Manufacturing has biggest potential of boosting employment in Egypt, according to Egyptian economist Ragui Assaad

Photo: Bruce Silcox/University of Minnesota

While the numbers show that Egypt’s economic growth has significantly recovered in recent years, this growth hasn’t translated into an increase in jobs, even though official figures have indicated a drop in unemployment. According to Egyptian economist Ragui Assaad, the few jobs that have been created have been of a low quality.

Assaad is Professor of Planning and Public Affairs at the Humphrey School of Public Affairs at the University of Minnesota and is also a research fellow at the Cairo-based Economic Research Forum. He has previously served as a consultant to the World Bank and the International Labor Organization. His research interests have focused on labor economics, labor markets in the Arab World, education, and human resource development.

In December last year, Alternative Policy Solutions, a public policy research center based at the American University in Cairo (AUC), hosted their first annual conference at the Tahrir Campus under the auspices of “Towards an economy for all.” Assaad was one of the experts invited to offer his crucial insights.

He revealed that recent trends in the Egyptian labor and job markets have been thanks to a focus on real estate and investment to boost growth and short-term speculative wealth. As a result, most jobs have been increasing in the construction, transport, retail, and low-end services sectors.

According to the CAPMAS Labor Force Survey, the growth of Egypt’s work force has slowed, causing a decline in employment. This hasn’t showed up as an increase in unemployment, partly due to a consistent decrease in labor force participation among men and women since 2010. CAPMAS only counts those who are actively seeking employment and are not in a job as unemployed. Those out of work but not in search for a job aren’t included in their unemployment statistics.

Since 1998, the share of formal employment in Egypt has gradually fallen thanks to a shrinking public sector and slow growth in the formal private sector. However, there have been job share increases in the informal private sector and informal jobs within formal establishments.

Between 1998 and 2018, the fastest growing industry sectors with regards to employment have been construction, which has seen its job share grow from 7% to 13%; and transport and storage which have seen their share grow from 5% to 9%.

On the other hand, mining, manufacturing, and utilities have seen their job share shrink from 18% to 14%.

In 2018, 48% of Egyptians earning a wage were not employed in a fixed establishment, marking a slight increase from 45% in 1998.

The top 10 contributing sectors to job creation within Egypt’s private sector tend to be smaller in size on average, are more likely to be informal and hence more likely to create informal jobs. Importantly, they tend to be less productive and employ lower numbers of secondary school and university-educated Egyptians than average.

This has been coupled with a decline in real wages between 2012 and 2018, where it has been felt the most in both the formal and informal private sector.

Assaad spoke exclusively to Business Forward to share his insights on how Egypt’s employment problem can be tackled, especially with regards to the mismatch between the available skills and levels of education in the Egyptian labor force and the actual demands of the job market.

He believes that manufacturing has the biggest potential of boosting employment in Egypt thanks to the availability of the relevant skills in the country’s work force. “In theory, Egypt has a lot of possible competitive advantages in manufacturing in terms of availability of relatively cheap labor and [a] fairly well qualified labor force for manufacturing. We have a lot of graduates who have secondary technical degrees. That’s the biggest group in the Egyptian labour force right now.

“People who have these technical secondary degrees are not very well trained, but I think they’re suitable for manufacturing jobs.” Assaad claims that people trained at that level are “what most countries have relied on for the most part for the manufacturing workforce.”

Egypt’s manufacturing sector has declined and been unable to realize its full potential thanks to a number of policies Assaad says are holding it back.

“Unfortunately, because of a variety of policies having to do with exchange rate policies that were overvalued for a long time until recently. Also microeconomic policies having to do with access to industrial land, having to do with access to credit and also energy pricing policy. Manufacturing has declined quite substantially as a share of the economy.

Although, there is no structural reason for why that would be the case. We should be quite competitive in the manufacturing sector. I think with some attention on the part of the government to the needs of the manufacturing sector, and in particular the blockages that are preventing manufacturers from participating in exports, I think that sector could hold quite a bit of promise.”

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