With 99 million inhabitants in 2019, Egypt is the most populous country in North Africa and the Arab world. Despite being classified as a middle-income country; Egypt faces a set of long-standing development challenges. Recent surveys have shown that income poverty in Egypt reached 32.5% in 2018, leaving 32 million people below the national income poverty line.
The high incidence of informality in developing countries means that many workers are not insured against important risks, such as unemployment, illness, and old-age poverty. Informal workers do not only include the poor, but highly skilled workers in undeclared self-employment and informal wage work as well. Despite some mobility on the labor market, about half of all wage workers are in informal jobs with poor labor conditions.
This commentary analyzes employment conditions in Egypt, particularly for the informally employed, who lack both written labor contracts and social insurance (World Bank, 2014). This article outlines the needs of the most vulnerable workers and argues that addressing these needs will effectively contribute to reducing poverty in Egypt. It also examines social insurance coverage through the lens of inequality of opportunity using the Human Opportunity Index (HOI) to measure inequality among wage workers without contracts, (V&eacute;lez, et al., 2012). The analysis relies on the nationally representative Household Income, Expenditure, and Consumption Survey (HIECS 2018), carried out by the Central Agency for Public Mobilization and Statistics (CAPMAS, 2019). The &lsquo;money metric&rsquo; measure of poverty is used, where households are considered poor if they cannot afford minimum basic needs (therefore falling under the poverty line).
<h3>Analysis</h3>
Poor conditions of employed people
Addressing informality in Egypt is a critical component of economic and social development, as sound social protection policies lead to less poverty and less inequality. Protection policies also enable families to recover rapidly from crises by helping them satisfy their consumption needs with relatively little hardship, as well as strengthen their capacity to cope with shocks.
Almost 69% of Egypt&rsquo;s employed are wage workers (almost 76% in urban areas and 63% in rural areas). In addition, employed people residing in metropolitan areas are more likely to be wage workers (80%), compared to only 62% in rural Upper Egypt. The majority of wage workers have no legal protection and no job security, as almost 60% have no permanent employment contract (55% have no employment contract at all and 5% have a temporary contract). Workers in rural areas are more likely to work with no employment contract compared to those in urban areas (61% vs. 48%). In addition, almost 74% of poor wage workers have no written contract, compared to only 46% of non-poor workers.
Social insurance coverage
Establishing a viable social insurance system is the first line of defense against income shocks and volatility. The problem is that workers who have no employment contract or work under a temporary contract do not benefit from social insurance and are thus unprotected.
Survey findings show that 56% of wage workers are not covered by social insurance and are therefore at risk of falling into poverty with any economic shock. Moreover, only 26% of poor wage workers are covered by social insurance, compared to 52% of non-poor workers. Wage workers in rural areas are less likely to be covered than those in urban areas. Additionally, educated wage workers are more likely to have social insurance coverage; 73% of wage workers with a university education are covered, compared to 15% of illiterate workers. As expected, 77% of wage workers in the private sector and 94% of people working outside an establishment are not covered by social insurance.
Informally employed people 
Almost 53% of wage workers in Egypt are informally employed (hired with no or temporary contracts and not covered by social insurance).
Informal wage workers are more likely to be poor since, without social insurance, they are more vulnerable to economic shocks due to price increases or personal adversities. Almost 72% of poor wage workers are informally employed compared to 45% of non-poor workers. Moreover, wage workers with low levels of education are more likely to be informally employed: 83% of illiterate wage workers compared to only 22% of workers with a university education.
Inequality of opportunity
Equality of opportunity entails the provision of the same opportunities for employment, pay, and promotion to all workers without discrimination based on gender, area of birth, poverty status, education, etc. Here, the HOI is used to measure inequality between wage workers with no labor contract due to circumstances beyond the individual's control (such as gender, age, or geographic residence), (Armanious et al, 2015). It is therefore an important tool to assist in designing public policy programs that guarantee equal opportunity.
HOI takes into account the average coverage of social insurance for wage workers and the inequality of its distribution. An increase in the index is associated with either increased coverage or a more equitable distribution of coverage, (Paes de Barros et al, 2009).
Social insurance opportunity 
Although some wage workers with no employment contract participate in a contributory social insurance scheme, this opportunity is not equally distributed. Overall, 10.7% of wage workers with no permanent employment contract or with a temporary contract are covered by social insurance. However, the HOI score of 7.6 points means that only 7.6% of social insurance opportunities are available and allocated equitably between workers of different circumstances, while 3.1% of the opportunities are not allocated equitably between all eligible workers.
Regarding the difference between urban and rural areas, Figure (1) shows that 14.1% of wage workers with no written contract in urban areas have access to social insurance opportunities. The HOI in urban areas reached 10.8 points, meaning that only 10.8% of social insurance opportunities available in urban areas are allocated equitably between workers with no contract regardless of their circumstances, while 3.3% are not allocated equitably. Similar results are observed in rural areas although accessibility to social insurance coverage is much less than that in urban areas.
