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Issues Related To Household Expenditures And Consumption Economics Essay

Introduction With economic and social progression of the nation the minimal basket of basic human needs which a society would expect for its citizen may be expected to keep expanding. These changes in the basic needs of the society may be affordable by the level of income. The level of income of the households ensures the minimum standard of living in the society.
Household income and consumption expenditure are two direct monetary measures used in assessing the economic well-being of a population. However, consumption expenditure is pre­ferred to income as it reflects long-term economic status of the household, particularly in low income countries (Friedman 1957). It is important to note however that expenditures are not similar with income, which may even be a better indicator of well-being, for various reasons. Among them is the possibility of consumption without expenditures at least within the same period. According to Atkinson, (1998), “Expenditures are thus supposed to better reflect “long-term” or “permanent” income and are from this point of view considered to be a better measure of economic well-being and respective inequalities”.
Besides, in developing countries, income estimates are under-reported, drawn from multiple sources and vary across seasons. Though the consumption expenditure data are collected in many developing countries including India, the process is time-consuming, expensive and needs adjustment for household size, composition and for price level. Owing to these difficulties, the economic proxies (consumer durables, housing quality and household amenities) are collected to measure the economic sta­tus of the households in both small-and large-scale population-based surveys.
In the context of the growth performance during these two decades, economists and policymakers have become interested in the trends in regional inequality during this period. Rising regional inequality can create economic, social and political problems for any country. For the Indian economy, it has serious ramification for the continuation of the reform process. Hence, it is of utmost importance to understand the regional disparity in terms of consumption expenditure on consumer durables, housing quality and household amenities of the economy.
Household expenditures as they result from budget limitations at the one hand and choices based on needs, demand, preferences etc. on the other may be regarded as manifestations of economic and social inequalities as well as cultural differences and social distinctions. Studying the patterns, disparities and determinants of household expenditures and their changes across time by making use of large scale population surveys thus seem to be promising in various respects. At a most general level it may provide insights into general consumption behaviour as a major source of human well-being and respective choices and restrictions.
Investigating household expenditures and consumption patterns is considered to be key for the monitoring and explanation of inequalities and changes in material living standards and general welfare. Studying expenditures and consumption behaviour of households also seems to be an important and promising strategy to extend and supplement mainstream approaches of studying inequality as a key topic of sociological and economic research.
As one would expect, research on household expenditures and consumption is much more common and popular among economists and looks back to a long tradition in economics (Stigler, 1954). This issue was also addressed by Houthakker (1957) as early as in the 1950s.
The issues related to household expenditures and consumption have been disregarded in sociology and particularly empirical sociological research to a large degree, although family and household budget data frequently used for empirical study in the early days. Some observers and commentators of developments in sociological research thus conclude that consumption has been strongly neglected in sociological research (Rosenkranz and Schneider, 2000). Thus it is an area which needs greater attention to be paid.
Although there is a long history of research on patterns of household expenditures and their changes across time, which goes back to the 19th century and the famous work by Ernst Engel and others, these questions have attracted surprisingly little attention in recent years.
Blacklow and Ray, (2000) in their paper compare, using Australian unit record data, income and expenditure inequalities over the period 1975-76 to 1993-94. The study finds inconsistencies between the two inequality movements over much of this period. They, also, observe differences in the nature of income and consumption disparities.
Bögenhold and Fachinger, (2000) used repeated cross sectional data (RCS) in their empirical analysis which is based on the West German Income and Expenditure Survey (IES) in 1973, 1978, 1983, 1988 and 1993. The results revealed that the relationship between income and expenditure is given but it is weak. All in all, the social organisation of consumption is a research object in itself to obtain information about the living standard of individuals and households.
Zaidi and Klass (2001) in their study on poverty and inequality in developed countries focus on income. This paper presents trends in consumption-based poverty and inequality in nine member countries of the European Union. During the 1980s, both poverty and inequality increased in Italy, France, the United Kingdom, Germany and Belgium, while decreases in both poverty and inequality are observed for Spain and Portugal. In Greece only inequality increased.
