Labor Reform in Lebanon: Wagging the Minimum Wage?

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Al-Akhbar Management

By: Rasha Abouzaki

Published Saturday, August 27, 2011

In the past 15 years, Lebanon witnessed high inflation rates while minimum wage increased only once and by a mere US$130. But low-income workers are bracing for a wage hike if an income adjustment study by the new Labor minister goes as planned.

In an interview with al-Akhbar, Lebanese Minister of Labor Charbel Nahas says a national committee is reviewing private and public sector data to determine an official inflation rate and measure the cost of living on a regular bases, which would help the government determine future wage adjustments.

The Index Committee charged with this task will publicly announce its findings and relay them to the Lebanese ministerial cabinet. A small committee of ministers would then determine any increase to the minimum wage. Lebanese Prime Minister Najib Mikati assured a delegation of the General Confederation of Lebanese Workers, a national labor advocacy group, that he would personally lead the committee.

Realities and Priorities of Workers

Nahas agreed that wages in Lebanon are indeed low. In 2008, the government increased the minimum wage from 300,000 Lebanese lira (LL), worth US$200, to LL500,000 (US$333). This increase would be the first since 1996.

During the last 15 years, inflation continued to spiral upwards, yet the government did little to address people’s declining purchasing power. Many attempts were made by the ministerial cabinet and the Ministry of Labor to change wage policies, but these efforts were thwarted by successive governments who “pledged” not to upset employers.

Since then, little has changed in Lebanon’s economic order. Employers still garner a great deal of power and support. However, the decline of purchasing power has become a public scandal.

Ghassan Ghosn, president of the General Confederation of Lebanese Workers, says that the delegation that met Mikati nearly two weeks ago made a number of demands, including potentially doubling transportation stipends and increasing school and university scholarships. According to Ghosn, Nahas and Economy and Trade Minister Mohammad Al Safadi confirmed the decision to increase wages. The confederation proposed a new minimum wage of LL1,250,000 (US$833) equivalent to estimated inflation since 1996. The adjustments proposed by the confederation would be phased in, with a 60 percent increase in the first phase, 30 percent in the second, and less than 20 percent in the third and final phase.

These figures are likely to be a subject of disagreement between workers and employers. Some sources believe that the Index Committee may be pressured to reject the confederation’s proposal because of likely opposition from employers. These same sources believe that negotiations should yield a minimum wage ranging between LL800,000 (US$533) and LL900,000 (US$600). Studies suggest that since 1996, inflation has halved people’s purchasing power (taking into account the minimum wage raise in 2008). Doubling the current minimum wage to account for this inflation may be a fair start.

Ghosn considers it the role of the Cabinet to arbitrate these differences of opinion. He believes that a newly formed ministerial committee will expedite the consensus process. Ghosn also points out that higher wages would yield increased purchasing power, which is profitable to all Lebanese and would drive the economy forward.

The Full Package Deal

The two camps clearly have different approaches. Beirut Traders Association President Nicolas Chammas said that the association favors increasing the purchasing power of the Lebanese. He added that increasing purchasing power serves the government’s commitment to the principles of social equality and economic justice.

According to Nahas, promoting economic justice requires an economic recovery in the private sector, fostered by a favorable environment for economic growth. He sees economic justice as an indispensable tool for promoting social justice.

The Beirut Traders Association also supports adjusting wages, as long as those measures are part of a larger policy package intended to strengthen purchasing power. Other measures include returning financial solvency to social security programs, as well as improvements to ailing public transportation and education programs. Intervention in these areas would likely lessen financial burdens on families due to high costs of medical care, transportation, and schooling.

Economy and Trade Minister Al Safadi believes that the 150 percent increase in minimum wage proposed by the Confederation is unreasonable. He emphasizes that any uncalculated increase would lead to inflation and pressed that negotiations should have a solid scientific basis.

This article is an edited translation from the Arabic Edition.

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