Analytical Reading of Unemployment Rates in Egypt and their Impact on Economic Growth

Unemployment reflects the unemployed part of the labor force in the national economy. The labor force is represented in the age group (62:15 years). Unemployment reflects the numbers of all able and willing individuals who are looking for work at the prevailing level of wages and did not find it. Hence, it is a measure of the health of the national economy that reflects, in turn, the extent to which economic activity contributes to providing job opportunities for individuals.

The unemployment rate in Egypt stabilized at 7.2% and 7.4% during the second and third quarters of 2022, respectively. Annually, unemployment rates reached 7.4% in 2021 compared to 9.6% in 2020, which is the lowest since 2019, which was estimated at 10.6% during the first quarter, which indicates a successive decline in unemployment in general over the past three years.

Employment rates have enhanced the stability of unemployment rates at the targeted levels without an increase, reaching 39.7% during 2021, while the participation rate during the second quarter of 2022 reached about 42.6%, which may be due to the expansion of development plans in the infrastructure and construction sectors in general. As a result of an increase in the number of workers and a decrease in the number of unemployed.

In light of this, the Strategic Forum for Public Policies and Development Studies “Draya” aims, through this report, to read and analyze unemployment rates in Egypt by reviewing the most important labor market indicators to determine the number of unemployed and the participation rate, in addition to providing quarterly forecasts for the employment rate, as well as shedding light on this affected the economic growth rate, according to various official data, especially according to the data of the Central Agency for Public Affairs and Statistics, September 2022, which is as follows:

First: Analysis of the most important indicators of unemployment and employment at the macro level

The labor market represents both the supply and demand of employment by corporate owners, enterprises and others in accordance with the mechanisms of economic markets. The human component is one of the most important elements of production and the fundamental pillar for improving the standard of living and developing the human resources on which States depend in strategic planning, for achieving sustainable development. The human component is the workforce that engages in all service, productive and consumer activities in society.

The most prominent of these indicators and statistics related to the growth, composition and distribution of human power and labor force of various types and characteristics:

1- Work force

The labor force in Egypt during the third quarter of 2022 amounted to about 30.264 million individuals, an increase of 0.9% over the previous quarter of the same year, as the rural population accounted for about 16.864 million individuals compared to 13.400 million urban individuals, and with regard to gender, the number of males reached 25.321 million individuals compared to 14.943 million for females.

With regard to the annual change, the labor force amounted to about 29.358 million individuals in 2021, compared to about 28.458 million in 2020, an increase that exceeds 900 thousand individuals. The countryside has about 16.249 million workers, compared to 13.100 million workers in urban areas.

The female contribution amounted to about 5.063 million working women, compared to 24.296 million for males in 2021, compared to about 4.774 million for females and about 23.684 million for males in 2020, which indicates a growth rate of 0.025% for males and 0.060% for females, on an annual basis, which indicates an increase in the ratio of females to males in the age group from (15-65) years, and it is concentrated in the youth category, as previously mentioned. Figures (1 and 2) show the geographical and qualitative distribution of the labor force in Egypt as follows:

2-The employed and the unemployed:

The total number of workers nationwide reached about 28.014 million workers in the third quarter of 2022, compared to about 27.188 million workers in the second quarter of 2022. During 2021, males accounted for about 22.93 million, or 84.3% of the total number of the workers, while the employment rate for females reached 16.7. % with a total of 4.25 million working women during 2021, compared to about 22.27 for males or 85% and about 3.928 million for females or 15% in 2020.

These numbers and statistics indicate an increase in women’s participation in working life, with rates of increase exceeding twice the rate of increase of females in the labor force, as it came with an increase rate not exceeding 0.05%, while the operational contribution increased by rates exceeding 1.7%, on an annual basis. Figures (3,4) show The distribution of the employed and the unemployed is as follows:

The previous data reflects a decline in unemployment among females from 21.4% in 2018 to 16% in 2021, compared to a decline in the share of males from 6.8% in 2018 to 5.6% in 2021, so that the unemployment rate on an annual basis in the Republic reached 7.4% during in 2021, compared to 9.9% in 2018.

Gross domestic product growth has contributed to reducing these rates amidst stability to reach the target limits according to the announced economic policies at an acceptable and relatively low level compared to previous years in light of achieving growth rates estimated at 5.7% and maintaining inflation rates at a level of (7 + & -2)  percent, which indicates the possibility of a contraction and then a rise in unemployment during the last quarter of the current year to reach 7.5% due to the expected contraction in a number of economic sectors related to the industrial and productive sector as a result of obstructing the imports necessary for production, which enhances the chances of a slowdown in the first quarter of next year. 2023.

Second: Analyzing the features of the labor market and its most important determinants

The labor market includes main features that are reflected in the pattern of the development of average wages, average working hours, and the variation in the number of workers in the private and public sectors. The most important features and determinants can be addressed as follows:

1- Average wages:

 The average weekly cash wages in pounds and average working hours change according to the type and main occupations of public sector establishments / public business and the private sector in the first week of June 2021, as the official data of the Central Agency for Public Mobilization and Statistics indicated that the average hourly wage is estimated at 18.5 pounds per hour in average, regardless of the operating sector or specialization.

