Egypt’s Economic Prosperity: A Prospect for Hope or Potential for Shattered Dreams?

Navtej Dhillon
Navtej Dhillon Former Brookings Expert

January 8, 2008

Egypt is on the move: over 1998-2006, the country slashed its unemployment rate from 11.7% to 8.3%. The drop itself is remarkable but what is even more impressive is that the decline has come about during a period of increasing labor force participation. However, the question our experts have been asking is whether the benefits of job acceleration will alter the economic prospects for the country’s youth, who account for more than 80% of the unemployed?

In order to determine how young people might gain from the recent economic revival, let’s look at the main drivers behind the drop in unemployment. In a recent presentation at the World Bank, Ragui Assaad, Director of Population Council Middle East, cited four explanations. First demographic pressures are easing on the labor market as the youth bulge moves along the age trajectory. Second, with fewer public sectors jobs available, there is a gradual shift in expectations where fewer youth are queuing up for government employment. Third, with the rapid growth of the private sector, especially in urban areas, there are greater opportunities for private sector work. Fourth, the agriculture sector is absorbing surplus labor, with many young workers either remaining in rural areas and some even returning back to their farms.

For youth, the economic revival appears to be creating new insiders and outsiders. The good news is that for youth at every education level, unemployment has dropped. The only exception is university graduates. Youth with intermediary levels of education, who in the past were most afflicted by unemployment, have improved their ranks, making university graduates the most excluded group from the labor market. However, youth who are now enjoying the fruits of being inside the labor market are finding themselves facing another trap: low productivity work. Though the private sector is expanding thanks to bold reforms like the 2003 labor law which allows firms to hire directly, majority of the job creation remains informal in nature.

Economic revival seems to be having a marginal affect on the employment prospects of young women: their education attainment is increasing but their participation in the labor force is declining. Rural youth – who once depended on migrating to urban and peri-urban areas are also facing a blocked pathway. Despite gains in education attainments, they are migrating to urban areas in fewer numbers. According to Ragui Assaad, the rise in housing prices might be one explanation.

In the coming weeks, we will be digging deeper into why Egypt’s economic turnaround is not fully benefiting the youth.

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