Egypt's Labor Market Revisited

Ragui Assaad

• Publisher: The American University in Cairo Press
• Year: 2009
• ISBN:
  9781617973932
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

This volume is a follow-up to a 1998 publication by the Economic Research Forum (ERF). Its significance lies in the contributors' reliance on fresh data and solid analytical techniques used to examine a wide spectrum of pertinent issues concerning the labor market in Egypt. The range of topics includes labor supply, employment and unemployment, youth labor market school-to-work transition, internal and international migration, earnings and inequality, and gender and education. The papers in this volume are the very first research available based on data collected in the Egypt Labor Market Panel Survey of 2006, a follow-up to the Egypt Labor Market Survey of 1998. The panel design used for collecting data is state-of-the-art methodology in the labor field, and has never before been implemented in Egypt on this scale.Contributors: Mohamed Fotouh Abulata, Mona Amer, Ragui Assaad, Ghada Barsoum, Asmaa Elbadawi, Fatma El Hamidi, Alia El Mahdi, Ali Rashed, Rania Roushdy, Mona Said, Jackline Wahba.

CHAPTER 1

Labor Supply, Employment, and Unemployment in the Egyptian Economy, 1988–2006

Ragui Assaad

Introduction

The Egypt Labor Market Panel Survey 2006 (ELMPS 2006) collected a wealth of information on employment and unemployment in Egypt, allowing for in-depth analysis of both the structure and the trend of these variables. The results reveal that the employment outlook in Egypt has broadly improved since 1998. Despite continued rapid growth of the working-age population since 1998, overall participation rates have increased, unemployment rates have decreased, and employment growth has been robust. In many instances, the levels of these variables have returned to or exceeded their 1988 levels.

The performance of the labor market in Egypt beween 1998 and 2006 was helped by favorable demographic as well as economic developments. In 1988, the children born prior to the onset of fertility declines of the early 1980s, and who were surviving at higher rates due to significant reduction in early childhood mortality, were still about 5 years old, too young to affect the labor market. This generation made its way to adolescence in the following decade and started putting severe supply pressures on the labor market. By 2006, the peak of this group was at age 22, and many of those on its leading edge had already made their way into the labor market, relieving some of the demographic pressure felt in the 1990s. Egypt is therefore now poised at the gateway of a demographic window of opportunity, where the proportion of the adult (that is, working-age) population will be rising steadily and dependency rates falling. It appears that the Egyptian labor market is now managing to absorb this increased number of potential producers into employment.

These demographic developments have been accompanied by important changes in the structure of the economy. While employment in state-owned enterprises (SOEs) had begun to decline in the decade spanning 1988–98, employment in government was still growing rapidly during that period at about twice the rate of growth of overall employment. This has clearly changed in the 1998–2006 period. Employment growth in the civil service has slowed dramatically and much of the burden of employment creation has shifted to the private sector. Although this development is generally positive, it has had negative consequences on some groups, namely educated young women, who had come to rely heavily on the government for employment. Without employment opportunities in the government, many of these educated young women appear to be opting out of the labor force altogether, as indicated by falling participation rates among educated females, the very group that in the past would have joined the ranks of the civil service.

Concurrent with the decline of employment opportunities in the public sector, the trend toward informalization of the labor market begun in the 1990s is continuing unabated. By 2006, 61 percent of all employment was informal, up from 57 percent in 1998. Moreover, 75 percent of the new entrants who entered the labor market in the first 5 years of this decade entered into informal work. However, if we restrict our attention to private wage employment, we can detect a certain degree of formalization since 1998, which could well be attributed to added flexibility in formal employment relations introduced by the passage of a new labor law in 2003.¹

In what follows, I review trends in the working-age population, the labor force, labor force participation, unemployment, and employment in the Egyptian economy over the period 1988 to 2006. Whenever possible, I compare developments from 1988 to 1998 to what happened in the 1998–2006 period. The three surveys I am relying on—the Labor Force Sample Survey 1988 (LFSS 1988), the Egypt Labor Market Survey (ELMS 1998), and the ELMPS 2006—are all broadly comparable in design and methodology. The ELMPS 2006 was designed as a longitudinal panel, but little of the ensuing analysis depends on this panel design. Despite some attrition from the panel, we made sure that the 2006 survey remains nationally representative by using appropriate weights that correct for this.²

The Egypt Labor Market Panel Survey of 2006

The Egypt Labor Market Panel Survey is a follow-up survey to the Egypt Labor Market Survey 1998, which was carried out in November and December of 1998 by the Economic Research Forum in cooperation with the Egyptian Central Agency for Public Mobilization and Statistics—the main statistical agency of the Egyptian government. The ELMS 1998 was carried out on a nationally representative sample of 4,816 households and was designed to be comparable to the special round of the Egyptian Labor Force Sample Survey carried out in October 1988.³ The ELMPS 2006 is the second round of what is intended to be a periodic longitudinal survey that tracks the labor market and the demographic characteristics of the households and individuals interviewed in 1998, and any new households that might have formed as a result of splits from the original households, as well as a refresher sample of households to ensure that the data continues to be nationally representative. The field work for the ELMPS 2006 was carried out from January to March of 2006.

