The ABCs of the grades and salaries scale

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A woman holds a placard saying "The people pay the price for corruption" during a protest for the grade and salaries scale to be passed by the Lebanese parliament. (Photo: Haitham Moussawi)

By: Maha Zaraket

Published Saturday, May 24, 2014

If it goes ahead, the parliament session scheduled for May 27 will theoretically be dedicated to deliberations ahead of passing the proposed wage scale and new tax adjustments. At the same time, the Union Coordination Committee (UCC) plans to hold a sit-in at Riad Solh Square.

This will not be the first showdown between those demanding their rights and those dragging their feet to grant them. Over the past three years, this proposed salary hike has made the rounds many times over between the cabinet, MPs, and the parliamentary committees, while serving as a catalyst for trade union demonstrations that mobilized tens of thousands of disgruntled citizens. Still, amid all the debates and controversies, many people have questions and doubts. Below, Al-Akhbar will attempt to answer some of the most important questions about the wage hike.

What is the grades and salaries scale?

The scale is a system for public sector employees. In Lebanon, the public sector relies on a grade-based system in evaluating its employees. It is a hierarchical system that places employees in bands, with each band divided into grades. Salaries are determined according to an equation that takes into account current salaries and grades, where employees are promoted according to merit and educational attainment. Moving up the bands also depends on seniority, i.e. the number of years in service.

Why are there demands for a new pay scale?

Because the last time the Lebanese government passed a comprehensive adjustment to the pay scale was in 1998. From then until 2008, public sector employees did not receive any raises. In that year, a decree was passed increasing wages by 200,000 L.L. ($133) for the private sector, which also benefited public sector employees.

However, the State Shura Council overturned the decree in 2011, citing its illegality, even though it did not match the inflation rates recorded over the past 12 years, i.e. since the last wage hike. In effect, prices increased by about 121 percent from 1996 to 2011.

Who benefits from the scale?

The scale benefits staff, contractors, and employees in public administrations, the Lebanese University, municipalities, and public institutions that are not subject to the labor law, as well as teaching staff at the Ministry of Education, military corps, teachers in private schools, and retirees – who together account for one-third of the labor force in Lebanon.

Why is the UCC spearheading the efforts to get the scale passed?

Because the UCC is comprised of five groups concerned by the scale: public secondary school teachers; public elementary school teachers; public vocational school teachers; private school teachers; and public administration employees.

How much does the scale cost?

There are several opinions and studies regarding the cost of the new grades and salaries scale, and it’s been studied by numerous parliamentary committees.

When the cabinet approved the new pay scale, and referred it to parliament, it put the cost at 1,669 billion L.L. (~$1.11 billion). The cost excluded National Social Security Fund (NSSF) contributions, family allowances, and other contributions, which raises the actual cost to 2,290 billion L.L. (~$1.53 billion).

The subcommittee formed by the joint committees charged with studying the law relating to the scale, chaired by MP Ibrahim Kanaan, put the cost at 3,150 billion L.L. ($2.1 billion).

After discussing the scale in parliament, it was referred to a new subcommittee chaired by MP George Adwan, which put the cost at 1,807 billion L.L. (~$1.204 billion). However, this subcommittee dropped 205 billion L.L. ($137 million) from its figure related to family allowances. Accordingly, the actual cost would be no less than 2,012 billion L.L. (~$1.341 billion).

But whatever the figure the scale will end up costing, it is important to point out the extent of hyperbole that has accompanied the issue, especially if we recall that the state is already paying 850 billion L.L. (~$567 million) towards it in the form of cost of living allowances, which were agreed to back in 2012.

Who will pay for it?

The expenditures arising from the scale are part of the state’s expenditures, which are usually funded by taxes and/or by borrowing. Therefore, funding the Scale depends on the current (or proposed) tax system and Lebanese treasury bonds.

The current tax system and the distribution of debt securities places the main burden on the middle class and low-income segments in funding government spending, much more than it does with the wealthy if we go by the different tax-to-income ratios these segments have.

Why are politicians dragging their feet over the scale?

The main political factions do not have a unified stance on the issue. The disagreement centers on how to fund it rather than on the scale itself.

Thus, the main political forces, which represent various interest groups entrenched in the Lebanese economy, proceeded to cut down the cost of adjusting the scale as much as possible, after realizing the limits of their ability to raise more taxes from non-wealthy segments.

What sources for funding the scale has the UCC proposed?

The UCC refuses any attempts to burden the poor and the middle class with additional taxes to fund the scale, and proposes overhauling the tax system and imposing taxes on real estate profits and undeveloped land, as well as increasing taxes on interest earnings to the level of corporate tax rates, and forcing banks to pay this tax (they are now exempt from it). This is in addition to increasing taxes on profits. The UCC also called for imposing fines on those occupying public property, specifically beachfront and riverfront property, without giving them any ownership rights, cracking down on smuggling through the airport and ports, and levying higher taxes on concessions, contracts, and monopolies (e.g. Sukleen, the Duty Free stores, Jeita Grotto, etc.)

What are the reasons preventing the endorsement of the scale?

There are two reasons: First, the economic committees, which represent business owners and employers, are opposed to the scale. For one thing, debating funding for the scale led to discussions about the tax system, including raising taxes on profits, interests, and real estate profits, which affects the interest groups these committees represent. For another, increasing public sector wages will encourage private sector employees to demand hikes as well, which probably is a bigger source of concern for the Economic Committees.

The second reason has to do with the bid to preserve current economic policies and the false belief that even a slight increase in the deficit would lead to disaster, which is not true.

Will prices rise if the scale passes?

The Lebanese economy is currently in a recession, and all sectors are experiencing a downturn. Therefore, an increase in demand resulting from wage increases could be absorbed at least in part when production increases, without a noticeable increase in prices. Meanwhile, many goods and services in Lebanon, including electricity, phone bills, and energy bills, will not be affected.

How do citizens not directly concerned by the scale benefit?

Increasing wages for public sector employees and teachers could lead to a corresponding increase in consumption and stimulate the economy, translating into economic growth that may well benefit all sectors, and therefore a large number of citizens. Moreover, improving the wages of public administration and education workers would attract skilled employees that would improve the quality of the services offered by state institutions and agencies.

Is it possible to replace the scale with other welfare benefits?

First, the scale is not part of government benefits, but affects wages paid in return for work by government employees and teachers. Therefore, benefits cannot replace it. Welfare benefits like universal healthcare are important, but cannot be a substitute for adjusting the scale, though they can supplement it to reinvigorate the state’s functions, role, and legitimacy.

This article is an edited translation from the Arabic Edition.

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