Behind Egypt's wages war

Niveen Wahish, Ahram Weekly, Saturday 18 Jun 2011

Egypt's revised minimum wage continues to fuel debate ahead of its introduction in July. An International Labour Organisation representative explains the benefits and potential problems

Egypt office worker
An Egyptian bank stores more workers' wages. A raise for the public sector only may raise inequalities and stifle job growth (Photo: Reuters)

Youssef Qaryouti has been director of the International Labour Organisation's country office for Egypt, Eritrea and Sudan and the Decent Work team for North Africa.

He shares some of his thoughts on Egypt's recently-announced minimum wage with Ahram Online.

Ahram Online: What is the experience of other countries in the minimum wage area?

Youssef Qaryouti: The minimum wage is one of the mechanisms being used in different parts of the world to ensure a degree of social justice for everybody, through an income which is not below the poverty line. By setting the minimum wage, you are also ensuring a better distribution of national resources and income. Sometimes, countries achieve high growth rates but we do not know how it filters down to the public, so by having a minimum wage, we can guarantee that all working people can meet their basic needs such as food, clothing and medical services.

Accordingly, you can maintain a better degree of social justice and provide a minimum standard of living for everybody. There are several approaches of setting up the minimum wage; sometimes it is set on a sectoral level, while at other times it is determined according to geographical regions because the living costs are different from one region to another. Different countries have different models to suit their situation.

AO: Should the minimum wage differ between the private sector and the public sector?

YQ: It should be the same across the board for the working force. If we take the basic principle behind the minimum wage, which is guaranteeing the minimum standard of living, it should be applicable for everybody.

If there is a difference, it will affect the country's whole economic, financial and developmental policies. Any reasonable government would like to encourage people to work for the private sector. If there is a wide difference in incomes between the public and private sector, people will continue to prefer working for the government and will be discouraged from working for the private sector.

AO: Do you believe the LE700 minimum wage set by the government is enough?

YQ: I am not in position to comment. As the ILO, we provide technical assistance on how the minimum wage can be set. We also provide support to put in place mechanisms for reviewing the minimum wage.

But the minimum wage is only one issue as the wage structure is more important. At present, the basic salary of employees represents 20 per cent of their income, while the benefit and incentives represent 80 per cent. It should be the other way around. The basic salary should be at least 60 per cent because retirement benefits are calculated on the basic salary.

But as far as the minimum wage is concerned, my personal opinion is that the government has done its best. We cannot ignore the economic and financial difficulties the country is facing right now. And setting a minimum wage does not only affect the portion of society which will benefit from the minimum wage because the wages of the other employees on the scale have to be pushed up as well. I am sure the government has tried to balance between what they aim for in terms of providing protection for the people, and the interest of the other party which is the employers.

One must also not forget that the government is providing a regime of subsidies for products such as food and energy. When people calculate the minimum wage, do they take into consideration that there are other benefits workers are taking advantage of? When you set a minimum wage, it is not just a figure, but in relation to other social protection polices, such as subsidies, access to health services, free education, etc.

Also, looking at the minimum wage, we should not ignore what has been approved in the taxation system, where in the proposed budget, annual income exempt from taxes has been raised from LE9,000 to LE12,000 (US$1,515 - $20,020). That has freed up additional income as well.

In the meantime, the minimum wage should not be just set and forgotten about. If there is a minimum wage it should be enforced and should be revised at least every two years. There also has to be a national wage council to look into the matter which means it has to be the result of a social dialogue between workers, employers and the government.

AO: There have been complaints, especially by the private sector, that in light of low workers' productivity, the minimum wage will be an added burden. What is your comment?

YQ: I do believe productivity in Egypt should be increased which will result in increasing whatever minimum wage is set. My concern is the low productivity in the various sectors. This is an issue that has to be tackled through different mechanisms such as improving the skills of workers, the work culture and social dialogue.

The starting point for any improvement in the working conditions, or for a more reasonable minimum wage, is the productivity issue. That is something that should be subject to serious discussion between all social partners; workers, employers and the government.

AO: How can the government help the private sector meet the minimum wage if the latter is unable to?

YQ: If a decision has been taken through a process of social dialogue, it means that an agreement has been reached. If there is no agreement, then the role of the government is to be the honest broker between employers and workers so that when they take a decision, it has to be implemented.

There are incentives that can be offered such as covering part of the employer's contribution to the pension fund for a transitional period, or offering some tax exemptions. The minimum wage should not be looked at as a single policy measure. It should be part of all social protection measures and socioeconomic regulatory framework.

AO: How can the government avoid having the private sector appointing people informally to avoid the minimum wage?

YQ: This is where inspection has to ensure full enforcement of the labour code. Setting the minimum wage is seen as part of a package of interventions to improve working conditions and productivity. The package should include labour legislation. And the minister of manpower is keen on getting the labour code revised to suit international standards.

The government has to ensure enforcement of the law, provide advocacy and public education for employees and employers, and strengthen the position of workers. If there is a strong labour movement to protect the workers' rights, employers will not be able to put harsh conditions on newly recruited staff.

I hope the dialogue over the minimum wage will be the beginning of the rationalisation of the labour market in Egypt, and the starting point for a more rational wage structure. The wage system in Egypt has to be revised and looked at seriously. If we are talking about democracy and fighting corruption, the starting point is the wage structure. An awkward wage structure will allow for favouritism, bribery and low productivity.

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