Inflation and low wages were two of the main factors behind the 25 January revolution, according to many analysts. A large proportion of Egypt’s working class can hardly cope with rising prices of staple goods, and many are calling for the government to revamp the minimum wage to place the minimum wage worker securely above the poverty line.
Until October 2010, the minimum wage, set in 1984, stayed the same at the rate of LE35, or about US$6 per month. When the National Council for Minimum Wages finally decided to revise it, the minimum wage went up to LE400, or US$70, per month, thereby putting the minimum wage at just above the World Bank’s moderate poverty threshold of US$2 per day.
Saying that it is impossible to live an honorable life on that salary, labor activists are still fighting against the LE400 figure. “Your average construction worker now pays LE2 per day for transportation to and from work, and around another LE8 for the day’s food and drink, that’s LE300 alone, and we haven’t even considered housing or having dependents,” said Nagi Rashad, a labor activist and worker at South Cairo Flour Mills.
Activists believe that LE400 was a ploy by the old regime to keep wages low by allowing a nominal increase.
Rashad, who has been active on the minimum wage issue since 2008 alongside Khaled Ali of the Egyptian Center for Economic and Social Rights, is pushing for a minimum wage of LE1200.
“In the beginning of the campaign we would half-jokingly chant, ‘We just want to live above the poverty line!’”Rashad said.
Some argue that the LE400 minimum wage decree, despite increasing substantially the minimum wage, has actually been debilitating for many. Ahmed Rayyan, 24, graduated with a hospitality degree from Helwan University and began working as a waiter in the restaurant of a 5-star hotel. When it came time to negotiate his salary, his employer told him, “The government set your salary; it’s 400 pounds.”
Rayyan thought that with his degree, he would be able to demand for a higher salary. He feels that before the LE400 law, he would have been able to negotiate.
“LE35 was such a farce, and as a degree-holder, I would’ve been able to ask for a higher salary,” Rayyan said.
“In order for a worker on the basic minimum wage to live a decent life, the wage should be set at LE1200 per month for the time being,” wrote economic expert of the Ahram Center for Strategic and Political Studies, Ahmed al-Naggar.
In a report published last year, Naggar said that the figure takes into account a worker’s most basic living accommodations, modest amounts of food, and clothing for the month. “In the current situation, most new laborers and their dependents live under the extreme poverty threshold of US$1.25 per day,” he said.
The previous regime constantly dodged the minimum-wage issue, despite the fact that in 2003, Article 34 of the Unified Labor Law said a National Council for the Minimum Wage would convene to look into setting an equitable rate.
“They didn’t convene, to the best of our knowledge, until we filed a lawsuit in 2008,” said Rashad.
When the council did convene, former President Hosni Mubarak announced an increase of 30 percent in government salaries. Egypt then witnessed a period of extremely high inflation.
“The government insisted on linking the 30 percent increase with inflation that far exceeded 30 percent and was proven to be artificially set by businessmen in power, to scare workers away from asking for another increase,” said Rashad.
The LE400 minimum wage includes possible incentives. “Actual basic minimum wage based on this decree is LE166,” Rashad said.
“The current wage structure was a mechanism for corruption, and corrupting,” Naggar wrote. His study reveals that Egyptians’ standard of living decreased greatly since 1978. The Purchasing Power Parity (PPP) of the 1978 basic minimum wage for laborers, he said, was equal to LE1500 in today’s terms. The PPP of the complete minimum wage (after incentives and additions) in that year was LE1900. Therefore, the PPP of the complete minimum wage decreased almost 80 percent since 1978. In other words, the minimum wage laborer can now afford around 20 percent of what the minimum wage laborer could have afforded in 1978.
One of the main debilitating factors of Mubarak’s regime was its seemingly obstinate refusal to listen to experts on economic issues.
“The relationship between researchers and policy makers has been lacking. The government has generally tended to ignore empirical studies that are necessary for policies such as minimum wage,” said Rana Hendy, an economist at the Economic Research Forum.
Economists generally agreed with statements by former Prime Minister Ahmed Nazif that an increase in wages would have to have been accompanied by an increase in production to avoid inflation. “Anyone who knows the mere basics of economics understands that, but he always said that [same line] without specifying a plan to change the disgraceful situation. Perhaps the reason for the absence of a stated plan was the absence of a plan to begin with,” said Hoda Youssef, an economist at the Arab Forum for Alternatives and a lecturer at Cairo University.
Naggar proposes closing the gap between the highest and lowest paid individuals to conform to international labor standards. These standards dictate that ratio of the highest wage to the lowest wage in a particular company or organization cannot surpass ten. He proposes that in order to make progress toward achieving this standard, Egypt’s authorities should set the maximum permitted ratio at 15.
“There are full-time employees making LE300 a month, while their bosses are paid hundreds of thousands,” said Nagi Rashad, the labor activist and mill worker.
The cabinet is set to have a maximum wage hearing on 7 June to study the issue.
Another option is redirecting wasted government funds to wealth distribution. “The main area that will need more in depth research for better wages is small enterprises in the private sector,” said Rashad, indicating that an immediate minimum wage change could drastically affect their profits.
The work of labor unions was severely constricted in the past. “The labor union was an NDP institution, and it was just as corrupt. Government unions need to be dissolved just like municipalities do,” said Rashad.
He accuses executives and government officials of failing to find real solutions to the problem of wages in order to maximize benefits for themselves. “We always suspected – and because of the revolution are now sure – that many of these officials siphoned a lot the money from these organizations to outside the country. They only cared about their own material gain,” he said.
For the first time, however, Minister of Manpower and Emigration Ahmed Hassan al-Borai, has allowed Egypt’s first independent labor union to form, something that Rashad thinks will give laborers new leverage to press their interests.
While they continue to push for the LE1200 minimum wage, Rashad says that talk of a gradual minimum wage increase may appease most laborers, as long as the first incremental raise reaches LE800 while the second reaches LE1200 within two years.
“Laborers and labor strikes have been called counter-revolutionary,” Rashad said. “It’s nothing like that; we are just searching for a way to live a decent life on our salaries.”
