The Minimum Wage in Lebanon

Before starting the analysis of a scenario suggesting the raising of the minimum wage in Lebanon, I would like to give an overview about the stages the Lebanese economy has gone through in the last few decades.

While Lebanese economy were well known for its prosperity in the late 60s and early 70s, thanks to the tourism industry, the economy suffered from hyper-inflation during the war (1975- 1990).

The Lebanese pound has lost most of its purchasing power, devaluating from 2.5 L.B. to astonishing 2800 L.B. for one US Dollar.

With Inflation rate reaching more than 100% year-to-year, most of the Lebanese households have seen their savings vanished in terms of value.

At that time, 1990, the infrastructure was destroyed. The airport,the hospitals, the electricity, the communications (telephone, post, radio, TV), and, of course, the public schools were no better.

Fortunately, the post war era experienced an improvement in the economic welfare of the Lebanese people.

In terms of inflation, the central bank started to absorb the surplus of money in the financial market by supplying foreign currencies and issuing bonds that yield high interest rates (12% on US dollars and 16% on L.B.)

The Lebanese pound gained back some of its value, exchanging now at 1,500 for one US dollar.

While Lebanon didn't get any external financial help from the international community (in fact, the whole world was busy at that time with the gulf war), the government had no choice but to borrow, in order to meet its obligation of re-build the country.

Nowadays, Lebanon got one of the most sophisticated infrastructures in the world, an airport that can host more than 6 million visitors, and a `'state of the art'' Telecom Providers.

However, the ministry of Finance has to deal with a scary budget deficit (about 50%), and a heavy debt (33 Billion dollars for a country with 17 Billion $ as GDP!!!!!)

Needless to say, The Lebanese economy is now encountering a deep recession, if not a stagnation.

Having summarized the economical situation in Lebanon, I believe that any increase in minimum wage will have a negative influence on the economy.

The economy is suffering from a huge deficit in its trading balance, thanks to its inability to export goods and products made in Lebanon.

The Lebanese industrial sector is challenged with high overhead costs, caused mainly by high labor cost and high cost of capital.

In fact, the average labor cost in Lebanon is the highest among all the neighbor countries.