Egypt, its labour market and the Arab spring

Widespread disenchantment at the lack of youth employment opportunities figured among the key motivations for the January 2011 uprising in Egypt, and again in June 2013 when the Morsi government was deposed. The labour market – “already dire”[i] in 2010, according to the African Development Bank – was suffering additionally from a weak regulatory framework, widespread informality and a mismatch of skills. The irony, however, is that this search for a new direction has subjected the Egyptian economy and labour market to even harsher conditions: soaring national debt, stagnating growth[ii] and increases in employment and poverty.[iii] In October 2014, 80 per cent of Egyptians polled in a Gallup survey felt their country was worse off then than it had been in 2011, and 70 per cent felt employment prospects in both the private and public sector had deteriorated. Half of those polled said they expected the recovery to take at least five years.[iv] This essay will take stock of the key labour market developments during this tumultuous period and comment on the implications of al-Sisi’s “new path for Egypt”.[v]

Unemployment and demographic transitions

Unemployment is a major concern for the Egyptian labour market, and has risen markedly in recent years, reaching a peak of 13.4 per cent in 2014, but falling to 12.9 per cent by the fourth quarter.[vi] Such figures are still significantly higher than the pre-revolutionary days, however. To be sure, unemployment stood at 8.9 per cent in the fourth quarter of 2010, and only ten months after Mubarak’s overthrow it had leaped to 12.4 per cent.[vii] However, it is important to note that such statistics rarely tell the whole story. Unemployment rates are indeed bound to have exceeded these official figures, because they do not factor in the informal economy, which represents a third of the workforce.[viii] Unemployment and income uncertainty have therefore become much graver problems than official figures would suggest.

Notwithstanding such discrepancies, unemployment continues to be by and large a youth problem, and the Arab spring has so far only worsened their lot. Official figures for youth unemployment (15-24) stood at 26.3 per cent in 2010, but had risen by nearly half to 39 per cent in 2013.[ix] Revealing most dramatically the impact of this transition period on the youth is that nearly 90 per cent of those unemployed in Egypt today come from the 15-29 age group,[x] warranting the prophetic depiction of a “time bomb” by Egypt’s first post-revolution finance minister, Samir Radwan.[xi] What one must bear in mind, however, when interpreting these statistics is that some sources of pressure on the labour market, notably the youth bulge (those aged between 15-24), have actually been relieved in recent years. To be sure, scholars Assad and Kraft have shown that while between 1988-98 this group grew by 3.4 per cent per annum, in the 2006-12 period it actually contracted by 2.3 per cent.[xii] The transition period in Egypt has been marked therefore by a shift in the age groups exerting the main pressures on the labour market. More demand is coming from the 25-29 age group, for example, among whom competition for jobs is on the rise; their group grew at a rate of 4.2 per cent per annum between 2006-12.[xiii] This has also produced another type of demographic trend: what has been termed the ‘echo of the youth bulge’.[xiv] A growing young adult population is indeed forming families and increasing the population growth rates for the youngest age group, which moved from 1 per cent per annum in the period 1998-2006 to 3 per cent per annum in 2006-12.[xv] The cumulative effect of these findings is, of course, that the period of respite on labour market pressures will only be brief. By 2012, even though the youth bulge had mostly made the transition into the labour market, its ‘echo’ that is currently young but growing fast, also needs to enter the labour market in the coming decades.[xvi]

Women, educational attainment and the labour market

Another major trend in Egypt has been improved educational attainment, but absorbing this has only presented the labour market with another challenge. In addition, the improvements in female literacy rates and overall education have not – as might have been expected – led to commensurate levels of female participation in the job market. Indeed, the slowdown in private sector employment following the 2008 global financial crisis, and curtailment of government jobs, have both hampered women’s chances of participation.[xvii] Young women (15-29) in Egypt today have the lowest employment rates at 13.4 per cent compared to 61.4 per cent among males of the same age.[xviii] The figures are slightly higher for economic activity, but the gap is still sizeable; 86.3 per cent of men above school age are economically active, compared with 17.6 per cent of women.[xix] Women are also more likely to work in informal, and therefore vulnerable, positions than men, and 49 per cent of working women were in unpaid employment between 2006 and 2010.[xx] Considering only half of all Egyptian workers have an employment contract[xxi], these figures give cause for concern about the position of women in today’s growing informal economy, which will be dealt with in the next section. Moreover, the Arab spring and its aftermath have not yet improved prospects for women. The increase in female joblessness, where women are neither in education nor employment, started in 1998-2006, accelerated between 2006-12 and has continued to do so since the revolution.[xxii]

