The Egyptian Initiative for Personal Rights (EIPR) released research titled “Pensioner Rights Pitted Against the Economic Crisis... A Critical Study of the Social Insurance and Pensions Law No. 148 of 2019”.

The paper reviews the change in pensioners’ conditions in light of the acute cost of living crisis and within the framework of the social insurance law and the amendments it introduced to the pension system.

Pensioners benefited from a series of executive decisions taken by the government to mitigate the social effects of the repeated devaluation of the national currency and the successive waves of price increases. These included the decisions of March 2023 to increase the pensions by 15%, other increases followed in September that lifted the “special allowance” from 300 to 600 pounds to all pensioners to alleviate the cost of living crisis; and finally, the decisions issued in January 2024 to increase the minimum pension from 1,105 to 1,300 pounds.

These steps helped mitigate the crisis’s impact on pensioners, whose number the government estimates to be 11 million. However, they remain a far cry from making up for the impact of the high rates of inflation, which reached 31.8% annually in April 2024.

The current economic crisis and its impact on pensioners bring the social insurance law back to centre stage of public debate. The law has sparked controversy more than once since it came into effect in January 2020 because of its general philosophy and approach, as well as many details of its provisions regulating pensioners' rights. This includes, for instance, the provision on the annual increase in pensions, which the law – for the first time – linked to the inflation rate, but fixed a ceiling of 15% to said increases - in a country that suffers from repeated inflationary shocks in the same year.

This law concerns the economic and social rights of a large segment of society. It introduced significant changes to the nature of the social protection and privileges that millions of people receive, against a backdrop of the state’s concerted efforts to reduce the burden on its public finances and the consequent decline in its social role.

The law seeks to reduce the social insurance system's dependence on the financial support provided by the government and make it more dependent on the insured's contributions. Advocates of the law believe that it is the only solution to save the insurance system from excessive dependence on the public treasury, which could lead to a reduction in pensions in the future.

The current shape of the insurance system results from a decades-long social philosophy that conflated the concepts of social insurance (which is supposed to provide benefits in exchange for contributions) and social support in the form of subsidy (financed by the government). This philosophy was not born in a vacuum; it developed as a natural reaction to the problems of the labour market in Egypt, since - realistically - any attempt to increase the resources of the insurance system through participant contributions is hindered by the low level of wages of a large segment of workers. This in turn compels those workers to evade the burden of insurance altogether, not to altogether increase spread of informal work relationships and the Egyptian economy’s weak employment capability.

The Insurance Law No. 148 of 2019 includes four categories covered by several previous laws: workers employed by others, irregular workers, self-employed workers, and expatriates. The law introduced several changes concerning all of these categories to increase insurance resources through direct contributions. This included changing the method of calculating the contributions and the end-of-service gratuities; extending or delaying the retirement age, changing the early retirement system, and changing the insurance method applied to certain categories.

Although the law aims to expand the base of beneficiaries and increase pension payments, it places financial burdens on the very low income category of workers ( such as newspaper hawkers, boot polishers, and irregular day labourers), making them unable to access the insurance system.

Additionally, the government suspended its funding of some items of this law, as it did with its subsidy for the old-age pension, after it used to contribute 1% of the participatory contribution to the fund. However, it continued to finance other items, such as the annual increase in pensions, which the public treasury will continue to subsidise along with the Social Insurance Fund. Additionally, the state had committed itself to more generous pensions for holders of senior positions.

This study provides a critical reading of Social Insurance Law and the frictional issues related to its application. It discusses the extent to which the law can provide a minimum pension that covers the basic needs of retirees, the protection of pensions in the face of inflation, and the burdens the law places on irregular and vulnerable or precarious workers.

The paper also aims to identify and preempt the social effects of modifying the method of calculating the insurance contribution and—relatedly—how the public treasury, in turn, continues to benefit from the money available in insurance or pension funds despite claiming the opposite. Finally, the study raises several questions about the practicability of applying the philosophy of this law, which depends on the continued work of the insured for longer years in an economy chronically suffering from the dearth of employment.