The Arabian Gulf’s natural resource-rich nations are paying princely sums to bring the world’s biggest events and most-respected cultural institutions to the Middle East. But they are being faulted for allowing construction workers to labor for poverty wages and in unsafe, unsanitary conditions.

Qatar, a country with a population of only two million, will play host to the FIFA World Cup in 2022, while in neighboring United Arab Emirates (UAE), the capital of Abu Dhabi is constructing an island district called Saadiyat that will include a campus for New York University, the Louvre and the Guggenheim. Qatar is spending $120 billion on infrastructure and road projects alone for the World Cup, while Abu Dhabi has made an estimated $100 billion investment in developing the cultural district.

Qatar and the UAE have found, though, that along with convincing such prestigious names and events to come to their countries, they have also bought a large amount of bad publicity and international criticism, as human rights groups and labor advocates take the opportunity to highlight longstanding concerns over the treatment of migrant Asian workers in the Arabian Gulf.

Recent reports from Amnesty International and Human Rights Watch link the future World Cup and Abu Dhabi’s cultural island plan to current working conditions in those construction sites. Prominent editorials discuss the development of the sporting event and the cultural venues while condemning labor practices in both countries. And an expose from The Guardian on a number of deaths of Nepalese workers in Qatar again linked the incidents to construction for the future World Cup.

“The problem is not the construction industry per se. It is their foreign worker practices.” –Peter Cappelli

The reports have in turn spurred boycott protests by artists, and generated additional coverage about worker conditions in Qatar in sports media — news sources that don’t otherwise report on such issues, but are following up on controversy among soccer fans over the decision to award the World Cup to Qatar in the first place. Meanwhile, the FIFA president has called for an end to “unacceptable” labor practices in Qatar.

The Arab countries have been minimal in their response to the reports, and regional observers are quick to note that there is little new in the concerns being raised by the rights groups. But in the light of ongoing negative coverage, Wharton experts say the Gulf countries can better answer their critics by taking measures to improve conditions without negatively impacting their economies, such as by strengthening inspections and expanding the application of existing labor laws.

Foreign Worker Practices

“The problem is not the construction industry per se,” says Peter Cappelli, director of Wharton’s Center for Human Resources. “It is their foreign worker practices. They tend to let in lots of unskilled workers, who flood the market, [which] depresses wages and working conditions for unskilled jobs.”

With small local populations, large fortunes fueled by natural resources and grand ambitions to develop into global economic hubs, Qatar and the UAE are magnets for foreign labor. Expatriates make up 85% of the UAE population and almost 95% of Qatar’s population. Though these countries manage to attract “white-collar” foreign labor, the vast majority of their expatriate populations are poor, unskilled workers from Asia and poorer Arab countries, employed in service and general labor industries such as construction.

The Gulf Arab economies play an important role for these workers. According to the World Bank, Asian and Arab expats in the region accounted for half of the $414 billion in remittances sent by migrant workers in 2013. Within the Gulf region, known as the Gulf Cooperation Council (GCC), the number of construction projects already underway is growing again — almost an estimated $70 billion across all construction sectors in 2013, according to a study by Dubai consulting firm Ventures Middle East — providing demand for jobs for most of these migrant workers, who struggle to find economic opportunities back home.

But that struggle and the resultant numbers looking for employment feed a labor market where the average worker is at a disadvantage. To even come to the GCC, most from these countries must rely on recruiting agencies, which arrange for jobs and travel, but claim a large percentage of their monthly salaries as a fee. The debt takes years for these migrant laborers to repay. According to regional salary surveys, whereas a Western construction manager can expect to earn more than $11,000 a month, wages for laborers hover between $200 and $400 a month. Most laborers live together in camps, located on the outskirts of the cities, often in crowded, unsanitary conditions. Unlike other expatriates, their employers hold their passports as a method of insuring they don’t leave their jobs.

“With such high rates of growth, a demand for buildings and a large supply of labor, there would be a temptation to take advantage of supply and demand,” notes Janice Bellace, director of the University of Pennsylvania’s Huntsman Program in International Studies and Business, and a Wharton professor of legal studies and business ethics.

Laws Not for Non-citizens

Bellace, a past president of the International Labor and Employment Relations Association, says that the labor laws of Gulf countries allow for free labor migration. But they do not provide protection equally. “There are laws relating to labor standards, but in some countries the laws do not apply to non-citizens, such as many of the people who perform low level work,” she says.

For example, in Qatar there are laws pertaining to how many hours a week an employee can work, how much time off that person can get and paid leave. But a decree from the minister of civil service and housing excludes some jobs and work groups from these laws. Bellace adds that this also happens in the U.S., as wait staff in restaurants, for instance, are exempt from the Fair Labor Standards Act that establishes minimum wage. Still, she notes, “the place you really want to apply health and safety regulations are construction sites.”

