--- title: "Economic Recovery and Salary Adjustment | Ghazi Mahmoud" url: https://ghazimahmoud.com/en/articles/2024-02-14-06a365/ lang: en description: "The salaries and wages of public sector employees and of the military and security services continue to stagnate at low levels compared with the general price level of goods and services, confirming that linking the financial and economic crisis battering Lebanon to the size and cost of the public sector defies the truth." --- [All articles](https://ghazimahmoud.com/en/articles/) # Economic Recovery and Salary Adjustment [Brig. Gen. (Ret.) Dr. Ghazi Mahmoud](https://ghazimahmoud.com/en/about/) 14 Feb 2024 · 7 min read [The Lebanese economy](https://ghazimahmoud.com/en/articles/leb/)[The world economy](https://ghazimahmoud.com/en/articles/world/) The salaries and wages of public sector employees and of the military and security services continue to stagnate at low levels compared with the general price level of goods and services, confirming that linking the financial and economic crisis battering Lebanon to the size and cost of the public sector defies the truth. At the same time, the crisis has led to a further decline in the purchasing power of salaries and wages, bringing it to unprecedented levels, and it remains in free fall to this day, despite the lump-sum increases approved under various names. The caretaker government's resort to increases that bear no relation to what employees actually need to live a dignified life is an injustice to public sector employees and to the military and security services. This is particularly true given that salaries and wages have dwindled to around 10% of what they were before the crisis, both for those still in active service and for those who have retired. While retirees, especially military personnel among them, believed that end-of-service indemnities were savings that would make up for some of the deprivation they endured during service, their value fell to the equivalent of less than two months of a pre-crisis salary, having previously ranged in value between 20 and 50 depending on the number of years of service. Retirees' hopes of rectifying their situation vanished with this drop in the value of indemnities, only for banks to finish eating away at what remained of them through the withholding of these deposits and the conditions on their withdrawal. Meanwhile, the general price level has continued to rise from the start of 2020 to this day, coinciding with the collapse in the value of the national currency and the accompanying economic contraction. Compounding the problem, merchants and service providers, including public service providers, have moved to dollarize the prices of their goods and services without that preventing them from continuing to rise. Subsidies were also halted on goods whose import had been subject to a fixed exchange rate, leading to the liberalization of their prices, including the prices of fuel, electricity, telecommunications, and even bread and medicine. The decline in the purchasing power of the salaries and wages of public sector employees and personnel of the military and security services has reflected negatively on public administration and its performance, leading to a growing vacancy rate within it and a drop in the manpower of the military and security forces as employees abandon their jobs and military personnel leave their service. At the same time, the political authorities resort to filling vacancies through contracting in violation of the law, without such contracting addressing the functional imbalance caused by those vacancies. Notably, vacancies across the staffing cadres of this sector have exceeded 70%, according to the Civil Service Board's report on the comprehensive survey of the numbers of civil servants, contractors, wage earners, and workers at the end of 2022. Those in charge of public affairs have taken a liking to expanding contracting to make up for the shortage in the number of employees, as it satisfies their desire to place their loyalists into ministries and public administrations, causing bloat in certain categories of staff at the expense of the principles of career progression and seniority. Yet the financial recovery plan had stipulated initiating a restructuring of public administration and redistributing employees and contractors across ministries and institutions according to need. Calls to streamline the public sector and cut its financial cost are no longer justified now that the volume of salaries and wages of employees in this sector has fallen to unprecedented levels, and now that the benefits that once constituted a significant portion of their income have shrunk. Similarly, calls to privatize certain institutions and administrations have also lost their grounds and justifications, and their appeal to potential investors has disappeared, particularly amid unstable political conditions and the recent Israeli attacks on southern Lebanon. Whereas the cost of salaries exceeded $8 billion in the 2019 budget according to the exchange rate prevailing up to that date, and after having accounted for nearly 20% of the value of expenditures in the 2019 budget, it dropped in the 2024 budget to 9.8% of total expenditures, which were limited to operational ones. This makes the refusal to raise salaries and wages on the pretext of needing to preserve budget balance misplaced, especially since governments often