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Arab bureaucracies are spending more to get less as they cut hiring

Mancarnival one uber It was never part of Kareem’s plan. His father had a comfortable job at the Egyptian National Bureau of Statistics. His grandfather was also a civil servant, employed during the massive expansion of the public sector during the Gamal Abdel Nasser era. Five years ago, with an accounting degree from Cairo University, Karim started looking for a side job doing calculations for the state.

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He never found it. Public hiring has slowed, especially for graduates. “I could have been a janitor with an accounting degree, but not an accountant,” he quipped. There aren’t many jobs in the private sector either, which has shrunk almost every month since he left college. That leaves gig workers: ride-hailing apps and coffee shifts.

His story is being told in a region once characterized by a large public sector. Many citizens view casual work in the civil service as a birthright. Sluggish state-owned enterprises often lose money, adding even more fat to public wages. Salary expenses take up a large portion of income, leaving little for healthcare, education or capital investment.

This is starting to change. In many Arab countries, the public sector is shrinking as a percentage of total employment. The International Labor Organization estimates that around 20% of Egyptian workers will be employed by the government by 2021, down from 27% a decade ago. The absolute number of civil servants has also declined. Those numbers are still high.inside OECD, the rich-country club, the average share of public employment is 18%. Still, the percentage is falling — not only in Egypt, but also in Jordan, Saudi Arabia and other Arab countries.

Relatively high payrolls still weigh on budgets.this International Monetary Fund Wages were estimated to account for around 20 percent of public spending in rich countries in 2016, compared with 30 percent in poor countries. In most Arab countries, it’s more than 40 percent (see chart).

The public sector should provide good services to citizens. It could also help expand the middle class and reduce income inequality, as it did in mid-century Egypt, or serve as an efficient (if expensive) way to absorb large numbers of unemployed young people. In much of the Arab world, it does none of these things: the state spends a lot of money and gets less and less.

The Saudi civil service has grown steadily for decades, adding about 20,000 citizens a year. Hiring surged during the oil boom of the mid-2000s: From 2005 to 2015, the state hired nearly half a million workers. Then it stopped. Government employment has grown by just 2% since 2016, according to central bank data. As more Saudis work in the private sector, the share of public sector employment falls from around 70% in 2016 to 52% in 2022.

Fewer hiring slows wage growth — but doesn’t cut it. Total wages climbed from 409 billion riyals ($109 billion) in 2016 to an estimated 506 billion riyals last year, a 24 percent increase during a period when cumulative inflation was below 9 percent.Wages budget to absorb 58% of public spending in 2022, unchanged from six years ago.

Wage spending has more than doubled from £199bn in 2014 (then $28bn) to £400bn last year, despite a decline in the number of public employees in Egypt. When Abdel-Fattah al-Sisi came to power after a military coup in 2014, the minimum wage in the public sector was £1,200. He has raised five times. The most recent increase, to 3,500 pounds, took effect April 1.

Honey, I’ve shrunk the status

Mr Sisi’s government finalizes a $3 billion deal International Monetary Fund Loan in December, insisting it has made progress in shrinking the public payroll bill. Officials noted that wages as a share of spending fell from 27 percent in 2014 to 20 percent last year. But these numbers require attention. Egypt was heavily indebted during that time. Annual maintenance costs have increased by 360%.

Strip out interest payments and the budget looks less impressive: wages accounted for 38% of discretionary public spending last year, compared with 40% in 2014. Egypt spends a smaller proportion on welfare and public services today than it did nine years ago. Its citizens complain of the poor state of public schools and hospitals.

Even if the government wanted to fire a lot of bureaucrats, civil service rules would make it difficult. They don’t want to do it – because it’s politically unpopular.Tunisia proposes national recruitment freeze to ensure International Monetary Fund trade. But the public sector nearly doubled in size following the 2010 revolution that toppled the country’s former dictator Zine el-Abidine Ben Ali.

In 2017, when hiring slowed, payroll was 15% gross domestic product. By 2020, it will be 18%. In 2021, cash-strapped countries are starting to delay the wages of many workers.

Civil servants often suffer, even with nominal wage increases. In Egypt, their pay rises have not kept pace with the currency’s depreciation: next month’s new minimum-wage civil servants will take home wages 34% lower than in 2014, in dollar terms. The absolute level of public sector wages in Arab countries is often low, sometimes subsistence.

Government jobs are harder to find and make a living – but the public sector remains an employer of choice. Researchers at the Economic Research Forum 2020 (emergency fund), a think tank calculated Exodus’ “reservation wage,” below which workers would not be accepted for work. The average result for unemployed men in the public sector was 2,500 pounds and in the private sector it was 3,000 pounds. The gap is even wider for women: £1,500 in the public sector and £2,500 in the private sector.

It’s not hard to see why. Many positions still have better job security than the private sector. Or take benefits.this emergency fund It was found that 95% of public sector employees have paid sick leave and 96% have health insurance. In the private sector, these figures were 40% and 36%, respectively.

The government may not be able to cut public wage bills. This is obviously not the right policy either: it requires laying off a lot of people in a lot of bad times. If they were more dynamic, they might keep civil servants away from boring idle jobs. Until then, the Arab bureaucracy will be reminded of an old Jewish joke: “The food here is terrible — and the portions are too small.”

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