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Volume :23 Issue : 90 1998      Add To Cart                                                                    Download

FOREIGN WORKERS IN GCC COUNTRIES: Pay Purchasing power – its Effects and Relationship to Job Nationalization.

Auther : Dr. Abdel-Raheem F. Al-Fares

 

           The issue of foreign workers in the GCC Countries have received much attention from researchers and private and governmental bodies.  The present paper analyses, first, the purchasing power of the foreign workers pay and its effect on their standard of living as compared to their counterparts in terms of skills in their home countries and in terms of pay to nationals is host countries.  Second, in light of the previous analysis, the paper presents three alternatives towards nationalizing jobs.

          Taking a hypothetical group of unskilled or semi-skilled foreign workers earning SR (Saudi Riyal) 3000 per year, assuming that 40 percent of the pay is remitted to home country and utilizing information presented by the World Bank Atlas (1995), the study finds:

 1.  Although the money pay is the same, there is purchasing power differential (Pay in international dollars) due to working in different host countries, e.g. a Bengali working, for example in Oman receives a higher pay in international dollars that a Bengali working in the UAE.

 2.  Differentials attributed to national origin.  The Bengali’s pay in international dollars is higher than the Turk’s though working in same host country and receiving same money pay.

 3.  The host country and the national origin factors once combined, obviously exaggerate the differential.

 4.  Foreign Workers in GCC Countries could achieve a much higher standard of living than the average citizen in their home countries.  They, though unskilled or semi-skilled, went a long way towards achieving the average standard of living in oil-rich countries: in 1993, a Bengali working in Oman whose annual monetary pay was SR 3000 achieved 98 percent of the average Omani standard of living.

 5.  GCC authorities have been keenly studying and trying approaches towards nationalizing jobs and reducing the numbers of foreign workers.  They have had modest success.  This paper presents another dimension towards understanding the foreign labour market in GCC countries and presents three alternatives:

  First:

         Actions that would encourage foreigners to return home.  The analysis shows an inverse relationship between the purchasing power of the foreign worker’s pay and his willingness to return or the success of actions, aimed at encouraging him to return home.  Some nationals (e.g. Turks) with relatively lower international dollar pay, are more ‘sensitive’ to such actions, i.e. the alternative encourages using ‘sensitive’ workers.  It is, however, in conflict with humanitarian, strategic and some economic decisions.

 Second:

          The introduction of the market-based labour environment: granting foreign workers, once they are admitted in GCC, freedom to change jobs, dismantling or sufficiently changing sponsorship (Kafalah) systems and allowing market forces to set pay for all.

 Third:

          Same as in second plus charging fees on foreign workers.  Applying market conditions causes rise in foreign workers pay and places pressures on nationals pay.  The foreigners’ advantage is further enhanced by the purchasing power effect.

        It is proposed that charges be utilized in establishing a fund to help national workers: training programs, unemployment insurance and encouraging the private sector to secure jobs to nationals.

          It is recognized, however, that further research is needed to study implications.

 

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