Public Sector Employment as a Social Welfare Policy: The “Social Contract†and Failed Job Creation for Youth in Egypt

Although the IMF and the World Bank have advocated public sector reforms for market-oriented economic development, Egyptian authoritarian leaders have avoided such reforms. Egypt maintains a large public sector with a significant number of young Egyptians among its ranks. However, the public sector has shortcomings such as overstaffed government departments, deteriorating working conditions, and employee protests. This study uses the “social contract†concept to understand why Egypt’s political leaders have preserved this inefficient institution. The logic of the “social contract†works under two conditions: generous welfare as the main source of the regime’s legitimacy and a lack of accurate information concerning the extent to which people can tolerate painful reforms under authoritarian rule. Contrary to the conventional understanding, a lack of democratic institutions imposes “shackles†upon authoritarian leaders rather than giving them wide discretion regarding policymaking and the manipulation of institutions for their survival. The findings thus offer important insights into the dynamics of authoritarianism.