Dhawan-Biswal, (2002) measure inequality in Canada with a comprehensive look at inequality trends in Atlantic Canada during the period 1969 to 19966. They use consumption expenditure as a measure of family well being and compare it with the income based measure of well being. Overall consumption inequality has continuously been lower in Atlantic Canada in comparison to the rest of Canada.
Meyer and Sullivan, (2003) found in their study that it is fairly compelling that most households can more easily report income. They suggested that use consumption to supplement income in analyses of poverty whenever possible.
Kalwij and Salverda, (2004) examine in detail the changes in household expenditures patterns, and in particular services related expenditures, in the Netherlands over the years 1979, 1989 and 1998. Using Engel curve estimations, these changes are related to changes in household demographics, employment, the budget and relative prices. They find that the dominating changes in demand are decreasing shares of expenditures on food and clothing and an increasing share of expenditures on housing. Decrease in food expenditures is for a large part explained by changes in household characteristics and the budget and about a third is a price effect. The increase in housing expenditures share is predominantly a price effect.
Blow, Leicester and Oldfield (2004) examined “how and why has the way in which the average British family spends its money changed over the past 25 years” by using data from the UK FES between 1975 and 1999. It looks not only at broad changes in total spending, but also at how the division of expenditure between basics and non-basics and between durable goods, non-durable goods and services has altered over time.
Johnson, Smeeding and Torrey (2005) used the period 1981 and 2001, to measure economic inequality among groups in the general population in the United States. Two measures of income and consumption are used to gauge relative well-being. Households with children are at a disadvantage, relative to the general population through both prisms. And households with children are the only group whose distribution of consumption was relatively more unequal than their distribution of disposable income throughout the 1981-2001 period studied. Comparison with the general population is a zero-sum game where households with children are relatively less well off, regardless of whether disposable income or consumption is used as the resource measure.
Brewer, Goodman, and Leicester, (2006) in their study on “Household spending in Britain” by using 30 years of data from household surveys conclude that “although there has been much recent emphasis on the advantages of measures of household expenditures in assessing household welfare in more academic circles, this has yet to work its way into the mainstream poverty measurement debate”. This study shows the trends in poverty in Britain since the 1970s when household expenditure is used as a measure of financial well-being, rather than household income and investigates how using spending, rather than income, as a measure of well-being alters our view of who is poor. It examines the spending levels of the lowest-income households and analyses whether low-income pensioners’ spending on basic and non-basic items increased as a result of the large increases in entitlements to means-tested benefits since 1999.
Zhang, Xie and Zhou, (2009) studied the disparity of consumption expenditure among rural areas in China by principle and method of cluster analysis. Results showed that income and consumption expenditure of 31 districts, cities and provinces could be divided into 5 classes of income and consumption. Shanghai City was the only city rated as the first-class areas with highest income and consumption.
Bhattacharya and Mahalanobis (1967) had decomposed the Gini-coefficient and the standard deviation of logarithms for the year 1957-58 based on the household consumer expenditure survey data of India and found that one-quarter of the total inequality was being explained by between-state inequality and the remaining three-quarters was explained by the within-state inequality.
Paul, (1988) studied the importance of household composition in the analysis of inequality measurement based on the National Sample Survey data (25th round). The results for rural Punjab reveal that the ranking of households by per equivalent adult consumption expenditure (PEAE) differs significantly from the ranking by per capita consumption expenditure (PCE). Many households classified as poor according to the criterion of PCE are not so classified by the criterion of PEAE. The exercise also reveals that the distribution of HCE, if not adjusted for household size and composition effects, gives biased measures of the extent of true inequality.
Jain and Tendulkar (1989) in their paper deduces the analytical conditions for the movements in the same or in the opposite direction of the real and the nominal relative disparity in cereal consumption consequent upon the differential movements in the prices of cereals faced by the bottom and the top fractile groups of the population. These conditions are used for interpreting the movements in the real and the nominal relative disparity with reference to the Indian rural population over the period from 1953 to 1978.
