I grew up to an Egyptian saying that went along the line that whoever missed a government job lived to regret it. It was said to indicate that government jobs were secure and stable, in contrast to private sector jobs that were seen as rife with insecurity and financial risk. But the times changed as Egypt moved away from the socialist economy of the 1960s and embraced an open market economy in the 1970s. The private sector flourished; it offered jobs that were starkly different from government or public sector jobs in that they required hard work in return for high pay. Such jobs also provided career growth opportunities and promotions that hinged not on seniority as typical in government jobs, but on competence and efficiency. All this lured large segments of the workforce who swiftly began turning up their noses at the non-challenging, low paid government jobs, even though some still preferred these jobs as an easier, more stable option. And so it was that along almost a half-century since the 1970s, the scale tipped in favour of private sector jobs, whereas government jobs took backstage.
The constant growth of the private sector saw it dominate the job market in general, especially given that the government was no longer able to accommodate the huge numbers of individuals entering the labour market every year. The private sector became a major employer which enjoyed autonomy in dealing with its resources; stabilising or decreasing wages when needed, or even laying off workers during crisis times when market fluctuations led to occasional drops in revenue, Yet never under the pretext of the best interest of Egyptians was the private sector placed under the thumb of the State where wages are concerned, or required to impose a minimum wage standard that goes beyond the social security bylaws and the tax law. After all, how can the State guess at the ability of the private sector to apply any minimum wage standard imposed on it? Especially that raising the minimum wage does not only mean raising the lowest levels of wages, but also involves reassessment of all levels of the wage pyramid in an organisation’s structure. It is self-evident that this would have a detrimental effect on the finances of private sector firms that are losing money or making marginal profit. Such firms would be forced to either not apply the minimum wage, or to lay off workers who would then be thrown into unemployment, causing a huge societal problem. Or these firms would have to exit the market altogether.
In light of such market realities, does the State believe that imposing a blanket minimum wage standard on the private sector, is in the best interest of citizens? And what would it do if the outcome is a wave of bankruptcies that leads to business closures and unleashes an army of unemployed individuals on the market? Again, what would it do if the private sector retaliates by rightfully aligning the raised wage burden with the size of manpower employed, resorting to layoffs? The collapse of or damage to private businesses or industries because of pressure imposed by wage policies, constitutes a very serious matter; the State will have to bear the consequences and shoulder the responsibility of remedying the aftermath.
The State has every right to legislate for minimum wage and the ensuing adjustment of the wage pyramid, but only when it comes to State institutions and government apparatuses; as long as their resources allow it, then good for those Egyptians who work for them. But, as the Egyptian folk saying goes: “If you want to splurge, then splurge from your own pocket”. It is unconscionable that the State exercises an unchecked depletion of the capacity of the private sector under the pretext of championing “the poor citizen”, while it ends up practically jeopardising the “poor citizen”.
In this context, let me recall a practical and reasonable incident that took place a few years ago when a bill was presented to Parliament suggesting raising the minimum wage. After studying and discussing the bill, the Parliament passed it into a legislation with a clause stipulating that businesses with lawful end-of-year budgets that featured overall losses on the previous year, would be exempt from raising the minimum wage. This was a practical, fair way that justly considered the situation of money-losing businesses. However, all subsequent decisions to raise the minimum wage overlooked measures that accommodated the needs of the private sector, whether by exemption from applying minimum wage in case of losses, or by defining a percentage of profits for the increase of wages.
Some may argue: but what about State institutions accruing losses yet that have to succumb to the decision of raising the minim wage? Well, the reply is quite simple: State institutions enjoy the protection and support of the State which covers their losses. They are exempted from accountability in case they fail to settle social security or tax dues, and their debts are rescheduled. So how can the private sector too enjoy such an umbrella of immunity and support?
Watani International
16 February 2024