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From Forbes.com

Immigration: Global Economies' Crack Cocaine
David A. Andelman, 03.27.06, 1:40 PM ET

New York - There was rioting and strikes by construction workers in Dubai
last week, which ordinarily wouldn't raise much of a blip on the global
radar screen, except for what some of the workers were saying: It's getting to the point where we can earn more money back home in India than we can in the Middle East.

That is a little-recognized, but potentially hugely dangerous, prospect that
has gone all but unremarked. Across the region, but especially in the heart of the Arabian Gulf--Saudi Arabia and Dubai in particular--the engine of explosive growth and rapid development has brought millions of grotesquely underpaid workers from the subcontinent and Southeast Asia. How else could one tiny city-state, Dubai, have 80 apartment buildings, each 30 to 60 stories in height, rising at the same time, not to mention the world's tallest office building, expected to exceed 100 stories when it's completed.

This structure, the Burj Dubai, happened to have been the scene of last
week's violent labor actions, which spread to the construction site of the
emirate's new airport facility.

And the construction in Dubai is only the tip of the iceberg, especially for
the Gulf region. Saudi Arabia is already in advanced stages of development of an entire new city on the shores of the Red Sea north of Jeddah--the King Abdullah Economic City--which has been budgeted initially at $30 billion.

Those prices, however, are built on the assumption of a virtually unending
supply of cheap foreign labor of the type that's built Dubai. The kingdom
even went so far as to eschew its own developers, including the powerful Bin Laden Group, in favor of Dubai-based Emaar.

The fact is that immigrants, also known as cheap foreign labor, have long
been and continue to be the engine of growth for much of the developed
world, and even more so in the Second World of regions like the Arabian
Gulf. It's not surprising that President George W. Bush on Monday, in
proposing his new immigration plan, pointed out that Google (nasdaq: GOOG - news - people ) was "built by immigrants." For that matter, going back a bit further, New York City was built by cheap foreign labor from Ireland in the 19th century at the same time America's railroads were being stretched from coast to coast on the backs of cheap Chinese laborers.

The problem is that the world is now running out of cheap places to go for
labor. By cheap labor, we mean the likes of $5 a day, and that's even before sending half their wages back home to care for their families left behind. With India and China in the midst of major booms of their own, a couple of
billion laborers will eventually be removed from the cheap labor pool.
Ironically, places like Saudi Arabia are even laying the foundations for
their own downfall in this respect.

Take Zamil Industries, a Saudi conglomerate specializing in construction
steel and petrochemicals. Its leader, Dr. Abdulrahman al-Zamil, suggested
when I visited him last month in Riyadh that he was in the process of
building a major plant in India and another in Vietnam. It's construction
projects like these that threaten to do in the labor market back home in
Zamil's Saudi Arabia and much of the Second World.

After all, why should an Indian construction worker go into debt to an
immigration broker, separate himself from his wife and children (as many
immigrants in Dubai described to me so graphically), and endure
discrimination, abuse and far worse, only to earn the same money (or less) that he would get staying home?

It's not as if they were coming to the land of the free and home of the
brave where, by sacrifice and hard work, they or their children could aspire to becoming an investment banker, buying and selling the companies where their fathers once slaved. In much of the Second World, they are perpetually in debt or virtual enslavement with no clear way out.

Take Saudi Arabia, the largest economy by far in the Middle East. Foreigners are barred from a vast sweep of rights and privileges available to Saudi citizens. They can't vote, they receive no government benefits and are ineligible for any public sector jobs. And with the active pressure for "Saudization" to create jobs for the millions of out-of-work Saudi youths pouring out of the universities, it's unlikely that immigrant workers will ever be able to bootstrap their way to anything resembling success.

At the same time, however, Saudi Arabia has become as dependent on immigrant labor as a drug addict on crack cocaine. Nearly a quarter of the kingdom's population of 26 million consists of foreigners. And they're not just day laborers and construction workers. Most workers in major hotels, restaurants and even luxury shopping malls are foreigners. Saudis sniff at most of these jobs. In neighboring Dubai, the dependence is even more intense, since 90% of the emirate's population is foreign.

What this means more broadly is that we must always look at low-cost
immigrant labor with skepticism. It is, for the most part, little more than
a short-term fix. With Latin America's economies and its stock markets on a surge, that region may well develop to the point where it's more
advantageous for these workers to stay home than head north. Is the U.S. economy any more ready for that than Saudi Arabia or Dubai are ready for their immigrant exodus?

Thanks for this. It started at the top some years ago, with senior level moving back to India....then the middle levels. I have heard in many circles the same complaint that its getting more and more difficult to find sub-continent executives at even triple the pays offered 3-4 years ago. Inflation in Dubai combined with development back in India..... Oh but I had not idea its reached the manual labour level even!!

AFG wrote:Thanks for this. It started at the top some years ago, with senior level moving back to India....then the middle levels. I have heard in many circles the same complaint that its getting more and more difficult to find sub-continent executives at even triple the pays offered 3-4 years ago. Inflation in Dubai combined with development back in India..... Oh but I had not idea its reached the manual labour level even!!

Most definitely. India is booming right now and shows no signs of slowing down. Even China is on the same path. In fact I have come across many companies in the past year that are slowly but surely wrapping up operations here and heading back to India (and some are setting up in China) which is now becoming a much more competitive place for businesses than Dubai is with the current inflation.

I have even heard for foreigners from Europe taking up jobs in India since they pay so is good there (I know some mid level guys making a cool 10,000 USD there plus benefits, and cost of living is much lower than Dubai and Europe). Hell, even we are looking at setting up a branch this year in India or China.

If things do not stabilize here soon and if the injustices arent addressed, people world over will realize that they are better off in their own countries (the fact that many Indians in the US are now returning to India is ample proof, given the craze that Indians once had to go the US). And that is when the Middle East will feel the crunch when immigrants start to head back to their respective countries or dont even bother coming here.