Labor Reform in the Middle East

Stephen DeAngelis

August 8, 2007

Last May I wrote a post about Dubai, UAE [On Becoming a Tiger], and noted in that blog that Emiratis are outnumbered by foreigners, including foreign laborers whose working conditions have been a source of past embarrassment. The more that the Dubai economy booms, the more scrutiny its labor practices receive. This increased international attention has finally prodded Dubai political leaders to consider doing something about working conditions for foreigners [“Fearful of Restive Foreign Labor, Dubai Eyes Reforms,” by Jason DeParle, New York Times, 6 August 2007]. DeParle writes:

“They still wake before dawn in desert dormitories that pack a dozen men or more to a room. They still pour concrete and tie steel rods in temperatures that top 110 degrees. They still spend years away from families in India and Pakistan to earn about $1 an hour. They remain bonded to employers under terms that critics liken to indentured servitude. But construction workers, a million strong here and famously mistreated, have won some humble victories. After several years of unprecedented labor unrest, the government is seeking peace with this army of sweat-stained migrants who make local citizens a minority in their own country and sustain one of the world’s great building booms. Regulators here have enforced midday sun breaks, improved health benefits, upgraded living conditions and cracked down on employers brazen enough to stop paying workers at all. The results form a portrait of halting change in a region synonymous with foreign labor and, for many years, labor abuse.”

Workers come from as far away as the Philippines, lured by promises of good pay and working conditions. As DeParle notes, most of those promises have been empty. Almost every developed country relies to some extent on foreign workers who are willing to accept difficult and dirty work for minimum wages. If the Department of Homeland Security’s recently announced crackdown on the employment of illegal aliens actually develops, Americans could soon understand exactly how dependent on these workers they have become. DeParle writes:

“Many rich countries, including the United States, rely on cheap foreign workers. But no country is as dependent as the United Arab Emirates, where foreigners make up about 85 percent of the population and 99 percent of the private work force. From bankers to barbers, there are 4.5 million foreigners here, compared with 800,000 Emirati citizens, according to the Ministry of Labor. About two-thirds of the foreigners are South Asians, including most of the 1.2 million construction workers.”

Residents of Dubai are becoming increasingly uncomfortable being surrounded and outnumbered by a group of people who have become increasingly unhappy with their pay and working conditions. As amazing as it sounds, labor unrest seems to have caught Dubai residents by surprise.

“The labor agitation came as a surprise in this city of glass towers and marble-tiled malls where social harmony is part of the marketing plan and political action can seem all but extinct. But when thousands of migrant construction workers walked off the job last year, blocking traffic and smashing parked cars, it became clear that the nonnatives were restless. ‘I’m not saying we don’t have a problem,’ said Ali bin Abdulla Al Kaabi, the Emirates’ labor minister, who was appointed by the ruling sheiks to upgrade standards and restore stability. ‘There is a problem. We’re working to fix it.’ Change here is constrained by rival concerns of the sort that shape the prospects of workers worldwide.”

I’m constantly amazed that employers who treat workers poorly believe they can get away with it forever. They never have and they never will. They can get away with it for awhile, but the consequences of ill treatment are always significant and negative. The UAE is not alone in having labor problems. My colleague Tom Barnett recently posted blogs about labor issues in two other countries [McDonald’s capitulates to grow and The growing free trade union movement in Iran]. Globalization’s upside ability to bring millions out of poverty can only be realized if working conditions help foster a growing middle class in emerging economies. Since foreign workers in Dubai have no chance of becoming citizens, the best way to ensure that they will return happily to their own countries is to provide them with decent working conditions and a sufficient wage to permit them to achieve what they wanted in the first place — to make enough money to send some home so that their families can live comfortably and also save enough so that they can return home and invest it in a new life there. Such is the case of Sadiq Batcha, a 40-year-old laborer from India who is working in Dubai. He considers himself lucky. “His monthly salary of $250 [is] more than twice what he could make back home in an Indian fishing village. He [has] built a house, given his sister a dowry of $2,500, allowing her to marry, and sent his children to a private, English-speaking school.” That is the expectation workers bring with them, but DeParle reports that they find something quite different when they arrive.

