Revive Lebanon’s job market

Time for a national labor policy

As part of Executive’s ‘10 Ways to Save Lebanon’ issue, we asked leading figures from a range of fields to put the case for one major changes for the country. In this article, former International Labor Organization advisor Zafiris Tzannatos discusses changes to the country’s job market.

 

At face value, Lebanon is probably the top economic and employment performer in the Arab region. Globally, it is an upper-middle-income country, one notch below the group of high-income economies. Within the Arab region, it has the highest per capita income among non oil-producing countries. It has the lowest unemployment rate — about 9 percent — in a region with an average of nearly 14 percent. This excludes the Gulf Cooperation Council, where unemployment is almost zero by virtue of oil wealth and the government being an employer of last resort. Moreover, the Lebanese education system produces graduates who can find jobs in the most technologically advanced high-income economies.

Yet the Lebanese labor minister faces daunting challenges, since the above picture masks deep structural economic deficiencies and weaknesses in labor market governance. Meeting these challenges will require radical, rather than reformative policies at the macro level, which are beyond the ministry’s mandate. And within the labor market, Lebanon is in need of a national labor policy.

The task ahead
Consider unemployment. It is not low because the economy creates too many jobs. On the contrary, domestic employment has been increasing by only 5,000 jobs a year, with almost 20,000 new entrants into the labor market.  And the latter figure would be far higher if more women were joining the workforce.  Now consider employment.  Are those 5,000 newly-created jobs what the young and dynamic Lebanese are aspiring to? The answer is no. Most jobs are in low value or low productivity sectors that offer low wages.  For its level of development, Lebanon has an exceptionally high share of small and micro-enterprises, self-employment and family work characterized by a high degree of informality. Even if wages in the formal sector were adequate to live on in the short term, they cannot compensate for the expensive investments families make in education.

As such, market failures that saddle the competitiveness of the private sector need to be addressed. Unfortunately, they have been met only by government failures, spanning from ineffective regulations and licensing procedures to a lack of infrastructure and a segmented education system. The latter produces the best learning outcomes for some students while leaving many behind — one in four Lebanese does not complete secondary education.

When the economy does not create decent jobs, employment is unstable, there is no unemployment insurance and a lifetime of work does not end in a pension, your choice is limited to staying out of work — as many women do — or emigrating — as many men do. Lebanon has both the highest emigration rate and the highest skilled emigration rate among Arab countries, and one of the highest across the globe.

The Ministry of Labor cannot change the big picture.  This is a giant task for the Cabinet, which faces the same constraints as its predecessors, in terms of the accumulated public debt, the most recent influx of refugees, the perennially unstable regional geopolitics and fragile internal politics. However, with the aim of creating greater and more fulfilling employment, a national labor policy can be developed through the creation of a level playing field for the private sector, a reduction of red tape and a boost to investor confidence. Additionally, an increase in the transparency, effectiveness and accountability of the state in the sphere of public goods — from electricity and broader infrastructure to education and social protection — is needed to produce the required outcome.

However, for the Ministry of Labor to be able to play an effective role in the labor market, it would need to upgrade its statistical, analytical, policy, administrative, management and planning capabilities.  Moreover, the ministry is a key player in improving the dialogue among employers and workers. In this respect, reviving the role of the Economic and Social Council is a low hanging fruit that can, in turn, contribute to the development of the national labor policy.

Areas of focus, some of which have been pending parliamentary approval for years, include the revision of the archaic 1946 Labor Code, the introduction of pensions for the private sector and a reconsideration of the available employment services (the mandate of the National Employment Office). Furthermore, improvements in health and safety in the workplace, the development of an accurate price index to reduce tensions in wage negotiations, a reduction in child labor and more effective labor inspections — including the case of the thousands of domestic workers — are equally vital.

Professor Zafiris Tzannatos is a senior international consultant for strategy and policy based in Lebanon.

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