Friday,26 April, 2019
Current issue | Issue 1229, (15 -21 January 2015)
Friday,26 April, 2019
Issue 1229, (15 -21 January 2015)

Ahram Weekly

Commentary: The reality of unemployment

There is no single solution to Egypt’s unemployment problems, but we can capitalise on each region’s special strengths, writes Iman Al-Ayouty

Al-Ahram Weekly

Egypt’s double-digit unemployment is distressing not only because almost 13 per cent of the labour force are unemployed, but also because the rate of unemployment among young people aged 15 to 29 is double that figure.

Other distress symptoms are the fact that 23 per cent of women in the labour force are unemployed, as are nine per cent of men, and that an overwhelming 80 per cent of the unemployed are the holders of either university or intermediate degrees, either secondary general, or secondary technical or vocational.

Whether from the age, gender or educational perspective, the picture is grimmer still in some of Egypt’s governorates. Geographical disparities mean that unemployment is far from being a generic problem, but is rather a problem that is specific to each region. Thus, in order to address its specific labour issues, we need to build on each region’s innate strengths, namely, its physical and human capital.

Egypt’s labour force is heavily concentrated in Greater Cairo (Cairo, Giza and Kalyoubia) and Alexandria, which together account for 29 per cent of the labour force. The Delta governorates of Behera, Sharkiyya, Gharbiyya, Dakahliyya and Menoufiyya represent 32 per cent of the labour force, while the Upper Egyptian governorates of Sohag, Minya, Asyout and Fayoum represent 19 per cent. These 13 governorates are the focus of Egypt’s unemployment problem.

Governorates vary in their problems, with Cairo’s unemployment among men and university degree holders exceeding the national averages. Alexandria has a similar predicament but has higher rates of female unemployment. Delta region problems (Behera, Sharkiyya and Gharbiyya) range from youth to male, female, as well as high unemployment among university and intermediate degree holders. Similar rates are reported from Upper Egypt, Sohag, Minya, Asyout and Fayoum.

Upper Egypt’s dilemma is further compounded by high rates of poverty. Egypt’s Household Income, Expenditure and Consumption Survey (HIECS) for 2010-2011 shows that 69 and 59 per cent of the respective populations of Sohag and Asyout are living below the national poverty line, dropping to 60 and 55 per cent, respectively, in the HIECS for 2012-2013, which is lower but still painfully high.

Understandably, one thinks of two “whats” in this regard: what factors may have contributed to these governorates’ inability to generate sufficient employment; and what can be done to solve their unemployment problems?

In taking up these questions one is tempted to estimate the overall capital intensity of each governorate’s leading activities, namely agriculture, industry and services, in order to find out whether capital intensity may be behind the low rates of job creation.

An in-depth analysis based on data for Egypt’s industry shows that the industry of all 13 governorates, except Dakhaliyya and Fayoum, which are dominated by mining activity (hence, capital intensive by definition), is dominated by manufacturing. However, capital- and energy-intensive industries heavily tip the manufacturing scale.

This structure has been fuelled by a long legacy of public and private investment in capital-intensive industries (on average, 72 per cent of total manufacturing investment over the period 1982 to 2012 went to capital-intensive industries), not to mention Egypt’s history of energy subsidies, which account for 20 per cent of government expenditure and six per cent of GDP.

The inability of the governorates, especially those in Upper Egypt, to attract investment and generate employment is part of an imbalanced pattern of investment in infrastructure. For perspective, Egypt’s 2013-2014 Plan for Economic and Social Development allocates to Upper Egypt only eight and 17 per cent of investment to transportation and storage, and electricity and other public utilities, respectively. The region’s capacity to attract investment, and generate employment must be backed up by adequate infrastructure.

There is also the often harped-upon issue of the supply-demand skill mismatch. Analysis reveals that governorate-level employment in agriculture correlates with the share of holders of agricultural technical and vocational training. No such correlation, however, has been established for industry and services.

The governorates’ skill needs (dictated by their leading activities) must be tuned to their specific technical/vocational output. This must come about as part of Egypt’s efforts at fiscal and administrative decentralisation. Only when the governorates are knowledgeable about the shortfalls in their human capital can they plan to develop specific agricultural, industrial or commercial vocational skills tuned to their needs.

It remains to ask which industrial activities may be expanded, and which mining-quarrying potentials may be built upon, in order to absorb specific categories of the unemployed in the governorates of interest. Again, a close examination of existing manufacturing and mining bases may lead to identifying good candidates in each governorate.

For instance, part of Cairo’s unemployment problem pertaining to males and university degree holders could be mitigated through the expansion of industries connected to pharmaceuticals, food products, beverages and leather.

In Minya, there is much potential yet to be tapped in limestone, basalt and ornamental stone, all with positive implications for employing those holding vocational degrees. These are but two examples. A close examination of each governorate’s potential is a must.

We all recognise that there is no panacea to the problem of unemployment. But there are efforts that can be made to help the governorates develop from the bottom-up, recognising their limitations and building on their strengths.

The writer is senior economist with the Egyptian Centre for Economic Studies.

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