The ridiculous increase

The General Labor Confederation (GLC) suspended Wednesday’s planned strike after the Cabinet agreed late Tuesday night to increase the minimum wage to LL700,00 ($466) from the current LL500,000. The government also agreed to increase by LL200,00 the wages of those earning less than LLl million, and by LL300,00 those who earn between LL1 million and LL1.8 million. The agreement also included raising the daily transportation allowance to LL10,000 from LL8,000 while the education allowance for children jumped to a maximum of LL1.5 million.

I’m no economics or finance expert, but I’m gonna go ahead and call this increase ridiculous.

Following which logic did our ministers conclude that people of inferior income should get a smaller increase?! And how is this going to minimize the gap between social classes?

Not to mention that if you earn 1,900,000L.L while your colleague gets 1,700,000L.L, he/she is entitled to an increase while you are not, and will soon be earning more than you do according to the new agreement! Pretty fair eh?!

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11 Responses to The ridiculous increase

  1. Hisham Assaad October 12, 2011 at 5:17 pm #

    those who get 179000 LL will be happy to get the 300 000 LL raise
    but those who get 1 800 000 are ….
    same as for those who get 900 000 and those who get at least 1 000 000

    either an equal raise for all or just work on lower prices.

    In few years we will have a scenario where a kid is asking his mom for 100 000 LL to get a bag of potato chip and “Haram” bonjus

  2. Danielle October 13, 2011 at 5:45 pm #

    This is crazy! Not making any sense at all.

  3. Mark October 13, 2011 at 7:20 pm #

    To be honest the whole thing is ridiculous. While I do acknowledge the need for social reform and that there is real need for more wages, if they do not go back on this decision many factories will unfortunately be laying off lots of workers.

    Fact is, the labor market is like any other market, based on supply and demand. If at 500,000 L.L. unemployment was 25% then this will definitely increase unemployment a lot more, especially when you are surrounded by cheap labor countries such as Turkey, Syria and Egypt. I know for a fact that a group I am part of will unfortunately be laying off 15% out our total workforce (1,300 today) to match the total cost of the increase. Unfortunately if we wish to remain competitive and in business, this is something that we need to do to survive.

    No country in the world has ever forced businesses to raise wages so fast with less than a month’s notice. Usually these things are budgeted and accounted for years ahead. Fact is, usually what happens is that the market demands higher wages due to its competitiveness, something we lack in Lebanon.

  4. Mohamad October 13, 2011 at 9:13 pm #

    It is true that you are no econ expert. Inequality in itself is a rate, and as a % of their income, the poorest are getting a bigger increase than those who are richer. So inequality will technically decrease if all other things were equal.

    But that is not the case here, first of all an increase in wages like this (not too long after a recent increase) is ridiculous. When you have an economy where productivity doesn’t change, and then you only increase people’s incomes, the only thing that happens in the long run (in the short run gdp will increase a little) is that the majority of this increase will show up not in an increase in the standard of living, but in significant inflation. Everything will just cost more (in monetary terms) and people will not be better off.

    On the other hand, unemployment will rise a little. Now as an economist, I can tell you that unemployment will not rise as much as some are claiming it will, but the people most affected by this unemployment will be those making close to the minimum wage, or those who need this employment the most. Also the informal sector will grow, and more people will work without social security which makes them all the more vulnerable.

  5. Choura2yak October 18, 2011 at 11:03 am #

    It is all about “BS”. Ghassan Ghosn should never be the eligible party to represent Lebanese workers. He is a Nabih Berri Follower and all his actions are managed and monitored by Amal movement and are always according to Amal’s interests !
    On the other hand, how can we imagine that there were no undertable deal while we all know that what happened is Totally unfair and will create a lot of conflicts between workers and the Business Owners !
    On the other hand just go to any supermarket and check the prices difference ! everything has increased drastically ! and this is also one additional BOX from This GHASSAN GHOSN to all Lebanese Workers !

  6. Todd November 9, 2011 at 12:58 am #

    This is amazing. Unless the wage distribution is a step-function then lump-sum transfers of this type are a bad idea from any social planner’s perspective. Due to the obvious inflationary effects, this policy is not Pareto optimal, as marginal wage-earners will suffer higher inflation without any additional compensation. The unions should have also been opposed to this if they understand introductory economics.

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