Chapter one Unemployment

SUEZ CANAL UNIVERSITY – FACULTY OF COMMERCE

ENGLISH SECTION Ismailia 41112
Year Four Egypt
Spring 2011 http://scuegypt.edu.eg/
Tel: +2 (064) 3231636
Fax: +2 (064) 3220496

Solving the Unemployment Problem in Egypt

Thanks go to the winner team:

Ahmed abdelazim ahmed
Enas elsayed
Engy hesham
Eslam nasr
Heba abdelsattar
Mariam ahmed elsakka
Mohamed atta'alla elfeky
Nada tarek
Sherif abdelhamid abdelsalam
Sherif ahmed hussein
Zeinab mohamed nagib

Supervised by
Dr.Mostafa AboElsoud
Lecturer
Economics Department

Page 1 of 11
Chapter one Unemployment

1-Introduction
Everyday millions of women give birth to children all over the
world, and not much time passes before they start the learning process, go
to school, get a degree and then apply for a college spends 4, 5 or even 6
years of his life studying, and after he graduates, he might get lucky and
find a job consistent with his education and social status as a college
graduate, or he might as most of his peers doesn't have that privilege.
The problem of unemployment is a worldwide problem that
represents a major challenge for every country in the world, it is a
problem that could be reduced in some places but never ever was fully
solved, academics and economists always mentioning it and trying to
come up with a solution or a policy to get rid of, it is just never enough.
In Egypt we have been facing this problem for a long time now
there is always more labor force than the existing places can handle, in
2009 the unemployment rate reached 9.4%, but who should take the
responsibility for this, the government ?, policy makers?, the people? .
This paper will be addressing few questions about unemployment,
what is unemployment, how to define it, what are its types, and how they
differ from each other, what are the causes of unemployment?, and why
does it keep increasing?, and finally what can be done to solve it, some
suggestions proposed hypothetically, some were implemented and
succeeded.
2-Unemployment Rate Definition
The labor force is defined as the number of people employed plus
the number unemployed but seeking work.
The participation rate is the number of people in the labor force
divided by the size of the adult civilian no institutional population (or by
the population of working age that is not institutionalized).
The non-labor force includes those who are not looking for work,
those who are institutionalized such as in prisons or psychiatric wards,
stay-at home spouses, kids, and those serving in the military.
The employment rate is as defined the number of people currently
employed divided by the adult population (or by the population of
Page 2 of 11
Chapter one Unemployment

working age). In these statistics, self-employed people are counted as

employed.
The unemployment level is defined as the labor force minus the
number of people currently employed. The unemployment rate is defined
as the level of unemployment divided by the labor force.

(Unemployment Rate)

Variables like employment level, unemployment level, labor force,

and unfilled vacancies are called stock variables because they measure a
quantity at a point in time. They can be contrasted with flow variables
which measure a quantity over duration of time.
Changes in the labor force are due to flow variables such as natural
population growth, net immigration, new entrants, and retirements from
the labor force.
Changes in unemployment depend on: inflows made up of non-
employed people starting to look for jobs and of employed people who
lose their jobs and look for new ones; and outflows of people who find
new employment and of people who stop looking for employment.
3-Types of unemployment
Frictional unemployment:
This reflects the fact that it takes time for people to find and settle
into new jobs. If 12 individuals each take one month before they start a
new job, the aggregate unemployment statistics will record this as a
single unemployed worker. Technological change often reduces frictional
unemployment, for example: the internet made job searches cheaper and
more comprehensive.
Structural unemployment:
This reflects a mismatch between the skills and other attributes of
the labor force and those demanded by employers. If 4 workers each take
six months off to re-train before they start a new job, the aggregate
unemployment statistics will record this as two unemployed workers.
Technological change often increases structural unemployment, for
example: technological change might require workers to re-train.

Page 3 of 11
Chapter one Unemployment

Natural rate of unemployment:

This is the summation of frictional and structural unemployment. It
is the lowest rate of unemployment that a stable economy can expect to
achieve, seeing as some frictional and structural unemployment is
inevitable. Economists do not agree on the natural rate, with estimates
ranging from 1% to 5%, or on its meaning — some associate it with
"non-accelerating inflation". The estimated rate varies from country to
country and from time to time.
Cyclical Unemployment:
Occurs when there is not enough aggregate demand in the
economy to provide jobs for everyone who wants to work according to
the economic status. Business cycles in the integrated economic activity;
when there is a decline in the demand for transit of goods, forced factory
owners to reduce the number of workers or reduce their working hours
Seasonal Unemployment:
Occurs when same workers becomes periodically unemployed
according to those activates seasons.
4-Causes of unemployment
In the set-up of modern market economy, there are many factors,
which contribute to unemployment, they are varied and it may be due to
the following factors:
Overpopulation
Misdistribution of population: Cairo, Giza and Alexandria have
about 18.6% of the total population. High birth rates: the birth rate in
Egypt is 24.63 births/1000 populations in 2011.
Poor education and training system. According to the Human
Development Index (HDI), Egypt is ranked 123 in the HDI and 7 in the
lowest 10 HDI countries in the Middle East and Northern Africa, in 2009.
According to the CIA Fact book, Education expenditures represent only
3.8% of the GDP in 2008.

