RISING INFORMAL EMPLOYMENT IN EGYPT: FROM LABOUR SUPPLY TO LABOUR DEMAND

This paper addresses the issue of rising informal employment (henceforth informality) in Egypt over 2012-2023, with a focus on the employment dynamics of youths (aged 15-34 years old). First, we examine the updated definition of informality, discussing its consistency, scope, and methodology. Among various theoretical approaches, labour market segmentation proves to be the most relevant to analysing the challenges of informality. Second, we conduct a microeconomic analysis using panel data to explore segmentation and income gaps with respect to gender and four job statuses, including formal/informal wage employment and formal/informal self-employment Third, we investigate occupational mobility according to transitions between employment statuses, unemployment, and inactivity, and with logistic regressions (Heckit) focusing upon individual characteristics (gender and education) and industries. Fourth, we tackle the supply side, applying a Mincer wage equation, which confirms labour market segmentation: formal employees earn more than informal ones, wage differentials being due to differences in human capital endowments. In addition; quantile regressions confirm the role of endogenous factors. Fifth, shifting to the demand side, we design a job quality index that reverses the perspective on informality towards exogenous factors. Such is also the case with an Oaxaca-Blinder decomposition wherein the unexplained component of wage differentials related to discrimination is key and confirms the role of exogenous factors. In addition, competition on the supply side translates into raising barriers to entry for formal jobs on the part of the insiders against queueing up outsiders. Last, we conclude that persistent informal employment is not a free choice for employees but a constraint imposed by employers. Employment dynamics depend on gender patterns and are better explained on the supply side for formal workers and on the demand side for informal workers. We eventually sketch four formalisation policies.