Experts say expected wage increase may not be enough

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CAIRO: The cost of pushing up the 15 percent wage increase in the basic salary of public sector employees by three months is estimated at LE 730 million and the funds are already available, said Finance Minister Samir Radwan on Monday.

Raises originally scheduled for July are due to be applied starting April, first announced by a decree from the Supreme Council of the Armed Forces on Feb. 17.

Raises will neither be subject to tax deductions nor to a ceiling or floor, according to a note from investment bank Beltone Financial.

Beltone Financial said as the salary increase was expected, it will not have a significant effect on the budget.

“As we indicated in previous research, as this salary increase represents an early payment of the end of year bonus to public sector employees (which had in the past ranged between 10-20 percent on an annual basis and was paid by the end of the fiscal year, June 30th), it is neither an additional nor unaccounted for fiscal outlay,” said Beltone.

“We had expected that it would not have a significant impact on the overall level of expenditure in the current fiscal year. The cost estimated by the [finance ministry] represents less than 0.3 percent of total budgeted spending for fiscal year 2010/11,” Beltone added.

Egypt’s new Prime Minister Essam Sharaf said on Monday, "Our priorities are to regain security and stability as fast as possible and to get the wheel of production rolling again," Reuters reported.

"We confirm that Egypt’s economy is a free economy but within the framework of social justice," Sharaf added. "The economy will come back stronger than it was before."

Doha Abdelhamid, a professor of finance at the Canadian International University, has done extensive research on civil service wage reform and previously worked in the Ministry of Finance and the Central Agency for Organization and Administration.

Abdelhamid told Daily News Egypt in order to build a framework of social justice which the constitution allows the first thing the government must do is redesign the salary structure. She said the 15 percent increase is not enough and may not quell people’s concerns.

“The 15 percent will not be sufficient to ensure a respectable living to government employees, as food prices of basic goods and foodstuffs are rising, negating the effect of the increase,” she said.

Jennifer Bremer, chair of the public policy and administration department at the American University in Cairo, said, “The government is probably mistaken that a 15 percent raise will calm down government workers. If Mubarak’s 30 percent raise didn’t work, why would 15 percent? It won’t cool them down, but it will heat up inflation, unfortunately.”

Abdelhamid called on government to take clear actions, explaining that although the government had promised to grant permanent contracts to temporary workers, she has received calls from government workers who are still under temporary contracts until this day.

According to Bloomberg, Radwan had given permanent contracts to as many as 600,000 government employees as one of his first decisions when he took office.

“We would like to see evidence of reform and enough lip service by the government,” she said, explaining that even though many think that the current government is “transitional” and therefore it has no power to make decisive decisions, that is not true.

Abdelhamid explained that the Armed Forces has the same power as the former president to pass decrees to make important decisions. Any statement made by the higher council is considered as the law.

She called on the council to take immediate action with a decree that the government immediately take first steps in civil service wage reform pointing out that extensive research has already been done by various governmental and international agencies on how to start the reforms.



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