Page 4 of 11
Chapter one Unemployment

Deflation polices
When the government investing in only few sectors of the
economy instead of all the sectors.
Governmental corruption
According to Worldwide Corruption Perceptions ranking of
countries published by Transparency International, Egypt is ranked 98 of
178.
Lack of local funding (Investment and savings)
According CIA Fact book, the investment in Egypt is only 18.40%
of the GDP in 2010. It’s ranted 108 of 151.
Rapid technological changes
It leads to a huge gap between the needed skills and workers skills
in the labor market.
Privatization
The changes in the economic structure from public to private
without an intensive study lead to Demobilization of a large number of
workers.
5-Unemployment in Egypt
While Egypt had set up the objective of attaining full employment,
this objective remained far from fulfillment at the turn of the new
century. The problem of unemployment worsened further and in now one
of the major causes of concern. One of the major factors of the
unemployment problem is that the labor force has grown at faster rate
than the demand for labor and this trend is likely to continue in the
coming years too.
Today, the questions are: what has gone wrong and why; and how
do we get out of this situation?

Page 5 of 11
Chapter one Unemployment

Here are some key statistics about the Egyptian economy in 2010:
GDP: L.E.498.1 billion
GDP Growth: 5.259%
GDP Per Capita: L.E. 6,367.43
Population: 78.238 million
Population Growth: 2%
Unemployment Rate: 9.7%
Inflation Rate: 11.703%
Current Account Balance: L.E.4.318 million
Gross Government Debt (% of GDP): 74.216%

A labor force of 26 million, with 32% working in agriculture, 17%

in industry, and 51% in the service sector. More than 20 million Internet
users, ranking the country 21st in the world, and 55 million cell phone
users, which is 19th in the world.
In Egypt, unemployment has also been the result of
underperformance of labor markets, the labor force has grown at faster
rate than the demand for labor and this trend is likely to continue in the
coming years too, Job opportunities have grown at slower rate in Egypt
compared to the growth rate of population. Moreover in rural Egypt, there
are some areas with excess labor force while some regions have a scarcity
of labor.
The IMF estimates Egypt's unemployment rate at 9.7% in 2010. Prior
to the crisis, unemployment figures were expected to decrease to 9% in
2011 and 8.2% by 2015.
Unemployment has had severe effects on the Egyptian economy. It
has also had negative mental and physical impacts on the Egyptian
society. Unemployment forces people to live their lives in a way they do
not wish to – The life expectancy is negatively affected. Unemployment
affects not just the person himself but also his/her family and in the long
run the society where he lives, and here are the main aspects:

Page 6 of 11
Chapter one Unemployment

Mental health
Health diseases
Tension at home
Political issues
Tension over taxes rise
Insecurity amongst employees
Crime and violence
Suicide cases
Social outing
Standard of leaving
Employment gaps
Lose of skills’ usage
In the last two decades, Egypt continued to witness an increase in the size
of its working population resulting from earlier high population growth
rates. As a result, there was pressure on the labor market to absorb an
increasing number of new entrants, as well as to adjust to economic
reforms. At present, 35% of the working age population in Egypt is youth
(15-24 years of age). Thus, high youth unemployment rates are a major
concern for policy makers.
Addressing parliament in January 2001, the Prime Minister of
Egypt declared that the government's most important task is to "create the
largest number of job opportunities possible for youth and to reduce the
size of accumulated unemployment."
The Government announced then a plan to create some 900,000
jobs in the fiscal year starting July 2001-2002. At the time, the labor force
has been increasing by some 733,000 graduates entering the labor market
each year for the first time. Thus, to absorb the new entrants and reduce
unemployment by 100,000 a year, the economy would need to create
833,000 new jobs every year, which requires an increase in GDP by 6-7%
annually.

