Labor Market Effects of Public Employment Guarantee

Overview & Synopsis

Public employment guarantee schemes, which channeled graduates into lifetime positions in the civil service and state-owned enterprises, were central to state-led industrialization across the postcolonial world, yet they have remained far less studied than temporary workfare programs. This paper provides the first causal estimates of their labor market effects, exploiting the Arab Republic of Egypt's archetypal public employment guarantee, which from the early 1960s guaranteed public sector jobs to secondary and university graduates without competitive examination. The paper measures district-level exposure by secondary school supply on the eve of the reform (1959/60) and links it to individual-level census microdata from 1986, 1996, and 2006. Using an event-study design with continuous treatment intensity, the analysis compares cohorts that differed in age at the time of the public employment guarantee's introduction across districts with differing pre-reform school supply. The findings show that the public employment guarantee reallocated urban male wage employment away from the private sector and toward state-owned enterprises, with no comparable shift in rural districts, where state-owned enterprises were largely absent. The reallocation was concentrated in manufacturing and high-skilled white-collar occupations, consistent with the policy channeling educated workers into sectors that were central to the state's industrialization drive. The paper finds little evidence that the public employment guarantee raised educational attainment, indicating that it primarily redirected an already growing pool of educated workers rather than expanding the supply of schooling.