Saturday, August 9
The Minimum Wage Is A Stupid Idea
Lebanese workers need to understand that the minimum wage is a hollow idea that does nothing to increase their living standards.
Lebanese workers are digging up trouble
It must have been the easiest thing in the world for the General Labor Confederation to threaten to stage a general strike if the government does not succumb to their crazy demand of raising the minimum wage to 1,100,000 L.L (730$).
Not only is the amount ridiculous (that’s the amount an engineering graduate gets), but the entire idea of the government enforcing how much private companies should pay to employees is laughable.
Minimum wages are a bad idea for 3 reasons:
1- They’re hard to enforce by even the strongest of governments
The competition will drive many workers to be willing to work for less than the minimum wage. This will result in a complicity with the employer that is inscrutable to the government, especially one as weak as the Lebanese government. Consequence: Large black market in labor.
2- If they do get enforced, they drive prices up and leave purchasing powers unchanged.
The producers of goods and services will have to increase their prices because labor has become more expensive. This will drive up inflation and makes everything dearer. The employees will discover that their new salary buys them the same amount of stuff as the old one, if not less.
3- They make the economy worse off.
Some factories and producers won’t be able to sustain their production because they will lose competitiveness with imported goods. This causes factories to shut down causing more unemployment, and government to lose tax money.
The Lebanese workers are having a terrible time. But they are deluded if they believe that minimum wages can solve their problems.
Wednesday, August 6
Standard & Poor Improves Lebanon’s Rating
The rating agency was impressed by the Doha accord and the “easing of tensions” in Lebanese politics.
We graduated from ‘CCC+’ to ‘B-’ because S&P believes our outlook is stable. Bank depositors are no longer freaked out by the prospect of a country falling apart and a banking collapse:
“The ratings on Lebanon were raised to reflect the easing of tensions between the March 14th coalition, which dominated the government, and the opposition that in May had taken Lebanon to the brink of civil conflict,” Standard & Poor’s credit analyst Ben Faulks said. “The Doha accord, which has delivered the election of a president and the formation of a national unity cabinet, augurs well for Lebanon’s immediate political stability. This reduces the risk that depositors will withdraw funds from the Lebanese banking sector, which in turn lessens the government’s near-term financing risks as banks are by far the government’s largest creditors.”
But of course, nothing is set in stone:
The ratings will be lowered should political tensions escalate to the extent that they seem likely to shake the long-documented resilience of depositors in the Lebanese banking sector. The ratings could be raised if the political compact strengthens to the point where the government begins to make progress in advancing the program of economic reforms pledged at the Paris III conference.
BADER Brings Private Equity Funding To Aspiring Lebanese Entrepreneurs
When Lebanese businessmen abroad empower young Lebanese entrepreneurs at home, great things can happen.
It works pretty much like it does in the US, but that doesn’t undermine the importance of BADER’s initiatives to bring the spirit of entrepreneurship to the young Lebanese.
The idea is simple yet brilliant. BADER asks Lebanese businessmen around the world to invest in new ideas and projects in Lebanon and gives them the option of becoming angel investors. They then set up private equity financing schemes that entice young people with good business plans to step forward.
Everyone wins: The entrepreneurs win by getting financing to their deserving projects and the businessmen win by owning a chunk of a business with a promising future.
For more details about BADER’s work, read this Al-Bawaba article. If you have an idea for a great business, I recommend you visit their website.
Saturday, August 2
The NSSF. A Big Hole In The Government’s Pocket
Reforming the NSSF is an admirable goal, but it can’t happen without a great effort by the government to communicate.
The NSSF at work..
Many of my relatives work in the public sector, and to them, the National Social Security Fund is a safety net that has served them very well in their moments of need. Any talk therefore of ‘reforming’ the sector by the government is guaranteed to get them up in Arms.
Yet for reasons beyond us all (an aging population, rising health costs), the fund is increasingly unsustainable and is putting a large hole in our government’s coffers. If nothing is done to counter the drain, the NSSF will eventually implode for lack of funding.
However, it is not enough for the government and financial experts to talk about reform. There should be a nationwide campaign to inform citizens on why reforms are necessary, especially since it involves an element of sacrifice from the public.
For that to work, the government needs to show the people that its doing its share of the hard work. there should also be an effort by the government to increase the efficiency of the fund by modernizing its bureaucracy and eliminating waste.
This will be an uphill battle, but it is one we shouldn’t shy away from.
Tuesday, July 29
The Silver Lining In Lebanon’s Unrest: Low Inflation
How the Lebanese fight their way into the low-inflation zone.
According to this article in the Daily Star, Lebanon has managed to keep a relatively low inflation rate of 6%, a very decent figure compared to the double digit figures of the Gulf. So how did we do it?
Saad Andary, the deputy GM of the Bank of Beirut and Arab Countries explained:
“inflation here remains lower in comparison to the exploding levels in the Gulf, because [...] Lebanon’s economic growth and domestic demand also fall far short of the numbers in the Gulf, which are driven by the oil-price windfall [..] they have plenty of cash, plenty of revenues,[..] they do not have the capacity to absorb all this liquidity.
“We don’t have oil - give us oil, and we’ll show you how we inflate prices.”
Yes, he actually said that last sentence. But don’t worry, the Lebanese don’t need oil to inflate prices: “If Lebanon’s turbulent political scene ever calms, it could lead to some of the excess cash from the Gulf arriving here - and pushing up prices,” Andary said.
So here’s a tip for price wary Lebanese: Whenever you feel prices getting out of hand, just create a fuss and send Lebanon back into political limbo. That ought to keep Arab money away and the prices low.
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