Whatever the size of the "social allowance" pay raise promised by President Mubarak earlier this month, much more action is needed, argues Doha Abdelhamid* Nowadays, all Egyptian households are speaking of this year's expected pay raise that the government is scheduled to give its employees starting July. This raise directly touches the livelihoods (i.e. disposable income) of six million government employees and their dependents, averaged in Egypt at four individuals, bringing the total number of people benefiting from the raise to over 24 million. Current civil service salary levels in Egypt are inhumane and do not guarantee a decent standard of living for people employed in governmental sectors. However, the present financial crisis has left them few job options other than stable government employment. In addition, to move to the private sector government employees require huge investment in retraining and rehabilitation. Therefore, government employees seek alternative payments to earn them and their families a decent living. One frequently adopted option is for them to have an additional job during after-work hours; one that does not require skill-based training, such as working as taxi-drivers, accountants in a grocery shop, selling cell phone charge cards, car or real-estate brokerage, and even, more recently, stock exchange speculation. Or, they simply engage in corrupt activities related to their jobs. Current salary scales for government employees are unacceptable irrespective of any additions. Annual bonuses of about 10 per cent, or about LE10 per month for the average employee, do not "mind the gap" for remunerations for same skill competence between the government and private sectors, nor do they account for inflation or GDP growth over the past 30 years. The last salary scale amendment was made by Law 47/1978. Basic salaries of government employees have been frozen for the past 30 years and illogical variations in salaries for same grade employment persist within governmental institutions. A rough calculation of the total cost of this raise, nicknamed the "social allowance" because it is not related to productivity, would dictate LE10 over 12 months over 5.6 million permanent employees -- or 10 per cent of the fiscal year 2009/10 budget of LE89 billion. It is high time for the government of Egypt to embark on a major overhaul of the salary structure of government employees. The complex structure of basic salaries, allowances and bonuses, per se, has to be revisited to reflect a number of variables all plugged in to an automatic adjustment formula. The salary scale has to start from a level that enables the sixth grade out of nine (the lowest entry-level government employment grade) a decent living standard adjusted to bring this cadre above the lower poverty line. This came to LE660 per month per household in fiscal year 2008/09 prices, or to an average standard of living for basic needs of LE912 per month per household for the same year. Both figures (LE660 and LE912) have to be adjusted on an annual basis by inflation and GDP growth. The reason for selecting both variables is as follows: inflation represents a pushdown factor on the purchasing power of the pound, which hopefully goes in an inverse relationship with GDP growth. The wellbeing of civil servants is improved once the net effect is in favour of GDP. Therefore, there will be an incentive for government to announce both real inflation and GDP growth rates. Both indicators reflect real, incremental productivity for the nation and citizens alike. This takes care of the macroeconomic side of the story. This formula, if adopted on a year-on-year basis, would seem to suggest a scientific logic for salary increases, rather than the haphazard volatilities that are taking place currently, which do not reflect in any way on the quality of living of the largest single employing sector in the economy -- the government. Why wait on addressing the salary question of government employees? President Hosni Mubarak announced a generous 30 per cent increase last year; after then any dialogue on government salary reviews froze as if the 30 per cent increase was the ultimate goal of discussion. In Egypt, we talk a lot about sustainable economic development, poverty eradication and improved quality of living for the population, without genuine thought on how to improve government employees pay and implement a comprehensive civil service reform package. This is serious given the crisis environment and challenges to the competitiveness of the investment environment in Egypt. This is, of course, if we set aside recurring labour demonstrations in all sectors of the economy, which I perceive as vehemently critical of government. If the government adopts a convincing formula for salary adjustment like the one proposed, there will be no cause for demonstrations, or for government services to be disrupted. In my view, same as for many, annual pay raises do not improve salaries when inflation rates top the rate of the annual increase. In effect, salary scales have been stagnant for over 30 years, with ad hoc and discriminatory incentive packages for certain grades from one government organisation or another. With bonuses reducing pension contributions on government employees, the burden is shouldered by future generations experiencing persistent asset-liability mismatches. It is also unfortunate that the current government employee salary structure does not correlate pay to productivity. The government has become, over the years, the biggest charity organisation in the country. Bonuses are charitable and based on social and political considerations, hence the name "social allowance". Despite continuous announcements about the success of longstanding economic reform policies, government employees remain in the shade. Immediate government pay reform attached to a comprehensive administrative reform package is vital. Delaying this reform agenda is incomprehensible. Economic reform can never succeed without reform of the government apparatus. In order to insure that government employee pay mirrors productivity, a set of measures have to be taken in addition to those abovementioned. First, other country experiences show that the difference between the highest paid (say that of a first under-secretary) and the lowest paid (sixth grade out of nine) should not exceed tenfold. Second, government culture should be geared for performance and performance-related pay. Unlike the private sector -- which is mostly driven by profit and has preset sales targets -- OECD country experience has proven that government employees have to make a decent minimum wage (the suggested formula above would suffice) and then have access to a range of top-ups of 10-15 per cent as performance-related incentives awarded to the top 30 per cent of performers. This helps guarantee high-level productivity at the microeconomic, organisational level. Third, the government's default position as a national charity organisation should be discontinued by instilling a culture of performance and developing monitoring and evaluation capacities within governmental agencies. Fourth, the current employee performance appraisal system dictated by the civil service law is acceptable if enforced fairly. Fifth, teams working towards the realisation of the goals of their organisations have to be rewarded. Sixth, government organisations have to be periodically assessed as to the degree of fulfilment of their organisational goals that should eventually be tied to national development goals. Such modes of thinking are, unfortunately, absent in Egypt. Yet a great step forward requires nothing more than real stamina and belief by a team of genuinely patriotic Egyptians who could make this dream reality for Egypt and its people. * The writer is executive board member of the International Development Evaluation Association (IDEAS).
