Wages in Egypt: Restructuring remuneration

Safeya Mounir , Thursday 28 Mar 2019

Pensioners queuing to receive their pensions

To the delight of pensioners, President Abdel-Fattah Al-Sisi ordered the Ministry of Social Solidarity last week to withdraw its appeal against a High Administrative Court ruling issued in February on the right of pensioners to receive annual increases to their pensions.

The court had ordered the government to include 80 per cent of the last five special allowances received by government employees since 2010.

Since 2006 the Public Authority for Social Insurance (PASI) has overlooked the special allowances the insured received in the last five years before retirement.

A group of pensioners had petitioned for their right to receive the special allowances based on a 2005 ruling by the Supreme Constitutional Court that granted pensioners the right to receive the allowances. Another group of pensioners appealed the PASI decision on the grounds it was unconstitutional before the Supreme Constitutional Court in 2013.

Al-Sisi also called for an overhaul of the wage system and is scheduled to review the Ministry of Finance’s plans within a month.

The government is seeking to reform the wage system in the coming fiscal year in line with the president’s directives, said Finance Minister Mohamed Maait.

Media reports suggest the plan to restructure remuneration may see the minimum wage rise to LE1,400 or LE1,600 — 17 or 33 per cent — from the current LE1,200, a figure that has not changed since January 2015.

Other suggestions include raising the annual bonus to 15 per cent, instead of the current 7.5 per cent stated in the 2016 Civil Service Law.

The controversial Civil Service Law was designed to curb large increases in salaries by placing a ceiling on annual allowances, encourage early retirement and control public expenditure.

After the law was approved government spending allocated to wages decreased by 18.9 per cent. Public spending on salaries of government employees fell to 5.1 per cent of the GDP during the current fiscal year, compared to 8.4 per cent in 2013-14.

Maait told a general session of parliamen convened to discuss the final account of the state budget for fiscal year 2017-18 that public sector employees will see improvements to their wages in the new state budget. His ministry was seeking drastic reform of the wages system, he added.

But how will the new scheme affect the government’s budget?

Former finance minister Amr Al-Garhi said last year that every LE10 increase in the weekly wages of employees under the umbrella of the Civil Service Law cost the state an extra LE3.5-4 billion a year.

Wage policies do not address the problem at its core and lack structural coherence, says researcher Abdel-Khalek Farouk. He adds that the structure of wages in Egypt is far more convoluted than in other countries.

Egypt’s wage system enshrines huge disparities. Central Agency for Public Mobilisation and Statistics (CAPMAS) figures from September 2017 showed that the average weekly wage for private sector employees— more than 60 per cent of the Egyptian workforce — was no more than LE670, 58 per cent of the average wage of workers in the public and public enterprise sectors.

The CAPMAS report also found the average wage of workers in the education sector — LE450 per week —came towards the bottom of average weekly wages of employees in 2016.

At the very bottom of the list were wages in the electricity, gas, mining, transportation and storage sectors. The list was topped by workers in insurance mediation with an average weekly wage of LE2,753.

Economist Doha Abdelhamid argues annual salary increases should be linked to inflation and GDP growth rates. She cited a study on the structure of wages by the Egyptian Centre for Economic Studies which highlighted the wide gap between the salary of sector directors and those of managers directly beneath them.

Restructuring the wage system has to go hand-in-hand with reforming the administrative sector and assessing the performance of each employee, says Abdelhamid.

The 2016 Civil Service Law was one of the tools devised in an attempt to reform the state’s administrative sector.

*A version of this article appears in print in the 28 March, 2019 edition of Al-Ahram Weekly under the headline: Restructuring remuneration 

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