The Egyptian Labor Market: Both Cause and Casualty of the 2011 Revolution

This blog is written by Ragui Assaad

Assad_hbThe Egyptian labor market has been both a driving force behind the January 25 Revolution and one of its major casualties. Although the revolution was about lofty ideals, such as dignity and liberty, it was also partially caused by the anger and frustration of increasingly educated but often jobless young people. The economic crisis and dramatic slowdown following the revolution adversely affected the labor market, but the impact was not necessarily felt in terms of increases in open unemployment, but rather in a sharp increase in underemployment – a phenomenon that is most likely to affect the most vulnerable of workers, namely irregular wageworkers and the self-employed. Some workers, such as public sector workers, actually benefited from the revolution, as politicians responded to popular anger by raising their wages and improving their conditions of employment.

Why were the young people so angry?

There was widespread feeling among young people that the Mubarak regime was failing to uphold its part of the social contract that had been the basis of state-society relations in Egypt since Nasser’s time. The terms of this implicit contract, which is often referred to in the political science literature as the ‘authoritarian bargain,’ are that the government guarantees a place in the middle class for those who achieve a minimum level of education (usually upper secondary schooling) by providing them with secure, lifetime jobs in the public sector and with access to subsidized goods and services. In return, the population agrees to a highly restrictive form of political participation and refrains from questioning the State’s authoritarian practices.

So long as the number of graduates was limited and revenues from oil, gas and foreign aid were flowing to government coffers, the regime was able to uphold its part of the bargain. Starting in the mid-1980s, however, fiscal pressures started to develop as a result of the fall in oil prices. This was coupled with a dramatic rise in the number of educated youth, driven in part by the emerging “youth bulge” and substantial increases in educational attainment. The government began eroding its commitment to employing educated youth by first delaying the hiring of new graduates and later suspending the program altogether. As a result, the proportion of educated new entrants whose first job was in the public sector fell from 70 percent in 1980 to nearly 20 percent by 2006, and then increased slightly after that. That would have been fine had the formal private sector grown sufficiently to absorb the increasing numbers of educated youth who were no longer being accommodated in the bureaucracy. However, the growth of that sector was sluggish at best, especially since it was starting from a very small base. Its role in absorbing educated new entrants only increased from about 5 percent in 1980 to about 15 percent in 2010. The majority of educated new entrants were increasingly relegated to low-quality jobs in the informal economy.

Although older workers who had obtained lifetime jobs in the public sector were able to retain their jobs, the burden of adjustment was imposed on the relative outsiders who were knocking at the door. These educated youth had formed expectations about the kind of jobs they would be able to achieve with their education and these expectations were simply not being met. At first, they reacted by spending more time searching and queuing for the few formal jobs that were available, thereby swelling the ranks of the unemployed. The extended period of waiting for their lives to come together and for their transition to adulthood to be completed was termed by some researchers “waithood,” a short-hand for ‘waiting for adulthood.’ As it became more apparent that these jobs were not materializing, young people had to fall back on their default option. For young men, that default option was insecure and often low-paid jobs in the informal economy. For young women, on the other hand, it often meant withdrawing from the labor force altogether rather than jeopardizing their reputation and marriageability by accepting temporary informal employment. These patterns preceded the revolution by a long shot, but were exacerbated by the economic slowdown brought about by the world financial crisis from 2008 to 2010, further dampening job creation in the Egyptian economy.

The most vulnerable suffered the most

The economic crisis that followed the revolution made a bad situation a lot worse. Not only was the formal economy not creating any jobs, but the informal economy was also slowing down, jeopardizing the livelihoods of the most vulnerable workers. Poor workers tend to be concentrated either in casual wage work or in self-employment in very small-scale farms and businesses. These workers are typically too poor to remain without work for very long and therefore rarely show up among the ranks of the unemployed, which are typically populated by educated workers searching for formal jobs. When the economy slows down, these workers experience the slowdown as visible and invisible underemployment. Visible underemployment is the inability to find enough work to be occupied full-time, while invisible underemployment is work at very low productivity or very low income due to the absence of markets or opportunities. Although it is difficult to measure invisible underemployment, it is possible to measure visible underemployment as the proportion of the labor force that is working less than full-time (40 hours per week) because of an absence of employment opportunities for the rest of the time. This proportion has increased from 2.8 percent of the Egyptian labor force in 2006, to 8.5 percent in 2012 – an almost threefold increase.

Not all workers in Egypt were affected in the same way by the revolution. When asked in the 2012 round of the Egypt Labor Market Panel Survey whether they experienced a change in their employment situation as a result of the revolution, 25 percent of workers said they did. However, among those who experienced a change, 56 percent of government workers and 43 percent of public sector workers experienced an improvement in conditions, while between 98.3 and 98.7 percent of informal and irregular wageworkers who had experienced a change said that their conditions had deteriorated. Public sector workers tend to be quite vocal and the various transitional regimes that came after the revolution were inclined to listen to them by granting them generous wage increases and extending permanent contracts to those among them who had been working on temporary contracts. In contrast, private sector workers were often forced to make wage concessions and to accept reductions in hours in order to be able to keep their jobs. Thus, the revolution has so far increased the segmentation in the Egyptian labor market in favor of public sector employment, encouraging educated young people and their families to clamor even more for these jobs. I surely hope that politicians today will resist the populist impulse of responding to these demands by resorting to the very same policies that got us into trouble the first time around.

Ragui Assaad is an ERF Research Fellow and a professor of planning and public affairs at the Humphrey Institute at the University of Minnesota. He recently co-edited a volume published by Oxford University Press titled ‘The Egyptian Labor Market in a Era of Revolution.’

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