Datt and Ravallion, (1990) argued that the costs and the benefits of regional policies will tend to be borne widely within regions. Some benefits are likely to leak to the nonpoor in recipient regions, and some costs to the poor in donor regions. The paper suggests that the quantitative potential for alleviating national poverty through purely regional redistributive policies is small. Even assuming no political problems, the maximum impact on poverty is nomore than could be achieved simply by giving everyone a uniform (untargeted) windfall gain equal to about 1.5 percent of India’s mean consumption. And other considerations – including increased migration to areas of higher benefits – make it unlikely that the maximum impact will be attained in practice. Greater alleviation of poverty requires supplementary interventions that reach the poor within regions, by reducing the costs borne by the poor in donor regions and enhancing benefits to the poor in recipient regions.
Mishra and Parikh (1992) in their paper measured household consumer expenditure inequalities in India by regions (states) and sectors (urban-rural) for the years 1977-78 and 1983 based on the National Sample Survey data. The results consistently indicate that the inequality within states contributes much more towards national inequality and within-sector inequality explains a large part of state level inequality. The inequality at state levels has shown a decline from 1977-78 to 1983 due to a better monsoon season in 1983, and anti-poverty programmes.
Dubey and Gangopadhyay (1998) in their analytical report mention intra-state disparities by using NSSO consumption income data set. There are several states in India where the incidence of poverty across regions within a state is very high. They reported for seven regions of Madhya Pradesh, poverty incidence varied from one of the lowest in the country in the western region to one of the highest in the eastern region.
Deaton and Dreze (2002) in their paper presents a new set of integrated poverty and inequality estimates for India and Indian states for 1987-88, 1993-94 and 1999-2000. The poverty estimates are broadly consistent with independent evidence on per capita expenditure, state domestic product and real agricultural wages. They show that poverty decline in the 1990s proceeded more or less in line with earlier trends. Regional disparities increased in the 1990s, with the southern and western regions doing much better than the northern and eastern regions. Economic inequality also increased within states, especially within urban areas, and between urban and rural areas. They also examine other development indicators, relating for instance to health and education. Most indicators have continued to improve in the nineties, but social progress has followed very diverse patterns, ranging from accelerated progress in some fields to slow down and even regression in others.
Gaiha, Thapa, Imai and Kulkarni (2007) in their analysis of the 61st round of the NSS for 2004-05 confirms higher incidence and intensity of poverty among the STs and SCs, relative to non-ST/SC (Others). A decomposition of poverty gap suggests that a large part of the gap between the ST and Others is due to differences in returns or structural differences while among the SCs it is due largely to differences in characteristics or endowments. Whether these structural differences are a reflection of ‘current’ discrimination is far from self-evident, given the important role of personal identity in determining performance. The policy design therefore cannot be limited to enhancing the endowments of the STs, SCs and other disadvantaged groups.
Dubey (2009) examine the interstate disparity in five states in India i.e. Gujarat, Haryana, Kerala, Orissa and Punjab by using NSSO data of 50th round and 61st round. He used three indicators, consumption, inequality and incidence of poverty. Highest level of disparity emerged in Punjab followed by Gujarat and Kerala. Haryana has least disparities only marginally lower than that in Orissa.
Singh (2010), in her study examined and analysed the disparities in level of living as measured by monthly per capita consumption expenditure across different income groups in various states in India based on 61st round survey of NSSO. Various measures like gini coefficient and rank for the states in rural and urban areas has been calculated. Disparities in MPCE across income groups are observed in Punjab.
Srivastava and Mohanty (2010) in their study used data from the World Health Survey, India, 2003, covering a nationally representative sample of 10,750 households and 9,994 adults, examines the extent of agreement of monthly per capita consumption expenditure and economic proxies (combined with the wealth index) with the differentials in health estimates.
Cain, Rana, Rhoda and Tandon, (2010) utilise household-level consumption expenditure data to examine the evolution of inequality during 1983-2004 in India. Various measures of inequality show that inequality levels were relatively stable during 1983-93, but increased during 1993-2004. The increases in inequality have not precluded reductions in poverty, however. They are also more of an urban phenomenon and can be accounted for by increases in returns to education in the urban sector to a considerable extent, especially among households that rely on income from education-intensive services and/or education-intensive occupations.
