On Egypt uprising's 2nd anniversary, social justice has yet to be achieved

Arab World Materials 25 January 2013 09:19 (UTC +04:00)

Walk down any back alley in the Egyptian capital, or even along one of Cairo's main thoroughfares, and you're likely to see scenes of shocking poverty. If the miserable grey buildings that shelter millions of impoverished souls don't get to you, the scores of street children - tirelessly weaving between cars and Chinese-made motorbikes - will Al Ahramonline reported.

Steady growth in Egypt's poverty head-count ratio - from 16.7 per cent in 2000 to some 22 per cent in 2010 - was a major ingredient of the Tahrir Square uprising. It was not, however, the poorest segments of society that initiated the revolution that toppled the Mubarak regime almost two years ago, but rather Egyptian youth from the middle and upper classes.

"When I see the magnitude of misery that exists in our society, I can't help but feel ashamed of how lucky I am," 26-year-old engineer Alaa El-Banna, who participated in the revolution, told Ahram Online.

El-Banna works for a multinational consumer goods firm; he drives a sporty French car and spends more than LE100 every day on cigarettes and fast food. Yet he felt obliged to join the 18-day sit-in in Tahrir Square in early 2011 to demand the ouster of Mubarak, who he views as a symbol of the "rampant corruption" that has "impoverished millions of Egyptians."

The two years since the uprising, however, have not been accompanied by the basic improvements El-Banna had initially hoped for. In fact, the chronic economic problems plaguing Egypt appear to have only become worse.

Egypt's poverty rate jumped to 25 per cent in 2010/11 while unemployment levels have reached ten-year highs. The government will be forced to trim its hefty subsidies bill to curb the budget deficit while raising sales taxes on a range of goods and services.

What's more, Egypt's depreciating currency will likely prompt a surge in prices of basic foodstuffs and fuel - most of which is imported.

Under the pretext of 'realising revolutionary goals,' successive post-revolution cabinets have tried to enact policies aimed at easing Egypt's vast income disparities. But such initiatives have either not gone far enough or have been overshadowed by wider economic realities.

One example of this was the new national minimum wage intended to lift working-class Egyptians out of poverty. Public servants were granted a monthly minimum wage of LE700 (roughly $107), cut down from an earlier proposed monthly wage of LE1,200.

The government simply could not afford more, since public wages alone account for more than a quarter of Egypt's state budget.

LE700, which translates into a paltry LE23 daily, shrinks before the ever increasing cost of everyday necessities. The amount is not enough to allow a family of four to eat nutritious food all month long, given that meat - which more and more Egyptians are doing without - now costs an average of LE50 per kilo.

The inadequacy of Egypt's new minimum wage structure is probably why labour actions continue to escalate in workplaces across the country.

Private-sector workers, meanwhile, were the beneficiaries of a similar arrangement at the end of 2011, yet the lack of a clear enforcement strategy by the government - along with continued high unemployment rates - prevent average wages from growing altogether.

Moreover, Egypt's informal workers, who make up an estimated 75 per cent of total national private-sector employment, did not benefit from the new wage rates at all.

"All these debates on the minimum wage will not help improve Egyptians' living conditions," Dorothea Schmidt, senior employment expert at the International Labour Organisation, told Ahram Online in 2011.

Taxation, another tool used by governments to promote financial equality, has not been utilised much by the government over the past two years.

In 2011, the top income-tax bracket was increased to 25 per cent - from a previous 20 per cent- for annual incomes above LE10 million. And last December, President Mohamed Morsi altered the highest tax bracket so that annual incomes above LE1 million (instead of LE10 million) would be taxed at a 25 per cent rate.

Morsi also announced new taxes on real estate, corporate mergers and acquisitions, and Initial Public Offerings (IPOs).

This latest bundle of tax hikes, however, also raised levies on consumer goods, some of which - such as cooking oil - are considered essential to ordinary Egyptians. Morsi quickly - and unofficially - suspended the tax hikes to avoid a popular backlash.

Last December's decisions reflect the tight spot that the government finds itself in. While it has to raise taxes to finance its ballooning public deficit, it cannot simply raise income taxes since this would take a heavy toll on Egypt's weak investment environment.

The government is therefore resorting to more regressive taxation schemes, such as sales taxes. But this, too, promises to put additional burdens on an already struggling public.

It appears that revolutionary demands for 'social justice' will likely have to be put on hold until the government sorts out its wider fiscal dilemmas.