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An income spent on daily subsistence Wage earners are picking up the tab of Egypt’s economic ‘reform’ program

Mai Abdel Ghany and Karima Hussein, both in their 20s, are trying to make their way in the labor market against all odds, but both find that the wages they earn are mostly spent on essential daily expenses.

After the government hiked metro prices in May this year, Hussein, who has an administrative job in downtown Cairo, posted an estimate on her personal Facebook account of how much her daily commute would now cost her. The cost of her metro fare alone increased to around LE1,000 a month. The hike in the cost of fuel that followed, which also raised microbus fares, came as an additional shock to her. A year earlier, Hussein wrote on Facebook about how hard it had been for her to find a job that paid her a monthly salary of approximately LE1,500. If her current salary were similar, the cost of transportation would render her work untenable.

Journalist Abdel Ghany struggled to find a Cairo-based job that would pay her enough to visit her family, who live outside the city, on top of the expense of her daily commute. Life is often additionally tough for young people who don’t reside in their hometowns and cannot live at home or receive financial help from their families. On June 18, Abdel Ghany wrote that her monthly food budget had jumped from LE400 to around LE700 after the flotation of the pound in November 2016, her transportation costs were around LE500, with an additional LE200 for work-related journeys, and that her trips to visit family were around LE250 a month. Monthly expenses for young professionals like Abdel Ghany are often as much as LE4,000, leading her, like Hussein, to question the utility of working in the current climate.

The stories of these two women are not in line with the ways in which Egyptian politicians and those who manage international funds describe Egypt’s plan to restructure subsidies. Both the government and the International Monetary Fund — from whom Egypt took a US$12 billion loan contingent upon the implementation of a structural adjustment program — have justified the hikes in fuel and transportation costs by explaining that subsidies are to be retargeted at those who are most eligible to receive them. It’s common to hear people complain about how foreign ambassadors and the wealthy use subsidized gasoline to fuel their large, luxurious cars. While this is not untrue, the majority of those in the middle and lower classes in Egypt also rely on means of transportation that use subsidized fuel, and therefore are also impacted by the reduction or removal of subsidies. Furthermore, the percentage increase for essential fuels that are used to power means of transportation that commonly serve members of the lower classes was much steeper than the percentage increase in higher-octane gasoline that is used to power luxury cars.

Since the program to restructure fuel subsidies was launched in 2014, diesel — which powers microbuses, a vital means of transportation for members of the lower and middle classes in areas that are often not covered by the public transportation system — saw price hikes of approximately 400 percent. On the other hand, the price increases for 95-octane gasoline — which powers cars used by wealthier sections of the population — have been around 180 percent since 2012.

In 2013, then-Planning Minister Ashraf al-Araby claimed only the early stages of the economic program would involve price increases across all fuel categories. The aim, he said, was to send a message to all social classes: The government is serious about “reform.” Later stages of the program were to involve subsidy cuts for the wealthier classes only, Araby said, and fuel would continue to be subsidized for those who need it through the use of smart cards that consumers would present at gas stations.

In a somewhat sudden turn of events, however, current Petroleum Minister Tarek al-Molla cancelled smart cards in mid-June of this year. Molla criticized the notion of selling fuel at two different rates, and asserted that the government is working to do away with gasoline subsidies altogether.

A more targeted philosophy of means-tested assistance, as applied in the government’s Takaful and Karama financial aid programs, was supposed to replace a previous subsidy system that was heavily criticized for benefitting all classes — rich and poor. Announcing the lifting of subsidies across the board completely undermines this notion.

The state tried to mitigate the impact of the steep rise in energy prices by increasing food subsidies and implementing limited tax breaks and pay increases. The latter, however, have generally only applied to some permanently salaried employees, not large sections of the private or informal sectors without formal contracts (who make up at least half of the working population).

A 2014 World Bank report indicates that Hussein and Abdel Ghany’s arduous search for employment to cover their daily expenses is not a unique experience. Approximately a quarter of the working population in Egypt, according to the report, has to commute a fair distance to their place of employment, with 13.8 percent crossing into a different governorate and 26.4 percent across regions, particularly those in rural areas. This is not surprising, as workers often travel to metropolitan centers in search of better opportunities and higher wages.

It would be unrealistic, for example, to expect Abdel Ghany to remain in her hometown of Mansoura while writing for a major newspaper that is based in Cairo. The same is true of many other vocations, due to the centralization of development in Egypt. This puts people in a difficult position: they either drain themselves through daily commutes to the city and spend a large portion of their incomes in doing so, or accept lower-paying jobs closer to home.

Hussein, who is based in Cairo, resides in Helwan, a neighborhood at the end of the metro line, where housing is more affordable than in the heart of the capital. She has a long commute to her place of work in downtown Cairo. Under the new metro fare scheme, the more stations she crosses, the more costly the ride becomes. This increase, therefore, seems to have a greater impact on people from lower income brackets who live on the outskirts of the capital.

For those who work long hours in the city, often away from family, fast food has become essential, with home cooked meals a luxury for those with more time. After the devaluation of the pound, many fast food chains increased their prices by around 30 percent, prices which had already risen following the implementation of a value-added tax in September 2016, making things even harder.

Statistics published by the state’s Central Agency for Public Mobilization and Statistics (CAPMAS) may suggest that those who can afford it are not working, instead increasingly relying on family for support. CAPMAS’ most recent quarterly report on the Egyptian labor force shows that  25.5 percent of those with university educations are unemployed, whereas only 1.2 percent of those who are illiterate are unemployed.

Some people argue the subsidy cuts and price hikes were inevitable, or even essential, as the state doesn’t have the resources that it did in previous decades. This argument is somewhat valid, as the government it struggling to service its debts. However, the state has come to view public energy providers as commercial companies. Even those that receive state subsidies are reporting losses and raising prices. But, should fuel, water and electricity be traded as commercial goods, or even luxury items that only those who can afford to can have?

Additionally, taxation in Egypt is not targeted at those earning more, though there are ways of implementing smarter taxation systems. The government’s rhetoric on taxation, as with subsidy cuts, continues to be that the economic measures being implemented are inevitable, and that all Egyptians must sacrifice for the good of the country. But what does this mean for those who want to work, like Abdel Ghani and Hussein, but for whom the cost of doing so in the current economic climate is making their efforts seem somewhat redundant?