Domestic finance
Informality in Egypt: a stepping stone or a dead end?
Does informal work lead to formal employment in Egypt?
Authors:
J. Wahba
Publisher:
Economic Research Forum, Egypt, 2009
In the last few decades, the informal sector has played a major role in many of the Least Developed Countries’ labour markets. This is partly because employment in the informal economy tends to expand during periods of economic adjustment or transition. By the late 1990s, more than two thirds of new workers in Egypt started work in informal employment. Yet, little is known about the dynamics of this sector. This paper addresses an important question, namely whether informal employment is a stepping stone into formal, more secure employment or is it a dead end?
Informal employment can have several drawbacks for workers such as lack of job security, lack of social security coverage and lack of rights. Women working in this sector are often discriminated against in both hiring and earnings. In this paper, the author uses a lack of contract and social security as a measure of informality, and focuses specifically on non-agricultural employment and private non-agricultural paid work. Then, using evidence from the Egyptian Labour Market Panel Survey 2006, and controlling for selectivity in informal jobs, the author examines the extent to which informal workers “graduate” to semi-formal and formal jobs.
The paper’s findings suggest that, in Egypt, mobility from informal to semi-formal/formal employment is highly segmented along education and gender lines. Overall, it seems that informal employment can be a stepping stone for highly educated male workers, but is a dead end for the uneducated, and for female workers.
