long history of Arabic culture. The city of Abu Dhabi is the capital of the Emirates, with the British awarding independence to these territories in 1971 (Jabeen, and Katsioloudes 57; Mayerowitz par. 3). The UAE is located in the Arabian Peninsula in the region between Oman and the kingdom of Saudi Arabia. The population of the UAE was reported at between 4.1 million and 4.6 million individuals in the results of the 2005 census. This figure has been rising over the years.
A significant proportion of the UAE’s population is young. Most of the citizens are also Arabic, with the chief religion being Islam. Education levels are also increasing, with the number of institutions that offer higher education being on the rise. The UAE has depended on oil for its national revenue since its discovery over 40 years ago. It is a member of the Organization of Petroleum Exporting Countries (OPEC). Before the discovery of oil in the Emirates, most of the population practiced fishing, pearling, agriculture, or herding as a means of livelihood (Mayerowitz par. 3). The discovery of oil has transformed this region into one of the world leaders in terms of trade, with economic analysts stating that the UAE has a high per capita income and a positive trade surplus.
Abu Dhabi has the largest reserves of oil in the Emirates. It is also the largest of the seven emirates (Sherif 3). This emirate is also the wealthiest in the UAE because of the sale of oil. Abu Dhabi also finances the federation in many areas. There are many opportunities in the oil industry in this Emirate. On the other hand, Dubai has considerable oil reserves, although its economy is mainly a service-based economy (The PRS Group: Country Report 1). Dubai is the second largest of the emirates. Its economy is dependent on the service industry where activities such as construction, real estate, tourism, and financial services contribute a large proportion of the economy. According to Sherif (3), Abu Dhabi and Dubai contribute over 80% of the income for the UAE. This income has seen these emirates develop at a faster rate in relation to their northern counterparts.
The UAE economy relies heavily on revenues from the oil and natural gas trade. This revenue is used to develop other parts of the economy (Sherif 3). The growth of UAE’s economy has been steady over the last few years. The economy has performed better than other Middle East economies. In the labor sector, the UAE has experienced a number of challenges over the past. The discovery of oil led to the influx of immigrants to run the industry since the federation did not have enough skilled employees at the time (Sherif 3).
The number of expatriates in the UAE was at some time a significant proportion of the population, making up over 80% of the people living there (Flanagan 2). The dawn of 2004 provides a case in point when the expatriate labor force consisted of 2.5 million individuals of the total 2.7 million workers (Flanagan 3). Therefore, citizens in the labor force were less than 10% of the labor force. The government of the UAE has ensured that the citizens are employed by considering them in the public sector where they make up over 80% of the workforce. The private sector, which is by far the largest, has only 2% of the citizens being enrolled. The strategy being used to increase the number of citizens in the workforce is the ‘emiratisation’ strategy developed by the government (Modarress, Ansari, and Lockwood 201).
The bulk of the expatriate workers in the UAE are from South Asia, with the working conditions being poor as reflected by the living standards. The construction industry is the main employer of these expatriates. Some often have fatal accidents at the workplace. However, the labor conditions in the UAE have been on the increase, with the ministry negotiating some basic benefits for the workers in the past. The improvement in working conditions for the expatriate workers and the increase of their salary as agreed between the employers and the government have seen the living standards of these workers improve. The level of unemployment in the UAE is considered among the lowest in the world (Flanagan 2). However, the rate has been on the rise, thus increasing from the level observed in 2001 of 2.4% to the current double digit.
Abu Dhabi Employment Status
The economy of Abu Dhabi is mainly oil-based, employing a significant part of the population. The national statistics in the emirate indicate that the level of unemployment has remained relatively constant. Most of the employees in this emirate are also from south Asia, just like in the UAE in general (Albuainain 3). The same conditions exist for the workers. The main source of employment in Abu Dhabi is the private sector that employs a large percentage of the population. The construction industry employs a significantly large proportion of the population, with this industry contributing significantly to the private economy.
Abu Dhabi has an expatriate population that is considered among the highest in the world. A large proportion of this population is employed. The proportion of unemployed individuals in this emirate is also mainly composed of expatriate workers. The oil and gas industry is the largest employer of expatriate workers in addition to the construction industry in Abu Dhabi (Albuainain 4). The emirate holds approximately 9% of the world oil reserves. This means that the industry will continue to attract workers from within the emirate and expatriate workers from elsewhere.
Some of the recent developments in the employment area of the economy in Abu Dhabi include the provision of special areas of the economy where only citizens can work (The Abu Dhabi Economic Vision 2030 8). The numbers of jobs that are tax-free have also reduced. This situation has increased the burden on employees and those that are not employed (Flanagan 1). As applied in the UAE, emiratisation has contributed to unemployment in Abu Dhabi as in the other emirates. This concept means that the government favors the employment of citizens in the public sector. The expatriates have a little chance of securing a job. Another aspect of emiratisation in the emirate is that the government has set a minimum proportion of emirate citizens that should be employed in the private sector.