Significance of the study The National Human Development Report 2001 for India (2002) reveals vast differences in human development and poverty between the States of India in 1981. The report notes that “At the state level, there are wide disparities in the level of human development.” (NHDR 2002, page 4). The report also notes that disparities amongst the States with respect to human poverty are quite striking. Socio-economic disparities across the regions and intra-regional disparities among different segments of the society have been the major plank for adopting planning process in India since independence.
Even after its impressive performance in the field of science, technology and agriculture during the last three or four decades, a vast majority of Indians are facing the problems of poverty. They are denied even the basic needs of human life like food, safe drinking water, shelter, health, education etc., and are forced to live in a degraded social and physical environment. According to the 61st NSS, the proportion of persons living below poverty line was estimated at 27.5%3 (i.e., more than 315 million people). But, about one third of the population lives under the poverty line of $1 a day, and out of them three in four poor people live in rural areas. Thus, poverty in India is most widespread in the rural areas.
Despite a vast range of poverty eradication programmes and several measures adopted in this regard, even after more than 60 years of Independence the situation is still very critical. In recent years, some significant changes have occurred in the poverty alleviation strategy. The Government of India has launched various programmes, such as NAREGA, MNAREGA, Integrated Rural Development Programme (IRDP), Training of Rural Youth for Self Employment (TRYSEM), Development of Women and Children in Rural Area (DWCRA), Wage Employment Programme, National Rural Employment Programme, Jawahar Rozgar Yojana, etc., for the alleviation of poverty. Further, these programmes are now the responsibility of the local bodies (Panchayati Raj institutions) that are expected to improve their performance. But despite all the rigorous efforts, the desired results could not be achieved and considerable level of regional disparities remained in the society. The Structure Adjustment Programme of economic reforms since 1991 with stabilisation and deregulation policies as their central pieces seems to have further widened the regional disparities. Sen 2002 rightly observed that, “the real concern of the so called anti-globalization protesters is surely not globalization per se, for these protests are amongst the most seem to stem in large part from the continuing deprivations and rising disparities in level of livings that they see in current period of globalization. Liberalisation had resulted in the rich becoming richer and the poor, poorer. No State actually got poorer in terms of falling per capita income but the interstate inequality certainly increased [1] . The seriousness of the emerging acute regional imbalances has not yet received the public attention it deserves.
On the basis of above it can be understood that no significant study has been found in the area of disparity in household consumption expenditure for the period 2005-06, 2006-07 and 2007-08 by using NSSO unit level data in India. The NSSO has been collecting data on consumption expenditure on a regular basis for over four decades. Along with other infor­mation, it collects detailed information on food and non-food items in a reference period. While majority of the studies happen to be at macro level, this study is a more specific analysis in micro frame by using unit level data household survey conducted by NSSO in India. It is able to lay stress on certain vital issues that needed a more serious discussion. To large extent, the study can be regarded as pioneering one.
Objective of the study: The major objectives of the study are as follows:
To know the expenditure structures and consumption patterns
To know the level of disparity in household consumer expenditure in Indian society.
To know the level of disparity in household consumer expenditure in various regions (states) and sectors (urban-rural) in the society.
To know the difference in levels and patterns of household consumer expenditure and across socio-economic groups i.e. caste, religion and family structure in the society.
To know the difference in levels and patterns of food and non-food expenditure of across socio-economic groups i.e. caste, religion and family structure in the society.
Methodology Data: Collecting consumption expenditure data is not new in India. The National Sample Survey Organisation (NSSO) conducted an all-India survey of households on participation and expenditure in education, employment, unemployment, migration and consumer expenditure on a regular basis for over four decades. Surveys on consumer expenditure are being conducted quinquennially on a large sample of households from the 27th round (October 1972 – September 1973) of NSS onwards. Additionally, the NSSO has conducted annual consumer expenditure surveys using a smaller sample of households from 1986-87 to 2007-08. In the present study data will be utilised from the three rounds of NSSO consumer expenditure survey i.e. 62, 63 and 64 round collected in the year 2005-06, 2006-07 and 2007-08 respectively .These three consumer expenditure surveys belongs to annual series.
