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Private sector warns of wage hike fallout

Head of the economic committees Adnan Kassar, speaks during the Saudi-Lebanese Economic Forum in Beirut, Lebanon, Thursday, March 1, 2012. (The Daily Star/Mahmoud Kheir)

BEIRUT: Lebanon’s Economic Committees handed Prime Minister Najib Mikati a copy Monday of a study that warns of negative ramifications if the Cabinet implements a proposed salary scale for government employees.

The meeting was part of drive by the private sector to persuade political leaders to abandon any support for any hasty wage hike for public sector employees, fearing that the move would cause a rise in inflation and send the budget deficit to alarming levels.

“We renewed our complete and outright rejection of the draft law endorsed by the Cabinet,” said Adnan Kassar, head of the Committees, following a meeting with Mikati.

Afterward, the Committees also visited Progressive Socialist Party leader Walid Jumblatt, who called on all sides to thoroughly study salary hikes objectively and independently from political considerations.

Jumblatt, who received the delegation at his Clemenceau residence, said there would have to be sufficient resources to adopt the wage increase approved by the Cabinet.

“This would protect the treasury and prevent any uncalculated repercussions at the economic and monetary levels,” Jumblatt added.

The PSP leader said the salary increase should take into consideration the elements of the tripartite formula: the state, workers and employers. “Scoring illusionary victories does not serve the national interest,” he added.

Efforts to increase the public sector salary date back to 1996, and a new pay scale was adopted by Cabinet three weeks ago. The measure, however, has yet to be implemented.

According to the conditions stipulated by the new salary scale, category one employees (such as general directors of public departments) will receive an increase of LL2.9 million a month; category two employees will get an LL1.7 million hike; category three employees will get an LL940,000 increase; and the state’s lowest-ranking clerks will receive a LL210,000 hike.

Public high-school teachers, the main advocates of the new scale, will receive around LL1 million in raises, while public elementary school teachers will receive LL789,000.

The increase has been met with vehement opposition from the private sector and the studies prepared by the Economic Committees warn that it would push inflation levels above 10 percent, increase tuition fees by 30 percent and add $2 billion to the budget deficit.

Cabinet has yet to refer the wage hike bill to Parliament for final approval.

Central Bank Governor Riad Salameh has also cautioned about the negative implications of the salary increase but has not rejected the proposal outright.

Salameh said he favored implementing the wage hike in increments over the next three years to reduce the impact of this measure on the monetary situation and inflation.

Mikati and Finance Minister Mohammad Safadi insisted that only new taxes could finance the wage hike but stressed that these would not burden the poor or low income families.

Several tax proposals submitted by Safadi were turned down by most of the ministers, who showed no enthusiasm for raising the value added tax from 10 percent to 12 percent or for a proposal to raise the tax on interest on deposits from 5 percent to 7 percent.

 
A version of this article appeared in the print edition of The Daily Star on October 02, 2012, on page 5.

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