Policy Viewpoints

Employment and Unemployment in Egypt

Publication Number: ECES-PVP11-E&A

June, 2002

Author : Ahmed Galal

Type : Policy Viewpoints

Unemployment and job creation are among the most important challenges facing policymakers in Egypt today. Not surprisingly, the government has made these challenges the cornerstone of its reform effort. The emphasis follows the recognition that unemployment is a waste of society’s human capital. It has direct adverse effects, especially on those with no physical assets. Furthermore, a high concentration of unemployment among the educated youth could be destabilizing. The question is: How can Egypt meet these challenges? Answers to this question are not in short supply. They range from labor-intensive growth as the most viable solution in the medium run, to government employment and extending credit to SMEs as the most expedient ways of dealing with the problem. In this edition of Policy Viewpoint, the key argument is that partial solutions are inadequate at best and misleading at worst. Public sector employment could ameliorate the problem now, only to exacerbate it in the future. Similarly, providing credit to SMEs would generate some employment, but on a scale too modest relative to the size of the problem. Lasting and effective solutions require the adoption of a coherent reform program, even if implementation is phased over time. The program should aim at expanding the demand for labor through economic recovery, labor-intensive growth and effective migration policy; aligning the supply of labor with market demand through education reforms and effective training; and improving the functioning of the labor market by reducing segmentation and rigidities, while protecting workers’ rights to decent wages and job conditions.