A difficult year for Egypt's workers.. EIPR issues a policy note on fair minimum wage for all workers

Press Release

2 May 2024

This year's Labour Day marks a very difficult year for all wage earners in Egypt. The public debt crisis, the exchange rate crunch that resulted in significant devaluations of the local currency against the US dollar, the successive inflation shocks, the rises in commodity prices, and the economic policies sponsored by the International Monetary Fund (IMF) have all dealt successive painful blows to wages and living standards of the majority of wage dependants in Egypt.

The major blows came due to the ensuing price hikes, which have continued since 2016 after each devaluation of the Egyptian pound, and the austerity measures that deepened year after year in the state budget, in both general and public services and social spending in particular. The cumulative inflation has reached about 991%, or almost tenfold, since 2016. At the same time, real wages continued to decline. In the current fiscal year alone, real wages in the public budget fell by 15% after increasing them at current prices by only 20%, despite the average inflation for the same fiscal year hitting 35.7%, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).

To make matters worse, the share of labour and wages in the national income declined significantly over the past years, as the share of profits and rents increased at the expense of wages, according to the World Bank’s diagnostic study on Egypt for 2022. The bank estimated the wage share in the national income to be about 25% compared to 40% in the previous decade. This means increased inequality between wage earners and income from profits and ownership of assets, whether financial or non-financial.

Given the restrictions on the trade union movement and its leaders, workers' ability to bargain and negotiate to improve their conditions, diminished. Moreover, wage gaps between women and men and between various sectors within the public budget continued to widen. The share of the "public services" and "public order and safety" sectors accounted for about a third of the value of wages in the budget. The first sector includes the legislative councils, the presidency, the ministry of finance and some sovereign bodies, while the second includes the interior ministry, the judiciary and courts. The rates of increase in wages in these two sectors were higher than those in the rest of other sectors.

As a large segment of wage earners are poor, the massive inflationary shocks in 2023 and 2024 pushed a large number of them below the poverty line. A study submitted to the UNICEF estimates the rate of the poor in Egypt in June 2023 at about 38% of the population at an inflation rate of 23%, compared to 29.7% in March 2020. The rate is expected to increase as the average inflation exceeds 35%.

Despite the positive steps taken by the Supreme Council for Wages to increase the minimum wage several times to reach 6,000 Egyptian pounds and extend its umbrella to cover some workers in the private sector, the minimum wage remains below the national poverty line calculated at the inflation rate from March 2020. The policies set to implement the minimum wage have major problems, both in not covering all workers in the state and the public sector and limiting its application in the private sector to a small number of facilities, with a mechanism for exceptions, and excluding workers in the informal sector.

Given the significance of including the minimum wage in Egypt's current economic policies, EIPR is releasing a policy paper entitled "Towards a Fair Wage for All in Egypt—Options for Universal Minimum Wage" on 1 May, which marks Labour Day. The note outlines practical steps to address implementation gaps to reach a poverty-preventing minimum wage that is applicable to all wage earners.

The note, which is based on an analytical study released by EIPR last September, stresses that the application of a unified policy to all wage earners in Egypt will alleviate the burden and cost of curbing poverty placed on the government’s shoulders, especially since there is a room for a better primary distribution of income in the formal and informal private sectors, in addition to stimulating the domestic demand, thus raising the growth rate, given the high marginal propensity to consume among the lower income categories. It is a kind of benign and inclusive stimulation of growth, which contains a better distribution of the fruits of growth and a more equitable sharing of income between the elements of production (labour and capital). This will enhance the resilience of millions of workers in the face of external shocks and will also encourage women to take up jobs.

A universal minimum wage is a first step on the road to social justice. It should be followed by  improvements of  the quality of gainful work through social protection mechanisms advocated by the International Labour Organization.