Data Analysis: In the present study the disparity in terms of consumer expenditure will be measured in the above mentioned three rounds of survey. Data provided by NSSO is in text document. For the analysis of these unit level data we will use statistical software (STATA). Disparity in terms of MPCE will be calculated for the state wise, region wise, caste, religion and family structure. Different statistical methods (like; descriptive statistics, range, standard deviation, coefficient of variation, Gini coefficient Lorenz curve, Theil’s index, etc.) will be utilised for measuring inequality and disparity. Graphical presentation of the results will be used for the easy understanding of the data.
There are the criteria (Mean Independence, Population size independence, Symmetry, Pigou Dalton Transfer sensitivity [2] , Decomposability, Statistical Testability) that make a good measure of income inequality. Among the most widely used are the Theil indexes and the mean log deviation measure. Both belong to the family of generalized entropy. The formula is given by
Where is the mean income per person (or expenditure per capita).The value of the measures vary between zero and infinity, with zero representing an equal distribution and higher values representing higher levels of inequality. The parameter in the GE class represents the weight given to distances between incomes at different parts of the income distribution, and can take any real value. For lower value of GE is more sensitive to changes in the lower tail of the distribution and for higher values GE is more sensitive to changes the affect the upper tail. The most common values of used are 0, 1, and 2. GE(1) is Theil’s T index and GE(0) is Theil’s L (sometimes refered to as the mean log deviation measures) are given by:
Atkinson has proposed another class of inequality measures that are used from time to time. This class also has a weighting parameter É› (which measures aversion to inequality). The Atkinson inequality measures defined as
Decomposition of Income Inequality The issue of relating subgroup inequality levels to overall inequality has been discussed in the number of recent studies (Cowell 1980, Cowell and Kuga 1981, Bourguignon, 1979, Shorrocks 1980 and 1984, Shorrocks and Mukherjee, 1982, Das and Parikh 1982, Mishra and Parikh 1992).
If the total inequality can be expressed as a function of sub-group inequality values, when the sub-groups are mutually exclusive and exhaustive, then a variety of ways is found to decompose the total inequality. The particular method of decomposition depends on the nature of the inequality index and the way in which it is decomposed since the decomposability of the indices differ from measure to measure.
The most attractive type of decomposability has been additive decomposability. An index is additively decomposable if it can be neatly expressed as the sum of a “between-group” term and a “within-group” term. Conceptually, the between-group component can be defined as the value of the inequality index when all the within-group inequalities are assumed to be non-existent by a hypothetical assignment of the group average income to each member of the same group.
The common inequality indicators mentioned above can be used to assess the major contributors to inequality, by different subgroups of the population and by region. For example, average income may vary from region to region, and this alone implies some inequality “between groups.” Moreover, incomes vary inside each region, adding a “within-group” component to total inequality. For policy purposes, it is useful to be able to decompose these sources of inequality: if most inequality is due to disparities across regions, for instance, then the focus of policy may need to be on regional economic development, with special attention to helping the poorer regions.
More generally, household income is determined by household and personal characteristics, such as education, gender, and occupation, as well as geographic factors including urban and regional location. Some overall inequality is due to differences in such characteristics-this is the “between-group” component-and some occurs because there is inequality within each group, for instance, among people with a given level of education or in a given occupation. The generalized entropy (GE) class of indicators, including the Theil indexes, can be decomposed across these partitions in an additive way, but the Gini index cannot.
To decompose Theil’s T index (that is, GE(1)), let Y be the total income of all N individuals in the sample, and be mean income. Likewise, Yj is the total income of a subgroup (for example, the urban population) with Nj members, and is the mean income of this subgroup. Using T to represent GE(1),
Where is the value of GE(1) for subgroup j. Equation separate the inequality measure in to two components the first of which represents within group inequality while the second term measures the between-group inequality.

The then and now of the UAE economies

INTRODUCTION Dubai’s population has grown by nearly seven per cent in the first nine months of 2010 to reach 1.87 million. This indicates that the emirate is back on track in economic recovery. As a fact, the emirate’s actual population becomes higher by more than one million during the day as Dubai remains a target for workers and businessmen from neighboring emirates.