By 2014, female unemployment across the board was three times higher than that of males’.[xxiii]

The informal market and wage discrepancies

Without adequate provision of jobs in the formal sector, many new entrants to the job market find their first position in the informal sector and this trend is becoming much more ingrained in Egyptian society. In the 1970s such work represented 20 per cent of new entrants’ first jobs, but this figure had risen to 60 per cent by the 1990s.[xxiv] Informality in employment continues to rise in Egypt, meaning more of the workforce is being subjected to poor-quality jobs without social security or written contracts. What is most concerning about this for the current labour market is that the trend has persisted even in years of impressive economic growth. According to a World Bank report released in July 2014, informal employment rose from 30.7 per cent in 1998 to 40 per cent in 2012, notwithstanding lengthy periods of high GDP growth, particularly between 2005-8.[xxv] Informality is also ‘primarily an affliction of the young’, according to Tara Vishwanath, a World Bank economist, because they have difficulty finding jobs in the increasingly inaccessible private and public sectors.[xxvi] While many have argued that the downsizing of the public sector is necessary, others have emphasised rather the need to close the wage gap between the public and private sector. In 2011, average public wages were 80 per cent higher than those in the private sector.[xxvii] At any rate, government moves to downsize the public sector, in conjunction with the private sector remaining small (at 13 per cent[xxviii]) have meant that jobs will inevitably be created in the informal sector.

Labour market and connectedness

The clout of politically connected firms has been relatively unaffected by events of the Arab spring, and this reflects a need to diversify the job market in Egypt. For one, the last decade has witnessed a growth in big private companies that, contrary to expectations, have been rather a disappointment in terms of job creation. There are two interrelated reasons behind this: i) they tend to be owned by current or former official figures, who have used their leverage with government to ensure cheaper access to inputs likes credit, capital, energy or land; and ii) by focussing on energy-intensive industries, and benefitting from erstwhile subsidies, they have tended to engage less in labour-intensive industries.[xxix] Indeed, among large firms, the politically connected ones accounted for only 11 per cent of employment in 2014, and yet they received 92 per cent of loans going to such firms.[xxx] Diwan et al have also documented the deleterious effects that flow from politically connected firms entry into previously unconnected sectors; they found that over a ten year period aggregate employment in the relevant sector can drop by as much as 25 per cent.[xxxi] The overwhelming evidence is that the entrance of crony firms into previously non-crony sectors leads to a decline in the employment rate of the ‘unconnected firms’, which can no longer compete.[xxxii] By 2014, the World Bank observed a 1.4 per cent annual decline in employment growth caused by the entry of a politically connected firm into a previously unconnected sector.[xxxiii] Given Diwan et al’s aforementioned figure, it is clear that any positive job creation by the crony firms is outweighed overall by the job losses they provoke elsewhere.

Before and during Egypt’s transition period, it has lagged behind countries like Morocco and Tunisia in encouraging the growth of ‘gazelle firms’, which double their employment in the space of four years. Indeed, only 10 per cent of Egyptian firms fall under this category, against at least 15 per cent in Morocco and Tunisia.[xxxiv] The challenge for the new government therefore is to promote innovative and start up firms, rather than simply supporting small firms or the large and politically connected. To do so, the regulatory framework must be updated and a more level playing field created, allowing new firms to compete based on merit and not connections. By 2014, the obstacles faced by a new firm entering a politically connected sector meant they were 28 per cent less likely to attempt entry than in a politically unconnected sector. Moreover, 71 per cent of connected firms sell products protected by at least three technical import barriers, compared to only 4 per cent for the unconnected.[xxxv] The youth could also benefit from changes to the regulatory framework and higher equality of opportunity, as they have only suffered from endemic cronyism in the labour market. In 2012, half of all job applications in Egypt were rejected on the basis of a “lack of recommendation/lack of connection with the company”.[xxxvi] The final part of this essay will therefore address some of the recommended changes to the regulatory framework.

