The government of Mostafa Madbouly in Egypt will submit the budget bill for the fiscal year 2021/2022 on the first of next April.

A meeting involving President Abdel Fattah al-Sisi and the Council of Ministers was held on Monday, March 15, 2021, and Sisi directed an increase in the minimum wage to 2,400 pounds (about $ 153) for workers in the state’s administrative apparatus, an increase of 400 pounds ($ 25.5) from what is currently in place. .

This directive costs the state budget 38 billion pounds (about 2.4 billion dollars).

This directive was also accompanied by several matters related to improving the conditions of workers in the state’s administrative apparatus, including the approval of two allowances at a cost of 7.5 billion pounds (about 478 million dollars).

And increasing the job incentive at a cost of 17 billion pounds (about one billion dollars).

Increasing pensions by 13%, at a cost of 31 billion pounds (about 1.9 billion dollars).

And the promotion of those eligible for a job promotion on June 30, 2021, at a cost to the state budget of one billion pounds ($ 63 million).

In addition, an incentive was approved for the employees transferred to the New Administrative Capital at a cost of 1.5 billion pounds (about 95 million dollars).

According to previous statements, the number of employees that will be transferred to the New Administrative Capital is around 50,000, which means that the per capita share of this incentive is about 2,500 pounds per month (about $ 159).

With the exception of raising the value of the minimum wage, all that is mentioned in the matter of improving the conditions of workers in the state is carried out periodically every year, with the preparation of the state's general budget.

The situation of the Egyptian pound is now much worse than in 2016, according to foreign reports (Getty Images)

The development of raising the minimum wage

The philosophy on which the policy of raising the minimum wage is based is achieving a measure of justice or a balance between wages and prices, and it is an issue that democratic governments are keen on, and it takes place periodically every year through negotiations between workers' organizations, employers and governments, so that the agreed value is a consensus. It is applicable and at the same time fulfilling the requirements of a decent living for workers.

The prevailing inflation rate is one of the most important indicators that are taken into account when determining the value of the minimum wage, because in the event that the wages of workers are not increased by a rate equal to or more than the rate of inflation, this means that the real wages of workers have decreased in terms of their purchasing power, which means an increase The social burdens of the families of these workers.

The increase in the minimum monthly wage in Egypt passed by 6 stations during the period from 2008-2021, during which it moved from 112 to 2,400 pounds.

However, it is necessary to point out that the values ​​related to the salaries of state employees, during the period from 2008 to 2012, included basic salaries only, without counting bonuses and allowances, or what is known as variable wages.

It is known that one of the causes of the wage system is that bonuses and allowances accounted for 80% of the total wage.

Lessons of the past

For decades, Egyptians have become accustomed to the fact that after the government announced an increase in workers' salaries on the first of July of each year, they face a wave of high prices sweeping the markets.

However, the gap between wages and prices before the January 2011 revolution was increasing, and it helped increase poverty rates, which approached about 25% of the community.

After the January revolution, one of the most important demands of the revolution was to raise the minimum wage, which was done in its first phase in 2012, by raising the minimum wage to 700 pounds, and this did not meet the aspirations of the workers and the poor.

In October 2013, a few months after the military coup, Hazem al-Beblawi's government decided to increase the minimum wage to 1,200 pounds.

This was used politically, as the new authority is keen to improve economic conditions.

However, the economic measures taken by the government, after this increase in the wages of workers, were harsh, and robbed of any real positive impact on the entry of workers, as the gradual increase in the prices of water, electricity and gas began, and the trend was to raise the prices of government goods and services, including tuition fees. All levels of education, which made workers wish their salaries remained without increase, in return for prices remaining at what they were before the increase.

The penultimate increase in 2019, by raising the minimum wage from 1,200 to 2,000 pounds, was necessary and imperative, in light of the devaluation of the pound at the end of November 2016, as inflation rates reached their peak in July 2017, reaching 34 This expanded the segment of the poor in society to reach about 32%.

Present concerns

The expected increase in the minimum wage represents 20% of the minimum wage value before the increase, and it is noticed that the usual annual increase against the rise in inflation is not less than 10% in the salaries of state workers, which means that the percentage of the increase entailed in directing the President of the Republic to raise the minimum wage does not add Only 10%.

But there is speculation that this increase will be followed by economic measures, which may have a negative impact on the social aspects of Egyptians, especially since the government in 2020 obtained loans from the International Monetary Fund up to $ 8.5 billion, due to the negative repercussions of the Corona pandemic, but the Fund's loans usually It is accompanied by imposing austerity policies.

Egyptians fear that a new step will take place within the framework of devaluing the pound, after foreign reports were issued predicting this, and it became clear that the current situation of the pound is worse than its position in 2016. In addition, the balance of foreign investments in the public debt, which amounted to 28.5 billion dollars in January / Last January, it was threatened with decline, after raising the interest rate on US bonds, which led to the exit of hot money from emerging markets to America.

If this step is taken with a new devaluation of the pound, the country will witness a new wave of inflation, which will increase the spread of poverty, which currently includes about 8.5 million families, according to statements by Nevin Kabbaj, Minister of Social Affairs.

The government may resort to imposing more taxes and fees on government goods and services, and the possibility of resorting to this option increases with the wave reflected by the government's actions in imposing more fees on people, through new legislation, such as real estate registration fees and reconciliation fees on violating real estate. Martyrs' Fund support fees from the army and police, and others

Scenarios

Some may argue that Sisi's directive to increase the minimum wage is an effort to improve the regime's image at home, after several laws that have angered the people over the past few months.

On top of it, he imposed the registration of real estate in the real estate registry, which prompted him to postpone the law for two next years.

But such a directive, at its cost of 38 billion pounds on the budget, is difficult to accept in light of the deteriorating financial conditions, and Egypt's resort to large foreign borrowing, as the budget no longer allows for the financial negative consequences of such decisions.

Some may see that there are financial surpluses achieved in the budget last year as a result of lower oil prices, which led to a reduction in the value of the funds allocated to support energy in the budget by about 48%, or that Egyptian gas exports have begun to bear fruit, and that the state may have some financial surpluses.

He excludes the first assumption of the effect of reducing the value of energy subsidies in the budget, because the matter has another side, which is that Egypt's exports of oil and gas are undoubtedly affected as well, and their value has decreased in a way that does not allow for such surpluses.

The second assumption, regarding the possibility of fiscal surpluses resulting from an increase in natural gas exports, does not match the financial consequences that the government incurs as a result of its expansion in public debt (domestically and internationally).

In conclusion: We find that Sisi's directive to increase the minimum wage for state workers is motivated by the attempt to appease this segment, to accept austerity economic measures, or to impose new taxes and fees that would increase the burden of living for individuals.

The directive also reflects the state of economic confusion in society, by asking about the rest of the state's workers, especially informal employment, which represents about 70% of the workforce, and the majority of these workers do not enjoy any kind of social protection.