Wages and salaried workers is a crucial topic that has been discussed world wide and addressed in different ways. Several factors affect the total number of salaried workers in a country including the available job opportunities, the demand and supply enforced on labor force, and the type of field a worker is in. As such, this has created huge gaps and inequality in wages and salaried workers all over the world.
To better understand this feature, the below graph displays the changes of wage and salaried workers percentage over the years from 1991 to 2019 in the MENA region.
Looking at the graph, we can see that Qatar, Bahrain, UAE, Saudi Arabia, and Oman are countries that remained to be the top in terms of wage and salaried workers throughout the years as compared to other countries in the MENA region such as Lebanon, Syria, Yemen, and others. These top 5 countries all recorded over 95% of the workers are salaried and waged overr the years.
Moreover, looking more closely at other countries, we can see that countries such as Lebanon has a maximum of 65% of workers who are salaried workers and Libya with the lowest value among all countries.
This shows that among the countries in the MENA region there exists huge gaps and inequalities between workers in countries mainly due to scarce job opportunities in middle and low income countries such as Lebanon. This huge difference has caused a large number of fresh graduates in Lebanon to seek jobs outside of their country and mainly towards UAE and Saudi Arabia.
Wassim, Nathalie, and Imad; three individuals who were pushed out of work by the deteriorating economic conditions in Lebanon. Tens of thousands of people like them have been suffering daily for the past 3 years living from paycheck to paycheck up until they were forced out of it (work). Lebanon has witnessed what no other country has. Unemployment rates doubled in only a decade, COVID-19 took out thousands, and inflation bankrupted hundreds of businesses.
According to Okun, a very low or negative growth in GDP leads to a rise in unemployment. By observing this visual, we can see how unemployment skyrocketed while GDP growth took a deep dive. Comparing the years 2008 and 2009, GDP growth increased 10.23 percentage points while unemployment rates decreased by 6.35 percentage points. We can conclude an inverse correlation between GDP growth and unemployment. Another observation is that between years 2020 and 2021, GDP growth increased by almost 15 percentage points. Despite this growth, unemployment remains significantly high at 14.49 percentage points. Importantly, this project is action-oriented in that it shows the nexus between unemployment and GDP growth #SDG8, which are intrinsic to an economy, from more “policy-driven” factors that can be addressed, improved or mitigated.
Here, a question rises? What is the cause for the disproportionality between GDP growth and unemployment rates? There are 3 possible causes for its inverse relation:
• The decrease of Foreign Direct Investment (FDI) which reached 3.98 percentage points in 2019 due to the lack of security and political tension
• Another possible cause is the low diversification in economic sectors due to scarcity of resources. Looking at this visual, we can see the focus of employment shift mainly to the service industry which witnessed an increase by 65.10 percentage points while the agricultural and industrial sectors are left behind increasing by under 30 percentage points in 2019.
• The third and final possible cause is the over-dependence on food and fuel imports. Lebanon possesses the second highest food and energy imports in 2019.
What should be done?
Drawing upon decades of empirical literature on drivers and predictors of lack of growth, this project proves Okun’s law using visualizations for the case of Lebanon. According to International Labor Organization (ILO), not just growth, but quality of growth is the key anchor in the SDGs 2030 agenda. Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment.
1. Creating greater opportunities for women and men to secure decent employment and income. Closing the employment gap is at the heart of the decent work agenda, this can be through promoting voluntary private initiatives and corporate social responsibility.
2. Instating policies to enhance knowledge, skills and employability for men and women since gender remains a source of labor market inequalities and inadequately utilized human resources. Women continue to be employed in a narrower range of occupations than men and to be concentrated in lower-paid, insecure, and unprotected jobs.
3. Promoting employment through reconstruction and employment-intensive investment.
4. Increasing access to financial services to manage incomes, accumulate assets and make productive investments.
Findings and Recommendations
A shift in economic thinking and planning towards economic structural transformation is necessary for the Arab region to develop on SDG 8 (ESCWA, 2021). The post-pandemic SDG agenda must leverage the lessons learnt to reinforce national social safety nets and employment policies. This strengthens economic resilience and allows developing countries to absorb shocks. A continued lack of decent job opportunities, insufficient investments, and under-consumption slows down economic growth. The average growth rate GDP is increasing after the pandemic; however, it still did not reach pre-pandemic levels of growth and developing countries such as Lebanon are moving farther from the 7% growth rate set for 2030. Therefore, as labor productivity decreases driven by low productivity and unemployment rate rises, standards of living decreases and overall economic growth decreases.
Governments must join forces and formulate policies to promote better job opportunities through active labor market programs, corresponding to important SDGs: Economic Growth and Decent Work, as well as Partnerships to Achieve the Goals.
Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Job opportunities and decent working conditions are also required for the whole working age population. There needs to be increased access to financial services to manage incomes, accumulate assets and make productive investments. Increased commitments to trade, banking and agriculture infrastructure will also help increase productivity and reduce unemployment levels in the world’s most vulnerable regions.#SDG8 #SDG16
Lebanon has been historically exporting skilled workers to many regions in the world including Gulf, Africa, Europe, and North America. For more than 10 years, the Unemployment rate in Lebanon has been increasing to reach 11.35% in 2019 (from 6.35% in 2009). Since the Economic crisis in 2019, the rate has dramatically increased to reach 14.5% in 2021.