Sample

The final sample of 8,349 households is made up of 3,684 households from the original ELMS 1998 survey, 2,167 new households that emerged from these households as a result of splits, and a refresher sample of 2,498 households. Of the 23,997 individuals interviewed in the 1998 survey, 17,357 (72 percent) were successfully re-interviewed in 2006, forming a panel that can be used for longitudinal analysis. The 2006 sample contains 19,743 new individuals. Of these, 2,663 individuals joined the original 1998 households, 4,880 joined the split households, and 12,200 were part of the refresher sample of households.

The original sample of the ELMS 1998 was selected from 200 primary sampling units (PSUs) across Egypt. Urban PSUs were over-sampled and constituted 140 of the total; rural PSUs made up the remainder. The 1998 sample was a two-stage stratified random sample selected from a master sample prepared by CAPMAS. The PSUs included in the master sample were selected according to the probability proportional to size (PPS) method. The refresher sample of 2,500 households was selected from an additional 100 PSUs randomly selected from a new master sample prepared by CAPMAS, of which 46 were urban PSUs and 54 were rural PSUs.

The attrition that occurred in the original 1998 sample was mostly random in nature since it resulted from the loss of records containing identifying information for the 1998 households. Of the 1,115 households that could not be re-interviewed, 615 are due to loss of records and the remainder is made up of expected losses due to total relocation of the household, death of all household members, or refusal to participate in the survey.⁴ A second source of attrition is due to the inability to locate some of the individuals who split from the original 1998 households. An analysis of the 1998 characteristics of these individuals revealed no systematic differences between them and those who were successfully tracked.

Questionnaire

The questionnaire for the ELMPS 2006 is closely based on that used in the ELMS 1998 to ensure comparability of the data over time; however, several critical modules that permit a more in-depth study of marriage dynamics in Egypt were added to the 2006 questionnaire. The questionnaire is composed of three major sections: (i) a household questionnaire administered to the head of household or his or her spouse requesting information about basic demographic characteristics of household members, movement of household members in and out of the household since 1998, ownership of durable goods and assets, and housing conditions; (ii) an individual questionnaire administered to every individual in the household above the age of six, containing questions related to his or her parents, detailed education histories, activity status, job search and unemployment, detailed employment characteristics, migration histories, job histories, time use, earnings, fertility, a module on costs incurred at the time of marriage, and a module on women’s work; and (iii) a household enterprise and income module that elicits information on all agricultural and non-agricultural enterprises operated by the household as well as all income sources, including remittances and transfers.

The Evolution of the Working-Age and Youth Populations

According to estimates prepared by CAPMAS, the overall average annual population growth rate in the 1998–2006 period was virtually the same as in the 1988–98 period at about 2 percent per annum (Table 1.1). The working-age population (15–64) grew a little faster at 2.4 percent per annum. This growth differential in favor of the working-age population is typical of the middle stages of the demographic transition, a period that follows the onset of fertility decline (Bloom and Williamson 1998). In the early stages of this period, however, much of the growth in the working-age population is concentrated among youth (15–24), which leads to severe labor supply pressures on the labor market. The youth population in Egypt indeed grew very rapidly in the 1988–98 period at 3.4 percent per annum, but has slowed, more recently, to a rate of 2.1 percent per annum, indicating that Egypt has passed the period of most severe labor supply pressures.⁵

As a reflection of the more recent fertility declines in rural areas and the continued slowing of net rural-to-urban migration, rural population growth rates were higher than urban rates, but have now slowed to about the same rate as in ur...

Table of contents

• Cover
• Halftitle Page
• Title Page
• Copyright Page
• About ERF
• Contents
• Foreword
• Acknowledgments
• Contributors
• Acronyms and Abbreviations
• Preface
• Chapter 1: Labor Supply, Employment, and Unemployment in the Egyptian Economy, 1988–2006
• Chapter 2: The Fall and Rise of Earnings and Inequality in Egypt: New Evidence from the Egypt Labor Market Panel Survey 2006
• Chapter 3: The Changing Economic Environment and the Development of Micro– and Small Enterprises in Egypt, 2006
• Chapter 4: Education at a Glance: Selected Indicators Based on the Egypt Labor Market Surveys of 1988, 1998, and 2006
• Chapter 5: An Overview of Internal and International Migration in Egypt
• Chapter 6: The Egyptian Youth Labor Market School-to-Work Transition, 1988-2006
• Chapter 7: Women in the Egyptian Labor Market: An Analysis of Developments, 1988-2006
• Methodological Appendix 1
• Methodological Appendix 2
• Methodological Appendix 3
• Index