Labor Supply, Employment and Unemployment in the Egyptian Economy, 1988-2006

This paper analyzes data from the Egypt Labor Market Panel Survey of 2006 (ELMPS 06) and its predecessor surveys from 1988 and 1998 to reveal that the employment outlook in Egypt has broadly improved since 1998. Despite continued rapid growth of the working age population since 1998, overall participation rates have increased, unemployment rates have decreased, and employment growth has been robust. In many instances, the levels of these variables have returned to or exceeded their levels in 1988, prior to the initiation of the 1991 stabilization and structural adjustment programs. The performance of the labor market in Egypt in the past eight years has been helped by favorable demographic as well as economic developments. The generation at the peak of the youth bulge, which was putting severe pressures on the labor market in the 1990s, has now completed its labor market transition, for the most part, and demographic pressures are easing. These demographic developments have been accompanied by important changes in the structure of the economy. While employment in state-owned enterprises (SOEs) had begun to decline in the 1988-98 decade, employment in government was still growing rapidly during that period at about twice the rate of growth of overall employment. This has clearly changed in the 1998-06. Employment growth in the civil service has slowed dramatically and much of the burden of employment creation has shifted to the private sector. Concurrent with the decline of employment opportunities in the public sector, the trend toward informalization of the labor market, begun in the 1990s, is continuing unabated. By 2006, 61 percent of all employment was informal, up from 57 percent in 1998. Moreover, 75 percent of new entrants who entered the labor market in the first five years of this decade were entering into informal work.