Govt moves to increase minimum wage, private sector promises to follow suit

With inflation in Egypt at its highest level in four years, the government took steps last week to raise the minimum wage.

But the gains were eroded almost immediately, as the central bank moved on Thursday to liberalize the exchange rate of the Egyptian pound, which took an immediate plunge in value against the dollar.

Under the prevailing conditions, with inflation worldwide compounding the impact on Egypt’s import-dependent economy, the pace of the hike in wages is far from sufficient, said Shaaban Khalifa, head of the Private Sector Workers Syndicate.

As part of a package of emergency relief measures, Prime Minister Mostafa Madbuly announced in a press conference on Wednesday that the minimum wage for state workers would be raised from LE2,700 to LE3,000.

Employees in state administrative bodies and workers in state-owned companies will feel the benefit, with the same increase to be implemented across all pay grades, Madbuly said, while state workers and pensioners will also receive a monthly cost-of-living raise worth LE300.

The additional cash support for lower-income households and the freeze on electricity rates, implemented in September and June, will also be extended by six months until June 2023, Madbuly said.

As for private-sector workers, President Abdel Fattah al-Sisi requested on Saturday that the chair of the Federation Of Egyptian Industries raise the minimum wage to match the new public-sector base rate, speaking at an event to celebrate the federation’s 100th anniversary. In response, the industry body’s chair Mohamed al-Sewedey vowed to increase the minimum wage to LE3,000 and introduce a LE300 raise. 

Supreme Council for Wages member Magdy Badawy told Mada Masr that the council will meet soon to discuss the timetable and regulations for fulfilling Sewedey’s promise, speaking in favor of “an immediate implementation of the new minimum wage and additional raise for private sector workers.”

The council was set to meet with business sector representatives in the coming weeks to negotiate a new increase in the private sector minimum wage matching that of the public sector, to be announced in January, Badway told Mada Masr previously.

But in the meantime, the Central Bank of Egypt decided on Thursday to liberalize the exchange value of the Egyptian pound, which dropped by over 15 percent against the dollar on the same day and continued to decline when trading reopened after the weekend

When the wage hike was announced on Wednesday, a LE300 increase amounted to the equivalent of around US$15 extra per month for workers. The salary increase is now worth just over $12 instead.

Even the president has acknowledged that wages are out of step with fast-rising costs. “Anything less than LE10,000 is not enough to live on for anyone,” Sisi said in a televised address earlier this month, adding that he cannot afford to provide more adequate salaries.

Broader structural problems in the private sector, said Khalifa, the private sector syndicate head, mean that many companies are yet to implement the legal minimum wage rate of LE2,400, which was introduced for the first time at the outset of this year. Mada Masr has covered a number of labor strikes in the country over the past year, all of which were prompted by concerns around wages: whether too low, overdue for extended periods, or stripped down to the bare minimum.

Around 5,000 workplaces, according to Bedawy, requested and received minimum wage exemptions from the Manpower Ministry, claiming that financial difficulties rendered it impossible for them to pay it.

In the short term, the government has said it is working on a mechanism to offer financial support through next June to companies facing difficulties or closure due to the economic crisis, on condition that the companies retain their workforce. Companies struggling to pay their workers are able to apply for support from the Manpower Ministry’s emergency fund, Badawy noted. 

But over the long term, Khalifa reiterated calls previously issued by his syndicate for stronger enforcement of minimum wage rules, with large fines for any companies that evade it.