Determinants of salary differentials of graduates in the United Arab Emirates: a human capital theory approach

The United Arab Emirates (UAE) has seen phenomenal economic growth in the last decade. Much of this growth has been supported by the UAE government investing in human capital of their nationals and the hiring of an educated expatriate workforce. This study uses the human capital theory conceptual framework and earning function approach of Mincer (1974), and Becker (1975), to analyze the determinants of salaries of graduates in the UAE. Data on education, salary, work experience, and demographic variables was collected from employees working in the UAE. The earning function was estimated via multiple regression equations.
The earnings function is typically estimated taking into consideration education, work experience and gender. Given the fact that the UAE working environment is non-unionized and dominated by expatriates who come from many different countries the earning function estimated also includes the impact of nationality on determining salaries. The results indicate that the returns to education for UAE Nationals are higher than those of expatriate workers in the UAE. Males across nationalities have higher salaries as compared to females. Returns to education of Business and Management degrees are less than that of Engineering and Information technology degrees. When compared to UAE Nationals the returns to experience for expatriates are higher. Implications of the results were discussed and future research directions outlined.