Egypt: Jitters over jobs

Niveen Wahish , Friday 28 Aug 2020

Higher unemployment figures may have been spurred by the fallout from the Covid-19 pandemic, but they are also driven by structural problems

Youth aged 20-24 represent only about 11 per cent of the total number of employed  photo: AFP
Youth aged 20-24 represent only about 11 per cent of the total number of employed photo: AFP

Emad Hassan, a web developer in Cairo, has seen his salary and those of his colleagues cut in half since March when the need to halt the spread of the Covid-19 forced a shutdown of many activities in Egypt.

However, he is not complaining, as he was glad to keep his job and continue working online at a time when the coronavirus crisis and associated lockdowns have slowed activity and caused many to lose their jobs.

Not everyone has been as lucky as Hassan. Mahmoud, a waiter at a coffee shop in 6 October City on the outskirts of Cairo, was unemployed for more than two months because all coffee shops were closed as part of preventive measures to halt the spread of the coronavirus.

Mahmoud only went back to work at the end of May, but even then a good part of his income, coming from tips and so on, was not back to usual until recently. Until late July, operating hours for such businesses were limited in order to limit public gatherings and curb the spread of the coronavirus.

Many stories similar to those of Hassan and Mahmoud could be heard over the past few months, and recently released unemployment data has quantified the extent to which the coronavirus has hit Egypt’s labour market.

The unemployment rate rose to a near two-year high in the second quarter of 2020 to reach 9.6 per cent, 2.1 per cent higher than its level in the same period last year, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS).

“The increase is due to the repercussions of the Covid-19 pandemic and the government’s taking precautionary measures against it, including the partial closure of shops as well as the night-time curfew,” CAPMAS said, adding that the labour force had fallen to 26.7 million compared to 28.1 million during the first quarter of the year.

A study by the Egyptian Centre for Economic Studies (ECES), a think tank, further analysed how the labour market reacted during the crisis. The ECES study showed that women were the most affected by the crisis among vulnerable categories, given their high representation in the services sector such as education and healthcare and in informal sector activities. They were also hard hit by the precautionary measures, such as the suspension of schools.

The crisis has also made itself felt on youth unemployment rates, especially in the sectors of food services and leisure activities such as cinemas and theatres and related transportation services such as cab-hailing applications, because young people are concentrated in these sectors.

The ECES noted that the peak of the crisis was from mid-March to mid-April, which saw the beginning of the suspension of work and paralysis in many sectors. This period saw the tightening of precautionary measures, such as the closure of restaurants, cafés, and commercial malls and stores, which meant major disruption for workers in these sectors.

During this period, the ECES showed that there were also signs of workers returning from abroad, especially from the Gulf countries. There was the beginning of a wave of layoffs as a result of paralysis in the tourism sector. The period saw temporary and permanent layoffs in the wholesale and retail trade sector following the closure of shops and commercial malls.

According to the ECES, an optimistic scenario for unemployment rates in the months to come in Egypt is that they will reach 14 per cent, a calculation made taking into account the number of those unemployed before the crisis hit, or around 2.3 million.

To these are added an estimated one million returnees from the Gulf and other countries, with the ECES estimating that more than 700,000 people could find themselves unemployed due to the crisis, a similar figure to that following the aftermath of the 25 January Revolution in 2011.

A more pessimistic forecast places unemployment at 20 per cent, according to the ECES. This takes into account a larger number of returnees and a greater number of unemployed as a result of the crisis.

The number of returnees from the Gulf has been increasing, though no exact numbers have been announced. One source working in Kuwait who preferred to remain anonymous spoke of how foreign workers were increasingly at risk of losing their jobs in the country.

Some 750,000 Egyptians live in Kuwait, with the bulk of them working in blue-collar jobs. According to the source, the Kuwaiti government has issued decrees affecting foreign workers, including Egyptians. As a result of some of these, some Egyptians who returned to Egypt for the summer holidays were not able to return.

Further decrees are likely to prompt others to leave, the source said, and many may have difficulty re-entering the job market in Egypt. With most such workers coming from the Delta and Upper Egypt, they will probably go back to working on land bought with their savings or living off the rent of homes built or bought with such savings.

The government said in late July that expatriates and workers returning from abroad could input their details in a database that could help them find jobs in Egypt. Returnees will also be assisted in setting up their own projects, and they can also work on the various national projects.

According to Mohamed Abed, a professor at the Faculty of Commerce at Alexandria University, such returnee workers are an asset for Egypt. They may have skills needed in the Egyptian labour market if they are white-collar workers, he said, and in ordinary times it may be difficult for Egyptian companies to pay salaries competitive with those in the Gulf.

Blue-collar workers were likely to be resilient and would find ways to survive, he said.

However, the problem is not just about finding jobs, but also about lower remittances from workers abroad reaching Egypt. Such remittances were a top source of hard currency in 2019, coming in at $26.8 billion. The source said that hundreds of thousands of Egyptian workers could return from Kuwait and Saudi Arabia whose economies have been affected not only by the coronavirus, but also by the drop in international oil prices.

Although the ECES said the situation would improve with the easing of the precautionary measures, it warned that in September, with the start of graduate entry into the labour market in addition to returnees from abroad, unemployment would persist.

Furthermore, it believes that the problem of finding employment will increase because of more reliance on the digital economy as a response to the Covid-19 crisis.

In addition to the negative effects of the coronavirus on employment, the ECES study also showed that Egypt’s unemployment market was already suffering from other problems. The education system was contributing a huge number of new graduates to the labour force on an annual basis that exceeded its ability to generate new job opportunities.

Young people in the 20 to 24 age group represent only about 11 per cent of the total number of employed compared to more than twice this percentage for the 30 to 39 age group.

The ECES study showed that unemployment rates were higher among the more highly educated, reflecting the failure of the education system to meet labour-market requirements, especially in the private sector. The number of unemployed university graduates is significant, and it even approaches the rate of the illiterate and those who can only read and write, the study said.

Another major problem, according to Abed, is the quality of the jobs available. He said that when unemployment falls in Egypt, it is often because of an increase in temporary jobs, but there was a need to create more good-quality permanent jobs.

In order to do so, there was a need to level the playing field for the private sector and prevent it from being crowded out by the public sector in order to allow it to grow. When the private sector encounters such difficulties, it may turn to the informal sector to survive, he said.

*A version of this article appears in print in the 27 August, 2020 edition of Al-Ahram Weekly.

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