True cost of living a rising concern in Gulf (page 1 of 2)

Several recent studies have found that the cost of living is exceeding pay increases across the region, particularly in the UAE and Qatar.

A survey by GulfTalent.com showed that salaries in the UAE increased 10.7 per cent over the one-year period to August 2007, slightly higher than last year's rise of 10.3 per cent. In Qatar, wages rose by 10.6 per cent compared with 11.1 per cent last year.

Meanwhile, inflation in the UAE stood at 9.3 per cent in 2006 and is forecast to reach 12 per cent in 2007, while Qatar's inflation rate rose from 11.8 per cent in 2006 to 14.78 per cent in the first quarter of 2007.

The rising cost of living is having a direct impact on employees' ability to save money. To illustrate, 41 per cent of UAE-based expatriates reported making no savings on their income, the highest figure in the Gulf.

Employees appear to be growing increasingly worried about their shrinking pocketbooks. A recent 'consumer confidence' survey by Bayt.com found that 70 per cent of respondents in Lebanon believe their salary had not kept pace with the cost of living, compared to 66 per cent in the UAE, 65 per cent in Jordan and 61 per cent in Saudi Arabia.

The survey also revealed that residents in Lebanon, Jordan, Saudi, and the UAE were among the most pessimistic in appraising their current financial situation relative to that of last year, with 31 per cent, 27 per cent, 27 per cent and 24 per cent of respondents indicating their situation was worse than it was last year.

Soaring rents

The high cost of living has been driven mostly by skyrocketing rents, which are swallowing a large chunk of income among Gulf residents, the vast majority of whom are renters.

Oman, Qatar, and the UAE have experienced the largest rent hikes, with 42 per cent, 32 per cent, and 23 per cent of tenants experiencing increases of 20 per cent or more, according to the Bayt.com survey. Not surprisingly, half of the respondents in Qatar and the UAE reported paying more than 30 per cent of their salary in rent, while eight per cent and six per cent of respondents in the respective countries said they pay over 60 per cent of their salaries in rent.

Many Gulf employers provide housing allowances for their workers, but increases in those payments often have not kept pace with rising rents. In Oman, salaries registered the biggest jump in the GCC, from 5.6 per cent last year to 11 per cent in 2007, but rents in the country have increased by 29 per cent over the last year, the GulfTalent.com report found.

While inflationary costs are altering the dynamic for everyone, those with families who have to contribute to their housing, transport, and schooling needs are feeling the impact most, said Tom O'Byrne, a principal at Mercer, a global human resources firm. This is also affecting employers that cover housing, transport, and schooling needs. However, there is no evidence that employers are trending towards hiring single employers with no dependents to save on costs, he added.

Salaries not keeping pace

Experts say salary rises generally are not on par with the rising cost of living in the region.