This paper analyzes the causes and ramifications of excessive civil service employment in Egypt and makes recommendations for future reforms. It attributes the problem to past policies, which combined guaranteed government employment for all graduates of intermediate and higher education together with free schooling for all. These policies led to an excessive demand for education, deterioration of its quality and a mismatch between the supply and demand for labor. At the same time, the government wage bill has become a budgetary burden, despite a decline in productivity and real wages of civil service employees.
To mitigate these adverse effects without compromising on equity and social stability, the paper advocates a new social contract that breaks away from past policies. The new social contract will address the civil service problem through rapid economic growth, a better human development strategy, and a host of other measures that go beyond simply reducing the number of employees or their wages.