Not sure if the title reflects the question very accurately but my question is specific to the Gulf countries which have a huge population of migrant workers, like Saudi and UAE. So, let's say Raj is an expat living and working in RandomGulfCountry with his family. He has a decent job which also pays for a modest apartment and for his kids to go to an okay-ish school. The economic activity created by Raj brings in wealth for the RandomGulfCountry government which then uses it to fund free healthcare, education, utilities etc. that is accessible by only its citizens. It is literally free because there's no income tax (at least for citizens). Most citizens don't really 'work', as they either own the companies or are employed in high positions because of a law requiring a quota of employees to be citizens so they're just figureheads; meaning most of the economic activity is created by expatriates like Raj.

Now, Raj could access these programs but becoming a citizen is almost next to impossible. But Raj is still happy, his job in RandomGulfCountry is paying 5x the salary he'd have gotten back in his home country. However, his continued residence in RandomGulfCountry is at the mercy of his employer. If he gets fired and doesn't find another job soon he has to leave, there is no path to permanent residence or citizenship. The government also charges a high fee for renewing his residence permit and that fee increases with the number of family members staying with him.

So by continuing to work in RandomGulfCountry, Raj is effectively subsidizing the social programs which he can never access. He still has to pay his utilities bill while the citizens don't have to. He has health insurance from his employer but he still has to pay his co-pays while citizens don't need to pay a single penny. Raj still has to fund his own kids higher education but the fruits of his labor go into funding RandomGulfCountry kids to go study abroad for college without them having to pay a single penny.

This example might be a bit too simplistic and people like Raj are very privileged unlike most of the actual migrant workers in the Gulf. So I want to know what is the most appropriate term for this phenomenon, where you contribute to a foreign economy directly and your productivity is exploited to increase the luxury of the citizens who already live quite luxuriously and you never have a chance to receive any of the benefits because you will always be considered a temporary resident.

I was thinking something like wage slavery but you do get good wages, just not the full outcome of your productivity I guess? While it takes into account the fact that you're at the mercy of your employer for your continued well being, it's not really the wages that are responsible for your well being. Also what term would also take into account that the foreign government not only exploits you but also charges you to stay in the country?


1 Answer 1


There's a lot going on in this question, so I'll focus on the labor-economics part of the question rather than the political-economy part of the question.

If it is the case that these migrant workers are being paid considerably better than their alternative labor options, but they are at the same time being deprived of rights they might value (access to social services, citizenship), then this is an example of a compensating differential.

The theory of compensating differentials says that, in order to get people to take a job that they'd rather not take (perhaps because taking it means they'd have to live as a second-class citizen), you have to pay them a little extra in order to convince them to take the job, "compensating" them for accepting the downsides of the job.

This explains, from a labor-econ perspective, why the workers might accept this arrangement. It doesn't explain the political system that deprives the workers of rights.

  • $\begingroup$ Compensating differentials are pretty easy when you are hiring people from poor countries to work in wealthy ones. $\endgroup$
    – arp
    Apr 4 at 5:37

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