Page 7 of 11
Chapter one Unemployment

In order to formulate policies to curb the rising problem of

unemployment in Egypt, it is important not only to understand the effect
of reforms on the incidence of unemployment among the youth, but also
on the duration of unemployment and, on the probability of exiting
unemployment and how it differs with demographic and economic
characteristics.
6- Solving for unemployment in Egypt
Youth unemployment in Egypt should not be viewed as a problem in
itself, but rather as an untapped resource, only if it is directed to the right
path. In response to this challenge a number of policies are suggested
below to tackle the youth unemployment problem in Egypt:
1- Expansionary macroeconomic policy
2- Enhancing the productivity of the labor force
3- The reform of the civil service.
A MUST read from Extra Reading files:
Radwan, S. (2002) Employment and Unemployment in Egypt:
Conventional Problems, Unconventional Remedies, pp 17-26.
There was also some suggestions to solve the unemployment problem
by solving other problems like the clustering of population around
the delta let's review some of them:
An Egyptian geologist and scientist called Farouk el Baz
suggested a project that would solve the problem of unemployment in
Egypt along with the problem of trespassing on agricultural lands causing
their desertification and other national problems, on so many levels
emphasizing on the importance of the excellent transportation system for
the progress of communities and help improve the quality of life for many
Egyptians.
The project is supposed to help the process of geographical
redistribution for the Egyptian citizens and moving the clustering of
habitants from the delta towards the western desert which enables the
nourishment of industrial & agricultural projects their and reduce the
desertification of lands along the delta line caused by overpopulation.

Page 8 of 11
Chapter one Unemployment

The suggestion of the project includes construction of:

A main high way with international standards that links west
Alexandria with the southern borders of Egypt along 1200 kilometers.
12 horizontal roads that branch from the main high way that links the
main highway with the assembly of population along its path about 800
kilometers.
These 12 horizontal axes are:
1- Alexandria axis: this one links Alexandria, its port and airports to
the main highway and it can extend to link Rasheed and Damietta
as well and this way it will link the main high way to the northern
delta.
2- The delta axis: this one links the main highway to the middle of
the delta maybe in Tanta (an axis like this requires the reservation
of the agricultural lands along its path it may also require new
bridges and the western part of this road lies a desert that can be
reclaimed and provides a good environment that represent a new
geographical dimension for el gharbeya governorate which is one
of the most crowded delta governorates.
3- Cairo axis: this axis enables the main high way to link to (Egypt-
Alex) desert road which leads to the biggest population clustering
in the continent of Africa (Cairo) this branch can extend east to el
maadi and to Suez road and Suez port which enables the
transportation of goods and cargos from the midetrenian to the red
sea through Suez bay.
4- El fayoom axis: this axis helps development of the desert west and
north el Fayoom especially the western part to push the harmful
industries outside, and develop industrial towns there.
5- El bahareya axis: this axis aims at linking the main highway to el
bahareya oasis in the direction of the western northern part of el
Giza governorate which enables the linkage between the northern
oasis (elwady elgdeed) and the main way which is very refreshing
to the tourism.

Page 9 of 11
Chapter one Unemployment

6- El Menia axis: this axis creates new dimensions for the extension
in the delta especially that el Menia has university.
7- Asioot axis: it will be pretty much like el Menia axis.
8- Kenna axis: this axis leads to a very wide area that can be
reclaimed that lies in the southern path of the Nile between kenna
and nag3 hammady with the possibility of underground water in
these areas.
9- Luxor axis: this one gives unlimited extension for the
extraordinary tourism projects for the city of Luxor has a huge
mass of monuments and history.
10- Aswan and Kom-Ombo axis: this axis will increase the
agriculture in this area because of the underground water and it is
said that this place was the Nile's passage in old times and shifted
due to geological matters plus this will pave the road for the
construction and development of Aswan's airport to be
international trading airport.
11- Toshka axis: the main highway goes down from the hill where it
gets connected to several places around touska hill; a canal has
been dug to transport the water of the Nile from Nasser Lake to
toushka hill in order to reclaim the lands around the pods that were
created.
12- Nasser's lake axis: Nasser's lake proved to be an excellent
location to develop the fishing industry.
A line of railway to a TGV parallel to the main highway.
A 1.5 meter diameter water tube from Nasser Lake in the south to the end
of the high way on the midetrenian coast and this tube will carry water for
human usage only.
Electricity line to provide power in the initial stages of the project to help
start the project.

Page 10 of 11
Chapter one Unemployment

References
Radwan, S. (2002) Employment and Unemployment in Egypt: Conventional
Problems, Unconventional Remedies. ECES, Working Paper No. 70. Retrieved from
www.eces.org.eg

Mahabub, H. Credit for alleviation of rural poverty: the grameen bank in Bangladesh.
Retrieved from
http://books.google.com/books?id=GkrRrt_ao50C&printsec=frontcover&dq=Credit+f
or+alleviation+of+rural+poverty:+the+grameen+bank+in+Bangladesh&hl=en&ei=qQ
S0TbC7E8fvsgb8wM3kCw&sa=X&oi=book_result&ct=result&resnum=1&ved=0C
DQQ6AEwAA#v=onepage&q&f=false

ElBaz, F. Public lecture. Retrieved from

http://www.youtube.com/watch?v=37u44IT5Qk8

www.meamonitor.com
www.CNNmoney.com
www.Economywatch.com
www.reuters.com
www.egyptse.com

Page 11 of 11