Foreign Labor Influence on the UAE Economy

The United Arab Emirate (UAE) dependency on foreign workers is a subject that dominates any discussion concerning the UAE’s economy. This fact implies that in the occasion that foreign workers depart from the UAE, its economy would be influenced negatively. Some do not realize that an economy is influenced by a variety of important features, not only the labor force.

This article will outline the relation between the economy and foreign labor and to what extent the latter influences the UAEeconomy and its economic growth. The economic cycle of 2002-2012 was quite eventful. The UAE’s economy started to thrive in 2003 where it reached its peak in 2006. After 2006, the UAE’s economy went into a crisis until it finally returned to normal by the end of 2012.

Population Growth

During 2002-2012, the population rate of the UAE seems to follow its economic growth rate, whereby population reached its peak in 2007 and then dropped rapidly to just above 0%. This reveals that the percentage of labor relies on the economy, which is more logical since an economy draws foreign workers as it develops and expands. At times when the economy experiences downfalls, foreign workers decrease.

Emiratis and UAE Residents

A country’s Gross Domestic Product (GDP) per capita is more during times whereby the economy expands and thrives. In reference to the UAE’s GDP, statistics show that following the international financial crisis, the country’s GDP dropped by 40% only to jump up again in 2004.

The above trend reveals that as the UAE expands, foreign labor supports the growth by being employed in positions. Confined labor policies smother the UAE’s economic growth since these restrict the supply of employees. This is especially the case in the UAE’s knowledge-based segments.

On the other hand, during times where economic growth declines or even is in crisis, the workforce adjusts automatically and evens out the GDP. Due to the fact that foreign workers are able to save large proportions of their income during the time where the economy expands as well as the fact workers are not subject to Income Tax means that they have enough saved to use in times when economic growth declines. Overall, foreign workers are interested in working in the UAE until its GDP becomes stable. 

On the other side, during recessions all public services experience budget cuts. This does not necessarily mean the public services sectors do not offer high quality because during recessions, there are less people to cater to so the quality of the services remains the same.

The same supply and demand trend applies in the private sector of the economy. There is less supply which matches with consumers’ decreased demand. Imagine there are 10 opticians throughout the country and people cannot afford to spend money on examining their eyes and purchasing glasses. Thereby, 5 of these opticians leave the country, which means the 5 remaining opticians sustain their business activity and quality of services. In basic terms, the workforce adjusts automatically to the demand and supply of the economy.