No SDES-2019-4
Title Wage and labor mobility between public, formal private and informal private sectors in Egypt
Author Mostafa Shahen, Koji Kotani and Makoto Kakinaka
Abstract Wage and labor between public and private sectors are main factors in economies. In developing countries, the private sector is divided into formal and informal private sectors. Little research has addressed temporal changes in wage and labor among public, formal private and informal private sectors within a single framework. We study the temporal wage gap, labor mobility and the impact of changing employment sectors on wages by Oaxaca-Blinder decomposition and difference-in-difference (DID) methods with the Egyptian Labor Market Panel Survey data from 1998 to 2012. The decomposition shows that the wage gap between public and formal (informal) private sectors has remained strong where education, age and working experience are driving forces. The DID method shows that the percentages and wage losses of movers to the informal private sector from the formal private sector are much higher and more significant than that from the public sector. In summary, Egyptian private sector employees face a high risk to unwillingly fall into and stay in the informal private sector, while the highly educated ones are attracted only to and stay long in the public sector. These results can be considered the obstacles for further economic growth and stability of Egyptian economy, which shall be the case in other developing and Arab countries with a sizable public sector. In this case, the government may need to restructure wage systems, employment practices and cultures, considering a balance with private sectors as well as providing people with incentive schemes and education to nurture (formalize) the formal (informal) private sectors.
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