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Wednesday, 03 June 2020

The wage cap that affects no-one: why Egypt's public high-earners want their true salaries private

A new maximum wage for government workers was supposed to answer calls for social justice, but as data shows no employee will actually be affected the focus is shifting to the public sector's unmonitored bonus system

Marwa Hussein, Salma Hussein, Friday 15 Jul 2011
Protests for social justice
A wage cap is an indispensable demand for social justice. (Photo Mai Shaheen)
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"Simply irrelevant," is how one commentator describes it.

When Egypt's Minister of Finance announced an upper wage limit for government employees on Monday he probably thought the move would be welcomed by those protesting against social injustice and inequality.
 
A press release from Samir Radwan's ministry said the salaries of civil servants would be capped at a monthly LE25,000 (US$4,200), around 36 times the minimum wage.
 
In practice, however, the decision looks like making no discernible difference; something made clear by the words of ministry advisor Abdel-Fatah Al-Guebali, who said no spending cuts would result from the decision.
 
A new wage limit that doesn't affect spending? Something strange is afoot.
 
Current statistics on public employee wages shows the average payment for upper management is LE1,540 per month ($261) -- 8 times the minimum wage.
 
But these basic figures are no reflection of what high-ranking public employees can actually earn. The Minister of Finance, Samir Radwan, has even admitted this himself, telling the Al-Shorouk daily newspaper that the real ratio of minimum to maximum wage is currently around 1 : 1,000.
 
So where do these massive bonuses come from?
 
While Egypt's public wages remained stagnant for more than 20 years, the government's administrative body found other ways to raise salaries for the especially favoured. 
 
Sometimes this included skilled, valuable workers. On many other occasions, it meant massive rewards for those with scant qualifications for their position beyond a close relationship with those in power. Cronies prospered.
 
In his book, 'Crony Capitalism: A Socio-economic Study', Egyptian economist Mahmoud Abdel Fadil refers to these highly-paid public servants as "the lucky category".
 
He describes salaries paid through international aid funds and non-transparent "special funds", neither of which methods are included in the government budget nor monitored by parliament.
 
Ex-member of Parliament, Achraf Badr Eddine, tells Ahram Online of the famous case of Manal Hussein, niece to a former prime minister and former employee in the office of the former minister of finance, Youssef Boutros Ghali.
 
Hussein was appointed representative of the government for more than one publicly-owned company, something in violation of Egyptian law.
 
"For one company she was representing the ministry of finance, for another she was present as a member of the Upper House. In that way her monthly salary reached LE1 million," says Badr Eddine.
 
So despite the fact that several hundred or more employees, like Hussein, have real salaries above the new LE25,000 ceiling, in the words of Abdel Fattah Al-Guebaly "not a single employee will be affected by the decision as the official upper wage is far less".
 
With the restrictions only applying to official wages, not the total salary package, Al-Guebaly admits the real earnings of "the lucky category" will be left untouched.
 
There are numerous ways for the high-earners to receive their earnings, explains Badr Eddine.
 
"Private funds that should be included in the budget and still are not are another source. Also, some public servants are nominated as representatives of public funds in companies or banks," he says.
 
Badr Eddine thinks all revenue sources for public sector employees should be gathered and measured before a new ceiling is set for wages.
 
A lame decision is better than none -- that seemed to be the government's approach when it made its wage announcement, most likely a sop to angry protesters currently attending the Tahrir Square sit-in who have made the lack of social justice in Egypt's recently passed budget a target of their ire.
 
But while it is unlikely to fix the rampant inequalities in public salaries, the government's step has nonetheless launched a wider debate over the issue.
 
One fear voiced by defenders of the current system is that placing a genuine limit on the income of valuable public workers might encourage an exodus to the private sector.
 
"If you have two candidates for the post of the president of the Tax Authority, one asking for LE 50,000 and who can collect a tax revenue of LE20 billion, and another with a LE100,000 salary but who will collect LE30 billion, which one should we choose?” asked Naguib Sawiris, a businessman and founder of the Free Egyptians political party, during a TV debate.
 
For many of those setting public policy, the logic is different.
 
"I agree there should be a maximum wage," says economist Ahmed Galal. "Those who want a higher salary can go to the private sector. 
 
"People work in the government to serve public interests not only for financial reasons. In the United States, the salary of the president is less than the salary of a medium director in a bank."
 
Galal believes the entire wage structure needs to be reformed if Monday's announcement is to have any meaningful social benefits.
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