In a nutshell
Active labour market policies, such as public employment schemes, wage subsidies, job search assistance and skills training have been ineffective in improving the quantity or quality of employment for youth in the MENA region.
Improving the business climate for small firms, particularly by reducing the regulatory burdens of operation and formalisation, can help create employment and improve job quality.
Policies that create safe, accessible and acceptable jobs for young women are an important part of ensuring successful employment transitions for youth.
In previous generations, if a young person acquired a secondary or higher education, she or he could almost certainly enter the middle class by means of a formal job, primarily in the public sector. The reality today is that youth with the same level of education face much worse prospects in accessing formal employment than their parents’ generation did.
In addition, socioeconomic status plays an increasing role in obtaining good jobs. Since it is primarily youth with secondary or higher education but from less privileged backgrounds that are expecting formal employment but facing much lower chances of obtaining it, we focus on policies that might help these young people.
Active labour market policies
In theory, active labour market policies can upgrade workers’ skills, promote job creation and assist in matching workers and employers. The reality is that these programmes – which include public employment schemes, wage subsidies, job search assistance and skills training – have been ineffective in improving the quantity or quality of employment for youth in the MENA region. They will not help to improve labour market transitions in Egypt in the absence of a substantial increase in labour demand.
The investment climate for small firms
A key issue limiting the quality and quantity of employment in Egypt is the poor investment climate, particularly for small firms. Out of 189 countries, Egypt ranks 128th in terms of its business environment – below the MENA average as well as below comparable countries such as Jordan, Morocco and Tunisia.
Improving the investment climate for small firms can have a number of benefits. As firms grow, they will not only contribute to job creation, but larger firms are more likely to be part of the formal economy, which could also improve job quality.
How can the investment climate be improved? Easing regulatory burdens can affect firm size and employment creation. Reforms to Egypt’s labour law in 2003, which allowed greater flexibility for firms to issue temporary employment contracts and also allowed employers to lay off workers more easily, contributed to an increase in the formality of employment. Further reforms increasing the flexibility of employment could encourage employment creation and improved job quality.
Small firms must be encouraged to grow and create employment, but also to formalise so as to be able to provide better quality jobs. Under current regulations in Egypt, however, the burdens of formality are enormous. For example, formal employers – together with the workers themselves – must contribute 41% of employees’ basic wage to the social insurance system. Such burdens – as well as taxes that are often arbitrarily assessed and other costly regulatory provisions – make it difficult for small enterprises to formalise and grow.
Safe and accessible working spaces for young women
The group that struggles the most in making the transition to employment in Egypt is young women. Just 18% of young women ages 25-34 work. Women face substantial barriers in finding work, but also in remaining employed, especially after marriage. Once married, women must undertake many hours of domestic work, equivalent to almost a full-time job. Part-time jobs, flexible work options, job-sharing and work-from-home arrangements could substantially increase women’s employment in the private sector.
Conditions of work – especially the risk of sexual harassment and other reputational threats – represent a further barrier to women’s employment. Akin to a ‘reservation wage’ (the minimum wage for which an individual would work), a key concept for women in Egypt is ‘reservation working conditions’ – the minimum working conditions that they or their families deem acceptable for them to accept or stay in a job.
These working conditions primarily relate to social norms as to what is acceptable for women, based on concerns about female sexual (and reputational) safety, concerns that are grounded in problems with maltreatment and harassment. Work that involves manual labour, that is outside a fixed establishment or is in a workplace with few or no other female employees is generally socially unacceptable – which rules out most jobs in Egypt.
The difficulty of finding safe and reliable transport is another barrier to women’s employment. In part because of difficulties with transport, where employment is located matters more for women: they will often work only in the area where they live, and they have lower commuting rates than men. Incentives and regulations to separate workplaces and residences and to locate industries outside of residential areas have increased the difficulties that women face in working.
What can be done to create safe, accessible and acceptable working places for young women? A key element of long-term improvements in working conditions is to provide women with both legal and practical recourse to realise the protections against maltreatment and harassment that are assured to them under existing laws. Encouraging woman-friendly employment opportunities and businesses in residential areas is also important. This may require changing rules and incentives guiding the locations of certain types of businesses.
An additional option is to create women-only spaces in both public transit systems and workplaces. Cairo’s women-only metro cars are one example of addressing the need for transport as well as women’s safety in a problematic environment. The women-only concept could be extended to gender-segregated workplaces, such as women-owned (and operated) enterprises. Women-only workplaces, as well as allowing women to work from home, are increasingly common in Saudi Arabia, for example.
A number of policy levers could potentially facilitate youth entry into employment. Active labour market policies are not likely to create additional employment, substantially upgrade skills or facilitate job matching in the Egyptian context.
A more promising avenue for employment creation is to improve the business climate for small firms, including altering the benefit-cost ratio of formalisation. For young women, creating woman-friendly work places and transport systems, and locating businesses nearer to where women live can promote their transition to employment.
Krafft, Caroline, and Ragui Assaad (2015) ‘Promoting Successful Transitions to Employment for Egyptian Youth’, ERF Policy Perspective No. 15.