The Emirates in the world

The Emirates in the world

Wednesday, August 20, 2008

Restoring a Marriage Bond

The Emirates has seen two major economic booms: one that took off in the mid-1970s and the other that we are experiencing as I write.

Before this current upswing -supported by oil prices per barrel in the triple-digit range- The Emirates had a unique marriage bond between wage rates and the standard of living. It was a bond not expressed in a declared minimum wage, but rather a bond maintained by creating a business environment that allows small businesses to survive easily.

This business environment allowed small businesses to provide goods and services to the lower earning sections of the labor force. Thus, providing the low-earning worker a decent standard of living -which is the aim of a minimum wage policy.

Low-skilled South Asian workers -working on a daily rate- were able to buy basic necessities without having to sacrifice the share of income that is sent back home at the end of each month. More specialized workers were also able to sustain a higher standard of living for themselves and their families in The Emirates by satisfying their market needs from higher quality outlets. The same story applies all the way to the highest earning workers in general, the

Store rents and other costs were diverse enough to accommodate the wide range of businesses that cater to each individual group according to its income. Most working individuals in The Emirates were able to sustain a decent life- for themselves and their families- whether their families were present in the country or not.

However here is were the happy story ends. A bitter divorce between the prevalent wage rates and the standard of living was announced with the declaration of pay-hikes to government employees in The Emirates along with a discontinuation of many welfare-style programs (such as programs regarding commercial building management, property rental regulation... etc).

This sudden, sharp hike in the money supply in circulation, future expectations resulting from rising government wages and oil prices, and the general increase in the demand for moving into The Emirates have contributed to one of the most vicious inflation periods the country has ever witnessed. Needless to say, rental properties were now difficult to retain.

Before trying to target this inflation that is storming its pleasant lifestyle like a hurricane, The Emirates has to bring immediate aid to the most damaged groups. One way to do so is by restoring the marriage bond between the wage rates and the standard of living in the country. That can be done through various means. Two of such means are: restoring the bond through a minimum wage policy or by bringing back the previous setup that ensured the market had something to offer to each income group. I prefer the latter.


Anonymous said...

Live international examples through history should provide various scenarios where prediction can be obtained to analyze and assist the magnitude of the events yet to come and how to avoid it before hand, other wise it will conceive forces characterized with inevitable bone breaking demands.

Tareq , Germany

Harbi Al Dhabiani said...

Hi Tareq,

I agree that all steps should be studied carefully before execution. The rear view mirror does have its blind spots, but still historical examples can largely avert the pains of bad policy.