The Fall and Rise of Earnings and Inequality in Egypt: New Evidence From the ELMPS, 2006

This paper investigates the distributional and structural developments of real hourly wages and monthly earnings in Egypt in the last two decades on the basis of three nation-wide labor force sample surveys (the 1988 LFSS, the 1998 ELMS and the 2006 ELMPS). The results reveal that after the initial period of real wage erosion and wage compression (1988-98), both real wages and wage inequality started rising again for most groups in Egypt. In 2006, although the overall wage distribution is much wider, median real wages have sufficiently increased such that the proportion of wage workers that can be classified as low-waged has significantly declined in comparison to 1998. In fact, in many ways, the 2006 wage structure very much resembles that of 1988, in terms of the level and dispersion of real wages as well as the percentage of workers with low wages. In other words, after almost twenty years of structural adjustment measures, labor market rewards in Egypt have mostly followed a "U-turn path" of decline followed by recovery and return to pre-adjustment levels. Further analysis of returns to education, sector and gender-based wage differentials indicate that the relative rewards of women have significantly improved compared to the situation in 1998. Finally, compared to 1988, the Egyptian labor market seems much less affected by the legacy of the public sector employment guarantee. Thus, although the government sector remains a haven for groups such as women or vocational school graduates, paying them higher wages than elsewhere, the magnitude of those wage gaps have significantly declined compared to the past. Moreover, rewards to the university level of education are now highest in the private sector, and the government sector has a much more decentralized/dispersed wage structure than in the 1980s.