May 03 2012
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The wage conundrum
Debate on minimum and maximum wage continues, despite numerous announcements that they would be implemented, writes Niveen Wahish
Starting last year, the LE700 minimum wage was set by the Ministry of Finance to increase to LE1,200 in five years. But to Nadim Mansour, head of the Egyptian Centre for Economic and Social Rights, five years is too long. While Mansour is not against gradualism, he believes the period should be shorter. His centre had originally demanded LE1,200 for workers in 2010, and took the government to court over it. But even that figure is not right any more, he told Al-Ahram Weekly. "It is what we demanded three years ago," he said. "That figure needs to be reviewed now."
Data from the Global Wage Report for 2010/11 showed that in Egypt, around 30 per cent of workers are low paid. Minimum wage constitutes a right that provides workers with a decent living standard, said Mansour, who added that it is the government's duty to see it implemented. In five years' time, he added, LE1,200 will not be worth anything. Minimum wage needs to be applied to all workers, regardless of how they were appointed, or whether they are public or private sector workers. "It is important to provide everyone with the minimum level of subsistence," said Mansour.
Mansour sees many advantages to applying the minimum wage. Employees will not be seeking a second job, leaving that job to someone else, and they will be more focussed, so their productivity will increase. Moreover, said Mansour, there is no way to fight corruption without improving wages. "People have to look for other sources of income when they do not make enough money," he said.
To Mansour, applying the maximum wage is just as important, if only for the public sector, and it should be capped at 15 times the minimum. The draft law in parliament sets maximum wage at 35 times the minimum wage, not exceeding LE50,000. And while acknowledging that some sectors such as the banking sector might suffer from this law, he said it should be applied to all sectors so as not to allow for discretion. "There may be other ways to lure expertise into public sector banks, other than high salaries," he said.
Professor of management studies Sabry El-Shabrawy believes the maximum wage should include not just the money people receive, but all the privileges they enjoy too. "Anyone in public service should be transparent about their income," he said. Any appointments for exceptional areas of expertise should be governed by clear and transparent criteria, he added.
El-Shabrawy does not approve of government plans to increase the minimum wage to LE1,200 over five years. "This way you are teaching people to beg," he said. He believes it is the government's responsibility to come up with creative projects that can help it improve its revenues, in order to be able to finance the minimum wage.
However, whatever wage they are getting, El-Shabrawy said, employees should be held accountable for a certain number of working hours and commitment to work. "Income should not increase without a rise in productivity," he said. Productivity can increase through training. "Even garbage collectors should learn to collect garbage efficiently," he said. Thus he stressed the need for a mechanism to evaluate performance.
Magda Shalaby, head of the department of economics at Banha University agrees. She believes minimum wage should take into account inflation, because it should cover employees' basic needs, including food, housing, clothing, education and health. She too stressed the importance of increasing productivity, otherwise additional income will represent a purchasing power that is unmet by equal production, thereby leading to inflation. "Thus employees will have lost the value of their additional income, bringing them back to square one," said Shalaby. One way to boost productivity, she said, is to increase government spending to improve health and educational services.
On the other hand, Shalaby is not a strong supporter of maximum wage. She is worried that it might drive away much-needed expertise or cause a brain-drain. She acknowledged that some public sector employees are currently receiving outrageous, undeservedly high salaries, and that that must be dealt with. But, she added, there are areas of expertise that Egypt needs for its development, and that some form of exception must be made to allow for their hiring.
© Al Ahram Weekly 2012
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