Maximum and minimum wage law lacks details, faces obstacles in implementation

Maximum and minimum wage law lacks details, faces obstacles in implementation

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Mon, 25/02/2013 - 12:33

Early this month, two Nour Party members of the upper house of parliament, the Shura Council, presented a bill that would create minimum and maximum wages in Egypt. The draft law is the latest in a series of attempts in recent years to raise the income of the nation’s lowest earners.

The draft law sets the national minimum wage at LE1200 per month for workers in both the public and private sectors. The maximum wage is calculated by multiplying the minimum wage by a factor of 35, bringing it to LE42,000.

The bill requires that whoever earns above the maximum wage reimburses the excess amount, to be returned to the state treasury.

This month’s bill not the first time that a maximum and minimum wage bill has been discussed in recent years; it is the third attempt to set national wage laws in as many years.  

In April 2012, the now-dissolved People’s Assembly approved a draft law setting Egypt's maximum monthly wage at LE50,000. Samir Radwan, finance minister at the time, said that the new monthly minimum wage would increase to LE700, up from the official minimum wage of less than LE100. He said the wage would increase to LE1200 over the next five years. 

Labor activists scoffed at the law at the time, in particular the slow gradual raising of the minimum wage. They also said it was dangerously vague: the law did not specify whether it would apply to the public or private sectors, or both.

Before that, in 2011, the Supreme Council of Armed Forces, the ruling body of the country at the time, also issued a decree, which was presumed to come into effect by January 2012, also setting the maximum wage at LE50,000.

“Whoever submits this bill, whether it is the Wasat Party, the Freedom and Justice Party or Nour Party, lacks the scientific basics and the objectivity to create something effective,” Abdel Khalek Farouk, an expert on economic affairs and public administration, says.

Farouk says that the bill fails to specify the wage and number of workers allocated to each grade in the public sector.

Those who submitted the most recent bill do not, he says, have even the most rudimentary knowledge of public finance, and do not know how to establish an official wage policy or go about setting a practical minimum/maximum wages system.

Farouk also believes that the bill is not viable because it fails to explain or plan how the suggested minimum/maximum wages scheme will be financed amid the government's budget deficit crisis.

If the bill is approved it will then be passed on to the Ministry of Finance where, Farouk predicts, it is likely that the same bureaucracy that stalled the laws of the previous two years will also thwart the implementation of this one.

Some experts speculate that the bill’s timing, amid the current atmosphere of polarization and division in Egyptian politics, seems timed to cultivate mass appeal and approval in the run-up to the parliamentary elections period.  

“The attempt to submit the draft law now is to try to win over public opinion,” Farouk says. “It is just politics, with no real commitment to the public interest or the notion of social justice.”

A third reason that the bill is not feasible, some experts believe, is that it specifies a number of exemptions with regard to the maximum wage. It grants, for instance, an exception to all ministers and the Cabinet, which some fear may open a door to financial and administrative corruption in the government.

“Any minister can submit his own list of positions and personnel they want to have excluded from the maximum wage cap,” Farouk says. “Social justice never be established this way.”

Maximum and minimum wages are means by which wealth can be redistributed within society, though some economists have criticized their distortion of the labor market’s natural functioning. Theoretically speaking, maximum wage is a lawful limit on how much earnings an individual can make. It is implemented less frequently than its mirror law, the minimum wage, which has become a legislative tool worldwide to help limit poverty.

The wage laws have also run into serious opposition from within the Egyptian government, making the possibility of implementation and enforcement even more difficult.

Some opponents to the most recent laws say they fear that wage caps would lead qualified workers to leave the public sector, thereby lowering its performance and capabilities compared to the private sector.

In February 2012, Farouk al-Oqda, governor at the time of the Central Bank of Egypt, openly stated his refusal to apply a ceiling wage in Egypt's banking sector.