The presence of emiratisation has created unemployment in several ways, especially for the expatriate workers. Private organizations have to comply with the standards set such as a minimum number of employees from any of the emirates in their workforce (Albuainain 5). This means that workers from other parts of the world have limited opportunities in the emirate. Those who may come looking for employment in Abu Dhabi may end up being jobless. In 2005, the unemployment rate for Abu Dhabi was at 3.5%. It was ranked among the lowest rate for any nation in the world.
The unemployment rate for Abu Dhabi has been on the increase over the past few years. Analysts state that this rate doubled from 2005 to 2013. The largest proportion of unemployed people in the emirate is women. This may be due to the culture that exists on women in the workplace (The Abu Dhabi Economic Vision 2030 9). The Arabic and Islamic cultures have a culture where women are required to stay in the homes to tend to the households and their husbands while the men are required to provide for the family. This practice may reveal the high unemployment rate among the female sex, with most of the women who are unemployed not considering looking for employment (Flanagan 3).
In 2005, the number of unemployed individuals in the UAE was at 786,738. This figure rose by over 100% to stand at 1,577,013 in 2012. This observation shows a remarkable increase in unemployment for the emirate. Some reasons have been given as to the rise in unemployment in Abu Dhabi. The poor economic performance of the global economy is among them. The population is also growing at a rate that is higher than the creation of new job opportunities in this emirate, and hence the other reason for the observed increase in unemployment over this period (Albuainain 5). The rate at which unemployment is changing is also reported to increase, with the unemployment level between 2011 and 2012 changing by 12.4% (Flanagan 2).
The unemployment rate in Abu Dhabi is dynamic. It has been changing on a positive and negative way over the last few years. The rate recorded in 2011 was 2.8%. This figure increased to 3.2% in 2012. The rate was significantly lower than that observed in 2005, which stood at 3.5% as stated earlier (Flanagan 3). Women in Abu Dhabi have consistently made a smaller proportion of the workforce. There were only 1,344,424 women employed in the emirate compared to the total workforce of 1,577,013 in 2012 (Flanagan 3).
Unemployment in Abu Dhabi is considerably low compared to other parts of the world, thus reflecting the general state of the same in the UAE. A number of measures have been put in place to ensure that the unemployment rate remains low in the emirate. Some of the measures include the economic policy that has been created to guide the country over the next few years. The country hopes to create employment opportunities in the near future to enable its citizens enjoy the increased employment opportunities.
Dubai Employment Status
Dubai is another emirate with a considerably low unemployment rate (Zulfiqar par. 1). This emirate depends heavily on the service industry for most of the revenues and the national income. Most of the employees are in the service industry, with the construction industry being among the major industries. Dubai’s economy has been widely studied after 2007 due to the resilience that it demonstrated against the global economic crisis that was experienced at the time. The economy continued to perform well even in the wake of the economic crisis, with the unemployment level remaining below the 1% mark (Buckley 23). Dubai has had the lowest unemployment rate in the world, with different sources reporting it at below 1% when using the different methods.
The construction industry is a large employer of expatriates in Dubai. Citizens are mainly employed in the public sector. It was reported that the proportion of employed females in Dubai was 31.4%. However, as in the other emirates, the male population was higher at 59.2% employed (Buckley 23). The unemployment rate in Dubai has been decreasing, with the emirate recording lower levels of unemployment compared to other emirates and regions. Between 2009 and 2011, the unemployment rate in Dubai decreased by half because of the improved performance of the various sectors such as the construction industry. There was also a positive performance of oil prices globally, with an average price for this commodity of this commodity increasing over the same period.
The number of emirates that were unemployed in 2012 was at 3,170. These individuals were mainly those without any form of training. Over 40% of the workforce that has higher education is employed. The total number of individuals who were unemployed in the same year was at 5,634. The unemployment rate stood at 0.4. These statistical findings mean that most of the unemployed people were the expatriates that had come into the emirate looking for a better life.
The construction boom in Dubai has ensured a steady supply of jobs for the expatriates and the citizens. However, the performance of this sector has been in question over the last few years, with the construction slowing down. Most of the buildings and projects have experienced financing problems, with a significant number of them staling. Therefore, the unemployment rate considerably increased, with some economic analysts stating that the emirate was headed for economic disaster. The oil industry has been performing well over the last few years. This situation has continued to cover the emirate against any economic downturn.