Aref Al-Muhairi, Executive Director of the Dubai Statistics Centre, projected Dubai’s economy, the UAE’s largest after Abu Dhabi, would grow by around 2.3 per cent in 2010 after expanding in the first half. Surveys show that there was a growth of seven per cent in the first nine months as the population with permanent residence was estimated at 1.87 million at the end of September, but the active population is estimated at 2.9 million during the day as many businessmen and workers from other cities and emirates stay in Dubai most of the day.
DEMOGRAPHIC DETAILS OF UAE
Total Population – 8,190,000 (2010 National Bureau of Statistics est.) Age structure 0-14 years : 25.3%
15-64 years : 71.1%
65 years and over: 3.6%
Population growth rate – 3.83% Net migration rate – 0.84 migrant(s)/1,000 population (2005 est.) Ethnic groups – Emiri (Emirati) – 19%
Other Arab, Iranian, South Asian (Indian, Pakistani, Bangladeshi, Sri Lankan) – 50%
Other expatriates (includes Westerners and East Asians) – 8%
(Note: less than 20% are UAE citizens)
EXPATS VS LOCAL POPULATION
Dubai is full of expatriates. Majority of the Dubai expats are Indians and South Asian nationals such as Pakistanis, Sri Lankans and Bangladeshis. There are many Phillipine nationals also.
Majority of the Europeans are from UK. US, Canadian, South African and Australian among the other major nationals in Dubai.
The gap between locals and expatriates in the GCC workforce has remained huge with the expatriates recording a dominating presence in virtually all job categories. It is seen that up to 58 per cent of the GCC’s workforce is made up of expatriates.
Much like in other GCC countries, the UAE Government has been aggressively pushing for its Emiratisation program, which aims to increase the number of qualified UAE workers in the job market. However, because the bulk of UAE nationals are absorbed almost exclusively in the public sector, the local job market will remain dominated by a growing expatriate population. It is concluded that increasing the adoption of local professional workforce in the private sector will play a critical role in achieving a sustainable economic development for the UAE. It further stated that available jobs in the public sector will not be sufficient to accommodate the rapidly growing number of UAE professional workers, particularly on account of the growing number of local graduates, making it crucially important to establish new gateways for locals to be absorbed in the private sector.
UAE – THEN AND NOW
The whole world is developing. There are some countries which are developed faster than the others. The UAE was one of these countries which showed a recognizable development in the last thirty years.
Thirty years ago the UAE was one of the least developed countries of the world. Today, it has achieved an income level comparable to that of the industrialized nations. The UAE did not pass through the hypothetical development ‘stages’ that most developed countries seem to have experienced. Rather, its large oil revenues have allowed her to leap these
stages to the stage of high mass consumption. Massive oil revenues have enabled the UAE to short-cut the usually difficult and lengthy process of saving and capital accumulation necessary for economic development.
1.3.1 Economic and Institutional Constraints
Before the discovery and export of oil, the economy of the Trucial States (which today form the UAE) depended mainly on subsistence agriculture, nomadic animal husbandry, the extracting of pearls and the trade in pearls, fishing, and seafaring. The period before the discovery of oil, therefore, reflected the country’s limited natural resources, and resulted in a simple subsistence economy. The epoch of economic development in the UAE (or the UAE’s First Development Decade) began in the early 1970s, the federation’s formation on 2 December 1971 (and the establishment
of its formal economic, social, and political institutions) coinciding with a massive increase in oil production and oil exports, followed by the explosive rise in oil prices in 1973.
Political and Social Stability Since its formation in 1971 the UAE has enjoyed a political stability. The existing political structures appear to suit the tribal society of the UAE, and the distribution of huge oil revenues in the form of social and economic infrastructure, high salaries, a high standard of social services, such as health and education, has raised the standard of living for UAE citizens and considerably reduced the likelihood of internal political and social unrest. It is worth mentioning that the UAE Government has maintained a relatively good record on human rights since the formation of the state. This in turn has promoted political and social stability.
