GRM 2010 GRM 2011

Abstract Details

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Economic implications of temporary labour contracts in the GCC: Challenges in increasing productivity and retaining higher skilled workers
Paper Proposal Text :
The peculiar ‘demographic imbalance’ that characterizes the GCC has increasingly drawn significant societal and academic attention over the past decade due to the evolving role of the bloc in the regional and international economic arena. The imbalance is fundamentally seen as a product of the regions traditional labor market structures which are typified by persistently large inflows of foreign workers. Although these inflows do not appear to be unique in the context of global migrant flows, with the US and Europe being the first and second largest recipients of migrant workers before the GCC, certain characteristics render them particularly distinctive. Primarily, the vast majority of migrants into the GCC region are bound by temporary contracts through the ‘Kafala’ system which allows workers only ‘temporary’ or ‘guest’ status. Over the past few decades this system attracted large volumes of low skilled workers at competitive wages which have resulted in labor markets epitomized by constant churn and low labor productivity. Thus far this system has been essentially suitable for GCC economies as they have been largely driven by sizeable, and in some cases dominating hydrocarbon sectors and other labor intensive sectors such as retail, construction and utilities. However, the foreseen transition of the GCC into more diversified economic models, which will be characterized by a greater emphasis on knowledge and information industries, will increase their need to attract and retain higher levels of skilled talent. For example, in the case of Abu Dhabi, sectors marked for further growth and expansion in the emirate include pharmaceuticals, biotechnology and life sciences, aviation , aerospace and defense and financial services amongst others. Undoubtedly these sectors will require more high skilled and specialized workers, in the fields of finance, engineering and medicine. Yet, employment mechanisms that are based on temporary contracts which must be renewed annually or every two or three years may render the GCC less attractive for higher skilled workers, relative to other economies by reducing residency and employment security. Additionally, the continuous churn of workers, caused by temporary employment contracts and residence permits, may also be unattractive for talent (Mahroum 2011, 50). Although significant scholarship has drawn attention to the decidedly unequal power relations between worker and sponsor that are created through the Kafala system there continues to be limited discussion regarding the economic implications of the Kafala system, particularly in the framework of labour supply across different sectors and skill brackets. The purpose of the present study will be to assess the economic implications of temporary labour contracts in the context of increasing productivity and retaining higher skilled workers as a projected policy goal across the GCC countries.