WATANI International
21 November 2010
How are people in Egypt coping today under the current economic climate? With prices of basic commodities, and especially food, spiralling almost out of control, the issue of minimum wage has come to the forefront of public concern. Notwithstanding a consensus over the necessity to review current wage scales—given that the dramatic rise in living costs means the current ones are undoubtedly insufficient—there is considerable divergence in estimates of a reasonable minimum wage. Officials have agreed to increase the current minimum wage—which now stands at EGP105—to EGP400.
Pretext not to raise wages
Samir Radwan, consultant at the General Authority for Investment and an expert in the area of wages and employment, suggested in a recent study that a monthly minimum wage of EGP656 would be appropriate for a four-member family. This, he says, matched the poverty line, below which as many as 20 per cent of the Egyptian population currently live. Dr Radwan warns that, should this minimum wage be established, public expenditure on wages would rise from 21 to 29 per cent of the State budget. He stresses though the need to differentiate between minimum wage, which is the amount of money required to cover basic needs; and wage scales, which imply a gradual rise in wages in accordance with advancement in one’s career and experience.
Although Dr Radwan defends a minimum wage of EGP656 on grounds that it is both fair and essential, he indicates that it would place a heavy burden on the State budget. “Were the minimum wage to rise to EGP1200 as advocated by some worker leaders and groups the rise in per capita income would increase by 205 per cent,” he says. In fact, the estimation of a EGP1200 minimum wage is based upon the update of poverty estimates by the World Bank, which places the poverty line to USD2 per day.
Despite the fact that employers claim the EGP1200 is intolerable since it would inevitably lead to higher production costs, higher prices and rising inflation, consumers hold different views. Researcher Maged Maximos argues that the monthly minimum wage should be no less than EGP1200. “This is the minimum amount of money required to secure basic living expenses.” he says. “Raising wage levels can help assuage the economic downturn and strengthen recovery. As for the argument that rising wages would result in rising prices, it is no secret that prices are soaring out of control anyway. The government merely uses this claim as a pretext not to raise wages.”
No savings
“The proposed EGP400 minimum wage is entirely unrealistic,” car mechanic Ibrahim Abdel-Mohsen says; “the minimum wage should be at least EGP1000.” Abdel-Mohsen says he spends EGP200 on personal expenses, EGP600 on food, and the rest of the EGP1500 to EGP2000 he earns a month on other obligations. He saves nothing. Yet it must be borne in mind that both Abdel-Mohsen and Maximos are Cairo residents; the cost of living is conspicuously lower elsewhere, and more so in the smaller towns and villages.
Amina Helmi, professor of economics at Cairo Univesity, recommends a new wage policy to meet social and economic goals. Dr Helmi, however, proposes that raising the minimum wage should be accompanied by other goals including increased productivity, youth employment, and setting new rules to regulate the relationship between employers and workers. As for the National Council for Wages, she reminds that it was established in 2003 to perform a number of set tasks. First and foremost, she says, it was to set a national minimum wage while taking measures to strike a balance between wages and prices. The national minimum wage was to be reviewed every three years at the most, and the annual rise in wages was to be no less than 7 per cent.
Not all about wages
Wages, however, are obviously not the single criterion a worker looks for in a job. A study conducted by Laila al-Baradie, public administration professor at Cairo University, involved interviews with 100 government employees in the ministries of industry and agriculture, as well as the Central Agency for Organisation and Administration. “When they were asked about their work preferences, 30 per cent said they preferred working in government agencies because of the social security they provide,” Dr Baradie said. “Another 20 per cent said the government provided jobs that suited their qualifications; and about 10 per cent said the working hours in government offices and public enterprises were much more lenient then in better paying jobs. About 8 per cent said government jobs left room for promotion. But 99 per cent of the interviewees agreed that bonuses and annual wage increases in the government were too small to meet inflation.”
Rising inflation
According to Cairo University professor of economics Naglaa al-Ahwani, the current minimum wage stands at EGP105 a month. In practice, however, it amounts to EGFP186 for those working in the government and public sector and EGP154 for private sector workers. Increasing the minimum wage is a necessity given the current escalating prices, she says.
Abdel-Fattah al-Gebali of Al-Ahram Centre for Political and Strategic Studies suggests that four measures should govern the wage policy. These are that everyone is entitled to a fair wage; there should be a reasonable minimum wage; the government should work on narrowing the income gap between members of society; and there should be proper rules to regulate wage increases, promotions and the like. Dr Gebali stresses the need to reconsider the current wage levels and double annual increases.