A better targeted investment policy could pave the way for both social justice and higher productivity, writes Niveen Wahish The past year has seen calls for social justice by implementing minimum and maximum wages. The dilemma has consistently been how to balance those calls with the need to raise productivity. Former finance minister Samir Radwan described this dilemma as Egypt's "wage chaos". In his view, Egyptian governments over the past 40 years have failed to institute a sound wage policy that ensures a healthy economy. Radwan made his statements during a roundtable discussion organised by the Egyptian Centre for Economic Studies (ECES) titled "Minimum wage in Egypt: Striking a balance between productivity and social equity." Studies presented at the roundtable showed cross-sector wage disparities, as well as unfair geographical differences within the country. The financial intermediation and mining sectors were the highest paid, while jobs in education, health and agricultural sectors were the worst paid, said Magda Kandil, ECES executive director. On the regional level Lower Egypt was the lowest earning region in Egypt, according to Omneia Helmi, lead economist at ECES. Helmi showed that there was a higher concentration of high-paying jobs such as those financial service provision and mining in Suez, while Sharqiya had the most low-paying jobs such as those in agriculture, fishing, education, health and social services. Helmi added that across the country's various regions, wage disparity "is tied to the share of employment in low and medium earning sectors, which are highly driven by private sector employment." Data from the Arabic version of the Global Wage Report for 2010/11 showed that in Egypt, around 30 per cent of workers are low paid. And of those, 41.1 per cent are employed by the private sector. The report, which was presented at the roundtable by Patrick Besler of the International Labour Organisation, also showed that 48.5 per cent of the low paid workers are in the manufacturing sector. Kandil studied not only the wage issue, but also compared various sectors' contributions to growth versus their ability to create jobs. She showed that while the public sector created the most jobs, it was a low contributor to growth. Egypt's public sector is estimated to employ 6.2 million individuals. Kandil added that within the public sector there is room for more employment in areas where contribution to growth is high, such as mining and financial service provision. She also said that for the private sector, there is scope for more employment opportunities in the areas of construction, wholesale and retail trade, as well as communications. Productivity is another factor to consider when setting wages. Kandil showed that in the areas of education services, transport and storage as well as retail and wholesale trade, productivity is a problem. But, she added, "there is scope to raise wages in line with productivity." Meanwhile, there is scope to increase employment and reduce wages, also in line with productivity, in areas such as agriculture, hotels and restaurants and processing industries. As such, Kandil said, there was room to increase wages in the private sector, where contribution to growth significantly exceeds the contribution to employment. However, excess employment in the government and a few private sector areas warrants a redistribution of resources towards increasing productivity and supporting higher wages. She advised "a redistribution of investment in line with employment priorities." Along similar lines, Helmi also studied international best practices on the issue of minimum wage. She found that minimum wages could be set according to regions, cost of living or based on the type of industry. She concluded that, given the experience of other countries, a mixed policy approach could be adopted. Helmi recommended that the minimum wage policy could vary across regions to "take into account intra-national disparities of productivity and cost of living." She added that, in some countries, certain groups were exempted from the minimum wage policy. They included young people, whose exemption could be used to ease their entry into the labour market. Small enterprises hiring less than 10 workers could also be excluded from the minimum wage. In addition, the informal sector had no reason to be bound by the minimum wage.
