Sheikh Humaid bin Rashid Al Nuaimi, the ruler of Ajman, recently ordered a wage increase for all national and non-national government employees in the emirate, part of a federal directive to increase salaries across the United Arab Emirates (UAE).
The 70% wage increase is planned to take effect in January. With mounting concerns over the rising cost of living throughout the region, the pay raise is expected to ease some of the financial burdens placed on residents in Ajman, increase the standard of living, boost job productivity and create incentives to buy property.
However questions remain about the effectiveness of the move. Last year inflation in the UAE reached a high of 9.3% and analysts are wondering if the increased spending power brought about by this dramatic pay increase, followed by price hikes for goods and services, may create further inflation problems.
Mohammad Khalfan bin Kharbash, the UAE's minister of finance and industry, was optimistic however, stating that the increase would not create an imbalance but instead offset differences in federal and local pay scales.
Sheikh Humaid said he would enforce legal action against those who abused the salary increase. He asked governing bodies in the emirate to keep a close eye on the market to avoid any exploitation of the wage increase through higher prices for goods and services. He also expressed the hope that the private sector would take steps to raise the wages of non-government workers.
Despite these warnings, prices in Ajman's supermarkets and general stores reached an all-time high in the week following the announcement of the wage increase, when costs for primary food products and gasoline increased by 15% to 35%. Store owners have blamed the rising prices on external factors such as the ban on eggs imported from Saudi Arabia due to reported bird flu cases, as well as continued global increases in the cost of essential goods. Nevertheless many residents have claimed the price hikes are disproportionately high and are linked to the proposed pay raise.
Ajman's municipal council is monitoring the situation, asking supermarkets to keep receipts of their transactions while periodic inspections are intensifying in an effort to quell unauthorised price hikes.
A similar situation occurred after the wage increase in 2005, which called for a 25% raise for nationals and 15% for non-nationals. Prices for essential food items rose and the municipality was forced to intervene by regulating prices. The Ajman government established teams to supervise the prices in markets to ensure that goods would remain affordable, especially for those who worked in the private sector and did not receive a set wage increase.
Concern over wages and costs of living are ongoing in the region. In August 1600 workers walked from Ajman to the Labour Department in Sharjah, claiming that their wages were still fixed to a salary of Dh500 per month even though they had been promised Dh800 per month. According to the US Department of State, in 2005 the UAE witnessed approximately 20 publicised, organised demonstrations about unpaid wages and poor working conditions.
While rents in the Northern Emirates are considerably lower than those in Dubai, inflation is high across the region and rapid housing price increases have continued to hit residents' pockets. In 2004 when the Al Naeymiyah Towers, specifically designed for middle-income buyers, went on the market in Ajman, flats were priced at about Dh150 per square foot. In 2007 the price soared to Dh350.
Ajman is hoping the wage increase will provide a boost to its freehold real estate sector, with freehold investment introduced for non-nationals in 2004. Catering to the influx of workers, many of whom now prefer to live in the Northern Emirates and commute to neighbouring Dubai, more projects slated to the middle-income segment are in the pipeline.