The UAE is an active member of many regional and international associations such as the Arab League, the United Nations, the Non-Aligned Movement, the Arab Gulf Cooperation Council, and the Organization of the Islamic Conference. Relations with many countries of the world, particularly the Western democratic countries, have been traditionally warm. Political and social stability has gone hand in hand with liberal trade policies and has paved the way for investment (domestic and international) in the industrial sector.
Population and Labour Force The UAE population is essentially a small one. However, after the discovery of oil and its export in the last four decades, it has experienced very rapid growth, the result of a combination of high natural rates of increase among the UAE’s indigenous population, and a massive inward migration of expatriates who now comprise more than three quarters of the population. Thus, a small indigenous population, a large expatriate population, and immense wealth generated by oil are the dominant socio-economic features of the UAE.
In addition to population size and age composition, social factors in the UAE have a great impact in determining the size of the UAE labour force. Female participation in the UAE labour force remains small, 16.3 per cent in 1999. However, incentives and legislation aim to change this situation. Greater female participation is seen as a way of increasing the UAE indigenous labour force and lessening the country’s dependence on foreign labour. A two-tier labour market has emerged in the UAE. At the top is the indigenous labour force, which constitutes about 10 per cent of the total work force. Below this is an unlimited supply of foreign labour. The UAE has reaped benefits from foreign skilled and unskilled workers, who initiated its economic development in the early 1970s and subsequently have come to sustain it.
The employment pattern in the UAE does not reflect the structure of output. The oil sector employs only 1.6 per cent of the UAE labour force, reflecting the capital-intensive nature of the industry. Nearly 39 per cent of the labour force is engaged in community, social and personal services. The unemployment rate in the UAE (0.5 per cent) is remarkably low, which means that the UAE economy is effectively at full employment. The UAE is highly urbanized. This has been attributed to the cluster of public services, transportation and communications, financial markets and service-based industries in the cities.
Industrialization In the process of economic development, industrialization has been considered crucial to the transition. Industrialization is linked to the idea of stimulating forward and backward linkages with the rest of the economy. In addition, industrialization creates new employment opportunities. In common with other developing countries, the UAE, whose economy has been significantly dependent on the export of one primary product, namely oil, pursued a strategy of industrialization to diversify the sources of its national income and reduce its dependence on oil.
The main factors which have acted as a constraint on UAE industrial development are limited raw materials, and the size of the domestic market. On the other hand, the abundance of natural mineral resources, the ready availability of financial capital, a well-established infrastructure, a flexible labour and employment policy, the availability of cheap energy, industrial zones and various incentives in legislation, plus political and social stability have been the main
resource and incentive for UAE industrialization.
Educational Institutions In the past the number of educated people was lower than the present which is reaching 90% of the UAE citizens. The students are going to schools and colleges to study as opposed to the past where they used to go to the mosques, but in both situations people are/were willing to learn as much as they can/could.
It is no secret that there was little development anywhere in the Arabian peninsula prior to the discovery of oil. The reason is simple: there was no money for it. The economy in those days was a simple one, based upon pearl diving, fishing, coastal trade and the most rudimentary agriculture. In 1962, when oil production began in Abu Dhabi the country lacked virtually everything: schools, hospitals, airports, seaports, a dependable supply of safe drinking water, electricity plants and, most importantly, proper housing for the majority of the people.
In 1962 there were only 20 schools in the country with less than 4000 students — and most of those boys. By the time the UAE was established in 1971, there were still less than 28,000 students and education was pretty well confined to the towns. Today there are over 290,000 children at government schools all over the country.
In the past, post-secondary education was government-financed and of course meant going abroad to other Arab countries or even to Britain or America. At present, however, the UAE can offer higher education at home. In 1977 the Emirates University was set up in Al Ain. Since that time there have been some 14,500 graduates with half of them women.
Courses offered include the traditional university subjects as well as various kinds of engineering, agriculture, various scientific disciplines and a highly-rated Faculty of Medicine which is recognized by Britain’s prestigious Royal College of Surgeons. Overseas scholarships are still available for higher degrees and are still financed by the government.
