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Should the minimum salary be increased?
Published on 11/10/2011 in L’Orient - Le Jour
Among the numerous ineffective queries that unfortunately fill our political media space too frequently, a real set of problems sometimes comes to light. The increase of the minimum salary is one of them.

Real queries do not seek to induce a simplistic answer, a simple yes or no but rather to lead to a debate, which scopes go clearly beyond the specific issue that is raised.

In fact, salary adjustment is not an isolated issue. Salaries can only be adjusted within the scope of a consistent inclusive economical policy which seeks to promote a long lasting economical growth, thus generating jobs and social equity.

Salary is on one hand an income. Deciding to increase it means that it is no longer sufficient to protect the purchasing power of the person who receives it. In Lebanon, it is obvious that employees have lost their purchasing power. The inflation figures are there to confirm it.

However, one must keep in mind that increasing salaries indirectly contributes to keeping the inflation going. Therefore, instead of rushing head-over-heels into this vicious circle, it might be better to take time to consider the reasons behind inflation and the loss of purchasing power.

On the other hand, salary is a cost. It remunerates one of the two production factors, which is labor. Increasing this cost would mean to further weaken the companies’ competitiveness, which is already very weak as a whole: between 1997 and 2009, domestic prices increased by 21% more than international prices.

However, at the same time, refusing to increase the salaries contributes to such drop in competiveness, by exhausting the quality of human resources employed in Lebanon: The Gulf countries suction pump is already extremely powerful. At the same time, the skills and qualifications of Lebanon’s workforce are already very low, as established from the results of a recent survey conducted by the World Bank. Among the working people, 47% did not go beyond primary school, and 48% are employed in low qualification sectors.

In fact, this study discloses that the workforce is barely developed in Lebanon! Out of a total working population of 1.4 million persons, those enjoying a formal (declared) employment in the private sector are barely 225,000. This raises the question of the real impact of an increase in salaries on the families’ purchasing power.

The issue at stake here is to bring the Lebanese economy to the capitalist stage* by developing payrolls, as salaries represent the counterpart of the capital for development.

Capitalism is a system which consists of accumulating profits and reinvesting them through a permanent quest of productivity.

As much as we should raise the simple question of salary raise, we should also and more importantly tackle the issue of salary productivity and, more broadly, the Lebanese human resources productivity. Incidentally, the extremely weak activity rate of Lebanese women (which is below the regional average and clearly below the world average) is one of the major impediments to growth.

Lastly, it is inconceivable to approach the salary issue in Lebanon without raising the question of the migratory flows. Our country is one of the planet’s few economies to massively export its human resources (qualified) while importing low qualified foreigners in such a large ratio. Such phenomenon does have an impact on employment and growth: Lebanese nationals face unfair competition from cheap workers exploited by enterprises that take advantage of the State incapacity to effectively oversee labor law enforcement.

On one hand, employers are concerned about an increase of their salary costs and on the other hand, unions are calling for an increase in salaries. However, the State’s function is not to reconcile, but to think of a win-win solution that would enable wealth creation and its equitable distribution.

* Cf. Study of economist Toufic Gaspard in his book “A Political Economy of Lebanon: The Limits of Laissez-Faire”, Brill Edition, 2004.