“With such high rates of growth, a demand for buildings and a large supply of labor, there would be a temptation to take advantage of supply and demand.” –Janice Bellace

Though there are laws in Gulf countries that spell out how labor conditions should be on construction sites and the responsibilities of companies to provide safe working environments for its employees, advocates and researchers studying labor in the Gulf say these laws aren’t enforced enough. Recently in the UAE, Shamma Al Zaabi, an Emirati woman, gained attention for campaigning to have air conditioning put in the buses that transport workers from sites to their camp quarters in the desert heat. Al Zaabi told The National that ignoring government specifications, most companies chose to use buses without air conditioning, because they are cheaper.

Abu Dhabi started keeping accident statistics about construction sites only in 2011, though it now has almost 20 safety inspectors conducting daily inspections of worksites, according to The National. The government promotes safety campaigns, and fines of up to $14,000 can be levied against companies found to be in violation of safety standards, and construction can be halted.

Still, because of the way the construction industry is generally structured, it is difficult to enforce standards, says Cappelli, who went to Bahrain in 2003 to advise the kingdom on how to reform the country’s labor markets. “Construction is often organized with lots of subcontractors, which means that although the main company doing the building may have good working practices, they outsource lots of tasks to smaller, local companies, often on the basis of cost, and those companies abuse the low-wage foreign labor,” he notes.

Cappelli suggests that Gulf governments could make progress “by putting pressure on the main contractors to in turn put pressure on their subcontractors to improve wages and working conditions. This might work better than it sounds because the costs of doing so can be passed on to the government, which is typically the one paying for the buildings.”

Labor Law Reform Needed

Labor advocates and human rights groups have called for labor legislation reform as the way to fix the working conditions on construction sites in the Gulf, but Cappelli wonders how effective that can be. “Legislation on wages and working conditions could work, but it requires lots of enforcement, and there is often little interest in doing so,” he notes. “Legislation limiting unskilled immigration is simpler.”

Gulf governments could make progress “by putting pressure on the main contractors to in turn put pressure on their subcontractors to improve wages and working conditions.” –Peter Cappelli

Since most Gulf countries outlaw unions and do not allow workers to engage in collective bargaining, Bellace says reform efforts could take a more effective path if Gulf governments work to set regulations and improve worker rights with inputs from non-governmental organizations (NGOs), private organizations and global bodies such as the United Nation’s International Labor Organization (ILO) of which the UAE and Qatar are members. “The ILO tends to work without publicity and uses phrases that are not emotive at all,” Bellace adds. “And they will send technical advisers to help governments to improve health and safety standards, and implement best practices.”

The ILO has one initiative in the Middle East, Better Work Jordan, which has aimed to improve labor standards in the garment industry, a key source of exports for Jordan. Bellace notes that Gulf countries are not the only ones with high growth demands that import significant numbers of workers on short-term permits, and could look to countries in Asia for reform examples. “It doesn’t mean there aren’t good approaches,” she says. “Other countries have figured out better practices.”

When questioned about construction workers at the Abu Dhabi island that will be home to their satellite institutions, representatives of the museums and New York University have said they are satisfied with the conditions that they have seen during site inspections. New York University issues a compliance report on worker conditions, conducted by a third party. Even with increased oversight, the report notes instances where workers were not being paid, and discovered unsafe working conditions.

The Abu Dhabi government also paid for an independent assessment of labor conditions at Saadiyat by PwC. In response to increased international attention when it first launched the island project, Abu Dhabi officials said they would house Saadiyat construction workers in special labor villages that were cleaner and included amenities not found in normal labor camps. Abu Dhabi recently announced a new plan to move 80,000 laborers from industrial camps into new labor cities. Qatar, meanwhile, is said to be in discussions with labor groups on how to improve working conditions and worker’s rights.

Bellace says that despite the bad publicity garnered by the focus on the construction industry in the Gulf, there has been progress in labor reform. “Over two decades there has been increasing attention to the situation,” she notes. “These countries have ratified the fundamental conventions of the ILO; the next step is to take progressive measures to implement them. Child labor, for instance, was once a big issue, but within the past decade it was ended in the UAE with the ban on child jockeys, so you do see some responses from international persuasion.”

Bellace adds that in bringing international events and institutions to the region, these countries opened themselves up to reform initiatives that otherwise would not have as much momentum. For one thing, she notes that the partner institutions for such projects are likely to insist on better conditions for workers associated with the sites, since the lack thereof carries a reputational risk for them. Also, she says, there is the knock-on effect of having to open your country up to visitors from around the world.

“There is a benefit,” Bellace notes. “In these international events, people come to do business, and they make comparisons. So these host countries are being held up and compared to the last country that hosted the event. People will be watching — as well as other countries — and reporters will be talking about experiences. People will say what they think. So it’s a big risk for them, and may provide the opportunity for significant improvements in the host over a period of time.”