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Egypt - Labor

Egypt is suffering from a chronic labor mismatch between market supply and demand. Despite several years of high economic growth, unemployment remains a problem, and there is a scarcity of skilled workers and managers. Each year, Egypt produces 750,000 new college graduates, many of whom have limited skills and lack training, and are not ready for the workforce. As a result, the comparative wage advantage of skilled and unskilled labor in Egypt is offset by much lower productivity than many other countries in the region. Efforts to address this issue by both the Egyptian government and the private sector are not well coordinated or communicated. The worldwide economic slowdown is likely to exacerbate the situation in the near term. USAID has been working closely with the Ministry of Education to improve the quality of primary and secondary education, but has found little traction for reform at the Ministry of Higher Education.

Despite having long ago abandoned guaranteed employment for all university graduates, the Government of Egypt has taken few steps to improve the quality of post secondary education in Egypt to make new graduates competitive in the modern workforce. The 750,000 graduates being produced each year by Egypt's universities are ill-equipped for the demands of most Egyptian employers. As a result of low skills and the lack of proper training, unemployment and underemployment are rampant. The Central Agency for Public Mobilization and Statistics (CAPMAS) reports that there are 24.9 million Egyptians in the labor force. According to Ambassador Magda Shahin, Director of the Trade-Related Assistance Center at the American Chamber of Commerce in Egypt, this number is expected to increase to 30 million workers over the next decade. With little training and low skills, graduates continue to enter the workforce with limited opportunities to work inside or outside Egypt.

Egypt has the largest labor pool in the Middle East and North Africa, accounting for 22% of the region's workforce. Heba Nassar, an economist and Vice President of Cairo University, contends that despite the comparatively low cost of Egyptian labor, there are a number of factors which prevent Egyptian workers from being competitive regionally and globally. Egyptian workers have some of the lowest productivity in the region (ahead of only Morocco and Yemen). Nassar also points out that Egypt's spending level on research and development represents a mere 0.19% of GDP. High levels of illiteracy coupled with poor education and a lack of technical skills contribute significantly to the low productivity of Egyptian workers. As a result, Egypt loses most if not all of its comparative wage advantage.

According to the Egyptian government, there are 5,000 vocational training centers, though according to private sector sources, much of the training and equipment is severely outdated. The sentiment among private sector companies is that the government should play a larger role in worker training, but most don't have high expectations that this will come to pass. Most private sector employers, particularly multinational corporations and labor intensive industries, provide their own training centers in order to obtain sufficient numbers of skilled employees.

Expatriate Egyptians working in the US, Europe, and the Gulf are a critical part of the workforce. An estimated 2 million Egyptians work overseas; their remittances account for over $8.5 billion per year (six percent of GDP in 2006/2007). As the global economy worsens, there are worries that significant numbers of expatriate Egyptians may lose their jobs (particularly in Dubai and other Gulf states) and return to Egypt, intensifying the domestic labor crisis.

This situation highlights out another gap in the GOE's labor management. Unlike many exporters of labor, Egypt has very little active management of its expatriate workforce to insure that workers have the skills required by labor importing countries and that workers can get jobs that match their skill sets. As a result, Egyptian workers may be particularly vulnerable during bad economic times. Though the effects of the economic slowdown are only beginning to be felt in Egypt, early anecdotal reports suggest that thousands of workers may soon be returning from the Gulf.

Egypt is a demographically young country and the Egyptian labor pool continues to grow at a rapid rate. Both the GOE and private sector agree that Egypt's educational system does not meet the country's needs. At the same time, there is a lack of coordination between the government and the private sector to address education and training. Focusing the work of the various stakeholder ministries within the GOE is a start, but the private sector needs to commit resources and political will to the issue as well. USAID has been working closely with the Ministry of Education to improve the quality of primary and secondary education, but has found little traction for reform at the Ministry of Higher Education (septel). In the short term, the worsening economic situation will undoubtedly result in increased unemployment and will further expose the shortcomings of Egyptian labor competitiveness in the global market.

The law permits workers to form unions, with several significant restrictions. All unions are required to join one of the 23 officially recognized industrial federations to operate, and these federations must affiliate with the government-linked Egyptian Trade Union Federation (ETUF) to be legally recognized. In addition a minimum of 50 employees are required to form a union. In practice there was minimal private-sector union representation, and private-sector union representation was most often found in privatized, formerly state-owned factories.

According to the Land Center for Human Rights, ETUF represented approximately 4.5 million workers. ETUF influenced nomination and election procedures for trade union officers and permitted public authorities to intervene in union financial activities. State-owned enterprises employed most union members, who made up approximately one-quarter of the labor force.

Workers seeking to form unions outside of the legal framework may face dismissal. Nevertheless, in December 2008 the country's 52,000 public-sector real estate tax collectors announced the formation of the Real Estate Tax Collectors Authority (RETA) Union and refused to join the ETUF. On April 22, the independent RETA presented its application for registration to the Ministry of Manpower and Migration (MOMM). The registration was not rejected, but the RETA union has uncertain legal standing because it has not been formally recognized by the ETUF. ETUF leadership filed a complaint with the public prosecutor against the RETA union president in September. The public prosecutor interviewed the president but took no further action.

