Salaries in the UAE rose by an average of 5 per cent over the past year, with Emirati graduates, who take home up to Dh32,000 (US$8,710) a month, commanding a premium over their expatriate counterparts.
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Wage increases have outpaced inflation, thanks in part to companies in the Emirates easing pay freezes, according to research by the management consultancy Hay Group.
"More organisations are giving out these increases compared with previous years," said Vijay Gandhi, a regional director at Hay. "Organisations are also moving away from promotion freezes."
However, an increase in the number of new positions in the UAE job market means that new recruits now get paid 6 per cent below the market average, according to Hay. Mr Gandhi said 37,000 people were recruited this year, primarily in sales and marketing roles, compared with 25,000 last year.
"This new wave of recruitment can be attributed to an improvement in business performance on last year and because new recruits can be sourced at below the average market rate," he said.
One exception to this is the pay rates for new Emirati graduates, who typically earn between Dh25,000 and Dh32,000 in Abu Dhabi, and Dh16,000 and Dh22,000 in Dubai, according to the research. That represents a premium of up to 80 per cent on their expatriate counterparts, said Mr Gandhi.
"The pay gap is wider at the graduate level," he said. "It's 50 per cent in Dubai, and 70 to 80 per cent in Abu Dhabi."
However, later in their careers Emirati nationals typically earn just 4 to 5 per cent more than expatriates, bringing the average wage premium commanded by UAE nationals to 33 per cent, according to Hay.
A government drive for Emiratisation, with its various incentives and quotas for the employment of UAE nationals, is one factor behind the higher pay rates, said recruitment experts.
"It is part of a general policy of the state," said Panos Manolopoulos, a vice chairman at the recruitment consultant Stanton Chase International in Dubai.
Mr Manolopoulos said that a lack of qualified Emiratis in specialist areas such as banking, finance and IT was driving up salaries in those sectors.
"There are not too many people to fill the positions, which means they have to pay higher," he said.
However, he said Hay Group's claim that Emirati employees earn on average 33 per cent more may be unrealistic.
"I think that's a little bit of an exaggerated number," said Mr Manolopoulos. "My feeling is that we have 15 to 20 per cent higher average compensation."
The Hay report analysed salary information for more than 200,000 employees in 488 companies in the UAE.
Workers based in Abu Dhabi were found to earn an average of 20 per cent more than those in Dubai, although the pay gap between the two cities is narrowing, the report found.
Low pay was seen as one factor behind the recent unrest in countries such as Egypt and Tunisia. Living conditions, salaries and employment levels in some other Arab states have came under scrutiny in the wake of the unrest in North Africa.
Wages in the GCC states are comparatively higher than those in most other parts of the region. Qatar surpassed Luxembourg as the world's richest nation last year, with a GDP per capita standing at $88,221, according to IMF data released last week.
Yet despite the relative wealth of the UAE, the Emiratisation drive - designed to lure more nationals to work in the private sector - is now "more important" in the wake of the Arab Spring, said Mr Manolopoulos.
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The biog
Simon Nadim has completed 7,000 dives.
The hardest dive in the UAE is the German U-boat 110m down off the Fujairah coast.
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The latest available figure of 728,000 for the 12 months to June 2024 suggests levels are starting to decrease.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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