Better salaries are essential if low income Egyptians are to secure a dignified standard of living. But financially, it is a heavy burden on the state's overstretched budget, Mona El-Fiqi reports This week, President Mohamed Mursi announced in an interview with Egyptian television that the minimum wage that currently stands at almost LE800 per month would be raised to LE1,200 in next year's budget. Mursi's decision came in response to pressure by employees in different sectors, including teachers, physicians, bus drivers and workers who continue to strike demanding better wages and salary adjustments. For workers on low incomes, a higher minimum wage would positively affect their life and help them to improve their living standards. According to official figures, 40 per cent of salary earners are poor and can be lifted from poverty if a sound minimum wage system is applied. "The minimum wage is an important policy tool for alleviating poverty and promoting social stability," said Nada Al-Nashif, International Labour Organisation (ILO) regional director for the Arab states, during the Regional Tripartite Meeting on Wage Policies in Arab Countries, held in Amman 17 September. According to Al-Nashif, adopting a coherent minimum wage policy ensures that socioeconomic conditions of workers and their families meet the minimum requirements for a life of dignity. The need for a sound minimum wage became more pressing during the past few years. The Global Wage Report 2010/2011 issued by ILO said the financial and economic crisis cut global wage growth by half in 2008/2009, affecting workers in both the formal and informal economy, including the Middle East and North Africa region, where paid employees number an estimated 75 million. Moreover, the report added that Arab governments should give priority to the minimum wage issue since 90 per cent of ILO member states have a minimum wage system in place but not all Arab countries have developed wage determination mechanisms. The adjustment in the minimum wage of Egypt's state salary next year, as Mursi promised, will be the second amendment following the 25 January Revolution in 2011. A minimum wage for all state employees was instituted, bringing the entry-level wage to LE708 ($116) per month, in January 2012. Subsequently, the hierarchy of salaries was adjusted upward by the same percentage increase. This upward move in the structure of wages and salaries cost the government an additional LE9 billion out of a total budget for wages and salaries of LE117 billion in the fiscal year 2011/2012, according to figures of the Egyptian Centre for Economic Studies (ECES). To cap public sector wages, a maximum wage policy was also put into force in July 2012, determining the ceiling at 35 times the minimum wage of a low-level employee in the same government body. According to Safwat Al-Nahas, head of the Central Agency for Public Mobilisation and Statistics (CAPMAS), the number of high officials in public administration positions likely to be affected by the maximum wage law is between 15,000 and 20,000, including ministers, assistants, governors and general managers. Differences between the basic salaries of junior and top-level public administration officials is about one to five, but allowances and bonuses for high officials are unlimited. Last week, Momtaz Al-Said, minister of finance, announced that officials who violate the regulations by receiving salaries that exceed the maximum wage will pay a fine ranging between LE1,000 to LE10,000. The upper ceiling on state wages is applied retroactively from January 2012, according to Al-Said. Though the government's insistence on the application of the maximum wage as well as Mursi's recent decision to raise the minimum wage are well received by many employees, implementation seems impossible for many experts. A former high ranking official at the Ministry of Finance who preferred to remain anonymous asserted that he was shocked while listening to Mursi's promise because applying it is practically impossible due to a current budget deficit estimated at LE170 billion, representing 11 per cent of Egypt's GDP. "If the government raises the minimum wage from LE800 to LE1,200, the cost will be high because wages and salaries component in the budget is already exceeding its value by LE27 billion," said the source. He added that financial resources should be first provided before taking such decisions. It is also important to keep a flow of financial resources for many years, to guarantee the government's sustainability in paying salaries across employee careers. According to the expert, a comprehensive plan for five years should be applied during which employees can receive a higher minimum wage, but gradually. A professor of economics who preferred to be anonymous is also against the decision for several reasons. First, she explained that raising minimum wages without increasing productivity means high inflation, which will lead to a high poverty rate. The productivity of the average Egyptian worker is 27 minutes per day, which is a very modest rate. Taking decisions to raise the minimum wage without restructuring the hierarchy of state bodies has a negative impact on society. For example, she said that a high minimum wage means that an unskilled individual will receive LE1,200 while the salary of a professor at a governmental university stands at LE3,000, which is unfair. She suggested that a committee of experts both in finance as well as management should streamline the basis according to which minimum and maximum wages would be set. Transparency, she said, is a must, as "citizens have the right to know what the person at each position is getting and why. It should be published on a governmental website." The source lamented workers and employees calling for salary adjustments. "Although their demands are legitimate, it is not a proper time to raise salaries. Such decisions, which are taken for political reasons, may harm the country's economy on the medium and long term since the government has no choice but to get loans to pay a higher minimum wage," the source added. She explained that it would be better if the government admits that employees have the right to higher salaries but promises to provide them after a grace period of 18 months, for example, when production increases in each sector to cover the upward minimum wage. A recent study conducted by ECES stated that the minimum wage policy in Egypt needs to strike a balance between productivity and social justice. "It should be flexible to account for variations in the cost of living and productivity across regions and economic sectors," the study said. Moreover, it said that there is clear disparity in wages across sectors and regions and the study introduced three scenarios for variations in minimum wages. The first scenario considers disparity in the wage policy based on variations in the cost of living across regions. The second scenario considers variation in the wage policy based on productivity indicators across sectors. While the third scenario factors in the weights attributed to the cost of living and productivity indicators to establish variations in wage policy across governorates.
