Nations that rely on large numbers of migrant workers can have a tricky relationship with unemployment insurance. While it is desirable to be able to provide a safety net for a large segment of the working population, at times both the practicalities of implementing it and the political fallout from doing so need to be balanced carefully.
The political fallout can result when foreign workers are seen to be treated differently to indigenous populations – sometimes worse and rarely better - and it is seldom an easy task to be able to please all of the people all of the time.
One instructive example of an unemployment insurance scheme that seems to be working well and that has been introduced recently is to be found in the UAE.
In mid-May 2023, UAE minister of human resources and Emiratisation Abdulrahman Al Awar revealed that, since the very recent introduction of unemployment insurance in the country, 2m workers had signed up for it.
Of that total, 40,000 were Emiratis and the rest foreigners – presumably a mix of both white-collar and blue-collar workers.
At its most basic, unemployment insurance pays a worker some benefit if the employer terminates the job. As it applies in the UAE, workers in both the public and private sectors can take advantage of the safety net for three months if their job is terminated by the employer.
One of the banes of many Gulf societies is the task of getting indigenous local populations to work in the private sector – since many feel that a job working ‘for the government’ is both more secure and more lucrative.
To be clear, the UAE’s unemployment insurance scheme is not a simple hand-out – and only those who have registered by 30 June and paid a premium based on their monthly salary are eligible. Part of the intention in structuring the insurance in this way is to remove the ‘moral hazard’ component of having workers seeking ‘free money’ - but perhaps more importantly, to leverage the pooling nature of insurance.
In the case of the UAE, the unemployment insurance benefit is calculated at 60% of the worker’s basic salary up to a maximum of $5,445 – and does not cover certain categories of workers such as domestic staff, business owners, temporary staff, under 18s and retirees receiving a pension.
The UAE has demonstrated an understanding that its future is tied closely to being able to attract both skilled and unskilled workers from overseas in order to implement the vision that is driving national growth.
While technological advances in business can be a boon for productivity, as every smart employer knows, the real jewel in any company is its staff. The UAE government has demonstrated clearly that it values being able to attract high quality staff to come and work in the various emirates – and that will be made significantly easier if the foreign workers do not face ‘sudden death’ if they lose their job.
Insurance, once again, is being placed at the very centre of economic development. M
Paul McNamara
Editorial director
Middle East Insurance Review