As a result of measures taken to combat the novel coronavirus, huge numbers of working class people quickly found themselves unemployed and without any source of income. This will necessarily limit their consumption capacity, setting off a recession that will in turn lead other firms to make hiring cuts or layoffs, thereby fueling a vicious cycle of ever increasing unemployment.&nbsp;
To confront this problem, several countries have adopted emergency plans to support groups economically affected by the epidemic and shore up consumption to prevent a slide into recession
For example, the Danish government pledged to temporarily cover 75 percent of private-sector workers&rsquo; wages up to $3,300 per month, provided firms did not engage in layoffs. For hourly wage workers who were let go, the government will cover 90 percent of their wages up to $3,800 per month (Boesen, 2020).&nbsp;
Sweden adopted a temporary wage subsidy program of a different type, allowing employers to cut their workers&rsquo; hours by up to 40 percent while the state covers 90 percent of their wages (The Local, 2020).&nbsp;
In the Arab region, Saudi Arabia recently tacked to the same wage-support policies. The state will pay 60 percent of workers&rsquo; wages in private firms for three months, as a way to encourage companies to retain their employees (Economy Plus, 2020).&nbsp;
For its part, the US is offering full forgiven loans to small businesses provided the cash is used to cover operating expenses like wages, with the goal of preserving these jobs in difficult circumstances (US Department of Treasury). It is also offering low-interest loans to medium-sized enterprises to cover operating expenses on the condition that they retain at least 90 percent of their workforce.&nbsp;
<h3>Generous unemployment spending</h3>
The US has also relied on fiscal policies, such as raising unemployment benefits to provide temporary relief to workers between jobs commensurate with their last salary. As part of the policy, an extra $600 per week will be tacked on to unemployment benefits for four months.&nbsp;
Chile has also developed support for unemployed people, expanding unemployment insurance to cover those who are unable to work from home. It also designated aid to the 2 million people who lack formal employment (Reuters, 2020). Relative to its economy, Chile has allocated huge sums to mitigate the impacts of COVID-19, despite the anticipated deficit increase this year (Thomson &amp; Feuntes, 2020). All told, allocations for exceptional relief total 4.7 percent of the country&rsquo;s GDP.&nbsp;
<h3>What about Egypt?</h3>
Egypt&rsquo;s response to the economic ramifications of the coronavirus epidemic was swift and positive, as the state made liberal use of the fiscal and monetary tools at its disposal to provide relief. But there remain challenges impeding a more comprehensive social vision for combating the fallout of the crisis.
On the monetary side, the Central Bank of Egypt (CBE) quickly cut the interest rate by 3 percent, a quick stimulus to minimize the chance of a recession (CBE, 2020a), while instructing government banks to issue bonds with interest of up to 15 percent.&nbsp;
The CBE also increased loan support to activities vital to the economy. It has been pursuing this policy for years to encourage loans for groups that face financial hardships, like small businesses or the mortgage financing sector, given the high cost of housing units, or the tourism sector, which was just coming out of a long slow-down before the epidemic hit. CBE measures taken in response to COVID-19 were an extension of these policies. Last month, it cut interest on LE100 billion in loans to the private industrial sector, mortgage financing firms, and hotel support and renovation to 8 percent from 10 percent (CBE, 2020b).&nbsp;
The CBE also facilitated settlements for delinquent borrowers, provided their debt was less than LE1 million (CBE, 2020c), and deferred loan payments for individuals and companies for six months, a move estimated to help more than 4 million people (Youm7, 2020). It further initiated easy financing to cover wages, but only for workers in the tourism industry.&nbsp;
On the fiscal side, the state gave civil servants temporary pay increases (Gad, 2020), increased pensions by 14 percent this year (Gamal &amp; Gaber, 2020), and expanded the beneficiary base of the Takaful and Karama programs. The Finance Ministry raised the income tax exemption, and drafted a law that would institute a partial or complete moratorium on property tax, while conditioning this on retaining employees.&nbsp;
Nevertheless, monetary policies do little to offer relief to most citizens, since only about 15 percent of the population have a bank account, according to some estimates (Nabil, 2019). Loan support with interest rate cuts is also a positive step, particularly in light of the high interest rates maintained due to the inflationary effects of the economic reform measures of 2016. Even so, the economic standstill resulting from coronavirus measures may limit the ability of the private sector to operate normally and take advantage of these initiatives.&nbsp;
Although the tourism sector is being funded&nbsp; to cover workers&rsquo; wages, the Federation of the Chambers of Tourism say that companies are finding it difficult to access the funding (Afifi, 2020).&nbsp;
