- 20
- Mar
- 2024
As long as minimum wage growth lags behind the inflation rate, salary adjustment measures remain an aberration and a futile economic absurdity. Much like a bottomless pit.
Which pertinent indicator did the Price Index Committee use to support the increase in the minimum wage to LBP 18 million, while simultaneously allowing employers to decide the extent of raises on other salary brackets within the bounds of contractual freedom between employer and employee?
Meanwhile, caretaker Labor Minister Mustafa Bayram—seemingly in a state of denial—praises the minimum wage increase as being a government accomplishment. In Lebanon's current state, marred by political, economic and financial crises, mere numerical adjustments to salaries and extra added zeros cannot ensure the slightest social stability needed in the short or medium term.
Wage-Price Spiral
Lebanon has been under a caretaker government for almost two years, with porous borders and an ongoing war in the South. In such a volatile context, untimely salary increases could only lead to cost-push inflation or a wage-price spiral. Simply put, raising wages would drive up production costs and, consequently, consumer prices. Amidst this vicious cycle, can employers afford to see their profits diminish? In the process of adjusting wages upward, both employees and employers must come out ahead.
Useless Comparison
A comparison of the private sector's payroll before and after 2019 is utterly useless. Meanwhile, Lebanon experienced a 98% devaluation of its national currency, with its annual GDP plummeting from nearly $55 million to less than $20 million.
As for inflation, it reached—based on the World Bank’s figures—231% in 2023, with the nominal inflation rate for food prices reaching 350% in the first half of the same year.
Discrepancy
In short, when a country lacks structural reforms, any increase in wages in the private or public sector will remain insignificant. It defies common sense, as it won't change the survival of low and middle-income households.
Nevertheless, the caretaker Minister of Labor had to address, even if only symbolically, the glaring imbalance between transport allowances and the minimum wage.
Before Tuesday's decision by the Price Index Committee, minimum wage stood at LBP 9 million, while transport allowances for an employee working 24 days a month (factoring in weekends and public holidays) amounted to 10,800,000 Lebanese pounds.
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