x Abu Dhabi, UAESunday 23 July 2017

Reliance on low-cost labour cripples goals of an R&D economy

Because labour is not expensive in the UAE, many businesses fail to invest in and adopt best practices. This undermines their ability to innovate.

The debate about a two-day weekend should focus on productivity and efficiency more than "hours worked". In an economy based on low-cost, low-skill labour, the value of work is very much related to the number of hours worked. However, a low-skill economy is not the vision of economic development in the UAE.

In fact, the current debate about the availability of low-cost labour is a distinct barrier to economic development and the goal of the UAE's economy, which is supposed to be less dependent on natural resources and more dependent on knowledge and high-quality products and services.

The low-cost, low-skill work environment has contributed to a dominant management style that is outdated and inappropriate for a knowledge-based economy. Management styles that enforce routine simplified work activities, high levels of supervision, limited worker autonomy and a "punch clock" mentality are remnants of a Tayloristic management style (after Frederick Taylor, the father of the "scientific management" movement of the late 1800s).

Such outdated techniques are ineffective in the modern workplace and actively stifle the innovation, creativity and organisational flexibility required to survive in today's dynamic business environment.

Advances in technology and the adoption of new business processes are frequently driven by organisational needs to improve efficiencies by reducing costs (including labour costs). If labour costs are already extremely low, then a key driver for the adoption of new technology and new business processes and practices is missing. There is little incentive for organisations to invest in training and developing human resources to enable them to act with greater efficiency, or to invest in new technologies that reduce the requirement for labour.

The overall effect is that many businesses within the UAE fail to invest in and adopt best practices from both a human and technological perspective, which significantly undermines their ability to innovate. As time goes by such businesses also run the risk of undermining their global competitiveness.

Of course, all organisations need their employees to contribute positively to their long-term goals, and that contribution is made through the time that each worker invests in trying to achieve those goals. Absenteeism, excessive breaks and unusually short work weeks will undoubtedly affect a company's success.

However, focusing excessively on the number of daily or weekly hours that an employee works, as a proxy measure of the contribution that an employee makes to an organisation, is highly problematic.

An exploration of productive economies, using GDP per capita as an indication of productivity, shows several GCC countries, including the UAE, as highly productive. IMF figures from 2011 show the top 10 GDP per capita countries to be Luxembourg, Qatar, Norway, Switzerland, Australia, the UAE, Denmark, Sweden, Canada and the Netherlands.

However, if we remove those countries that rely heavily on nonrenewable, unsustainable economic resources such as hydrocarbons, ores and minerals, we lose the GCC countries from the list, as well as countries such as Norway (heavily hydrocarbon dependent) and to some extent Australia (heavily ore, mineral and hydrocarbon dependent). An examination of those countries that remain reveals highly diversified economies based on high-tech, high-skill products and services.

So in these leading economies, how many hours a week do people work on average? Do we accept the view that some business owners in the UAE are putting forward, that a longer working week contributes significantly to productivity and profitability? Then we might expect the average working week in these leading economy countries to be 45 to 50 hours. The reality, however, is very different.

Luxembourg has an average working week of 37 hours, similar to Sweden at 36.5, and Switzerland's 35.2. Denmark's is even lower at 33.7. At the lowest end of the spectrum, the Netherlands has an average working week of only 30.5 hours, yet still has one of the highest GDPs per capita in the world.

Clearly in these cases, what contributes to high productivity is not the amount of work that is done, but the quality of the work.

That quality is very much dependent on an educated and well-trained workforce that is operating with the latest technologies available to support their various industries.

It also depends upon the effective use of these high-value human and technological resources through the application of modern management principles.

These are principles that encourage job enrichment, employee involvement and empowerment, problem-solving, innovation, knowledge sharing, fair and effective performance management, profit-sharing, and ethical and sustainable business practices.

Unfortunately, when I speak to employees in the UAE (both in high-skill and low-skill jobs), many say their experience of management practices is very different from these principles.

Many UAE businesses cannot continue to rely on the generous employment regulations of the Government that have traditionally favoured business owners. These regulations have also contributed to an imbalance in the economy that has undermined Emiratisation initiatives. But the change needed to address this imbalance seems to be coming.


Dr James C Ryan is an assistant professor of human resource management at United Arab Emirates University