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Labor: Egyptians launch new battle for minimum wage

CAM MCGRATH | 11/23/2011, 1:38 p.m.

Former finance minister Samir Radwan, in an interview to IPS last year, cast doubt on those arguments. He contended that increasing the minimum wage above 700 Egyptian pounds would result in higher worker productivity, which would make Egypt more competitive in the long run. Any resulting inflation would be manageable.

"Once you raise the minimum wage, the brackets above the minimum will increase as well, which would lead to an improvement in income distribution," he said. "This could also lead to inflation, but since the share of wages in Egypt's GDP is not that high-just 36 percent-in all likelihood the total wage (cost) would not have any significant impact on inflation."

Yet it was Radwan, in his capacity as finance minister, who sought a compromise solution ostensibly aimed at reducing inflationary pressure and state expenditure. In July, Egypt's cabinet agreed to gradually increase the minimum wage for government employees from 700 to 1,200 Egyptian pounds over five years.

But with urban inflation running around 12 percent, local labor rights groups say any increase will be eroded before it is realized.

"If you calculate the real value of 1,200 Egyptian pounds in five years you will find it has the same purchasing power as 700 today," says Tamer Fathy, spokesman for the Centre for Trade Union and Workers' Services (CTUWS). "So nothing will have changed."

Authorities claim one in ten Egyptians stand to benefit from the government and private sector minimum wage. But Adel Zakariya, a program officer at CTUWS, fears its impact will be watered down by various exemptions.

"Very few workers will actually benefit from this decision," he says.

According to Egypt's labor ministry, the minimum wage does not apply to SMEs (small and medium sized enterprises) with less than 10 employees, or companies that present "sufficient proof" that they cannot afford to raise worker salaries-a loophole that opens the door to abuse. In addition, there will be no attempt to enforce the minimum wage in public sector companies, many government authorities, or in the struggling tourism sector, which accounts for one out of every eight jobs.

There also remain many unanswered questions about how the minimum wage will be enforced in a labor market notorious for its contempt of regulation. If pressed, many private sector employers could shift to informal employment, which studies estimate already accounts for 75 percent of the sector's workforce.

While the government hopes that low salaries will preserve jobs and investment, labor activists have vowed to step up their campaign for a livable minimum wage.

"We'll continue our pressure to reach a minimum wage that is suitable for the labor sector, and we can expect more strikes until then," says Zakariya.