“Among those buffeted by recent events is Sami Yullah, a 24-year-old pipe fitter from Pakistan, who arrived four years ago. Like many workers, he paid nearly a year’s salary in illegal recruiter’s fees, despite laws here that require employers to bear all the hiring costs. In exchange, he was promised a job building sewer systems at a monthly salary of about $225, nearly twice what he earned at home. Mr. Yullah found the work harder and more hazardous than he had expected. Two co-workers were killed on the job, he said, and two others injured, when they fell through a manhole. Conditions at the workers’ camp where he lived, rudimentary at best, disintegrated when his employer let the water and electricity lapse. Then a problem even more basic arose: the company stopped paying the workers. The owner kept saying, “Wait a minute, I will get some money,”‘ said Mr. Yullah, who joined about 400 co-workers last year in walking off the job. ‘He was taking advantage of us.’ In a break with past practice, Mr. Kaabi’s Labor Ministry backed the workers. Tapping a company bank guarantee, it restored the camp utilities and paid some of the back wages. It barred the company, Industrial and Engineering Enterprises, from hiring more workers, leading it to close its Emirates operation. And it helped workers like Mr. Yullah, who is still owed nearly six months’ back pay, find new jobs. By global standards, punishing a company that does not pay its workers may seem modest, but Mr. Yullah recognized it as something new.”

Dubai political leaders understand that the boom there can’t last if labor is not available to support it. Some Dubai companies rely on false promises, unquenchable hope, and dismal conditions elsewhere to help them attract workers. To date that has been sufficient, but that may not last as word gets out and conditions improve abroad.

“Some workers count their debts. ‘I was so eager to come to Dubai, I didn’t ask questions,’ said Rajash Manata, who paid placement fees of nearly $3,800, thinking his salary would be six times higher than it is. ‘I blame myself.’ Some workers simply count the days until they see their families again.”

Although the workers have begun to assert themselves, the bright glare of the world press and non-governmental organizations ha
s had an even greater impact on getting Dubai leaders to consider making changes.

“For a country courting tourists and investors — and a free trade pact with the United States — [a blistering 2006 Human Rights Watch] report stung. ‘If the U.A.E. wants to be a first-class global player, it can’t just do it with gold faucets and Rolls-Royces,’ said Sarah Leah Whitson, the Middle East director for Human Rights Watch. ‘It needs to bring up its labor standards.’ Mr. Kaabi, 39, took office in late 2004, with what he describes as a mandate to do just that, for ethical and practical purposes, a departure from the Labor Ministry’s earlier focus on processing employer requests for more foreign hires. ‘A healthy worker will provide more effective labor — period,’ he said in an interview. He created the summer sun breaks, from 12:30 to 3 p.m. He pledged to increase the number of inspectors to 1,000, from roughly 100, though progress has been slow. And he publicly punished companies caught failing to pay their workers. The most notable action involved the Al Hamed Development and Construction Company, which was run by a well-connected sheik. After hundreds of workers blocked traffic in Dubai, Mr. Kaabi ordered the company to pay nearly $2 million in fines and temporarily froze the company’s ability to hire new workers.”

Kaabi admits that if all the Indians in Dubai departed the city would have to shut down. While he doesn’t expect that to happen, he does understand that conditions need to improve so that both the residents of Dubai and those who make it function effectively are happy with the arrangement. This epiphany is coming to the government late in the game and has not yet happened for many employers. This can (and should) be a win-win-win situation for the country, employers, and employees — but no victory can be achieved by exploitation. Dubai has become a world-class city and needs to ensure that all its citizens benefit from its new status. If Dubai can actually implement necessary reforms, it could be a model for ethical economic growth elsewhere.