Dubai contractors’ decision to increase labourers’ wages by up to 20 per cent is, on the face of it, a good solution for all involved. A braver decision, however, would have been for the government to introduce a minimum wage linked to the cost of living.
The number of strikes in Dubai’s booming construction sector has been steady in recent years, but never significant. The difference this November is that the biggest contractors have been hit for the first time.
The action has focused the minds of construction bosses. As a result, Dubai’s expatriate labourers have secured a pay rise to compensate for rising living costs and weakening exchange rates, which together have reduced the amount of money they can afford to send home.
Contractors will be hit in the short term, but while the sums of money involved are significant for larger employers, they will be able to pass on the additional costs to their clients.
The situation has some similarities to the one in 2003 and 2004, when the industry witnessed sharp increases in steel and cement prices. It plunged projects into the red and forced contractors to insert escalation clauses into their contracts and to rethink their procurement methods.
They should be able to follow a similar solution for wage increases. But while increases are not mandatory, clients will be able to dispute whether a pay rise is necessary. Even when they do agree, there is no benchmark to assess how much they should increase wages by.
A minimum wage, linked to the cost of living, would solve the problem and could be beneficial in the longer term. It would address a major grievance of workers and lead to better labour relations, which in turn would benefit Dubai as a whole. Without it, the industry will find itself dealing with more strikes in the future.