CAIRO, Nov. 21, 2011 (IPS/GIN) – Mohamed El-Abyad’s employer has agreed to increase his salary by 20 percent, but the factory worker still cannot afford to send his children to school. After paying his apartment rent and utilities, El-Abyad will have the equivalent of 20 dollars left over each month to put food on his family’s table. And while education is mandatory, he pulled both his sons out of school to help cover the shortfall.
“I want my children to be educated, but we also have difficult circumstances,” he says.
His eldest son, 16-year-old Hassan, works in a stone cutting yard, where he earns about two dollars a day. Mahmoud, 14, makes less as an assistant in a small workshop.
Experts say Egypt’s high drop-out rate and widespread illiteracy-in excess of 40 percent-is a consequence of grinding poverty. Impoverished workers accuse the government of foot-dragging over wage control in order to keep the country’s salaries among the lowest in the world.
It is a longstanding arrangement that exploits the disenfranchised masses for the benefit of the wealthy elite. And slowly, reluctantly, it is changing.
Egypt recently approved its first ever minimum wage for the private sector, bringing it in line with the minimum wage for public sector employees that was set at 700 Egyptian pounds ($117) per month in July. The cabinet decision followed a lengthy battle to establish a livable minimum monthly wage, which in the case of government employees had remained fixed at 35 Egyptian pounds (about $6 at today’s rate) for over 25 years.
“It’s a sad joke,” says El-Abyad. “Company owners say they can’t afford to pay workers more, but we see them living in enormous villas and driving luxury cars.”
The fight for a livable wage has been going on for as long as El-Abyad can remember. Hosni Mubarak, Egypt’s fallen dictator, thought he could keep impoverished workers in check by co-opting trade unions and hiding behind draconian labor laws that prevented workers from organizing and striking. But it was disenfranchised workers who hastened his downfall.
A string of wildcat labor strikes over low wages and unpaid bonuses that began five years ago took on a political dimension during an uprising in the northern industrial town of Mahalla El-Kubra in April 2008, and eventually spawned the youth movements that were instrumental in toppling Mubarak’s regime last February.
Labor unrest has continued under Egypt’s military-run transitional government, which has carried on Mubarak-era policies and tried to handle worker demands piecemeal. Workers and activists are pressing for the government to set a minimum wage of 1,200 Egyptian pounds ($200) a month. They say it is the absolute lowest salary that covers the most basic living expenses.
“Who can afford to live on 700 a month?” wonders Ibrahim Barakat, a gas meter inspector. “In Cairo, you’d be lucky to find a small apartment for that price. But then you have to eat, and that’s expensive too.”
Government economists claim raising the minimum wage any further would burden the state budget and accelerate inflation. They insist that higher wages would reduce Egypt’s global competitiveness and drive investors towards cheaper labor markets.
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.