On November 3, eight years would have passed since the Egyptian government decided to float the Egyptian pound against the US dollar, reducing the currency's value. When this happened in 2016, it was the first time there had been a devaluation since the January 2011 revolution. This was followed by other declines, as the Egyptian pound slipped against the dollar from 8.8 pounds in early 2016 to 50 pounds against the US dollar now. The dollar's value increased against the pound by about 470 percent, causing the purchasing power of the Egyptian pound to erode due to rampant inflation and high prices.
Perhaps the middle class in Egypt has been the most affected. Although members of this class survived the economic reforms from the mid-1970s to the 1990s, which are very similar to the current economic reforms, the speed with which the middle class has slipped recently has never happened. Spending patterns, consumption, and economic trends have changed.
Everything has changed. Prices have exploded, and inflation has spread, affecting everything from basic commodities to the prices of luxury and durable goods. For example, the price of fuel has increased three times in 10 months. The social status and spending levels of a large segment of Egyptians have not only been affected but they have completely altered. Despite the increase in salaries since 2016, inflation has devoured these increases.
The collapse of the middle class is not in society's interest
The minimum wage in Egypt has jumped by more than 300 percent in eight years, rising from EGP 1,400 (USD 28.4) in 2016 to EGP 2,000 (USD 40.57) in 2019. It then rose to EGP 2,400 (USD 49) in 2021, when some of the private sector embraced it at the beginning of this year. The minimum wage then increased to EGP 2,700 (USD 55) in mid-2022 before reaching EGP 6,000 (USD122).
However, the wage limit is not applied to most private sector workers, despite the persistent attempts by the state, represented by the National Wages Council affiliated with the Egyptian Ministry of Planning.
Hani Tawfik, an economics specialist, says: "The middle class collapsed unexpectedly in light of rampant inflation, the high cost of living, and the increase in taxes of all kinds, while income remained stable or even increased at a rate much lower than the rate of price increases that affected almost everything."
Tawfik explained that the purchasing value of the Egyptian pound used to be greater despite the decline in salaries and wages. Tawfik says: "The middle class is the most affected by what has happened."
He adds: "The middle class in the late 1970s and even in the 1980s and 90s had the ability to spend and replace their old cars with new ones. They also had the ability to spend on educating their children and sending them to foreign schools. They had the ability to save after those expenses."
He believes that the collapse of the middle class is not in the interest of Egyptian society and called on the state to intervene immediately to support it with financial tools and facilities, job opportunities, increased salaries and wages.
The middle class does not have a single definition. Traditionally, the middle class comprises those whose income is between USD 11 and USD 110 per day. However, this definition may be correct for some countries and not for others. For example, it is impossible to consider someone with an income of USD 15 as middle class in countries such as Britain, France, and the US.
Some may see the middle class as those who can withstand economic shocks without being exposed to bankruptcy or government.
Photo: The minimum wage in Egypt has jumped by more than 300 percent in eight years. (by Adobe).