<img src="https://api-aps.aucegypt.edu/uploads/tinymce/1601474936imagefig 1 en.png" alt="" width="500" height="348">
The last two columns of Table (1) disaggregate the total difference of HOI between urban and rural areas into access and equality of opportunity, Singh, (2011). The table shows that the coverage effect for social insurance opportunity reached 79%, while the effect of different circumstances on accessibility represents 21%. This indicates that participation in a social insurance scheme depends to a great extent on the circumstances of wage workers themselves, even if all wage workers without employment contracts are eligible for social insurance programs.
<img src="https://api-aps.aucegypt.edu/uploads/tinymce/1601474981imagetable 1 en.png" alt="" width="500" height="184">
<h3>Factors explaining inequality of opportunity </h3>
The education level of wage workers with no employment contract is the main factor determining inequitable social insurance coverage, as demonstrated by an examination of the relative contributions of various circumstances to the overall inequality of opportunity. The data shows that workers&rsquo; education level is the most important source of inequality in social insurance coverage, explaining 39% of inequality. Regarding urban-rural differences, the figure shows that education has a greater impact on overall inequality in urban areas than in rural areas (48% vs. 32%). On the other hand, a worker&rsquo;s age has more of an impact on participation in social insurance in rural areas than in urban areas, accounting for 40% of inequality in rural areas compared to 31% in urban areas. The poverty status of workers also represents a main factor for inequality in rural areas&mdash;almost 23% compared to 14% in urban areas.
<h3>Policy recommendations</h3>
Financing is a key aspect of any social insurance system. In addition to individual and employer contributions, general government revenues and dedicated taxes can generate adequate public resources to finance social protection programs. In Chile for example, the pension system is fully funded by workers&rsquo; contributions, but the government finances the basic solidarity pension for people who have not paid in and a complementary pension for people whose contributions are below a certain threshold (Winkler et al., 2017).
Until a new scheme for insuring informal workers is in place, there are interim measures that could alleviate the situation for workers without benefits:
<ul>
<li style="text-align: justify;">Encourage larger informal firms to regularize their status by increasing the benefits of formality, including by offering tax breaks and reducing employer contributions to social insurance. This could lower the cost of formalizing workers and also reduce the costs to firms of hiring formal workers.</li>
<li style="text-align: justify;">Extend pensions to informal workers through other means: membership in trade unions, non-governmental organizations, or a public-private partnership.</li>
<li style="text-align: justify;">Enhance the capabilities, education, and skills of the poor. Since education is one of the main factors affecting social insurance coverage, this would improve employment conditions. This requires addressing both supply and demand for education. Public schools are widely accessible for minimal or no fees, which is necessary to ensure that every child has a chance to go to school. It is crucial to improve the quality of education for an even higher return.</li>
<li style="text-align: justify;">Combine all social protection programs (to include informal workers) and pool them into a single system for beneficiaries across the income spectrum. This is integral to the creation of enough decent jobs (with written employment contracts) that guarantee adequate income levels.</li>
</ul>
<hr>
References
<ul>
<li>
Armanious, D., &amp; Kalliny, M. (2015). Inequality of opportunities in food security among Egyptian households, 2011. The Egyptian Population and Family Planning Review, 48(1).
</li>
<li style="font-size: 10pt;">
Central Agency for Public Mobilization and Statistics. (2019). <a style="color: #000000;" href="https://www.capmas.gov.eg/Pages/StaticPages.aspx?page_id=7183">Key indicators from the income, expenditure, and consumption survey 2017/18</a> [Ahamm al-Mu&rsquo;ashshirat Bahth al-Dakhl wa-l-Infaq wa-l-Istihlalk]. [In Arabic].
</li>
<li style="font-size: 10pt;">
Paes de Barros, R., Ferreira, F. H. G., Vega, J. R. M., &amp; Chanduvi, J.S. (2009). <a style="color: #000000;" href="https://openknowledge.worldbank.org/bitstream/handle/10986/2580/468270PUB0Meas101OFFICIAL0USE0ONLY1.pdf?sequence=1&amp;isAllowed=y">Measuring inequality of opportunities in Latin America and the Caribbean.</a> World Bank.
</li>
<li style="font-size: 10pt;">
Singh, A. (2011). Inequality of opportunity in Indian children: The case of immunization and nutrition. Population Research and Policy Review, 30(6), 861&ndash;883.
</li>
<li style="font-size: 10pt;">
V&eacute;lez, E. C., Al-Shawarby, S., &amp; El-Laithy, H. (2012). Equality of opportunity for children in Egypt, 2000&ndash;2009: Achievements and challenges (Policy Research Working Paper No. 6159). World Bank.
</li>
<li style="font-size: 10pt;">
Winkler, H., Bulmer, E. R., &amp; Mote, H. (2017). <a style="color: #000000;" href="http://documents1.worldbank.org/curated/en/798051502894913219/pdf/118728-NWP-PUBLIC-P164623-28p-ExpandingSocialInsuranceCoveragetoInformalWorkers.pdf">Expanding social insurance coverage to informal workers</a> (Jobs Working Paper No. 6). World Bank.
</li>
<li style="font-size: 10pt;">
World Bank. (2014). <a style="color: #000000;" href="http://documents1.worldbank.org/curated/en/926831468247461895/pdf/884470EG0repla00Box385343B00PUBLIC0.pdf">More jobs, better jobs: A priority for Egypt</a> (Report No. 88447-EG).
</li>
</ul>

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