Preserving tourism jobs is important, especially after the sector&rsquo;s long slowdown e since 2011, due to political unrest and terrorism. As a result, the sector shed much skilled labor, which was difficult to replace during its&nbsp; resurgence shortly before the COVID-19 crisis. With beaches shutting down as part of the anti-epidemic measures, the tourism sector is again facing the prospect of losing skilled labor.&nbsp;
We do not have adequate information about recent layoffs in the private sector, but it is certain that they are proceeding apace, as demonstrated by several newspaper reports. This is especially vital considering the large number of workers in the informal sector who lack any type of protection. Insured workers constitute only 45.5 percent of the workforce.&nbsp;
The state has attempted to offer relief for these vulnerable informal workers. The Ministry of Manpower announced grants of LE500, but the limits of the coverage are unclear, and the ministry recently began accepting applications to collect new data. But the state did not explain the criteria used to reach the sum of LE500 or whether it was enough to keep such informal workers from falling into poverty. This sum is roughly equivalent to the extreme poverty line, meaning it barely covers the basic needs of one individual.&nbsp;&nbsp;
In another statement, the president said that informal workers would receive the grant for three months, while formally employed workers would receive support from an emergency fund under the Ministry of Manpower. But this statement, too, did not clarify the size of the fund or how it would support the broad base of workers in the private sector. Previous statements from the minister of manpower focused on support for tourism workers (Ali, 2020).&nbsp;
In addition, insured workers are not eligible for unemployment assistance; although it is provided for in Law 79/1975 on insurance, it is not enforced. Thus far, there have been no statements about the implementation of the unemployment assistance set forth in Law 148/2019, which just entered into force in January.&nbsp;
<h3>What does the international experience tell us?</h3>
Generally speaking, the policies of developed countries focused on containing the epidemic crisis, either by shoring up the private sector so it can retain workers while suspending work or by directly protecting workers through cash subsidies and unemployment benefits.&nbsp;
Egypt, on the other hand, increased pay for government workers while attempting to find some form of support for private-sector workers, though the extent of the coverage remains unclear, as does whether it is enough to counter current cost-of-living pressures.&nbsp;
Egypt needs to direct attention to private-sector workers in various sectors, either through monetary policies, like the CBE initiative to provide easy financing for private-sector wages, or fiscal policies, especially through generous unemployment benefits, to expand support to meet the magnitude of the current crisis.&nbsp;
It is important to reconsider existing cash support policies, specifically Takaful benefits, which could offer supplementary income support to working families harmed by the crisis. We need a society-wide dialogue on the value of these cash benefits and their adequacy to the circumstances created by the epidemic, as well as conditions for eligibility and the possibility of expanding the beneficiary base.&nbsp;
In addition, workers in the informal sector require special attention. Initiatives in developing countries like Brazil and Panama have focused on cash payments to this class of workers as part of emergency measures to confront the consequences of the epidemic (IMF). Egypt has taken preliminary steps in this regard, and we look forward to seeing how effective they are and how quickly they evolve. The fallout from the epidemic could offer the chance to build a database about the informal workforce and incorporate them in the new insurance system created by the 2019 insurance law.&nbsp;
There is also a need to reconsider our tax policies in order to raise revenue to support social policies. The Finance Ministry proposed raising the tax rate on&nbsp; persons in the highest income bracket from 22.5 to 25 percent. This is a good step, but we need to understand the fiscal impact and consider other available alternatives&mdash;such as an even higher tax rate increase, an increase on legal persons as well, or expanded wealth taxes&mdash;to provide the resources to fund the social policies required by these exigent circumstances.&nbsp;
<hr>
References
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Afifi, A. (2020, April). <a style="color: #333333;" href="https://bit.ly/2VguaSo">No liquidity: Tourism Chambers discuss weathering coronavirus crisis and workers&rsquo; wages</a>. Masrawy. [In Arabic]..
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Ali, N. (2020, April). <a style="color: #333333;" href="https://www.shorouknews.com/news/view.aspx?cdate=06042020&amp;id=e183fc11-9099-44a8-ae8d-cadfc3b3f9f4.">Minister of manpower: wages of tourism workers paid from emergency fund</a>.&nbsp; Al-Shorouk. [In Arabic].&nbsp;
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