The number of weekly hours ranges between (39-46 working hours per week) with an average daily working hours ranging between (6-8) hours, which indicates a significant decrease in the average hourly rate for work with large disparities between the different categories of workers in the same public sector. The public sector compared to the private sector. The following table shows the distribution of average wages, number of working hours, and specialization, as follows:

2-Distribution of workers’ numbers between the public sector and public business :

The official data indicates a decrease in the number of workers in the state due to the state’s general policy tendencies to reduce those numbers to reach international rates, which is nearly half. The percentage of workers in the public sector and public works is distributed at 86.73% for males and 13.27% for females. The following figure No. (5) shows the development of the number of workers in the government sector and the public business sector, as follows:

3- Level of education:

The level of education is inversely linked to the number of unemployed, as the number of the unemployed who hold university qualifications and beyond increases, as the data recorded at the level of the whole Republic were about 934.9 thousand unemployed, then the category of technical education came to include 678.1 thousand unemployed, while the category of education was less than the average by about 196.1 thousand unemployed.

Data also indicate that approximately 641.6 thousand urban university qualifiers are unemployed, of which 330.9 thousand are female and 3107.0 thousand are male, compared to about 68,000 who do not hold (illiterate) qualifications, of whom 96,000 are females and about 58,400,000 are males, i.e. This indicates that the unemployed category is concentrated among young people, especially those with university degrees and those with higher qualifications, which naturally indicates that the stereotype of graduates is not commensurate with the requirements of the labor market. The accumulation of graduates without suitable job opportunities, and the following table describes the educational categories and the numbers of the unemployed as follows:

4-Infection rates:

The improvement of the business environment in the private sector and the change in the State’s philosophy in dealing with the files (social and health insurance) prompted a decrease in the number of injuries at work, indicating that these numbers could decrease according to the new census, especially after the amendments to the Labour Code and the Uniform Insurance Act. A presentation of the numbers can be dealt with as shown in the following figure:

Third: The implications of the development of unemployment and employment indicators on the structure of the national economy

The increase in the activity of the leading and influential sectors in the Egyptian economy prompted them to contribute to providing more job opportunities, which was reflected in the relative distribution of workers according to economic activity. The agricultural and fishing sector attracted about 5.232 million new workers during 2021, at a rate of 19.2%, which indicates that it is the largest sector and the most contributor to the gross domestic product, which is estimated at about 7 trillion pounds.

The wholesale and retail trade sector came with a contribution of 15%, with a total of 4.07 million workers during 2021, then the building and construction sector by 13.8%, followed by the manufacturing industries sector by 12%, and the transportation and storage sector by 8.9%, and other sectors range between 8% and 2% for the scientific activities sector as a limit. The lowest relative contribution to the volume of employment, and the following figure shows the relative distribution of workers according to economic activity:

It is worth noting that the state’s efforts, which are part of the initiatives launched by the Central Bank to support troubled companies and revitalize some sectors, come within the attempts of the Central Bank and the banking sector to find solutions that would support small, serious customers and help them get up from their stumbling blocks, as part of the banking sector’s role in the economic reform program.

The Central Bank’s initiative to help factories and the faltering industrial sector has contributed significantly to absorbing more temporary and permanent employment, which is reflected in the volume of employment and thus reducing the unemployment rate.

It included the Central Bank’s initiative for the tourism sector, which was represented in financing up to about 75% for replacement and renewal operations for tourism companies and establishments and tourist transport fleets, with a total value exceeding 10 billion pounds, and a return rate not exceeding 10% decreasing.

This initiative contributed to the growth of the tourism sector by 36% during the period from July 2020/2021 and is expected to see the recovery of the foreign inmates during the current financial year in particular with the instability of European energy prices during the winter of 2022, the resulting significant cost-of-living raises as well as the damage to the elderly sector and their desire to travel and stay outside the European Union.

In a related context, the growth rate of the gross domestic product witnessed stability at 6.6% during the fourth quarter of 2021, compared to the first quarter, which was mainly supported by net external demand and domestic investments, and job creation was supported by the stability of the quarterly unemployment rate at 7.2%, to record its lowest level since December 2010, and on the level of stability of financial policies, a primary surplus ranging between 1.5: 2% of GDP was achieved in the current fiscal year, which supports the acceleration of growth rates in the coming years.

 Conclusion

There is no doubt that providing more job opportunities requires working on balanced economic growth that fiscal policy seeks to achieve through deficit targets in the budget and rationalization of public spending in a way that does not affect it, in addition to adopting a flexible monetary policy aimed at reducing annual inflation rates of less than 10% during the coming period, accelerating the pace of recovery from the global repercussions, foremost of which are high inflation, which would shrink GDP at the local and international levels

Despite the decrease in the unemployment rate from 13.2% to 7.2% during the second quarter of 2022, the unemployment rate rose to rates exceeding 90% for holders of intermediate, above-average, university and above qualifications, during the current year, compared to 87.7% in the previous quarter, including holders of university qualifications and above, reaching about 52.1%, compared to 45.9% for the first quarter, as a result of new graduates, which will be reflected in the increase in the size of the work force during the third quarter of this year, which requires the provision of more job opportunities by stimulating investment and working to provide an environment that incubates business and attracts investment, especially foreign direct.