A recipe to end Egyptians' picketing over wages

Niveen Wahish, Saturday 26 Feb 2011

Tackling the wage policy lies at the heart of stemming demonstrations

No sooner had former president Hosni Mubarak announced he was stepping down and demonstrators in Tahrir Square began dismantling the tents that had housed them for 18 days, dozens of other demonstrations sprang across the country.

Everyone seemed to complain about their pay and work conditions. Those did not only include civil servants or workers in low- paying jobs, but also bankers and petroleum company staff who are perceived to be among the best-paid.

"It is not just about the pay; but about wage disparities," said Omneia Helmy, lead economist at the Egyptian Centre for Economic Studies (ECES), adding that some employees are frustrated by the fact that others, whom they consider equals, may be getting paid a higher salary.

In fact, a report by the International Institute for Labour Studies (IILS) says that social conflicts tend to increase when inequalities are perceived as being too great.

Helmy pointed out there is a problem with what has become known as the parallel system whereby government institutions needing certain skills, which it does not believe exist amongst its staff, hires at a higher salary to attract the cadres they need.

"The trouble is not in the higher salaries," Helmy said, "because the salaries these cadres receive are often equivalent to what they would be getting in the private sector." The problem, she added, lies in the lack of transparency regarding the job description, qualifications needed and salary levels. "Just as there is a minimum wage, there must be a maximum wage," Helmy said.

Another aspect of the problem is that the actual fixed salary is a small sum of the amount the employee finally pockets. According to a March 2010 paper by Minister of Finance Samir Radwan the fixed salary is only 22 per cent of the overall pay of employees.

The remaining 78 per cent are variable bonuses and allowances. To deal with this problem, Abdel-Fattah El-Gebaly, deputy head of Al-Ahram Centre for Political and Strategic Studies, suggests adding up all these items so that the employee receives one lump sum. "Any bonuses should be for exceptional performance," he said.

Currently, bonuses are taken for granted as a given right. From thereon, El-Gebaly said, salaries' increases should keep up with inflation.

In the meantime, both Helmy and El-Gebaly called for the need to reform wage policies to take into account inflation and the cost of living as well as productivity. "Employers would not resort to foreign labour," Helmy said, "if they found their needs locally."

Helmy believes there is a need to change the work culture whereby punctuality, discipline and excellence are promoted. "A change of mindset is needed," she said. "Those who are unemployed must accept to carry out jobs which may not necessarily fit their qualifications. They must be willing to be retrained and acquire new skills." The answer, according to Helmy, is not to apply for government jobs as thousands do whenever government vacancies are announced as in recent weeks.

But Radwan is well aware of these issues. In the 2010 paper he had prepared for the Information and Decision Support Centre (IDSC), he had called for "a broad outline of wage policy reform."

Wage policy is based on three pillars: first, to end the dispute over setting a minimum wage using international standards; second is the need to link wages to productivity; then both lead to the third pillar which is institutional reform and creating a technical entity for managing the labour market and facilitating dialogue between workers, the private sector and the government.

Radwan called for democratic institutions which represent the workers and the private sector and express their demands. "Setting wages and settling disputes should take place in this framework," he said.

In fact, a statement made earlier this month by International Labour Organisation (ILO) Director-General on the situation in Egypt said that a "specific and long-standing concern to the ILO has been restrictive legislation in Egypt which allows the operation of only a single approved trade union federation and obstructs free organisation of workers in trade unions of their choice."

Along the same lines, Radwan had called for the need to reactivate the role of the Higher Council for Wages established by the 2003 labour law. "Demonstrations should be the last option," he said. "But lacking these mechanisms," Helmy added, "individuals with complaints had no option but take to the streets."

Another part of reforming the institutional framework, Helmy adds, is revisiting social insurance laws. She pointed out that private sector employers complain that insuring a worker is very costly and have often demanded a reduction of their share in the insurance premium. As a matter of fact, many of them, to avoid insuring their workers, hire them under a temporary contract which poses no obligations.

If that problem is resolved and workers feel secure that they will get their full rights with the private sector, Helmy said, they will not refrain from working for the private sector rather than opting to wait for government jobs despite the lower pay. There are currently around six million government employees.

Another issue to revisit is the firing process.

Speaking recently at a seminar at the Egyptian Centre for Economic Studies (ECES) Ratna Sahay, deputy director of the International Monetary Fund's (IMF) Middle East and Central Asia Department, pointed out that it is more costly for a firm to let go of an employee in Egypt than elsewhere since firms have to pay 132 weeks' salary compared to 53 weeks in other oil-importing countries.

Not only is it costly, but also complicated.

Once hired, it is very difficult to fire an employee. "That should not be the case," Helmy said, adding that through dialogue, both employers and employees could agree on a formula that would guarantee the two parties' rights.


Short link: