After prolonged negotiations, the Egyptian government has drafted a law to diminish dramatically the state’s role in labor affairs. Expected to go before Parliament this spring, it gives both private employers and public-sector managers far greater leeway to hire and fire, and to set wages and benefits for future employees. In an explicit quid pro quo for the “right to fire,” the law also legalizes strikes, which have been banned since 1952. It signifies the government’s formal withdrawal from the Nasserist “moral economy,” in which Egyptians came to expect the state to guarantee job security and a living wage in exchange for their contribution to national production.
Egypt’s Western creditors have been pressing for new labor legislation since the government committed itself to a privatization program in 1991. Law 203 of that year restructured the public sector into holding companies empowered to liquidate or privatize their subsidiaries. But to ameliorate labor opposition, Law 203 stipulated that all subsidiaries must abide by the extant labor laws which effectively prohibited worker dismissals. The government further insisted that the few sales contracts actually negotiated since that time contain “no layoff” clauses. [1] The multilateral advisers to the privatization program argued that these protections for workers discouraged private investment and made the purchase of parastatals less attractive. [2]
Formal discussion of a new law began in October 1991, with a committee consisting of representatives from the Egyptian Trade Union Federation (ETUF), business organizations, the Ministry of Labor, the local legal community and the International Labor Organization. The ILO was asked to ensure that the new law did not contradict Egypt’s international agreements, and provided funding for the endeavor. [3]
The current version is the sixteenth draft prepared by the committee, indicating the intense disagreements which plagued and prolonged its work. While union leaders resisted takeaways, the government sought to contain the right to strike, obviously fearing that legalizing any form of collective protest could have a snowball effect.
Employers’ representatives also opposed lifting the strike ban. Indeed, smaller domestic entrepreneurs have historically evaded the labor laws, and they gain little from the new bill; their management prerogatives are legally (though not actually) increased, but they lose some claim to government assistance in suppressing labor protest. [4] The true beneficiaries are larger local and foreign capitalists whose firms were previously subject to regulation, and new investors purchasing Egypt’s parastatals.
Legalizing Layoffs
The principal takeaway in the new law is the job security enjoyed by the public sector work force. [5] Although all firms must still obtain government approval for mass layoffs, the new law makes such permission more likely, stating that employers have the right to adjust the work force according to economic conditions.
Individual dismissals are facilitated in numerous ways. All workers must still be employed under written contract, which can be of indefinite (“permanent”) or specified duration, but the new law widens the range of infractions for which employers are entitled to break a contract. The old 1981 Labor Law (Number 137) also required that employers consult a tripartite committee representing management, unions and the Ministry of Labor before firing a worker. [6] Although the decisions of this committee were only advisory, dismissed employees could appeal its rulings before turning to the courts, which in tum could require an employer to continue paying the worker until the case was settled. [7] The new legislation — at the insistence of union leaders — makes committee decisions to reinstate workers binding, but it expands the committee to include two judges, which will probably make rulings in favor of workers less frequent. [8] While a worker can still appeal a negative committee decision to the courts, there are no longer provisions for salary payments, making it unlikely that workers will be financially able to appeal dismissals.
While Law 137 specified that a temporary contract, if renewed, acquires indefinite status, the new law permits multiple renewals. This makes it unlikely that temporary workers will ever achieve the security of permanent status, or that new workers will be hired indefinitely. Finally, the law enables employers to effectively force workers to resign by empowering them, “for economic reasons,” to lower wages and/or require employees to perform different jobs. This article, included at the insistence of the business organizations, nullifies the very essence of the work contract concept. Nasserist and leftist delegates to Parliament vowed to challenge it, but the ruling National Democratic Party’s (NDP) crushing majority means their opposition can only be token. [9]
Many private-sector employers have until now evaded the old protections against firing through techniques such as using only temporary contracts and terminating workers briefly before renewing them, or forcing workers to sign blank contracts or undated resignation letters upon hiring. The resulting disparity in job security between the two sectors has been the major reason why qualified workers have preferred public sector employment. [10] The new law, by effectively legalizing such practices in all sectors, clearly aims to eliminate this basis for labor opposition to privatization.
The Future of Unionism
The left kept pressure on the government by publicizing the negotiations even when they were officially “secret,” and distributing detailed critiques of the earlier drafts. Under this spotlight, ETUF leaders insisted that they would oppose any diminution of workers’ established rights. They now claim that Article 2 maintains Law 137’s stipulation that all workers receive a minimum 7 percent annual raise, and that it actually removes a previous cap on the pound value of this increase. Article 4 specifies that workers’ current wages and benefits must not be reduced by the law’s application. Thus, although the law eliminates the rigid job grades and pay scales which used to constrain public sector managers in hiring and promoting workers, only new hires should be affected. Some leftists have charged that this aims at dividing the interests of the current public-sector work force from those of future entrants. [11]
The last-minute inclusion of these two articles confirms that the law’s immediate goal is to facilitate layoffs and dismissals. Greater wage flexibility will be achieved only gradually, as older workers retire and are replaced. Nevertheless, Article 4 is ambiguous and may not provide the full guarantees it seems to promise today’s workers. Moreover, it does not specify which of the many supplements to workers’ basic wages are covered. Attacks on these supplements have prompted many wildcat public sector protests in the last ten years. Nor are pensions and insurance specifically mentioned, and the Egyptian government has already enacted new health insurance legislation which increases workers’ contributions for drugs and empowers the prime minister to decree further increases. [12]
The elimination of fixed pay scales renders the starting wage of future public-sector employees subject to negotiations between union and management, and supplementary wages in both sectors are now explicitly relegated to collective bargaining. The law thus increases the importance of union negotiating skills to workers’ livelihoods, and is likely to spawn further unionization in the private sector, historically neglected by the ETUF. Militant local officials, though, are constrained by the ETUF’s hierarchical structure, which denies them power to negotiate independently — federation officials must approve all contracts. While leftists have been able to capture leading posts at the local level, a combination of indirect elections, overt government intervention and deliberate cooptation have ensured that virtually all federation and confederation officials are loyal to the regime. [13]
Similarly, the new provisions legalizing strikes require the approval of two thirds of a federation’s leadership for walkouts at individual plants. Strikes are still prohibited while contracts are in effect, during mediation and arbitration, and in vital services. Moreover, union leaders are required to give employers and the government 15 days notice, and a justification, before striking. Formal strikes are therefore unlikely; but informal strike activity is apt to increase. In most previous wildcat actions, disenchanted workers, committed to the moral economy, eschewed actual work stoppages in favor of symbolic protest. [14] Most organizers encouraged this approach, but as the government’s intent to withdraw job security has become clear, the idea of striking has gained more acceptance among rank-and-file activists.
A new union law now under consideration would further entrench the current crop of NDP unionists by allowing them to maintain their posts even during retirement. But the hierarchical functioning of the ETUF will inevitably be challenged as the performance of unions at the local level becomes more important to workers’ paychecks. Both the Tagammu‘ and Nasserist parties argue for democratizing the ETUF while maintaining its singularity, but calls for competitive unionism will grow if the confederation’s leadership continues to resist reform.
Author’s Note: I would like to thank Ragui Assaad for his help in interpreting both the new legislation and the old labor law. Any factual errors, as well as the analysis, are my responsibility.
Footnotes
[1] This paragraph corrects erroneous information on Law 203 contained in Joe Stork’s report in the Kafr al-Dawwar strike in Middle East Report 192 (January/February 1995), p. 29.
[2] The perspective of the multilaterals is covered routinely in Middle East Economic Digest (London) and Middle East Economic Survey (Nicosia).
[3] See al-Ahali, December 2, 1992; al-Ahram, March 5, 1993; al-Gumhuriyya, October 21, 1993; and al-Tadamun 1 (December 1993), pp. 14-16. The ILO insisted on the inclusion of the right to strike. Although the organization has historically served as a liberal counterweight to the orthodox multilaterals, some Egyptian leftists claim that it has now allied with them to promote structural adjustment. See Richard B. Freeman, “Labor Market Institutions and Policies: Help or Hindrance to Economic Development?” Proceedings of the World Bank Annual Conference on Development Economics, 1992, pp. 117-144; and Ahmad Nabil al-Hilali, “Hadha al-Mashru‘ Lan Yamurr (This Draft Law Will Not Pass),” Dar al-Khadamat al-Niqabiyya, Helwan, 1994, pp. 10-11.
[4] On employers’ objections to the strike/layoff tradeoff, see al-‘Alam al-Yawm, June 5, 1993.
[5] Article numbers cited here are based on the draft published in al-Ahali, November 30, 1994. A slightly different version was published in al-‘Amal, March 1995.
[6] Public-sector workers have enjoyed the protection of these tripartite committees since 1962.
[7] The courts were empowered to order reinstatement of the worker only if it was established that dismissal was not punishment for trade union organizing; otherwise, they could mandate only financial compensation. The burden of proof that the firing was not union-related fell on the employer; the new law maintains this provision.
[8] Employers complained that the tripartite committees were an obstacle to firing because both government and union representatives usually sided with the worker. In contrast, the courts have upheld dismissals in most cases. See Samih Sa‘id ‘Abboud al-Muhami, “Al-Haraka al-‘Ummaliyya wa al-Nidal al-Qanuni (The Workers’ Movement and the Legal Struggle),” al-Badil 2 (August 1994), p. 20.
[9] Interview with Fathi Mahmoud, general secretary of the Arab Nasserist Party, January 4, 1995. Mahmoud, former president of the federation representing commerce workers, spearheaded labor’s fight against privatization in the 1970s.
[10] See Marsha Pripstein Posusney, “Labor as an Obstacle to Privatization: The Case of Egypt,” in Iliya Harik and Denis Sullivan, eds., Privatization and Liberalization in the Middle East (Bloomington, IN: University of Indiana Press, 1992); and Ragui Assaad, “Structural Adjustment and Labor Market Reform in Egypt” paper presented at the 1993 annual meeting of the Middle East Studies Association, pp. 2, 41-2. Since the late 1950s, public-sector managers have increasingly resorted to temporary hiring to enhance profitability but until the new law takes effect such employees could still aspire to permanent positions.
[11] Mahmoud interview.
[12] Mahmoud interview.
[13] See Marsha Pripstein Posusney, “Workers Against the State: Actors, Issues and Outcomes in Egyptian Labor-State Relations,” Ph.D. dissertation, University of Pennsylvania, 1991.
[14] Marsha Pripstein Posusney, “Irrational Workers: The Moral Economy of Labor Protest in Egypt” World Politics 46, 1 (October 1993).