Tourism and Investment

The tourism industry accounted for 13 per cent of Egypt’s GDP in 2010, the last year before the uprising, which was also the year that witnessed the arrival of a record 14 million visitors.[xxxvii] This injected $12.5 billion into the economy, and it has been estimated that the industry directly or indirectly provided jobs to one in seven Egyptians.[xxxviii] Evidently, the tourism industry is a source of livelihood for much of Egypt’s workforce, but by 2013 visitation had dropped to 9.5 million tourists, and the following year the sector’s revenues were a third of the 2010 levels.[xxxix] The events of the Arab spring therefore dealt a considerable blow to the Egyptian economy, scaring away many tourists but also investors. Indeed, even by February 2015 many had failed to return. Far from affecting only the tourism industry, sectors such as construction and textiles – typically big employers – were also badly hit by the withdrawal of investment. In cities like Port Said for example, one company reported 4,000 job losses (out of 35,000) in the textile industry over a two-year period.[xl] In many respects, Egypt’s Economic Development Conference (EEDC), held in March 2015, augurs well for both an economic turnaround and the labour market. By securing $36.2 billion in investment contracts, the figures far outweighed forecasts of $15-20 billion.[xli] This also dwarfs the pre-Arab spring annual foreign direct investment (FDI) figures: $13.2 billion.[xlii] In terms of prospects for the labour market, one must still remain wary due to the overwhelming focus on energy sector investment, which tends to be capital sensitive as opposed to labour sensitive. Globally, however, there is some cause for optimism, particularly if there is consistent implementation of Egypt’s policy plans; the International Monetary Fund (IMF) has recently made its projections on the potential for growth, which could reach 5 per cent by 2018-19.[xliii] In addition, such figures do correspond with benefits to be conferred on the labour market, as the IMF estimates “unemployment could fall to 10 per cent” in the same period.[xliv]

Targeting the right industries

One of the key lessons of the Arab spring for Egypt has been that high economic growth in itself will not translate into substantial declines in unemployment unless such growth is both sustained and in the right type of industry. Indeed, in some ways the failure of pre- and early post-revolutionary Egypt has been to focus too heavily on certain forms of investment and generation of capital, without promoting sectors with a large labour content: services, construction and agriculture, for example.[xlv] The information and communications technology (ICT) sector also proved to be rather robust even during the revolutionary period, as demand for employment has been particularly high in non-technical vocations like mobile maintenance and call-centre staffing.[xlvi] Many commentators have indeed speculated on Egypt’s prospects for moving to the ‘top five list of outsourcing destinations’ for ICT, but insist this depends on the government’s ability to prove responsive in terms of both the human resources and skills required.[xlvii] Egypt@Work, an initiative launched by the International Youth Foundation, also identified this sector as particularly important for addressing youth unemployment, but they too emphasised the need for appropriate skills training.[xlviii] Certainly, with as many as 60 per cent of employed Egyptians stating in 2015 that they are not working in their specialisation field, it is has been made clear that the ‘skills mismatch’ has worsened through the revolutionary period, and this presents the al-Sisi government with another labour market challenge.[xlix] One must now ask what are the current indicators for the Egyptian labour market, and what will be the wider implications of al-Sisi’s policy reforms.

Current indicators and al-Sisi’s policy reforms

President al-Sisi’s “new path for Egypt” was promised a difficult start. The fiscal deficit and government debt had both risen dramatically from 2010/11 to 2013/14, and 2.2 per cent economic growth in this latter period was not high enough to improve economic standards.[l] More than a quarter of the country – 26.3 per cent – is living below the poverty line as of 2012/13, with another 20 per cent estimated to be close, according to the IMF.[li] Overall unemployment appears to have peaked at 13.4 per cent in early 2014 but, as previously noted, the youth and women continue to be hit the hardest, and the real figures are undoubtedly worse than the official ones. Nevertheless, the IMF expressed confidence in Egypt’s economic reform programme in February, noting that their measures were spurring growth and prompting a “turnaround.”[lii] Predictions of GDP growth of 3.8 per cent until June (the end of the fiscal year) are an improvement on the 2.2 per cent growth rate recorded in the 2013/14 fiscal year.[liii] In the few years before the uprising, however, growth ranged from between 4 and 7 per cent. At least 7 per cent GDP growth is needed to absorb the new job market entrants, and that is before even dealing with the backlog of the unemployed.[liv] Therefore, even predicted growth rates of 4.2 per cent in 2016[lv] remain far from the target levels needed to absorb 600,000 to 700,000 jobseekers annually.[lvi]

Part of the reform programme has seen the raising of $8.5 billion via local bonds in order to expand the Suez Canal, a project employing as many as 100,000 people. Half the money was apparently raised informally, through Syrian and Libyan investment.[lvii] While not uncontroversial, the project is poised to provide many opportunities for investors, by laying the groundwork for Egypt’s new role as a global trading and logistics hub. In the same vein, increasing external competitiveness in order to attract more tourists and foreign investment is important for Egypt’s evolving labour market. The recent devaluation therefore of the Egyptian pound against the US dollar has been hailed as a ‘step in the right direction’ by the IMF.[lviii] This too is an important step for job creation.

