For a Decent Life in Egypt; What is the Minimum Wage Required?

In early July 2021, Egypt's cabinet's decision on the minimum wage for employees and employees of state and public economic agencies came into force.

Article 1 of the resolution, submitted by Prime Minister Mustafa Madbouli, stipulated that the minimum monthly wage due to the employee/worker, starting on July 1, 2021, should be for the premium grade or the equivalent of 8,400 pounds ($535), up to the sixth degree with a wage of 2,400 pounds ($153).

The salary increase includes about 5 million workers and employees of the state administrative apparatus, raising the minimum wage from 2000 to 2,400 pounds by 20 percent, and increasing the value of pensions by about 13 percent.

 

Insufficient

These figures come below minimums that create a decent life or provide the basic requirements of the Egyptian family.

According to economist Abdel Hafiz al-Sawi, Egypt's minimum wage is not even linked to the World Bank's poverty limit of $1.9 a day, so if there is a family of a husband, wife and two children, their income is supposed to be 3,500 pounds ($223).

Al-Sawi added to "Istiqlal", that setting the minimum wage of Egyptian government workers at 2,400 pounds cannot meet the basic needs of the family for food, drink, clothing, housing and transportation, as well as treatment, education and many other things.

He stressed that there is still a big gap between the government's wages and the requirements of a decent life that Egyptian citizens must enjoy.

This coincided with a resurgence in inflation, which in May 2021 was about 4.9 percent.

Economics professor Ahmed Zikrallah said the minimum wage is not humane even after the increase.

"By dividing 2,400 pounds by 16, the monthly income in dollars is about $150, and by dividing this amount into 5 members of one family, the per capita income is only $1 a day, which is below the acceptable global limit," he said.

"Although the Egyptian administration has controlled inflation rates to some extent over the past period, it cannot be said that this will continue forever as a result of a wave of global price hikes," he told Istiqlal.

Global inflation reached its highest level since 2008 in April 2021 at 3.3 percent, according to the Organization for Economic Cooperation and Development (OECD).

Without the unprecedented stampede or increase in debt in Egypt, the Egyptian regime could have even slightly increased the minimum wage by more than 2,400 to the 3,000 pounds limit, "so that we can get the citizen to at least $1.25 a day," he said.

Earlier figures from the Egyptian Ministry of Finance show that the country's external public debt as of the end of December 2020 was $129.2 billion, growing by 14.7 percent year-on-year, while domestic public debt was nearly $200 billion.

According to Zikrallah, the Egyptian regime deliberately limits workers' wages so that it can control the state's budget deficit, in order to satisfy the IMF at the expense of the Egyptian citizens.

Since 2013, Egypt has borrowed from the International Monetary Fund (IMF) about three loans worth up to $20 billion, and the country receives them provided a range of IMF-imposed issues are implemented, including reducing the budget deficit, floating the local currency and reducing subsidies.

 

Wage Structuring

But as the country's budget funding gap widens, and most revenues are eroded by interest and debt premiums, some question how much the budget can absorb those wage increases.

Despite the government's fiscal stimulus and improved minimum wages and pensions, this year's budget wage line ded not exceed 20 percent and it was normally increased by 10 percent, al-Sawi said.

He pointed out that the wage line is not the largest in the Egyptian budget spending allocation, and that the benefits paid by the government on public debt in both domestic and external terms are the largest item.

The total wage volume in the next fiscal year 2021/222 is expected to be 361 million pounds ($23 million), representing about 19.6 percent of the budget.

Al-Sawi said there are many problems related to wage structure, as the basic salary still represents only 20 percent of the value of what the Egyptian worker receives and the rest of the salary, which is 80 percent, which is bonuses and allowances.

This opens the door to personal courtesies, nepotism and corruption, and wages vary between workers in the State from sector to sector and from institution to institution.

Thus, a 20 percent increase in wages in the general budget would not be a burdensome thing to balance under the current debt conditions and what it requires, he said.

Egypt fell to 117th among 180 countries in Transparency International's Global Corruption Perceptions Index 2020, down from 106th in 2019 and 105th in 2018.

According to Zikrallah, The general budget now does not bear any spending, he said, noting that most of the state's public revenues go to paying interest and debt premiums of up to 90 percent.

Therefore, talking about any increase in wages, investment or services will not be borne by the budget.

That never meant leaving citizens in a state of extreme poverty, because of the negative social and economic effects, especially in light of the deterioration of the services provided by the State to the poor citizen.

The World Bank issued a statement in May 2019, saying that about 60 percent of Egypt's population is either poor or vulnerable to poverty.

Not a Burden

In the midst of this, it comes to the citizen's mind that salaries are a burden on the state budget, considering that a sound economic structure requires creating a climate suitable for the private sector so that it is the main driver of employment.

But this does not prevent the state from employing part of the labor to provide the necessary services to citizens, especially since wages account for only about 20 percent of the budget.

Al-Sawi said that although budget wages borrow from subsidies, they are much lower than debt interest allocations.

Here, the state must increase the productivity of public sector workers so that these salaries have an added payoff and value in government services.

The Government is required to look at the wage file each year in the framework of a holistic treatment of increased productivity, rehabilitation, training and good governance in its institutions, not out of budgetary value.

According to a study prepared by the Egyptian Center for Economic Studies (Independent), in June 2019, the most important challenges facing the state's administrative system are labor inflation, misallocation, high cost, low productivity and dissatisfaction of citizens with the services provided by the state.

The study indicated that there are about 6.4 million career degrees funded by the administrative device, a very large percentage equivalent to about one employee per 15 citizens, to confirm the mismanagement of the skills development system for employees in the administrative apparatus of the State.

For his part, He said wages cannot be eliminated because they are the main shipper for domestic consumption, which is also the main engine of external production and import.

It is therefore believed that the production cycle in Egypt depends largely on the local wages of public officials.

A foreign investor who views the Egyptian market as a promising market with about 100 million citizens or consumers will also be affected.

If the per capita consumption rate declines as a result of low wages, this investor will look for another market.

The state must therefore raise wages in a way that allows citizens to live decently, while controlling the government's open lust to borrow to reduce its effects on the state budget, work to provide an environment for the rehabilitation and efficiency of the public worker, and get rid of financial and administrative corruption to preserve public money, according to his vision.