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Tuesday, 10 December 2019

Beware of the ‘echo’

The government should get ready for an increase in the number of new entrants to the labour market over the coming decade, reports Niveen Wahish

Niveen Wahish , Thursday 31 Oct 2019
Beware of the ‘echo’
The share of informal employment outside fixed establishments doubled between 2006 and 2018
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Despite a recovery in the country’s economic growth, Egypt’s economy is still not creating enough quality jobs, a recent survey has revealed. Egypt’s gross domestic product grew 5.6 per cent in the first quarter of the current fiscal year.

Employment rates in Egypt have not recovered since they began declining in 2011, economist Ragui Assaad said this week, while delivering the findings of the 2018 Egyptian Labour Market Panel Survey (ELMPS) to a conference organised by the Economic Research Forum (ERF), a think-tank, in Cairo.

According to Assaad, in 2018 the employment rate, being the number of people of working age who are employed, had declined by 8.5 per cent since 2010. However, this had not translated into rising unemployment rates because of a slowdown in the growth of the labour force owing to a smaller than usual number of young people joining the labour market and falling participation rates.

Egypt’s unemployment rate reached its lowest level in 30 years at 7.5 per cent in the second quarter of 2019, according to statistics announced this week.

The 2018 ELMPS was the fourth edition of this survey conducted by the ERF in collaboration with the Central Agency for Public Mobilisation and Statistics (CAPMAS), the government statistics agency. The ELMPS measures indicators related to employment, labour-market activity, and household economic and social status.

Labour-force participation rates, the total number of people who are currently employed or in search of a job, in Egypt declined from 52 per cent in 2006 to 48 per cent in 2018, economists Caroline Krafft and Emma Kettle wrote in a policy paper based on the survey results.

One reason there had been less pressure on the labour market was an increase in “discouraged unemployment”, they said, being those who want and can work but have given up searching for jobs. This group is not accounted for in the official unemployment rate.

According to Assaad, the period between 2012 and 2018 was also characterised by a steady decline in the share of the public-sector jobs, a slow rise in formal private waged employment, and a substantial rise in informal waged employment.

The share of informal waged employment outside fixed establishments also almost doubled between 2006 to 2018 to reach 23 per cent. This form of employment is most vulnerable to job insecurity, because of the irregularity of employment and involuntary part-time work, Assaad said. It also involves more exposure to occupational hazards and injuries.

Assaad attributed the growth of these kinds of jobs to disproportionate growth in the construction and transport and storage industries in Egypt over recent years. He said that the share of construction in total employment had increased from eight per cent in 2006 to 13 per cent in 2018 and the share of transport and storage had increased from six per cent in 2006 to nine per cent in 2018.

The middle class has been particularly affected by the informalisation of employment. While the poorest quintiles of the population have always lacked access to formal jobs, the second to the fourth quintiles had now also seen substantial declines in their access to such jobs, Assaad said.

The government intends to combat this informalisation of the labour market, Minister of Planning Hala Al-Said told the conference. She said that a draft law would soon be presented to parliament that aims to offer incentives to the small and medium-sized enterprise sector to encourage them to formalise their employment offerings.

In the meantime, the survey showed an improvement in the job security of informal workers.

The proportion of workers reporting irregular employment fell from 40 per cent in 2012 to 30 per cent in 2018, according to Assaad. Similarly, the extent of involuntary part-time work, a sign of job insecurity most prevalent among workers outside fixed establishments, also fell from 2012 to 2018.

These indicators, Assaad said, “are highly susceptible to the business cycle and have improved as a result of the overall improvement in the economy”. He stressed that this group could be vulnerable in the next economic downturn, however.

Women’s participation in the labour market during the period of study did not fare well. According to Krafft and Kettle, it declined from 27 per cent in 2006 to 21 per cent in 2018. They also said that contrary to expectations, Egyptian women’s labour force participation did not increase with education, attributing this to the decline in public-sector jobs that are often women’s preferred employer.

They also attributed the decline to the low quality of jobs created by the private sector and the difficulties women face reconciling domestic responsibilities with work.

According to Krafft and Kettle. these are all signs of a weakly labour-absorbing labour market. “Egypt must address these long-standing structural challenges for the labour market to make better use of its human resources,” they said.

To make full use of its human potential, Egypt must create good jobs that will attract its increasingly educated young people. Private-sector jobs that suit women’s domestic responsibilities are also crucial, since marriage and domestic responsibilities are a major constraint on women’s participation, they said.

Krafft and Kettle suggested that Egypt has a window of opportunity with reduced demographic pressures to try to address these challenges, with survey results showing that it is only a matter of time before Egypt’s labour market is hit by a demographic phenomenon that began three decades ago.

The so-called “youth bulge”, or the disproportionate share of young people in the population that occurred in the late 1980s when mortality rates fell but there was a lag before fertility decreased caused pressure on the labour market as more people reached working age.

The “bulge” hit most in 2006, when there were more young people aged between 15 and 24, but gradually these people got older, found jobs, and decreased the pressure. Members of this group are now married and have children of their own, who will represent an influx of new entrants to the job market in a couple of years.

These children are called the “echo” of the original “youth bulge”. But according to Assaad, the problem lies not in this echo itself, but in its size.

He said that the 2012 survey had showed a rise in fertility to 3.5 births per woman after having reached three births per woman in 2008. The rise in fertility had contributed to the size of the echo. However, the 2018 ELMPS survey provided new evidence that fertility was once again declining, having fallen to 3.1 births per woman, he said.

The ELMPS survey included a sample of around 16,000 households, representing around 61,000 individuals. Around 80 per cent of the sample were households that also formed part of the 2012 survey. The rest were a new sample of 2,000 households from the poorest villages in the country to test for economic vulnerability.

*A version of this article appears in print in the 31 October, 2019 edition of Al-Ahram Weekly.

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