CAIRO: In the current context of worker’s unrest and increased private sector concern about Egypt’s labor law, the views of economists, organizations and businessmen differ, particularly when it comes to minimum wage.
Calls to set the minimum wage at LE 1,200 were based on proposals by Ahmed El-Naggar, an economist at Al-Ahram Center for Political and Strategic Studies, whose research was used to obtain the recent court order mandating the government to raise the minimum wage to comply with the current cost of living.
A lower minimum wage of LE 900 was proposed by Egyptian Trade Union Federation (ETUF) President Hussein Megawer during recent negotiations with the government.
Egypt’s national minimum wage remains unchanged since 1984, and stands at LE 35 per month.
Private sector CEOs and businessmen have cited low productivity as the main reason why Egyptian workers, who they say have few skills and negative work ethics, do not merit this much of a rise in minimum wage.
According to the World Economic Forum Global Competitiveness Report for 2009-2010, Egypt ranks 93 out of 133 countries and has a score of 3.6 in the pay and productivity index, showing a comparative disadvantage with regards to this parameter. The index measures the link between pay and productivity and the score ranges 1 for wages not linked to productivity and 7 for wages strongly related to productivity.
When compared to other developing nations, even Arab countries at a similar developmental stage, it is clear that the wages to productivity issue needs reform. Tunisia ranks 65th, Jordan 56th and Qatar 4th in the same parameter.
Mohamed El-Trabelsi, a workers specialist at the International Labor Organization (ILO), claims that the wages productivity dilemma is the “chicken or the egg” question.
“When workers are satisfied with their wages, working conditions, relationships with employers, and their general living standards, they will no doubt work harder. Just as much as employers will pay more for more productivity” said Trabelsi.
According to Vice President of Electrostar Egypt Khaled El-Monoufi, wages and productivity should be closely tied so that worker’s productivity justifies their expected wages.
“We pay the most inexperienced workers a minimum of LE 750 a month; but as workers gain more experience and their productivity increases, their wages will rise significantly,” he said.
He warns about raising the minimum wage without consulting the private sector. “This will inevitably cause layoffs and inflation,” he said.
Mohamed El-Abd, CEO of El-Abd Companies, also said that wages should be considered only when linked to productivity.
“Along with layoffs and inflation, raising the minimum wage will cause the private sector to resort to informal contracting causing the workers to lose their benefits,” he said.
“Productivity should be measured by the ratio of productivity to labor costs. If workers’ productivity increases then wages will automatically go up and you won’t need to set a minimum,” El-Abd added.
Workers should be fairly paid, he said, but according to their merits and skills. “Every case should be taken separately. For example, in our limousine service we pay the drivers a salary less than LE 1,200 but they make much more than that from tips.”
Capacity building
“If the government wants to increase welfare it should focus on improving health and education, not raising the minimum wage,” said El-Abd, adding that an alternative to raising the minimum wage would be to provide on-the-job training. “This would increase their productivity and their wages.”
Skills training should include changing employees’ attitudes and work ethic. “Workers try to avoid work as much as possible,” El-Abd complained.
Luca Azzoni, worker skills specialist at the ILO, said, “The proposal made by different private sector employers to train inexperienced workers at the workplace is one solution to the labor problem but only if it is over and above the minimum wage.”
He added, “The minimum wage is required for a decent living and should have no connection to productivity.”
Karima Haggag, head of the textile research division at the National Research Center, said that most textile workers deserve the proposed minimum wage of LE 1,200. “Most workers in the textile industries are well trained.
“There is progress in the vocational training programs by the private sector but the workers leave the factories after being trained for better wages in other companies, the labor law must be changed to insure employers can keep their workers after training them.”
To that point, Azzoni adds, “Employers believe that workers coming from within the government vocational training and education systems have inadequate skills and therefore are not productive enough. But the government can only train workers up to a certain point. The responsibility is on both government and private sector.”
“The government should focus more on training in core skills to make them ready for vocational work. This training should not only focus on the technical aspects but also on attitudes and creating a better work ethic.”
He also underscored the importance of career guidance to bridge the gap between what youths expect and the realities of the job market. “Career guidance should begin from an early age when children should be informed of different careers in vocational work to raise their interest about their preferred career and to decrease the negative attitudes workers have towards technical and vocational fields.”
Mona Said, labor economist and assistant professor at the American University in Cairo, said that the main problem of labor in Cairo is “informalization.” If a minimum wage is legally raised to a level they perceive is too high, the private sector would react by moving towards offering informal jobs for lower wages and benefits.
“There are three stakeholders in the wages issue, the government, the private sector and the workers’ ‘real’ representatives,” remarked Said.
Said commented that “real” labor representation is not incorporated into the state structure as the current labor movement is. “There is a social contract between labor and the state that guarantees job stability, wages rising with inflation and minimum decent wages for the workers in return for them giving up the right to protest.”
“The contract was renegotiated in 2003 with the new labor law that took away lifetime job security while giving the workers a very limited right to strike, but this is still not enough. As we can see grass-root labor protests on the increase, without any role for unions,” she added.
“In Egypt these problems can only be solved if there is dialogue between these three stakeholders. They have to find the best arrangement about the minimum wage and the labor law in general, being mindful of private sector values like competitiveness, productivity and government concerns of inflation.”
El-Trabelsi said the ILO should be the mediator between these stakeholders. “In an effort to fix a just minimum wage and find a balance, there must be dialogue. We can facilitate this. We have enough experience in the area and can consider all factors while making the calculation.”
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Workers in the textile industry are well trained, expert says.
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