Egypt’s salary increase is a challenge for businesses and workers

Egypt’s decision to raise the private sector minimum wage to EGP 7,000 (effective March 2025) marks the sixth increase in three years. While the move aims to support workers amid rising living costs, it presents significant challenges for businesses struggling to comply. The question remains: Will this wage hike improve livelihoods, or will it strain businesses, drive inflation, and deepen non-compliance?

A lifeline for workers or an illusion?

For Egypt’s 14 million private-sector workers, the wage hike is a much-needed boost, but does it translate to real financial relief?

1. Inflation vs. wage growth: Despite the raise, inflation has eroded purchasing power. The Egyptian pound has depreciated significantly, making salaries worth less in dollar terms.


2. Regional wage gaps: Egyptian labor is increasingly seeking jobs in Saudi Arabia, Iraq, and Libya, where wages are nearly double what’s offered locally.


3. Worker protests & enforcement issues: Many private companies ignored previous wage mandates, leading to employee strikes. If enforcement remains weak, will this raise have any real impact?

Can private businesses afford the wage hike?

For business owners, this increase raises concerns about profit margins, employment costs, and overall feasibility.

• 80% of businesses failed to apply the last wage hike (EGP 6,000), citing economic struggles. How likely are they to implement this new threshold?


• Small retailers and manufacturers—especially those in low-margin industries—may reduce hiring or cut hours to cope with higher labor costs.


• Large corporations and multinationals already pay above the minimum wage, meaning this policy mainly affects small and mid-sized enterprises (SMEs).

Will prices rise? the inflation question

The Egyptian government insists that the wage increase won’t trigger inflation, but economic history suggests otherwise.

• Cost-push inflation: If businesses raise wages, they may increase prices on goods and services, indirectly hurting consumers.


• Stable input costs? Business leaders argue that labor costs are a small fraction of total expenses, meaning price hikes might not be necessary.


• Will SMEs follow suit? While large supermarkets and wholesalers can absorb costs, small businesses may struggle to comply without price adjustments.

Government’s role: social support vs. business growth

Egypt’s government is walking a fine line between protecting workers and ensuring business competitiveness.

• A new social relief package (effective July 2025) will also raise public sector salaries and pensions, adding to the economic strain.


• Calls for interest rate cuts are growing, as lower borrowing costs could help businesses manage wage increases without layoffs.


• Market oversight & compliance: Without strict enforcement, many businesses may continue avoiding the minimum wage law.

Conclusion: a sustainable policy or a temporary fix?

The minimum wage hike is a double-edged sword. While it seeks to improve workers’ living standards, it could lead to higher unemployment, inflation, and non-compliance. The real challenge lies in ensuring enforcement, providing business incentives, and stabilizing Egypt’s currency to make wage increases meaningful.

If the government fails to balance these factors, this policy could be more symbolic than practical—benefiting some while pushing others to the brink.