It seems the best investment young Arabs can make depends on whether they plan to work locally or emigrate. If they eye a job abroad, more and better education would open doors for them. If they stay home, investing in education may have lower payoff than investing in connections (wasta).
This tongue-in-cheek proposition may be valid in strict economic terms. Education has many nonpecuniary benefits for individuals and families and many social benefits for countries. Its importance for public policy cannot be overstated. However, more and better education may not always solve the problem of unemployment and may accelerate skilled emigration and brain drain.
To put this in perspective, one needs to examine how much an educated person is paid compared to a less-educated one. For example, the wage of a secondary school graduate should be higher than that of a person with only primary education, and the salary of a university graduate should be higher than that of a diploma holder.
Economists examine the wage premium that the labour market pays to educated workers through the concept and measurement of “the rate of return to education”. In other words, investments in human capital are likened to other forms of investments that result in future rewards. The relevant question is framed as “how much would pay increase if one had an additional year of education?”
From global analyses undertaken by the World Bank, an extra year of education increases pay on average by about 10 per cent globally. The corresponding figure in the Arab region is only 5 per cent. The lowest returns are found in the GCC countries, notably Kuwait, Saudi Arabia and the UAE. Higher returns are reported in North Africa.
A commonly cited explanation for these low returns to investments in education is low quality of education. Arab students underperform in international comparative exams in sciences, maths and literacy compared to students in other regions. Still, the critical question is: if Arab students had more and better education, would their additional qualifications be in demand and at higher wages?
Another common explanation is skills mismatch – that is, the misalignment of the school curricula with the needs of the labour market. This is a relevant explanation when wages are not determined by the market but are, for example, affected by public-sector employment or regulations. This is so because when workers can perform only half the tasks required by an employer, they will be paid only half the wage of the ideal worker. This is like the car industry, where price differences reflect differences in the characteristics and usefulness of different marques.
However, two relatively neglected explanations are the lack of competitiveness in the private sector and emigration. With regard to competitiveness, much is said about the segmentation between employment in the public sector and that in the private sector, the former offering higher pay (and other advantages such as better working conditions and greater job security). Most Arab countries, with the exception of some GCC countries, have taken measures to reduce this differential.
What is more important today is how competitive the private sector is. To put it bluntly, Arab markets tend to be less competitive and less globalised than those in other world regions. Private firms often invest more in gaining privileges than in new technology. Under such clubby and crony arrangements, productivity, and accordingly pay for higher skills, remains low.
With regard to migration, skilled emigration rates in the Arab region are among the highest in the world (with the exception of GCC countries). Arab countries that report the most serious skills shortages are precisely those that have the relatively best education outcomes – Lebanon, Tunisia and Jordan being the leading ones. Even in these countries there is no demand for skills, as firms are not prepared to pay more to those who have more and better education and are therefore more productive.
The low rates of return to education can be the result of labour supply (quality and relevance of education and willingness of the educated to work outside the public sector) or labour demand factors (competitive markets striving for higher productivity that requires more education). What is sure is that both are relevant, and the question is which of the two is more important than the other. The answer can only be based on empirical investigation.
For now, given that the educated Arab youth have higher unemployment rates than the less educated, and when they are employed the wage premium (return to education) is low and many are able to emigrate to more technologically advanced economies, one is inclined to conclude that the Arab youth are overeducated compared to what the labour market demands.
All in all, the problem is probably less with the education system and the job seekers and more with economic policies and firms.
Professor Zafiris Tzannatos is an economist living in Beirut. He is a former adviser to many international organisations and regional governments, as well as the chair of the economics department at the American University of Beirut
Ms Yang's top tips for parents new to the UAE
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- Keep an open mind
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Specs
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The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Tuesday's fixtures
Kyrgyzstan v Qatar, 5.45pm
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
The Details
Kabir Singh
Produced by: Cinestaan Studios, T-Series
Directed by: Sandeep Reddy Vanga
Starring: Shahid Kapoor, Kiara Advani, Suresh Oberoi, Soham Majumdar, Arjun Pahwa
Rating: 2.5/5
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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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
10 tips for entry-level job seekers
- Have an up-to-date, professional LinkedIn profile. If you don’t have a LinkedIn account, set one up today. Avoid poor-quality profile pictures with distracting backgrounds. Include a professional summary and begin to grow your network.
- Keep track of the job trends in your sector through the news. Apply for job alerts at your dream organisations and the types of jobs you want – LinkedIn uses AI to share similar relevant jobs based on your selections.
- Double check that you’ve highlighted relevant skills on your resume and LinkedIn profile.
- For most entry-level jobs, your resume will first be filtered by an applicant tracking system for keywords. Look closely at the description of the job you are applying for and mirror the language as much as possible (while being honest and accurate about your skills and experience).
- Keep your CV professional and in a simple format – make sure you tailor your cover letter and application to the company and role.
- Go online and look for details on job specifications for your target position. Make a list of skills required and set yourself some learning goals to tick off all the necessary skills one by one.
- Don’t be afraid to reach outside your immediate friends and family to other acquaintances and let them know you are looking for new opportunities.
- Make sure you’ve set your LinkedIn profile to signal that you are “open to opportunities”. Also be sure to use LinkedIn to search for people who are still actively hiring by searching for those that have the headline “I’m hiring” or “We’re hiring” in their profile.
- Prepare for online interviews using mock interview tools. Even before landing interviews, it can be useful to start practising.
- Be professional and patient. Always be professional with whoever you are interacting with throughout your search process, this will be remembered. You need to be patient, dedicated and not give up on your search. Candidates need to make sure they are following up appropriately for roles they have applied.
Arda Atalay, head of Mena private sector at LinkedIn Talent Solutions, Rudy Bier, managing partner of Kinetic Business Solutions and Ben Kinerman Daltrey, co-founder of KinFitz
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Emirates Cricket Board Women’s T10
ECB Hawks v ECB Falcons
Monday, April 6, 7.30pm, Sharjah Cricket Stadium
The match will be broadcast live on the My Sports Eye Facebook page
Hawks
Coach: Chaitrali Kalgutkar
Squad: Chaya Mughal (captain), Archara Supriya, Chamani Senevirathne, Chathurika Anand, Geethika Jyothis, Indhuja Nandakumar, Kashish Loungani, Khushi Sharma, Khushi Tanwar, Rinitha Rajith, Siddhi Pagarani, Siya Gokhale, Subha Srinivasan, Suraksha Kotte, Theertha Satish
Falcons
Coach: Najeeb Amar
Squad: Kavisha Kumari (captain), Almaseera Jahangir, Annika Shivpuri, Archisha Mukherjee, Judit Cleetus, Ishani Senavirathne, Lavanya Keny, Mahika Gaur, Malavika Unnithan, Rishitha Rajith, Rithika Rajith, Samaira Dharnidharka, Shashini Kaluarachchi, Udeni Kuruppuarachchi, Vaishnave Mahesh
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