The removal of energy subsidies, which took up about 20 per cent of Egypt’s national budget, could stand to benefit the labour market.[lix] The waste and distortion of incentives provoked by energy subsidies meant that capital intensive investment was also prioritised over the labour intensive, which is of course needed to address unemployment. Having acknowledged the opportunity costs involved in maintaining energy subsidies, the Egyptian government can now re-direct some of this money to infrastructure, hospitals and education, creating more jobs.

A poor regulatory framework had also been identified as an impediment to job creation in pre- and post-Arab spring Egypt. By 2014, the country ranked 119 out of 142 in the World Economic Forum’s Competitiveness Index[lx], and it would take on average more than 1000 days to enforce a contract.[lxi] As such, government plans for a new simplified tax regime for small and medium-sized enterprises (SMEs) should be applauded.[lxii] While at this stage little evidence of effects has emerged, SMEs are important job creators, and their growth and development ought to tackle the problem of informality by taxing a wider pool of economic actors. There is still room for further evolution of the labour market, however, even as the current round of reforms kick in. A complicated bureaucratic process, for instance, by which it can take 27 separate steps to process with the government the necessary paperwork to open a small business, is unhelpful and burdensome, especially when coupled with “up to seven years of legal work” to liquidate such businesses if they fail.[lxiii] Progress here would also, over time, bring parts of the informal sector into the fold.


The labour market in Egypt continues to face significant challenges more than four years after the Arab spring’s first wave. High unemployment, job insecurity and informality are in some ways an inevitable result of a ballooning population, but unnecessary conditions have long hampered job creation in the private sector, while wages remain disproportionately high in the public sector. Many commentators have argued that al-Sisi’s government seems to be creating the conditions for a genuine market economy, by removing energy subsidies, devaluing the currency, and reinvigorating both tourism and investment. Although the IMF has applauded the government for steps in the right direction, one of the more worrying findings of this essay is that cronyism persists in Egypt without any real constraint, and by some accounts is worsening today[lxiv]. In addition, it remains to be seen whether women and the youth – the main victims of the labour market woes – will benefit significantly from these broad reforms.

[i] Gita Subrahmanyam and Vincent Castel, ‘Labour market reforms in post-transition North Africa’, Chief Economist Complex, African Development Bank, 2014

[ii] 16 September 2014, ‘President Abdel Fattah Al-Sisi to Daily News Egypt: Egypt’s Blueprint for Stability, Investment and Growth’, Daily News Egypt,

[iii] 20 August 2014, ‘Egyptian education system doesn’t prepare the youth for modern jobs’, The Guardian,

[iv] 18 October 2014, Employment challenges in MENA linked to economic governance: World Bank’, Daily News Egypt,

[v] See reference ii

[vi] Trading Economics, Egypt Unemployment Rate 1993-2015,

[vii] 27 February 2013, ‘Egypt struggles as joblessness soars’, The Financial Times,

[viii] Ibid

[ix] 12 July 2013, ‘No Jobs and Bad Jobs’, Cairo Review of Global Affairs,

[x] A labor market assessment of Post-revolution Egypt, Egypt at Work,

[xi] 31 January 2013, ‘Socio-economic timebomb ticking in troubled Egypt,’ The Globe and Mail,

[xii] November 2013, ‘The Evolution of Labor Supply and Unemployment in the Egyptian Economy: 1988-2012’, Working Paper 806, Economic Research Forum,

[xiii] Ibid, pp. 6

[xiv] Ibid, pp. 4

[xv] Ibid, pp. 5

[xvi] Ibid

[xvii] Assaad, R., & Krafft, C. (2013). The Egypt labor market panel survey: introducing the 2012 round. IZA Journal of Labor & Development2(1), 1-30.

[xviii] December 2010, ‘Survey of Young People in Egypt’, Population Council,

[xix] 28 October 2013, Egyptian female youth and their labour market, Daily News Egypt,

[xx] International Labour Organisation (2012) Global Employment Trends for Women December 2012 (Geneva: ILO), pp. 11

[xxi] Gatti, R.; Angel-Urdinola, D.; Silva, J.; Bodor, A. 2011. “Striving for Better Jobs: The Challenge of Informality in the Middle East and North Africa Region”. MENA Knowledge and Learning Quick Notes Series, Number 49, Dec. (Washington, DC, World Bank).