The 2003 Unified Labor Law permits peaceful strikes, but only after an extended negotiation process and only if the strike is announced in advance and approved by a general trade union affiliated with ETUF. In practice strikes were rarely, if ever, approved. According to credible workers' rights NGOs, there were 117 strikes as of October 30 and an additional 170 actions that did not involve a work stoppage; a general trade union, the General Union of Textile Workers, approved only one strike. Police rarely intervened, and intervention generally was limited to containing protests and demonstrations to the immediate vicinity of the workplace. To call a strike, the trade union must notify the employer and concerned administrative authority at least 10 days in advance, giving the reason for the strike and the date it would commence. Prior to this formal notification, approval from two-thirds majority of the ETUF-member general trade union is necessary. The law prohibits strikes while collective bargaining agreements are in force or during the mediation and arbitration process. The law also prohibits strikes in a lengthy list of "strategic or vital" entities, at which the interruption of work could result in disturbance of national security or basic services. Despite these prohibitions, strikes and work stoppages occurred throughout the country.

Strikes were largely peaceful, despite the presence of government security forces at larger strikes. The majority of high-profile strikes occurred in the textile industry. With some notable exceptions, the government generally did not interfere in strikes in either the public or private sector, provided they did not become violent and strikers' demands were focused on economic issues.

In 2009, there were over 300 strikes and other worker protests in Egypt, despite legal restrictions and a lack of support for strikers from GoE-affiliated trade unions. Worker activism was driven by economic, not political, concerns. Some workers' rights advocates nonetheless saw the wave of activism as "inherently political," forcing workers to organize themselves, acclimating Egyptians to peaceful protest as a positive force, and demonstrating to the GoE the utility of compromise and negotiation. Labor activists criticize Egypt's opposition and human rights groups as "elitists" unable or unwilling to include workers in their movements. On-going activism may create an environment for meaningful labor union leadership elections in 2011, resulting in independent leadership able to tackle Egypt's challenging labor issues, especially workers' rights in the expanding private sector.

Whether ongoing labor activism can have a broader influence on an Egyptian system characterized by illiberal institutions, both within the government and without, remained to be seen. The Goovernment's approach had been to generally balance economic demands with steps to ensure that strikes and labor actions remain local and non-political. Observers noted that Egypt's secular opposition and civil society appears to be missing an opportunity to broaden their appeal, either through an inability or unwillingness to engage with the labor movement.

As of 30 October 2009, the Land Center for Human Rights, a respected local labor rights NGO, had documented 117 strikes and 170 other labor protests in 2009. The Land Center documented strikes in both the public and private sectors involving both unionized and independent workers. Although Egypt's labor law requires striking workers - unionized and independent - to receive the approval of a GoE-affiliated "general trade union" before striking, only one strike in 2009 received approval (ref A). Nonetheless, according to local activists, most strikes proceeded with minimal GoE interference.

The 2009 wave of labor unrest was a historic development, involving workers and professionals from both the public and private sectors. Despite this, there was no political component to Egyptian labor activism. Secular opposition movements were seen as "elitists unable to break free of Egypt's stratified class structure" and take advantage of an opportunity to expand their influence. The Muslim Brotherhood, unlike secular opposition leaders, recognized the political opportunity inherent in growing labor activism. However, it has been unable to take advantage because, as an institution, it is dominated by middle and upper middle class professionals who workers see as inherently hostile to their interests.

Others saw labor activism as having broader implications for Egyptian society. The wave of strikes in 2009 acclimated Egyptians (who often negatively associate any form of protest with "chaos") to activism as a positive force, while also demonstrating to the Government that negotiation and compromise, not just repression, can be effective tools of governance. Additionally, workers are learning that even without the involvement of Government-approved unions and ETUF, they can organize and bargain effectively, making irrelevant formerly powerful state-controlled institutions.

There are currently 23 GoE recognized trade unions. All "collective workers organizations" are required by law to affiliate with one of the recognized unions, which in turn must join the Egyptian Trade Union Federation (ETUF). In December 2008, a group of government employees formed the Real Estate Tax Collectors Union (RETU), which applied for GoE recognition but refused to affiliate with ETUF. The Government aggressively interfered in the last union elections, in 2006, by barring "thousands" of candidates from running, resulting in ETUF and general union leadership dominated by members of the ruling National Democratic Party (NDP). As an example, 22 of the 23 seats on ETUF's ruling council are filled by NDP members. The 2011 union elections will be a massive undertaking, with Egyptian union members simultaneously selecting the leaders of "workplace committees," regional and national union boards, and ETUF.

As a result of NDP and Government control of unions, the official union structure was not only disconnected from the interests of workers, but beholden to the Government. This situation had particularly negative implications in Egypt's growing private sector, with Egypt's NDP-dominated union leadership bowing to the wishes of business owners with close ties to the GoE and making no effort to expand membership to include private sector workers. The wide-spread practice of private sector employers requiring workers to sign undated resignation letters as a condition of employment was an especially egregious result of the absence of unions and other labor rights organizations from private sector workplaces.

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Page last modified: 09-07-2011 02:38:42 ZULU