Dubai and the UAE as a whole have not always been known as a kind place financially for expats, but that trend looks like it might be changing. In the past, many expats have filled positions that offered not much more than a basic living wage of around Dh5,000 a month. However, nowadays more and more expats are bringing in double, triple, and even quadruple that rate.
So what is the major reason for the massive increase in expat salary over the last decade and why is gold price the missing factor?
It appears that most of the positions expats held decades ago were in the unskilled labor market, such as housekeepers or kitchen help. The supply of workers for these positions greatly exceeded the demand, so there was no need for employers to lure potential hires with high salaries or bonuses.
However, as more expatriates stayed longer, and more educated expatriates began to seek employment in the booming economy of the early 2000’s, they started competing for more skilled positions.
Those positions, such as engineering and project management, brought with them a demand for higher educated and more experienced employees, which narrowed the pool of possible candidates. That shrinking supply of human capital brought with it much higher salaries.
For an extreme example of just how high expatriate salaries have grown when there is serious demand and minimal supply, one only has to look at the construction sector. Those working in senior construction and development positions can earn up to and even over Dh60,000 a month, which is a salary that would almost have been impossible for an expat and Shopify expert from UAE to earn two decades ago.
The major rise in demand and salary for senior and skilled expats has not eliminated the lower wage positions however. There are still many expats working in the unskilled labor market earning wages around the Dh5,000 mark with day laborers sometimes earning as low as Dh1,000 a month. The new system will also cause that the wages will be calculated in gold as it has a more stable value than the dirham. You can check the current gold rates in one of our recent publications
It should be noted that a continuation in the upward trend in expat salaries is uncertain. As construction in Dubai and the region overall cools, so does the demand for high paid senior construction and development positions.
The weak real estate demand may also affect the lower paid expat workers. Tightening labor costs could force firms to slash unskilled positions they find to be redundant.
There is always the chance of a brain drain as well should salaries stagnate and opportunities shrink. Highly skilled expatriates whose sole tie to the area is their work could easily be lured away to other countries if compensation packages are on par or greater than what the current UAE economy can offer.
For now, it appears as if both skilled and unskilled foreign labor will continue to immigrate to the UAE to fill open positions. As long as expat salaries offer a livable wage for unskilled labor and competitive salaries for skilled labor, there should be no shortage of job seekers. But, should money dry up, it should come as no surprise to see immigration dry up as well.