Pierre El Sokhn

Unemployment is bringing new industries to surface

Lebanon is currently suffering from cyclical but structural unemployment. It is mostly driven by corrupted major political and social parties and other issues. They have slowed down economy and the creation of jobs in the past years. In addition to that, there is a growing gap between the labor supply and labor demand in the market. This makes the current situation even worse, in terms of youth employment and the inclusion of new skills according to the demand.

The Lebanese labor market is mostly characterized by a low activity and a high unemployment rate. Characteristics of this sector are that women rarely contribute in the labor force and the sector is widely uninformed. Moreover, skills are not matched and many foreign workers come into the country to work. In the meantime, a large number of skilled Lebanese people try to flee the country to find employment abroad. The youth spends a lot of time searching for jobs. However, they continuously face challenges related to finding a permanent one with fair wages. The average length of unemployment in Lebanon is one year. In other countries a year is considered as long-term unemployment.

Unemployment is bringing new industries to surface

The influence of Syrian workers

Moreover, the influx of Syrian workers has influenced an already weak labor market. It resulted to have the biggest consequences on the youth and unskilled workers. The economic growth and job creation suffered form it too. Lebanon needs to create six times more jobs than now, in order to be able to absorb the 23,000 labor market entrants per year. There is a shift to the low-skill sector with a small wage addition between primary, secondary and tertiary education. A low return on education, further stimulates brain drain. Over 90% of firms in Lebanon, which play a major role in the Lebanese economy, yet need major support.

The causes of youth unemployment

Youth unemployment is high. The National Youth Policy Document states that youth unemployment rate is 35%. The unemployment is higher among the higher-educated youth. 21.8% for secondary graduates and 36.1% among university graduates. Female employees have a higher educational level with 43% of employed women having a university degree. Educated people spend the same time to find a job as those who are less educated. Examples are people with 1.4 years for secondary education graduates and 1.2 years for tertiary education graduates.

A World Bank study in 2016 found that 76% of those employed between 15 and 64 years of age were males. Only 24% were females. There is a pay gap between males and females, which would let to consider Lebanon as a gender based country. This needs to change.

Is skilled workforce taken into account?

The jobs created in the economy in recent years have been concentrated in the low productivity sectors. They hired only low skilled workers and left the highly skilled ones jobless. According to the World Bank, 41% of workers perform jobs that are not in their line of education and skills. Moreover, the lack of skills to perform a specific job is highly encountered. Lebanon mainly suffers from two types of unemployment: cyclical and structural. In order to reduce the cyclical one, the State needs to boost economic growth. This would help increase labor demand.

However, in order to reduce structural unemployment, the State needs to work on the supply side as well. In this way, the labor market will be provided with the needed skills. This requires the reform of the educational system, another major factor of Lebanon’s lack in prosperity.

The development of new “industries”

Moreover, with the country under lockdown for Covid-19, the unemployment rate raised above 30 percent. Therefore, new “industries” are starting to develop. People are in need of a source of income, and they try everything in their power to achieve that. According to the Lebanese Interior Ministry, the rate of theft is doubled compared to previous years. Car theft especially, seems to be the preferred business. Stolen cars get sent to Syria, where they are presented with two options.

First one, to be sold to Syrians at a lower price. Second one, to be sent back to their Lebanese owners. This activity has long been a thriving industry, but recently, it has increased, as well as the variety of goods being smuggled. They now exchange staple products like flour, oil and gas, which are very expensive in Lebanon but sold at market prices in Syria instead.

The government is now considering ending these subsidies, which cost the state some $6 billion a year, and replacing them with direct aid to the poor. A family in need would get an estimated $400 a month. But like every other proposal considered by the caretaker government, it will have to get through a political minefield before it’s approved. Some families are supported mainly by financial help from relatives working abroad. Remittances account for 36 percent of gross domestic product, and Lebanon ranks third in the world in terms of remittances per capita.

Is Joe Biden the solution to Lebanon’s crisis?

The country’s situation isn’t likely to change anytime soon, since they are considering of creating a new government. Like every other country, Lebanon is awaiting Joe Biden’s entry into the White House. They are waiting to find out whether the conditions set by the current U.S. President Donald Trump, under which Lebanon’s new cabinet must not include any Hezbollah representatives, will remain in force. If this condition will be softened due to Biden’s desire to resume negotiations with Iran, the possibility to create a new government will then be formed.