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Sowing seeds

Lebanon is behind in labor reforms, but can make a fresh start in 2015

by Zafiris Tzannatos

Much is written and more is discussed about the impact of Syrian refugees on the Lebanese labor market. Plenty of analyses and proposals are in the air. This is as commendable as it is understandable: Lebanon faces both a humanitarian crisis and a labor market crisis.

In the labor market, an already bad situation is expected to become worse in the coming year. Simple economic theory suggests that when the supply of workers increases, labor is offered in the market at discounted wages. And not only that: working conditions may deteriorate while occupational health and safety risks increase, unless employers are scrupulous and labor laws are enforced.

In addition to this shock, longstanding structural issues in Lebanese labor remain. These include the local underutilization of Lebanese in marginal or seasonal types of work, or more directly in terms of part time or seasonal employment and high unemployment, and the migration of the most capable Lebanese abroad while social protection defies the conventional use of the term as it is mostly provided privately.

The gravity of the labor market situation becomes clear when referencing the reversal in unemployment rates among youth and adults. While the unemployment rate in Lebanon has remained practically constant at around 10 percent for the past 20 years according to the International Labor Organization, there were 30 percent more unemployed youth than unemployed adults in 1990, but by 2010 there were 50 percent more unemployed adults than unemployed youth. This suggests the problem is not just the employability of young job seekers. And the situation would have been worse had adults not emigrated in such large numbers.

All in all, Lebanon is entering the new year with uncertain prospects. The geopolitical situation and the issue of Syrian refugees remain tense. Partly because of this, the macroeconomy (and tourism) has stalled. And politically, in addition to having no president, practically all (98 percent) of the parliamentarians who were present in the relevant vote this past November 2014 agreed for the second time to extend their tenure until 2017. This can be contrasted with the British Parliament’s House of Commons, whose members can eventually pass any law against the objections of the House of Lords except one: the extension of the life of a parliament.

Leaving aside these historical and political remarks, what can be said about what needs to be done in 2015?

Lagging legislation

To answer this, one should first look at another question: how effectively can a country address the issue of refugees if it does not really have a strategy and policy framework for its own citizens? Or, put differently, the refugee question is not only a national issue, but also a regional and international one, and therefore goes beyond the exclusive mandate and capacity of Lebanon.

But the labor market is a domestic issue and can and should be addressed earlier rather than later. The results will not be immediate as labor reforms may take generations to show their full effect. But as the proverb goes, if it takes 100 years to grow a tree, it is all the more urgent to plant it today.

For 2015, there are some low hanging fruit in the sense that the relevant legwork has already been done and the ‘sell by’ date passed decades ago. This includes the enactment of the labor law that has been on the books since the 1990s. This is also the case with private sector pensions under the National Social Security Fund, noting that Lebanon remains perhaps the only upper middle income country in the world without private pensions for its workers. While a law on disability has recently been enacted, its implementation is lagging. Finally, one should not forget the needed improvements in occupational health and safety, including enhancing the role of labor inspections, and the implementation of guidelines for the employment of the sizeable number of domestic workers.

Lebanon is one of few Arab countries with a mandated national minimum wage, but its role is compromised by the absence of an institutionalized framework for the social partners to set its level and then periodically revise it through an objective price index. Similarly, there has been an Economic and Social Council for years, but its involvement and impact has been minimal. These are issues within reach if there is political will.

To conclude with a modification of the aforementioned proverb: if the best time to plant a tree in Lebanon was in 1990, the second best time is 2015.

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Zafiris Tzannatos

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

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