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3. The Necessity of Restructuring the Public Sector: A 'Political' Solution

Salaries and wages of public sector employees and workers: a pending issue whose resolution is tied to the beginning of the new mandate… These employees have already received promises that have not materialized, the latest being from the previous government led by Najib Mikati, which promised a new salary scale—never adopted—last June. Many economists fear that the government may approve a poorly designed salary scale, similar to Law 46 of July 21, 2017, which provided for an increase in the minimum wage and salaries, as well as a cost-of-living adjustment for employees, contract workers and laborers in public administrations, the Lebanese University, municipalities, municipal unions and public institutions not subject to labor laws. This law had catastrophic consequences for the state treasury.

Eight years have passed since the adoption of the salary scale, which later became one of the causes of the financial collapse at the end of 2019. Today, a new debate is emerging on drafting a new salary scale for the public sector, necessitating precautions to prevent history from repeating itself. The Lebanese Public Administration Employees' Association is demanding salary and compensation improvements to keep up with rising living costs, along with the adoption of a new salary scale to restore financial balance for employees. They also call for a temporary adjustment of the weekly working hours to three days only, until salaries are restored to their 2017 levels. Additionally, they propose eliminating the “loyalty” allowance and incorporating it as a salary increase, as well as integrating all various increments into the base salary to cover all public sector workers. Public sector employees are also demanding that these increments be included in the base salary to enhance end-of-service compensation.

Although these demands are legitimate, simply mentioning a new salary scale brings back memories of the 2017 disaster and its financial repercussions. In this context, sources familiar with the matter confirm that discussions will revolve around the possibility of granting an increase to public sector employees outside the base salary—similar to what the government has done repeatedly—rather than approving an unstudied salary scale. Most importantly, no new salary scale should be adopted before implementing public sector reforms, which include restructuring and accurately counting the number of employees. The issue that arose in 2017 was that the salary scale was approved based on an estimated cost of $800 million, but this figure quickly escalated to nearly $3 billion, highlighting the deterioration, waste and corruption in a sector plagued by employment and contracting chaos. Lebanon has more than 10 different employment classifications, including daily workers, laborers, contract workers, invoice-based employees, hourly workers, permanent staff, service-based employees and more. Thus, restoring order within the state, restructuring and reforming the public sector remains a necessity.

Currently, the minimum wage is around $200, with discussions to raise it to $300, accompanied by an automatic increase in incentives. However, any upcoming increase depends on the Ministry of Finance’s ability to cover the additional costs. In numbers, the Lebanese state pays 300,000 salaries monthly to public sector employees, military personnel and retirees, amounting to $150 million per month. Meanwhile, representatives of public sector workers and employees are demanding salaries no less than twice their current earnings, setting a minimum of $600, which would raise the Ministry of Finance’s monthly expenditure to $350 million. However, discussions about increasing salaries and wages remain futile in the absence of a realistic budget. This highlights the urgent need for the government to reclaim the 2025 budget proposal and revise its figures after the war ends. The first step in restructuring is to determine the exact number of employees. Indeed, in developed countries, public sector workers do not exceed 10% of the total workforce, whereas in Lebanon, this percentage exceeds 30%.

The new government faces numerous complex files, with public sector restructuring being one of the most pressing, as it heavily burdens the state treasury. Restructuring the sector is the first step before any real reform in the public sector can take place, especially since this proposal is one of the primary international conditions for achieving economic recovery. Addressing the public sector issue requires a political approach first and foremost, given its impact on the living conditions of a large segment of Lebanese society. This issue remains one of the most complex due to the overlap between political and economic aspects, closely tied to the country’s social situation.