Private sector minimum wage not settled yet amid warnings of a hunger revolution

Ahmed Feteha, Tuesday 7 Jun 2011

The minimum wage for the private sector has not yet been fixed, with the government 'merely a mediator' in the debate between business and labour leaders

Egypt’s labor minister Ahmed Hassan El-Boraie

The minimum wage in the private sector might vary from one economic sector and geographical area to another, according to Egypt’s labour minister.

During a meeting with economists and business lobbyists, Ahmed Hassan El-Boraie said that the structure of the minimum wage to be imposed on the private sector is not yet finalised.

“The higher council for wages is open to all suggestions and ideas from all concerned parties to decide upon the issue,” he said, indicating that government’s role is merely to mediate between the labour force and businessmen.

He did not specify an exact timeframe for implementation, but when December 2011 was suggested, he deemed it “too far.”

El-Boraie did not uncover any information about the mechanisms through which the rate is being set, or any enforcement strategies.

When faced with questions about how he expects the public sector to receive the wage, he indicated that he doesn’t believe that the “sacrifice” businessmen are expected to make is significant.

He seemed lenient about enforcement of the wage, ignoring a question about whether the wage would be mandatory for the private sector or not. “It is their affair [to object to the wage]…but everyone has to assume responsibility.”

“By fixing the wage structure, I am protecting investors, not driving them away,” he confirmed.

As for setting a maximum wage in the private sector, El-Boraie refused to talk about the issue, saying the government should not tell businessmen how to spend their money.

Minimum wage or hunger revolution?

“We have no choice; the minimum wage is the solution.”

The minister of labour painted a gloomy picture of a “hunger” revolution if immediate social justice measures are not taken to “rescue” Egypt.

“Don’t talk to me about the economy now; sacrifices must be made or we will be facing another revolution” El-Boraie elaborated.

El-Boraie was faced with stark criticism of the new minimum wage which the interim cabinet is proposing to apply on public and private sectors. The monthly rate has been set at LE700 for the public sector but hasn’t been finalised yet for the private sector.

Application of minimum wage is estimated to cost the government LE7.5 billion in the 2011/2012 budget currently being drafted.

Magda Qandil, director of the Egyptian Center for Economic Studies, explained that raising the minimum wage puts burdens on an already struggling state budget, forcing the government to acquire more expensive debt, which would result in a growth in inflation.

“Consumption that is not buoyed by production will severely harm the economy, defeating the original goal of social justice,” she said.

Surprisingly, El-Boraie expressed his agreement with Qandil’s comments and did not try to rebuke them. “After 30 or 40 years of a flawed work system, it is very hard to link pay to production,” he added.

El-Boraie explained that the interim government is currently using the available resources to save the current situation given the time constraint. Subsidy reform, he added, is an ultimate milestone towards social justice.

“The government is currently working on diesel subsidies, which is estimated to save up LE4 billion in the budget. We are also working on the smart card system to rationalise gas subsidies,” he indicated.

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