Minimum Wage Movement in light of State’s Efforts and Current Challenges
The minimum wage file is receiving great attention from many countries, especially those that have taken serious steps on the path of development, due to the economic challenges their citizens are experiencing that negatively affect their living conditions.
Since January 2011, the Egyptian economy has been subjected to many pressures and strong shocks with the devaluation of the pound and the decline of its purchasing power, which negatively affected citizens and their ability to provide their basic needs, so the state had to intervene to relieve that suffering on the shoulders of individuals, especially low-income, and this has been evident since 2014 as the political leadership sought to raise the minimum wage.
In this context, the Strategic Forum for Public Policy and Development Studies “Draya” issues a report that sheds light on the movement of the minimum wage in Egypt during the period from 2014 to 2023, and its allocations in the state’s general budget, in addition to highlighting the relationship between rising wages, inflation, purchasing power, and the obstacles that It faces the wage system and ways to overcome it, through the following axes:
First: The reality of the workforce in Egypt.
Second: The movement of the minimum wage during nine years from 2014 to 2023.
Third: The cost of increasing the minimum wage from the state’s general budget.
Fourth: The relationship between rising wages, inflation, and purchasing power.
Fifth: Obstacles facing the wage system in Egypt.
Sixth: Proposed solutions and recommendations to address these problems.
Results of the research paper:
– The labor force in the first quarter of 2023 registered about 30.6 million individuals, compared to 27.6 individuals in the same quarter of 2014, an increase of 10.9%.
– The number of employees increased and amounted to about 28.4 million individuals in the first quarter of 2023, compared to 23.9 million individuals in the same quarter in 2014, an increase of 18.8%.
– The number of unemployed decreased by 40.5%, reaching 2.2 million individuals in the first quarter of 2023, compared to 3.7 million individuals in the first quarter of 2014.
– The minimum wage of employees in the country has witnessed 7 consecutive increases since 2014 until 2023, increasing from 1200 pounds in 2014 to 4000 pounds in 2023 with an increase of 233%.
– Raising the tax exemption limit from 12 thousand pounds in 2014 to 45 thousand pounds in 2023, an increase of 275%, in order to reduce the tax burden on low-income people.
– The approval of two exceptional grants “cost of living allowance ” for the first time within one year by the decision of the president of the Republic for employees of the administrative apparatus of the state, economic bodies and the business sector, where the first grant was worth 300 pounds the first of November 2022, and the second of 300 pounds the first of October 2023 .
– The wages of private sector workers have witnessed successive increases, as the minimum wage for private sector workers increased from 2,400 pounds in January 2022, to 2,700 pounds in January 2023, then to 3,000 pounds in July 2023, and then 3,500 starting from 2024.
– Approval of an annual periodic bonus for private sector employees of at least 3% of the insurance contribution fee, with a minimum of 200 pounds, to be applied from January 2024.
– Wage allocations and compensation of employees in the state budget increased from 207.2 billion pounds in 2014 to reach 470 billion pounds in 2023 at an increase rate of about 127%.
– The increase in inflation rates significantly during the period from 2014 to 2023 represents a major challenge that may prevent the achievement of the state’s efforts to ensure a minimum level of well – being of citizens.
First: The reality of the workforce in Egypt
The labor force in the first quarter of 2023 registered about 30.6 million people, compared to 27.6 million in the same quarter of 2014, with an increase of 10.9%, as the number of employed increased and reached about 28.4 million in the first quarter of 2023, compared to 23.9 million individuals in the same quarter of 2014, with an increase of 18.8%, while the number of unemployed decreased by 40.5%, reaching 2.2 million in the first quarter of 2023, compared to 3.7 million in the first quarter of 2014, according to the latest report issued by the cabinet of ministers.
It should be noted that the unemployment rate decreased by 6.3%, where it was recorded about 7.1% in the first quarter of 2023, compared to 13.4% during the same quarter of 2014
With regard to the distribution of workers according to the most important economic activities, agricultural and fishing activity included 18.1% of the labor force, with 5.1 million workers in the first quarter of 2023, compared to 26.9%, with 6.4 million workers in the same quarter of 2014, and wholesale and retail activity employed about 14.6% of the labor force, with 4.2 million employees in the first quarter of 2023, compared to 11.3%, with 2.6 million employees, in the same quarter of 2014.
Second: Wage movement over nine years
1) Wages of workers in the state’s administrative apparatus:
The minimum wage for workers in the country witnessed 7 consecutive increases from 2014 until 2023, with the minimum wage increasing as follows:
-1,200 pounds in 2014, compared to 700 pounds in 2011, an increase of 500 pounds.
-2000 pounds in 2019, an increase of 800 pounds.
-2,400 pounds in 2021, an increase of 400 pounds.
-2700 in April 2022, an increase of 300 pounds.
-3000 in October 2022, an increase of 300 pounds.
-3,500 in March 2023, an increase of 500 pounds.
-4000 in September 2023, an increase of 500 pounds.
2)-Wages of workers in the private sector:
The wages of workers in the private sector witnessed successive increases, as the minimum wage for workers in the private sector rose from 2,400 pounds in January 2022, to 2,700 pounds in January 2023, then to 3,000 pounds in July 2023, then 3,500 starting in 2024.