[xxii] November 2013, ‘The Evolution of Labor Supply and Unemployment in the Egyptian Economy: 1988-2012’, Working Paper 806, Economic Research Forum,, pp. 13

[xxiii] 17 July 2014, ‘Egypt still has a sexual assault problem’, Al Jazeera America,

[xxiv] Wahba, J. and Mokhtar, M. (2002) ‘Informalization of Labor in Egypt’, in Assaad, R. (ed) The Labor Market in a Reforming Economy: Egypt in the 1990s (Cairo: American University in Cairo Press).

[xxv] 29 July 2014, Egypt: World Bank sees widening of ‘shadow’ economy, The Financial Times,

[xxvi] Ibid

[xxvii] ‘Designing Youth Employment Opportunities in Egypt’, Akira Murata, Global Economy & Development at Brookings, pp. 17,

[xxviii] Ibid

[xxix] 29 July 2014, Egypt: World Bank sees widening of ‘shadow’ economy, The Financial Times,

[xxx] Ibid

[xxxi] Diwan, I., Keefer, P., & Schiffbauer, M. (2014). On top of the Pyramids: Cronyism and Private Sector Growth in Egypt. Working Paper, World Bank, Washington, DC., pp. 36

[xxxii] Ibid, pp. 37

[xxxiii] World Bank,

[xxxiv] World Bank, Unleashing the Employment Potential of the Middle East and North Africa,

[xxxv] 18 October 2014, Employment challenges in MENA linked to economic governance: World Bank’, Daily News Egypt,

[xxxvi] ‘Designing Youth Employment Opportunities in Egypt’, Akira Murata, Global Economy & Development at Brookings, pp. 9,

[xxxvii] 4 May 2013, ‘Arab Spring Break’, The Economist,

[xxxviii] Ibid

[xxxix] 27 May 2014, ‘Commentary: The Prospects for Egypt: El Sisi’s Choice’, Institute of International Finance,

[xl] 27 February 2013, ‘Egypt struggles as joblessness soars’, The Financial Times,

[xli] 31 March 2015, ‘Egypt looks to success after investment conference’, Oxford Business Group,

[xlii] Ibid

[xliii] February 2013, IMF Country Report No. 15/33, Arab Republic of Egypt, International Monetary Fund

[xliv] 11 February 2015, IMF sends ‘message of confidence’ for Egypt’s economic reforms, The Financial Times,

[xlv] Hassan, Mohamed, and Cyrus Sassanpour. “Labor market pressures in Egypt: Why is the unemployment rate stubbornly high?.” Journal of Development and Economic Policies 10.2 (2008): 79-115.

[xlvi] A labor market assessment of Post-revolution Egypt, Egypt at Work,

[xlvii] “Egypt Information and Communications Technology Sector: Competitiveness, growth and key challenges”,

[xlviii] Ibid

[xlix] Addressing the Challenges of the Education/Skills and Jobs Mismatch, Prof. Amr Ezzat Salama, the UN,

[l] 11 February 2015, ‘How Can Egypt Achieve Economic Stability and Better Living Standards Together?’, IMF Blog,

[li] Ibid

[lii] 11 February 2015, IMF sends ‘message of confidence’ for Egypt’s economic reforms, The Financial Times,

[liii] 13 October 2014, ‘UPDATE 1-Egypt Q4 GDP growth rate up to 3.7 pct as confidence returns’, Reuters,

[liv] 27 February 2013, ‘Egypt struggles as joblessness soars’, The Financial Times,

[lv] 11 February 2015, IMF sends ‘message of confidence’ for Egypt’s economic reforms, The Financial Times,

[lvi] 27 February 2013, ‘Egypt struggles as joblessness soars’, The Financial Times,

[lvii] 17 October 2014, ‘Egypt’s bold reforms start to bear fruit’, The Financial Times,

[lviii] 11 February 2013, IMF: Egyptian Pound depreciation ‘important step in right direction’, The Cairo Post,

[lix] 16 September 2014, ‘President Abdel Fattah Al-Sisi to Daily News Egypt: Egypt’s Blueprint for Stability, Investment and Growth’, Daily News Egypt,

[lx] The Global Competitiveness Report 2014–2015, World Economic Report,

[lxi] 13 March 2015, Moment of Opportunity—Delivering on Egypt’s Aspirations, Speech: Christine Lagarde,

[lxii] Ibid

[lxiii] 8 April 2015, Egypt must turn to SMEs for job creation, The National,

[lxiv] 15 March 2015, Egypt investment conference: Return of crony capitalism’, Daily Sabah,

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