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Unemployment has been an important challenge facing Egypt for more than two decades and remains so. Official statistics indicate that out of a labor force of 27 million people, around 3.5 million are unemployed. In addition, the unemployment rate reached 13 percent by the end of 2012, 4 percentage points higher than the pre-January 25, 2011 rate of about 9 percent in 2010 (CBE 2013). The unemployment problem is both supply and demand driven; no employment policy has yet been able to deal with unemployment in a comprehensive and efficient manner.

Several reasons may underlie the persistence of high rates of unemployment.  Economic growth has not been driven by the broad development of employment generating small and medium enterprises (SME), but rather by capital and technology intensive and resource based industries. Furthermore, the private sector has played  a modest role in creating jobs. In addition, high population[1] growth rates have surpassed the economy's ability to create jobs, and the educational system has failed to match labor market requirements.[2] Population growth has been decreasing since 1980–85, when it was 2.39 percent, leveling at 1.78 percent during 2005–10. In parallel, the working-age group (15–64) has been growing since 1980, from 54.1 percent to 63.4 in the respective periods.[3]

Unemployment is mainly concentrated among youth; for those aged 15–29, unemployment has been in the range of 84 percent over the 1990s and into the 2000s. The median age has increased in Egypt from 20.4 in 1950 to 25.2 in 2013 (UN Economic and Social Affairs Division 2013). According to the 2005 Labor Force Sample Survey compiled by the Central Agency for Public Mobilization and Statistics (CAPMAS), 92 percent of the unemployed were under age 30. Moreover, unemployment is concentrated among graduates of intermediate education, and to a lesser extent, university graduates, who represent 55 percent of total unemployment. Unemployment is related more to first-time job seekers. In addition, unemployment is more acute in rural than in urban areas. Finally, unemployment among females is double the national average and quadruple that of males (Assaad 2007).

Job Creation and Informal Employment

According to the latest estimates, more than 620,000 jobs need to be created annually to absorb new entrants into the labor market. The government has undertaken a number of initiatives to respond to this challenge, but so far such initiatives have met with little success. Among such initiatives have been public sector and central government employment, which had to be abandoned after the adoption of the Economic Reform and Structural Adjustment Programme (ESRAP) in the early 1990s (El-Megharbel 2007).

Due to the private sector's inability to take the lead and several complexities associated with labor market regulations, informalization of the labor market increased in an unprecedented manner. For example, by the mid-2000s, 61 percent of all employment was informal—up from 57 percent in 1998—and 75 percent of new entrants who entered the labor market in early 2002 were entering into informal work (Assaad 2007).

Authorities have also adopted a National Employment Program and a National Action Plan on Youth, both of which aim at creating policies to enhance employment and decrease unemployment rates, especially among youth (Handoussa 2010; Radwan 2009).

References

• Assaad, Ragui. 2007. “Labor Supply, Employment and Unemployment in the Egyptian Economy, 1988–2006.” ERF Working Paper No. 0701, Economic Research Forum, Cairo. http://www.erf.org.eg/CMS/uploads/pdf/1194100952_Assaad.pdf.
• CBE (Central Bank of Egypt). 2013. "Monthly Statistical Bulletin." Central Bank of Egypt Publications, Cairo, July. http://www.cbe.org.eg/English/Economic+Research/Publications/Monthly+Statistical+Bulletin/July+2013+Statistical+Bulletin.htm.
• El-Megharbel, Nihal. 2007. “The Impact of Recent Macro and Labor Market Policies on Job Creation in Egypt.” ECES Working Paper No. 123, Egyptian Center for Economic Studies, Cairo. http://www.eces.org.eg/Uploaded_Files/%7BDF772483-1D99-4231-90E7-42A78900764B%7D_ECESWP123e.pdf.
• Galal, Ahmed. 2002. “The Paradox of Education and Unemployment in Egypt.” ECES Working Paper No. 67, Egyptian Center for Economic Studies, Cairo. http://www.eces.org.eg/Uploaded_Files/%7BB6065D33-E098-455B-8287-17E03C608A79%7D_ECESWP67.pdf.
• Handoussa, Heba. 2010. “Situation Analysis: Key Development Challenges Facing Egypt.” Situation Analysis Task Force led by Prof. Heba Handoussa, UNDP, Cairo. http://www.undp.org.eg/Portals/0/Homepage%20Art/2010_Sit%20Analysis_KDCFE_English.pdf.
• Hassan, Mohamed, and Cyrus Sassanpour. 2008. “Labor Market Pressures in Egypt: Why Is the Unemployment Rate Stubbornly High?” Paper presented at the conference, The Unemployment Crisis in the Arab Countries, Cairo, March 17–18. http://www.ilo.org/dyn/travail/docs/437/Hassan%20and%20Sassanpour%202008%20'Labor%20Market%20Pressures%20in%20Egypt'%20API.pdf.
• Nassar, Heba. 2009. Presentation at Trade-Related American Center at American Chamber of Commerce (TRAC) conference on Human Resources in Egypt: Maximizing our Best Asset, Cairo, January 27.
• Radwan, Samir. 2009. “The Financial and Economic Global Crisis: Impact on the Egyptian Economy and Its Labor Market.” Paper presented at the Federation of Egyptian Industries, Cairo, April 28.
• UN Economic and Social Affairs Division. 2013. World Population Prospects: The 2012 Revision. New York: United Nations. http://esa.un.org/unpd/wpp/Documentation/pdf/WPP2012_%20KEY%20FINDINGS.pdf.