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Cablegate: Egyptians Demand a New Minimum Wage

VZCZCXYZ0022
RR RUEHWEB

DE RUEHEG #0563/01 0830717
ZNR UUUUU ZZH
R 230717Z MAR 08
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 8617
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0392

UNCLAS CAIRO 000563

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ELA, NEA/RA AND EEB/IDF
USAID FOR ANE/MEA MCCLOUD AND DUNN
TREASURY FOR MATHIASON AND CONNOLLY
COMMERCE FOR 4520/ITA/ANESA/OBERG

E.O. 12958: N/A
TAGS: ECON EFIN EG
SUBJECT: EGYPTIANS DEMAND A NEW MINIMUM WAGE

REF: Cairo 0150

Sensitive but Unclassified. Not for Internet distribution.

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Summary
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1. (U) Demonstrations over rising prices have turned into calls for
a new minimum monthly wage for public sector employees. The current
minimum wage of LE 40 ($7.20)/month for unskilled workers has not
changed since the 1980s. University professors and doctors have
joined the call for a new pay scale, and plan sit-ins and a strike
on March 23. Textile workers in Mahalla, scene of wildcat strikes
in 2006 and 2007, will strike April 6 to demand a monthly minimum
wage of LE 1,200 ($218), though the Egyptian Trade Union Federation
(ETUF) supports a demand of only LE 800 ($145)/month. Leaders of
the opposition Kefaya (Enough) movement have called on workers to
act independently of NDP-controlled trade unions. The GOE tasked
the National Wages Council with recommending a new national minimum
wage. Both public and private sector contacts believe that workers
in market-driven industries are seeing wages/salaries keep pace with
inflation, but the same is not true for the public sector.

--------------------------------------------- ---------
Professionals Join Workers in Calling for Higher Wages
--------------------------------------------- ---------

2. (U) Recent demonstrations against rising prices (reftel) have
given way to calls for an increase in the minimum wage and new
salary scales for public sector professionals. The legal minimum
wage, unchanged since the 1980s, is LE 40 ($7.20)/month for
unskilled workers, LE 98 ($17.80) for those with a secondary
education, LE 108 ($19.63) for those with some post-secondary
education, and LE 123 ($22.36) for university graduates. Professors
announced they will strike March 23 to demand minimum salaries of LE
1,000 ($181)/month for assistant professors and LE 2,000
($363)/month for full professors, according to press reports.
Professors at public universities currently average LE 420
($76)/month. Hamdi al-Sayyid, Chairman of the Doctors' Syndicate,
told the press that doctors will stage sit-ins at parliament to
demand minimum monthly salaries of LE 1,000 ($181). Doctors in
public hospitals currently average LE 346 ($63)/ month.

3. (U) Speaking at a press conference in February, leftist Tagammu
party member Nabil Abdel Ghany said that the spread of unrest to
white-collar workers indicates the extent to which inflation is
affecting all social sectors. "The government is clashing with
doctors and university professors - this regime has no legitimacy."
Also at the conference, workers from the state-owned Mahallah
Weaving and Spinning Company announced plans for a strike on April 6
to demand a minimum wage of LE 1,200 ($218)/month for all public
sector workers, not just those in textiles. The Mahalla workers,
who staged wildcat strikes in 2006 and 2007, called on all Egyptians
to support the strike.

4. (U) Hussein Mugawer, head of the NDP-controlled ETUF, has
publicly stated that the labor federation supports a minimum wage of
only LE 800 ($145)/month. Leaders of the opposition Kefaya movement
have called for a general strike on Labor Day, May 1, saying workers
should act independently of trade unions, as Real Estate Tax
Authority (RETA) employees did in December 2007. Without support
from organized labor, the employees of RETA, an agency of the
Ministry of Finance (MOF), went on strike demanding inclusion in a
new MOF pay scale. The strike succeeded, emboldening employees to
establish an independent labor committee in RETA.

-----------------------------
National Wages Council Tasked
-----------------------------

5. (SBU) Unrest over wages prompted the GOE to task the National
Wages Council with proposing a national new minimum wage. The
Council held its first meeting on the topic in early March. Abdel
Fatah El-Gebaly, Director of Economic Research at the government Al
Ahram Center for Political and Strategic Studies and a member of the
Council, told us the Council will likely recommend a new minimum
monthly wage of LE 125 ($22) for unskilled workers, LE 250 ($45) for
workers with secondary education, LE 275 ($50) for workers with some
post-secondary education, and LE 300 ($54) for university graduates.
Unless the new minimum wage is enacted into law by parliament,
which is not currently envisioned, it will be binding only for the
public sector.

6. (U) El Gebaly explained that wages make up only part of public
sector employees' actual take-home pay. Employees also receive
variable semiannual "bonuses," paid by individual government/public
sector entities. Amounts vary depending on year and agency, but
often constitute up to 90% of employees' take-home pay. It was
meager bonuses, for example, that caused RETA employees to strike.
RETA did not have a large budget for bonuses in 2007, but MOF did,
prompting RETA employees to demand inclusion in MOF's pay scale,
according to El Gebaly. Wages, salaries and benefits make up
approximately 94% of the GOE's projected budget of LE 241.5 billion
($43.9 billion) for FY 2007/08.

---------------------------------------------
Public Sector Suffers, Private Sector Thrives
---------------------------------------------

7. (SBU) Although Prime Minister Nazif placed a moratorium on
government hiring in 2006, the public sector still employs some 7
million workers, 32% of Egypt's 22 million workforce. According to
Alaa Saba of Beltone Financial, it is these workers' wages that are
stagnant. Salaries in market-based industries such as construction,
telecoms, banking, tourism, manufacturing and oil and gas are
keeping pace with inflation. In fact, the private sector is
experiencing a shortage of qualified labor, allowing competent
workers to demand salaries similar to their earning potential in a
developed economy (Note: Embassy Cairo's difficulties in keeping
pace with private sector wages, and subsequent retention problems,
corroborate Saba's statements). But competent workers often want to
leave Egypt, usually taking the first opportunity to do so, even if
they have good paying jobs in Egypt. This is a reflection of the
corrupt organizational culture in Egypt, which places a premium on
political and social connections over competency when it comes to
professional advancement.

8. (U) In contrast to the private sector, public sector employees
and pensioners are not benefiting from Egypt's growth, according to
Saba. Inflation has averaged 10% over the last two years. Although
the GOE ostensibly increases public sector wages by about the same
amount annually, the increase only affects wages, not bonuses.
Since wages make up only a small part of most employees' take-home
pay, the annual increase results in only minor increases to
take-home pay.

9. (SBU) Saba's views were echoed by Ahmed Noshi, Director of
Research at the Central Bank, who said that wages were keeping up
with inflation in some sectors, specifically construction and
banking, but not in the public sector. Noshi said that wage data
are difficult to come by, as so much of the economy is informal. He
noted that the poor quality of government data collection is itself
a result of low salaries. If a surveyor working for the Central
Authority for Public Mobilization and Statistics is not given
transportation costs to conduct wage interviews/surveys outside
Cairo, he/she will contrive the data. Supervisors, who are not well
paid themselves, will not verify the data, according to Noshi.

-------
Comment
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10. (SBU) Public sector employment in Egypt is essentially a
quasi-subsidy system, providing wages to millions of workers who
produce little output. These workers in turn support up to 28
million people, or roughly one third of Egypt's population,
according to the World Bank's Population Council. Ideally, the
calls for wage reform would be accompanied by a broader reform of
the civil service. As with food subsidies, however, the GOE has
shown little political will make the difficult decisions necessary
to tackle this complicated and controversial task.
RICCIARDONE

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