CAIRO: With a court order mandating the government to reset minimum wage to comply with the current cost of living and a rising wave of labor unrest, questions about the size of this potential increase in government expenditure and the resources and structural reforms required for it, are yielding different answers.
According to CAPMAS, 7.9 million were employed in the public sector in the beginning of 2009. The wages for government employees accounted for approximately 27 percent of government expenditure and the budget deficit amounted to LE 94,880 million in the draft budget for 2009/2010, according to the Analytical Statement of the State General Budget Draft For 2009/2010 on the Ministry of Finance website.
The wages on the other hand, even with all incentives and bonuses included, are viewed as too low to meet basic living expenses and, according to many economic studies, have failed to keep up with rising inflation, subsequently causing mounting labor unrest.
A revised minimum wage of LE 1,200 a month was proposed in a study by Ahmed El-Naggar, an economist at Al-Ahram Center for Political and Strategic Studies. El-Naggar based the wage increase on conservative estimates of the ability of government workers to acquire basic living space, nutrition, transportation and health services, a minimum of LE 300 for renting a flat in the Mubarak Youth Housing project and a minimum of LE 300 for food.
But others don’t see this proposed LE 1,200 as feasible. Doha Abdelhamid, professor of public policy evaluation in Carelton University in Canada and co-author of a study on the subject, said that the difference between the current minimum wage for government employees, which is around LE 300, and the proposed LE 1,200 is too big. “It seems that it is not really feasible since in order to make this change, the government will have to print money and this will inevitably cause inflation.”
At a public lecture, about the challenges and opportunities of civil service reform, organized Monday by the American University in Cairo (AUC), Safwat El-Nahas, president of the Central Agency for Organization and Administration, further explained why.
“Countries around the world calculate minimum wage to be around the poverty line, which is around LE 160 a month in Egypt. The government of Egypt pays around LE 400 a month to the lowest level employees, 18-year-olds who have no experience and who do not support families,” El-Nahas said.
A report published by the Egyptian Center for Economic Studies (ECES), titled “Reforming the Pay System for Government Employees in Egypt”, proposes that the minimum wage for government employees should be LE 733.2 per month compared to the officially announced minimum wage of LE 295.13.
Abdelhamind, who co-authored the study, said the calculation of this figure included more social aspects as well as average per capita GDP, like dependency of families on income earners and number of income earners in each family. “The proposed wage was calculated taking into account how much government employees would really need to provide for their families.”
However, Khaled Ali, the director of the Egyptian Center for Economic and Social Rights, the center that had filed the minimum wage case against the government, contests the announced figure the government pays to the lowest level employees per month, claiming that it is actually much lower than LE 400.
He says that the issue of funding the required wage increase can be solved by bridging the gap between the maximum and minimum wage.
“The main issue here is dealing with the huge discrepancies between minimum and maximum wages within the government sector. Some workers, like the workers in the Ministry of Local Development who are currently protesting outside cabinet, get only around LE 90 a month, while the highest ranking officials get LE 1 million a month,” he said.
El-Naggar further points to the disparity in income distribution.
“Government officials make hundreds of thousands of pounds a month through additions to their basic government salaries, including allowances, bonuses, commissions, incentives and profit-sharing. Most of this money comes directly from the government.”
El-Naggar’s study suggests that if the difference between minimum wages and the maximum allowed total wages (including additions) is reduced to 15 percent and a revised salary scale is adopted, the millions saved could be used to fund the minimum wage increase.
The ECES report echoes El-Naggar’s suggestion.
“Of course, we have used this proposed salary [LE 733.2 a month] to calculate a new wage scale for government employees with an acceptable difference between the highest paid government officials and the lowest paid workers, 14 fold. We found that in international experience, the difference should not be more than 10 fold,” explained Abdelhamid.
According to the ECES report, the ratio of minimum to per capita GNP has decreased from nearly 60 percent in 1984 to 19.4 percent in 1991/92 and further to 13 percent in 2007. When the ratio of minimum wage to per capita GNP is compared to other countries, it appears amongst the lowest. While in Turkey the rate is 78 percent, France 51 percent, Spain 26 percent, in Egypt it is only 13 percent.
The report concludes that the proposed salary structure will increase the total government fiscal cost of wages by nearly 256 percent, which would require substantial government funding. The report makes recommendations on how the government could find the necessary funding for this wage increase, which they advise should be implemented immediately. Mainly, it advises cutting back corruption in government authorities and better management of human resources.
El-Nahas pointed to some government plans to reform the civil service by ending the practice of giving the customary “excellent” performance appraisal. With basic low salaries, such appraisals are required to give employees the bonuses that could make their monthly income more compatible with the cost of living.
According to El-Nahas, another civil service reform is to stop hiring workers on temporary basis which has been cited as a major concern by labor groups, since this diminishes their social welfare benefits and bonuses.
El-Nahas also talked about stopping temporary contracts from becoming permanent, even after the work for that short-term project has ended. “This creates an unnecessary burden on government resources and is one of the main issues we are working on.”
The ECES report advised reducing military and police spending (specifically army and police perks) and channeling the cash to wages.
“The government should reduce funding on luxury vehicles and other perks for higher government officials,” said Laila ElBaradei, public policy professor at AUC and co-author of the report.
El-Nahas added that the government is planning to resort to freezing new appointments and not replacing employees who leave, as well as “reshuffling employees from over-staffed government offices to create new, more specialized agencies to deal with different issues.”
The authors agreed that by adopting these reforms, the government would be able to finance the budget increase required to raise minimum wage.
This could be a major political advantage for the current government in the upcoming elections, said Abdelhamid.