This is in addition to approving an annual periodic bonus for workers in the private sector of no less than 3% of the insurance subscription wage, with a minimum of 200 pounds, as the annual periodic bonus for the year 2023 was a minimum of one hundred pounds, provided that these new decisions are implemented as of January 2024.
We point out here that workers in the private sector receive a lower minimum wage than their counterparts in the government sector, and that there are a large number of companies that have not implemented the decisions to increase the minimum wage.
Third: The cost of increasing wages from the state’s general budget:
The increase in the minimum wage is reflected in the increase in wage allocations and workers ‘ compensation (title I) of the state budget, and during the period from 2014 to 2023, the allocations of this section of the budget witnessed a huge increase year after year as follows:
The increase in the minimum wage is reflected in the increase in allocations for wages and workers’ compensation (Part One) in the state’s general budget. During the period from 2014 until 2023, the allocations for this section of the budget witnessed a tremendous increase year after year, as follows:
1) 207.2 billion pounds in the fiscal year 2014/2015, compared to 171.2 billion pounds in 2013/2014.
2) 213.7 billion pounds in the 2015/2016 fiscal year, an increase of 6 billion pounds over the previous fiscal year.
3) 225.5 billion pounds in the fiscal year 2016/2017, an increase of 12 billion pounds.
4) 240.1 billion pounds in the fiscal year 2017/2018, an increase of 15 billion pounds.
5) 266 billion and 91 million pounds in the fiscal year 2018/2019, an increase of 26 billion and 37 million pounds.
6) 288 billion and 773 million pounds in the fiscal year 2019/2020, an increase of 22 billion and 682 million pounds.
7) 318 billion and 806 million pounds in the fiscal year 2020/2021, an increase of 30 billion and 33 million pounds.
8) 358 billion and 735 million pounds in the fiscal year 2021/2022, a financial increase of 39 billion and 928 million pounds.
9) 410 billion pounds in the fiscal year 2022/2023, an increase in value amounting to 51 billion and 265 million pounds.
10) 470 billion pounds in the fiscal year 2023/2024, an increase of 60 billion pounds.
From what was previously presented, it is clear to us that the allocations for wages and workers’ compensation in the state’s general budget increased from 207.2 billion pounds in 2014 to reach 470 billion pounds in 2023, with an increase rate of about 127%.
Fourth: the relationship of wages to inflation and purchasing power
There is no doubt that the Egyptian state has made unprecedented efforts to take care of the wages of workers in the state and the private sector, but the increase in inflation rates significantly during the period from 2014 to 2023 represents a major challenge that may prevent these efforts from achieving their goals, which are centered on ensuring a minimum level of well – being of citizens.
Due to Egypt’s heavy dependence on the import of goods (especially food and fuel) from abroad-despite the decrease in imports by 40%- the prices of these goods increase with the increase in the value of the dollar, as well as the impact of the exchange rate on local goods, as the rise in prices of imported goods leads to an increase in the cost of production of local goods, which leads to a decrease in the actual living value of wages, especially with the depreciation of the pound against the dollar.
Fifth: Problems and obstacles facing the wage system in Egypt:
-There is no uniform minimum wage that includes all wage earners in Egypt
-No law has been issued regulating the minimum wage, which makes it easy to circumvent, especially with regard to workers in the private sector, and no penalty has been stipulated for those who do not adhere to applying the minimum wage.
-Private sector workers receive a lower minimum wage than their counterparts in the government sector, in addition to the lack of a binding mechanism for implementing the minimum.
-The National Wage Council does not have a mechanism for complaints about companies’ non-compliance, or immunity for workers from being subjected to retaliatory penalties for demanding the implementation of the minimum wage, or for demanding better wages in general.
Sixth: proposed solutions and recommendations:
– The need for a legislative basis for the minimum wage: this necessitates the enactment of a unified law to restructure the wages of all wage earners in Egypt, so that their wages increase commensurate with price increases at least, and review the minimum wages of workers, whether in the government sector or the private sector every six months in light of the continuous increase in prices.
– The need to take care of the wages of workers in the private sector in the state : by providing a package of compensation and transfers to maintain their purchasing power.
– The need to have a mechanism that obliges the private sector to apply the minimum wage approved by the National Council, and a complaints mechanism in case of non-compliance with the implementation of decisions.
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– The adoption by the National Wages Council of the principle of the Living Wage instead of the minimum wage: the living wage is defined as the wage that is granted to a family breadwinner, middle-aged, with accumulated experience in his field of work. This wage should vary according to skills and degrees of education, as well as years of experience and type of work, and the living wage benefits a large number of wage earners in Egypt with experience and family owners, who receive income less than the minimum wage, so these will benefit when the minimum living wage is applied to them, which achieves proportionality between the minimum wage and inflation rates, and the adoption of the National Council for wages of the principle of living wage requires more social research to identify and codify enough to ensure the individual, family and society availability of minimum requirements for well-being living .
– The National Wages Council follows an approach based on linking the minimum wage and inflation rates: each time the value of the minimum wage is raised or determined in general, this is done by periodically measuring inflation rates and determining the requirements of monthly consumer spending for the Egyptian citizen, and based on it, the minimum wage is determined.
