Employment Status, Income Equality, and Poverty in Egypt

By Hoda Abd El Hamid Ali

http://econpapers.repec.org/paper/pramprapa/52578.htm

Policy Brief:

The focus of this paper draws on the employment, income equality, and poverty linkages, without a better understanding of such relationship, development strategies aimed at poverty reduction, social justice may be incomplete, as employment is the principal channel through which economic growth reduces poverty. However access to employment is not sufficient to reduce poverty and inequality, the type and quality of work are also important. Many youth , housewives, or retired people are trapped in low-productivity, low or unpaid or other types of work that fall short of their aspirations and that often do not open opportunities to move to more permanent, higher-productivity and better-paid positions.

Therefore, understanding the links between different types of employment status, poverty, and social justice are critical for formulating policy, as many reforms are needed regarding labor regulations to reduce disincentives for hiring and divert job seekers in to the informal sector, where workers do not enjoy the same level of protection as in the formal economy, revisiting public sector hiring practices, active labor market polices needed also to lower unemployment and to promote youth and female employment, and reforming the education system.

This Paper aims first, to analyze and test the factors that influence different practices and participation in the Egyptian labor force, more specifically what determines an individual’s choice to work for paid employment (full or part-time or self employment), or has no paid employment (students of all kinds and levels, household duties, retired or pensioned, unemployed, and others), and to test if the impact of these factors will differ according to gender. Second, linking these employment statuses with poverty and income equality, the paper examines the impact of an individual’s choice of a specific employment status, and his/her perception regarding the importance of having more equal distribution of income on his/her perception regarding the importance of poverty, as the most serious problem in his or her country.

The results underline the importance of analyzing the factors that affect the different employment and unemployment (paid and unpaid employment) practices in the Egyptian labor force and analyzing the linkages between employment, poverty, and income equality, as nowadays the country is struggling and in its ongoing movements towards democracy. Reforming the labor market in Egypt is a major challenge for the country for poverty reduction, creating more social justice and a successful economic transition.

This paper assesses the main micro- determinants of employment status in Egypt, and the joint impact of employment status and income equality on poverty by gender applied on a sample of 3050 individuals obtained from the (2005-2008) wave of the World Values Survey (WVS), the study concludes that there is a discrimination against women’s role in the economy that make them less accessible to better education, health, and technical skills, and in returns to better work.

Women also are more affected by the inequality in distribution of income which makes them also more affected by the poverty problem in Egypt. Supporting the poor especially women, who are often poor, less accessible to better employment with specialized programs and other sorts of assistance seems highly justified. Social security should be reformed to cover all women, reforms are also needed for pensions, and unemployment insurance which was almost non-existent before 2010, to cover all retired, old age, care –giving, and unemployed individuals.

The study also finds that employment status has weak and insignificant impact on poverty; such findings are resulted from the weak relationship between employment and growth. What is needed above all is an employment policy that puts the emphasis on strengthening the growth-employment linkages through promoting highly quality jobs and the notion of decent jobs in particular for the poor. The study also concludes that there is a positive and strong relationship between females’ perceptions regarding the importance of having more equal distribution of income and their perceptions regarding the importance of the poverty problem in the Egyptian economy.