Educational attainment not a factor in wages

Dubai: UAE and GCC workers get only a 5.1 per cent increase in earnings for every year they invest in education, giving them little incentive to pursue higher education because their earnings will not differ drastically from illiterate workers, a study revealed at the Cost of Labour workshop yesterday.

The paper was presented by Dr Rosalia Vazquez-Alvarez during a session on micro-analysis of wages and wage determination in the UAE.

Workers from the MENA region get a 13 per cent return on their earnings after investing in education. Westerners get 9.3 per cent, and other nationalities (mainly Bangladeshis, Indians and Filipinos), get a 12.7 per cent return, she noted.

"It doesn't matter what your education background or experience is, it doesn't seem to pay, and that has an effect on your productivity at the end of the day," she said.

In the UAE, an illiterate worker earns Dh10 per hour while a PhD-holder earns Dh150 per hour across nationalities — but Emiratis who are illiterate earn Dh90 per hour, she pointed out.

Only 36 per cent of the population is educated above the secondary level. The study revealed glaring wage gaps between expats and Emiratis, men and women, and experience levels. A system of wage premiums to Emiratis must be introduced to increase incentives for education, she emphasised.

This improves the profile of human capital and encourages the young generation to invest in education and earn higher pay accordingly. Alvarez used the UAE Labour Force Survey released in 2009 to study the micro-structure of wages in the country to get information on the work force characterstics, estimate wage profiles, and wage gaps between groups of workers.