deliberately widen the fiscal deficit to counter contraction and get the economy moving. The financial and economic crisis has shown that the problem lies neither in the size of the public sector nor in its cost, but rather in the deliberate squandering of public funds carried out by the political authorities through indiscriminate spending on projects benefiting their key figures, extending to subsidies on imported consumer goods and other forms of waste, and the list goes on. The crisis has exposed the extent of the mismanagement of public funds and the level of waste in government procurement contracts and deals, which exceed dozens of times over the cost of salaries, wages, and other benefits and allowances. The draft decree from the Cabinet session held on Saturday, February 11, 2024, revealed the unlawful discrimination between military and civilian public sector employees that the caretaker government has routinely practiced every time it approves increases to salaries and wages. If this discrimination shows anything, it shows the government's inability to draw up a comprehensive and integrated strategy for salaries and wages that covers both military personnel and civilians, secures justice between them, and serves as the cornerstone of the broader strategy of the economic revival and recovery plan. On the other hand, this government ignores the rights of the personnel of the army and security forces, who persevere in performing their duties with peerless professionalism. Indeed, it does not hesitate to thrust military personnel into confrontation with demonstrators, particularly the retirees among them demanding fair treatment on par with their colleagues in active service and the adjustment of their salaries in accordance with the laws in force. As for postponing a decision on the aforementioned decree, no reliance can be placed on it with a government that fails to honor its commitments, noting that the postponement and the effort to amend the decree would not have occurred without the commendable intervention of the Army Commander. Adjusting salaries and wages plays a pivotal role in formulating any strategy for economic reform, hence the necessity of adjusting salaries rather than increasing them. What is meant by salary adjustment is adopting a new salary scale that provides the minimum requirements for a dignified life and removes the injustice from those in service as well as those whose service will be terminated or who will retire. For the temporary increases applied to salaries and wages to date involve an attempt to circumvent the acquired rights of employees and military personnel, since they are not incorporated into the base salary and therefore count toward neither the calculation of severance indemnity nor retirement pensions. It is worth noting that salaries and wages play an essential economic role in the production cycle, constituting the price of one of the three factors of production, namely labor, in return for its contribution to the production process. They are a primary driver of economic activity, since the incomes of low-income earners are used mainly for consumption. Any increase in salaries and wages is an increase in employees' purchasing power and inevitably translates into higher demand for goods and services, and into greater consumption that helps stimulate the various productive and economic sectors. Salaries and wages are not merely a cost paid by the state to public sector employees, but rather the price of these employees' contribution to providing public services; without civilian and military employees, neither the public sector nor its services would exist. Based on the foregoing, the caretaker government's evasion of adjusting salaries and wages in the public sector is in fact an evasion of pursuing the requirements of reform, without which there is no hope of Lebanon rising from its slump or achieving its economic recovery. There can be no reform without a competent and self-sufficient public sector, a sector in which employees earn enough to suffice them and meet their needs; indeed, there is no hope for Lebanon's economic recovery unless the salaries and wages of public sector employees are adjusted as a percentage of pre-crisis salaries in accordance with available revenues, and made adjustable so as to achieve the principles of justice and equality among rights holders. Translated from Arabic with AI. [Read it in Arabic](https://ghazimahmoud.com/articles/2024-02-14-06a365/) ## Published in - [Channel 23](https://ch23.com/Article/144632/التعافي-الاقتصادي-وتصحيح-الرواتب) - [Channel 23](https://ch23.com/Article/144943/التعافي-الاقتصادي-وتصحيح-الرواتب) - [Lebanon Files](https://archive.lebanonfiles.com/2024/articles/باقلامهم/التعافي-الاقتصادي-وتصحيح-الرواتب/) - [OZ Arab Media](https://ozarab.media/التعافي-الاقتصادي-وتصحيح-الرواتب/) - [Radar News](https://www.radar-news.net/التعافي-الاقتصادي-وتصحيح-الرواتب-بقل/) ## More on the Lebanese economy [All articles on this subject](https://ghazimahmoud.com/en/articles/leb/) [1 Feb 2024 · The Budget and Economic Revival · Channel 23, Lebanon Files ](https://ghazimahmoud.com/en/articles/2024-02-01-fea43f/) [6 Dec 2023 · The Fragile Economy and the Devastating War · Channel 23, Radar News ](https://ghazimahmoud.com/en/articles/2023-12-06-3647a9/) [22 Nov 2023 · More Than Mere Monetary Stability Is Needed · Channel 23, Lebanon Files ](https://ghazimahmoud.com/en/articles/2023-11-22-de319e/)