At the end of March 2010, the judiciary issued a verdict obliging the Egyptian government to set minimum wages for employees in the public and private sectors. Six consecutive governments since that date have ignored the verdict citing many allegations as pretexts, until the current Prime Minister Hazem Beblawi issued a decision last September that set January 2014 as the starting date for implementing the minimum wage decision.

At the end of March 2010, the judiciary issued a verdict obliging the Egyptian government to set minimum wages for employees in the public and private sectors. Six consecutive governments since that date have ignored the verdict citing many allegations as pretexts, until the current Prime Minister Hazem Beblawi issued a decision last September that set January 2014 as the starting date for implementing the minimum wage decision.

However, it faced several obstacles in light of the aggravating budget deficiency, the growing inflation rates, the ever increasing prices and the deteriorating security and economic situation. Although employees’ incomes have increased, their actual values have decreased due to high prices.

Employees welcomed the decision

Ahmad Ibrahim, an employee at the Ministry of Agriculture, said raising wages was one of the January 25 Revolution’s demands when millions of Egyptians famously chanted ‘bread, freedom and social justice’.  Yet increasing wages without controlling prices will be a mere short-term painkiller and will not bring about the indented results, according to Ibrahim, who said the government should understand that.

Hassan Ibrahim, another employee, was enthusiastic about the decision: “I had that dream since I was appointed to the Ministry of Local Development five years ago. I did not believe the news about the minimum-wage decision and I will not believe it until I get my salary at the end of the month.”

Is the decision feasible?

Although the decision was welcomed by a broad sector of governmental employees, economic experts including Rashad Abdo believe that the decision from an economic point of view will fail, since the government’s burdens will increase and it will be forced to issue bank notes in order to implement the decision. That will cost the government EP 200 billion (US $28 million) in light of the ever-decreasing total investments down to 8.1% (EP 73.5 billion in the fourth quarter of the last fiscal year) and the gap between investment and local savings that reached 7% of the gross domestic product.

This decision, Abdo explained, is expected to increase the unemployment rate in Egypt according to the General Mobilization and Statistics Apparatus by 0.8% (30,000 unemployed person) amounting to 13.4% of the total workforce despite the fact that 1.2 million Egyptians decided to work abroad, according to the total work permits Issued by the Ministry of Interior.

Other sectors not covered by the decision

Although the decision benefits the public-sector workers, other limited income sectors will not be covered by the decision. Farmers believe that the decision is not fair since, after the decision, the prices of goods and services are expected to rise, irrespective of their low incomes.

The decision also did not mention the private sector factory workers whose number amounts to 18 million according to official statistics.

Mohamed Hasanin, a worker at a tourist bazaar in Luxor, criticized the government’s disregard of the private-sector workers suggesting that the decision will increase the government’s already aggregated burdens.  Hasanin gets EP 600 as a monthly salary for ten daily work hours. He works without any contracts, which would guarantee his rights and oblige the bazaar owner to improve his situation over time.

“Decision will lead to higher prices”

Rushdie Arnot, Head of the Farmers Association in Luxor Governorate, said farmers get between EP 700 to 750 per month (US $100 – $108) implying that the income difference between those farmers and the workers in public and private sectors will increase after applying the decision which, in turn, will drive the demand on goods with the same level of supply leading to higher prices. Workers and farmers will pay the highest price.

In the meanwhile, Arnot demanded that government pays for the income difference between the governmental employees and the private-sector workers.

Minimum wages is a myth

Osama Ghaith, professor of Economics at Cairo University, underlined that the majority of Egyptian workers are informal: including farmers, craftsmen and micro-enterprise workers. They are not covered by the decision despite the fact that they receive very low wages and are not covered by health or social insurance policies.

In this context, Ghaith warned against the continuing rising prices during the coming few months in light of the decreasing revenues by 21% in the previous month according to official statistics.

Ghaith concluded that when calculating the governmental employees’ overall wages, the fixed salary, variable wages, incentives, rewards, allowances and other in-kind and insurance advantages should be considered, which means that setting minimum wages is a myth that misguides people.