Early on, the government realized the importance of technical and vocational training for its citizens — both male and female — so that they could help in meeting the demands of the local job market. To help meet these demands, in 1988 a system of Higher Colleges of Technology was set up. As in the university and the government schools, tuition at the Colleges is free and curriculum has been produced in consultation with potential employers such as banks, airlines and the local oil industry. Additional technical education and training is also available in institutions such as the Dubai Aviation College, the Emirates Banking Training Institute or the Career Development Centre of the Abu Dhabi National Oil Company.
Outside the government sector, there exists a wide range of private schools with an enrollment of some 150,000 students. A number of these teach in the language of one of the expatriate communities living in the UAE and follow the curriculum of their countries. For example, there are English, French, German and Urdu schools preparing children for life in their home countries. In the last few years, a number of universities and colleges from overseas have begun to offer partial or full degree courses through affiliates in the UAE. This means that a full range of education is available for both citizens and expatriates.
The President of the UAE, Sheikh Zayed, has said: “Youth is the real wealth of the nation” and if the income from oil can be used to create an academically and technically qualified citizenry, there can be no doubt of the wisdom of the immense expenditure.
All these factors combined together give result to a need for studying the interests and pattern trends in higher education, of the graduates working in the UAE. This project will aim at understanding the needs and scope of higher education among the working graduates in United Arab Emirates. This will be achieved by carrying out a survey to predict the demand forecast for the same amongst the target population. The data will be collected through questionnaires aimed at organizations. The subsequent chapters will present these survey result and inferences will be drawn from the data collected to arrive at the conclusion regarding higher education interests of expats in the UAE.
CHAPTER 2 HIGHER EDUCATION IN UAE EDUCATIONAL HUB
The UAE is an intriguing case of educational development because of the multiple layers of education, and thus hubs, that exist. This is different than any other nation. The UAE is comprised of seven Emirates, which operate semi-independent of each other. Higher education has historically been the responsibility of the federal government under the Ministry of Higher Education and Scientific Research. There are three public higher education institutions, which serve the seven Emirates through several campuses. In addition, all private institutions are required to have licensure and accreditation from the federal accrediting body, CAA. However, the semi-independent nature of the Emirates has led several of them to develop “free zones,” which exempt the organizations operating within each zone from federal regulation. Originally developed to attract foreign investment from corporations, these free zones have been used during the 2000s to attract foreign educational institutions. Now, several emirates, including Abu Dhabi, Dubai, and Ras Al Khaimah, have declared intent to become educational hubs. A description of each Emirate and/or relevant free zone seeking to become a hub is included below.
Abu Dhabi This Emirate has not been as aggressive as the other Emirates in seeking to attract foreign institutions. It has opted for a more targeted approach of attracting and investing in institutions with recognizable names. At present, both the Sorbonne (France) and New York University (USA) operate campuses in UAE’s capital city. NYU accepted its first class of students in fall, 2010. Abu Dhabi seeks to capitalize on the presence of these elite education institutions to develop itself into a hub of ideas.
Dubai Over the past decade, Dubai has garnered a great deal of international attention for the aggressive pursuit of international branch campuses and their desire to become an educational hub. Rather than solely investing in their own system, various sub-hubs within Dubai have targeted the development of IBCs in order to provide a diverse set of educational opportunities to the local expatriate population, as well as, attract foreign students to study in Dubai. Presently, more than 25 IBCs representing 13 different national curriculums, (e.g. Indian, American, Australian, British, Russia) provide undergraduate and graduate degrees in Dubai. The IBCs are spread across four different free zones.
Dubai Knowledge Village / Dubai International Academic City: Launched in 2003, Dubai Knowledge Village (DKV) is owned by TECOM Investments, which is a subsidiary of Dubai Holding, and is one of TECOM’s many business parks. It was founded as part of a long-term economic strategy to develop the region’s talent pool and become a knowledge-based economy. This education hub is set up to complement TECOM’s other business parks, including, Dubai Internet City and Dubai Media City. DKV has attracted 15 international universities from Australia, India, Pakistan, Iran, Russia, Belgium, UK, Ireland, and Canada. It is also home to approximately 150 training institutes and learning centers, HR development centers, professional training institutes, R

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