UAE economic success: Could it be driving down salaries?

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With the UAE’s real GDP expected to grow by 3.9 per cent this year, and 4.1 per cent in 2025 according to World Bank’s latest Economic Prospects Report, the country is surpassing expectations.

As one of the world’s strongest economies, with growth surpassing any member of the G7, the UAE has become one of the most attractive countries for investors and business leaders, creating fresh opportunities for ambitious employees.

Despite its excellent prospects and high growth, which one might normally expect to boost salaries, our latest Salary Guide reveals that wages in the UAE are stagnating, and starting salaries in many sectors have even declined over the past 12 months. So, the question is – has the UAE become a victim of its own success?

A decade ago, the UAE was seen as a hardship posting – with high salaries required to attract workers into the region. As a result of significant investment in infrastructure, the UAE, and particularly Dubai, is now seen as a lifestyle destination.

With world-class shopping, fine dining, healthcare, education and entertainment on offer, coupled with low crime rates, the UAE now rivals many other countries in the G7 as a place to live and work. In fact, more than half (54%) of expat professionals agree that life in the UAE is much better than in their home country, and half (50%) agree that they have better job prospects.

And where many of the world’s other economies are reining in public spending, life in Dubai just gets better and better. Around half of the governments 2025 budget allocated to further infrastructure projects that will support quality of life and sustainable transportation as growth continues, with a view of establishing a ‘land of opportunity’.

As a result, the UAE has become one of the most attractive destinations in the world for expat employees, many of whom are moving to the country without having a job secured in advance. This is incredible news for employers, who are finding it easier to access the talent they need to grow, with half (48%) of business leaders in a recent survey agreeing that they can pick and choose workers become more expats are available.

Expats arriving without a job are willing to take pay cuts to secure a role that will give them the right to remain in the UAE, with a third (32%) of business leaders reporting that unemployed expats are prepared to take large pay cuts. Of course, this undermines salary growth, which is resulting in average starting salaries for professional services roles falling by over 20 per cent in some specific cases.

This leaves businesses in a strong position, but it is starting to impact the financial security and opportunities of expats who are already living and working in the UAE. With high inflation and increased demand for housing continuing to push up the cost of living, existing employees are worried about making ends meet, with a third (34%) agreeing they will need a higher salary to meet their financial obligations.

However, with employers firmly in the driving seat, it is becoming more challenging to negotiate a pay rise. High candidate availability also means that a job move – even with a promotion – no longer guarantees a pay increase, leaving many employees feeling trapped in their current roles.

It could be easy for employers to see this as a good thing, as it increases retention, but it could have a significant impact on both productivity and growth. Nearly two-thirds (65%) of employees are staying in their current role due to necessity rather than preference, which means morale and motivation is likely to be lower than usual.

If the situation changes, businesses that have been lulled into a false sense of security could be in for a nasty surprise. If candidate availability falls and salaries start to increase once more, the majority (65%) of workers in the UAE could be looking to jump ship, with those who are dissatisfied with their pay or development opportunities at the front of the queue.

While boosting infrastructure has helped to make the UAE significantly more attractive to investors, businesses and employees, it has backfired on expats already living and working in the country. We are not currently seeing the healthy employment market the country and businesses will need to meet their goals, but more than that, these stagnant salaries are creating less than ideal living and working conditions for employees, ultimately reducing rather than increasing overall quality of life.

Want more of the latest trends and advice? You can find more on our insights page, or alternatively you can contact your local UAE experts today.

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