To dig deeper into unemployment in Lebanon we can see that the citizens with advanced education (holders of a university degree or above) are prone more to unemployment, in comparison to intermediate (secondary schooling) and basic education (primary schooling or below).
So what can we do to solve this?
It is worth mentioning that since the economic crisis in Lebanon in 2019 followed by the COVID-19 pandemic, the Lebanese economy deteriorated severely leading to the closure of many companies and establishments or downsizing in the terms of employees and costs.
Note that among the 3 sectors (services, industry, and agriculture), the services sector was the most to hold the burden of this economical crisis, especially for the restaurants, hotels, banks, and retail traders,…
The employment breakdown as per sector shows that the service sector retained the most employment over years, in contrast to agriculture which only received 11.32% of total employment in 2019.
Therefore, we should try to shift the load of the employment to the other sectors in Lebanon (industry and agriculture) by encouraging the highly educated persons to start their own businesses in this area, which will then lead to more employment from the less educated in these 2 fields.
This will not be attainable unless the government and international entities start incentivizing the youth by providing the below:
Access to finance (through long-term small loans at a minimized rate of interest)
Access to knowledge (by providing proper training to the youth in management and technical expertise)
Access to market (by providing the connections to the youth to sell their products through)
To note that some initiatives from the public have been launched to provide one or more of the above-mentioned, however, the government hasn’t yet started any steps to help.
The average CPI (Consumer Price Index) has drastically increased in 2021 mainly due to governments’ economic
policies shaped by the COVID-19 pandemic.
As we can see in the graphs below, the average government debt as % of GDP has increased from 61% in 2019 to 80%
in 2020. This suggests that these governments are taking loans from their central banks to counter the COVID-19
pandemic. As we can see, the average money supply growth has increased from 10% in 2019 to 18% in 2020. This jump is
explained by the central banks printing money to lend it to their governments. The increase in money supply has led
to global inflation which affects most countries’ citizens.
Governments should stop spending so much money on unemployment benefits since:
Keeping those benefits would encourage people to stay unemployed and collect a paycheck while contributing nothing to the economy of their country
The funds are directly used in consumer expenditure which is raising the CPI
Governments should instead adopt more long-term strategies that aim to increase production and help with the recession
Lately, Lebanon has been overwhelmed by hyperinflation: the value of the Lebanese Pound is plummeting as compared to the United States Dollar. More and more Lebanese Pounds are needed to purchase a dollar. The devaluation is partially caused by the fact that outflows of foreign currency from Lebanon are greater than inflows of foreign currency. Part of the problem is that for decades, Lebanon has been operating with a trade deficit, which means that it is paying more foreign currency for its imports than it earns from its exports. This means that there is a leakage of foreign currency from the Lebanese economy. So how can we improve the net trade balance to prevent leakages of foreign currency that result in further devaluation of the Lebanese Pound?
Well, the government can manage trade policies to interfere with foreign trade activities. Two potential instruments that a government can use are subsidies and tariffs.
When a government subsidies a locally produced product, the supply curve related to this product shifts from S0 to S1. This results in the price of this product decreasing from P0 to P1 which then leads to an increase in the quantity demanded from Q0 to Q1. By doing this, governments can incentivize their local producers to increase their output at lower prices which then makes the locally produced product more attractive to consumers than a more expensive imported alternative. If the local suppliers are able to fully satisfy local demand for their product, they could go on to produce excess amounts that could then be exported to other countries.
When a government introduces a tariff on an imported product, the supply curve related to the imported product shifts from S0 to S1. This results in the price of this imported product increasing from P0 to P1 which then leads to a decrease in the quantity demanded from Q0 to Q1. The tariff applied by the local government sets a markup to the price of the import product making it more expensive and thus less attractive to consumers as compared to locally produced products. This encourages consumers to buy local products instead of imported ones.
At an aggregate level, if local production levels across more and more product types increases to satisfy a bigger proportion of demand, the need for imports will decrease. Suppliers could even begin to export products. Increased production levels can also increase employment opportunities. At the same time, if at an aggregate level, consumers are willing to switch from imported products to locally produced products, the aggregate demand for imports will decrease which means fewer quantities of these products will be imported. The decrease in total import levels and or the increase in total export levels will result in a higher net trade position, or in other words a decrease the trade deficit or even result in a trade surplus if the total import level is lower than the total export level.
It’s worth mentioning that tariffs and subsidies should not be used as long term solution. Imposing tariffs on imports can result in retaliation from other countries in which they impose tariffs on Lebanon’s exports. Also, constantly subsidizing local production, requires funds that the government may not always have available. However, doing so on the short run motivates local suppliers to increase production which can help improve employment and development of domestic industries for future sustainability.
You may be thinking that this sounds like a lot of theory. Let’s take a look at an example of a country that used these policies. The Brazilian government imposes tariffs on imports and subsidizes local production. Additionally, the Brazilian government entered into several trade agreements with other countries to facilitate its exports. By doing so, Brazil was able to overcome its trade deficit and even operate at a trade surplus for many years.
The Lebanese Ministry of Finance, Ministry of Economy and Trade, and Ministry of Foreign Affairs should work together to enter into trade agreements with other countries to promote Lebanese exports, impose tariffs on imported products to shift local demand away from imported products toward domestic products and subsidize the production of local goods and services. By decreasing the net outflow of foreign currency from Lebanon, the Lebanese government can better manage the exchange rate and reduce inflation levels. This leads to more sustainable economic growth and more productive employment.