Several measures have been put in place to ensure that Dubai prevents an increase in the unemployment rate. One of these measures is the presence of sound economic policies that are aimed at creating and maintaining employment opportunities for the citizens. The emirate has also developed a foreign policy that controls the level of immigration into the job market. Emiratisation is widely practiced in Dubai, with expatriates working mainly in the service industry and mainly in constructions. The unemployment rate for Dubai has continued to decrease because of the policies that are in place in the emirate (Buckley 23). The unemployment rate in Dubai reflects the general unemployment level in the population. However, it is important to note that the employment rate for the various races, citizenship, and gender varies.
Comparison
Dubai and Abu Dhabi are the main emirates that drive the economy in the UAE. These emirates are also important geographically since they make up over half of the land mass for this federation. The economies of these emirates are important, as they are the main sources of income and employment for the rest of the emirates. The oil industry is a common industry for the two emirates. It provides the federation with the necessary revenues and cash foreign exchange.
Both of these emirates draw their labor from foreign countries. Findings show that the proportion of expatriates in the emirates is significantly high. This observation is significant when comparing the unemployment rates for the two nations. The other similarity in the labor sectors for Abu Dhabi and Dubai is that they have significant investments in the service sector, with this sector providing employment opportunities for the citizens and expatriates. The unemployment rate for the two emirates is an important aspect of the UAE’s economy. Unemployment in the two emirates can be attributed to several factors such as the global economic performance and the slowing of the various industrial sectors. The other reason for unemployment is the increased influx of expatriates who end up being unemployed.
The trends observed for Dubai and Abu Dhabi are similar to the national unemployment trends for the UAE. This inference may be explained by the fact that the two emirates have the largest part of the population. Hence, any statistic reflects the national average. While the unemployment rate in Dubai is frequently below 1%, the unemployment rate for Abu Dhabi is considerably higher. Several reasons may be advanced for the disparity in employment between the two emirates. One significant explanation is the nature of the economies for the two emirates. While Abu Dhabi is heavily reliant on the oil returns, Dubai has been able to diversify its economy over the past few years. The service industry employs thousands of people in Dubai, with one of the major areas being the construction industry.
Another reason for the disparity between the unemployment between Dubai and Abu Dhabi is the relative sizes of the emirates and the population. Dubai is a small emirate within the city holding a large proportion of its population. The other difference between the unemployment for the two emirates is the proportion of the employed women. Dubai has managed to recruit a significantly larger population of women to its workforce compared to Abu Dhabi that has only few women workers. Abu Dhabi had only 14% of the women being employed while the proportion of employed women in Dubai is over 30% of those eligible for employment.
The unemployment rate for the two emirates is also varies in the number of unemployed expatriates. Abu Dhabi has a large proportion of its foreign citizens being unemployed compared to Dubai. The proportion of unemployed expatriates in Abu Dhabi is over 10%, with the figure for Dubai being considerably lower at less than 5%. The differences in the unemployment rate for the expatriate workers are because of the disparities in the population of these workers in the two emirates, with Abu Dhabi having a considerably higher population of workers.
The other difference that emerges in the unemployment characteristics for the two nations is the age of the unemployed population. The population of the UAE is made up mostly of the youthful people who have different areas in which they work. The expatriate population in the UAE is also largely young, with an average age being 30. The young expatriates come into the federation in search of jobs. The youthful cohort makes up the greatest proportion of unemployed individuals in the UAE. The same situation is observed in the two emirates under discussion. Dubai has a lower proportion of young individuals being employed compared to Abu Dhabi.
The rate of unemployment has been used in the past to evaluate the economic performance of the nation. The better performing economies have a relatively low unemployment rate. The assessment of the unemployment rate in Dubai and Abu Dhabi allows for the comparison of the economic performance of the two emirates. Therefore, it will be appropriate to say that the economy of Abu Dhabi is better performing compared to that of Dubai when using this macroeconomic factor as a basis for comparison.
Conclusion
The analysis of unemployment as a macroeconomic factor is an important part of assessing any economy. Unemployment is one of the indicators of the health of any economy. The UAE has one of the lowest unemployment rates in the world. The two emirates that have been discussed contribute to the lowering of the unemployment rate. Abu Dhabi has a higher unemployment rate compared to Dubai, with Dubai having the lowest unemployment rate in the world.
There are disparities in the unemployment rate for the two emirates such as the observed rate for women, young people, and expatriates. Women unemployment rate for Abu Dhabi is higher compared to that of Dubai, which boasts of over 30% employed women population. The population of unemployed youths in Abu Dhabi is also higher in Abu Dhabi compared to that observed in Dubai. In general, the unemployment rate in Dubai is lower in relation to that of the United Arab Emirates of which it is a member. Dubai is also performing very well on the international front in terms of employment, ranking highly among the nations with very low unemployment rates.
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