Externe Publikationen

Labour demand and informal employment in Egypt’s manufacturing sector

El-Haddad, Amirah / Caroline Krafft / Irene Selwaness / Ragui Assaad
Externe Publikationen, Policy Brief (2026)

published on theforum.erf.org.eg, 25.04.2026

Volltext/Full text

Egypt’s manufacturing sector faces a dual challenge of weak job creation and persistent informality. Drawing on survey evidence on business behaviour and labour market dynamics, this column explains why job creation is limited and informal work remains such an integral part of how firms organise production. The generation of more formal jobs requires a comprehensive policy approach, one that goes beyond enforcement of labour regulations to reshape the economic environment in which firms and workers make decisions. In a nutshell:
- Informality in the labour market reflects incentives on both sides: firms benefit from lower costs and flexibility, while workers may prefer higher take-home pay or they may perceive limited benefits from formal employment.
- Policies to create formal jobs that are focused solely on enforcement may backfire by raising hiring costs; effective reform requires reducing the cost of formality - including through simpler tax procedures and more proportionate labour costs - while increasing its benefits.
- Addressing informality requires targeting informal employment within formal firms, aligning labour market and industrial policies, and adapting social protection and contribution systems to non-standard work arrangements.

 

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