Lebanon's Unemployment Crisis: Strategies for Job Creation in a Collapsed Economy

*This paper is the winning submission of our 2023 Student Essay Contest. It has been slightly edited for style; the arguments, tone, and content are those of the author.

Since the outbreak of protests in October 2019, Lebanon has plunged into a severe financial crisis, ranking among the worst globally since the mid-19th century, according to a World Bank official. Lebanese citizens witnessed the perplexing and surreal scenario of their life savings vanishing from banks, a crisis closely followed by the onset of the COVID-19 pandemic. Corruption further exacerbated the situation, culminating in the devastating Beirut Port explosion in 2020, which dealt a crippling blow to one of Lebanon's key economic pillars.

Lebanon's economy is characterized as a rentier economy, with a substantial 40% dependency on remittances from Lebanese abroad. Regrettably, the architects of Lebanon's economy have exploited the unemployment crisis to push the only industry they possess – the labor of young Lebanese individuals – abroad. Consequently, the enduring issue of unemployment in Lebanon is an integral part of a deliberate strategy by the country's political class, which has held power since the end of the Lebanese civil war in 1990.

This approach, however, neglected the development of Lebanon's industrial and agricultural sectors, opting instead to prioritize banking and tourism. This preference was accompanied by a string of corrupt and unchecked policies, effectively constructing Lebanon's economy on an unstable foundation, susceptible to successive collapses.

Addressing this systemic unemployment crisis presents a formidable challenge, particularly when dealing with a rentier economy that relies on external resources, as is the case in Lebanon. Solving this issue hinges primarily on the reconstruction of Lebanon's financial system and economy, coupled with comprehensive reforms of the political system from its core.

Providing viable solutions and recommendations within this framework is a more complex endeavor compared to other Arab countries. This is because resolving the worsening unemployment crisis in Lebanon, a country that "eats what it doesn't grow and wears what it doesn't make," necessitates a fundamental transformation of its political landscape. The cure for Lebanon's crisis serves as a model for other Arab countries grappling with similar issues. These countries often find themselves stuck in political systems that, when they change, only alter their outward appearances and titles, while the underlying political and economic approaches remain unchanged. This has been the enduring reality for over three decades in Lebanon and mirrors the situation in many other Arab countries.

Understanding the Unemployment Crisis in Lebanon

In 2020, Lebanon allocated approximately 9.9% of its total government spending to education, a seemingly commendable figure. However, this percentage stands out as notably high for a country grappling with a severe economic crisis, rivaling allocations made by countries like Turkey (9.4%) and Germany (9.2%) in the same year. Over the years, from the Taif Agreement in 1990 until the economic collapse in 2019, the Lebanese political regime has elevated university education to a social ideal, irrespective of the prevailing economic circumstances. This emphasis has led to a paradoxical situation where thousands of university graduates find themselves unable to secure employment that matches their qualifications. This overproduction of specialized Lebanese labor has occurred without concurrent development in the manufacturing or agricultural sectors, leaving newly graduated Lebanese youth with little choice but to seek opportunities abroad. This systemic cycle, characterized by an economy reliant on exporting youth as a primary commodity, prioritizes financial and real estate gains over the rewards of labor and production.

Additionally, the problem extends to the mismatch between the specializations of Lebanese graduates and the demands of the labor market. A World Bank survey in Lebanon revealed that 88% of technology companies seeking highly skilled workers in Lebanon are currently unable to find suitable talent. Furthermore, societal norms in Lebanon have been less accepting of the idea of low-skilled labor, such as in agriculture, manual labor, or domestic work. These norms, rooted in Lebanon's rentier economy, rely heavily on foreign workers and immigrants. This cycle of producing specialized youth was disrupted by the recent economic collapse, which resulted in a lack of funds to support the Lebanese University and public schools, effectively turning education into a luxury accessible only to the affluent segment of society.

Consequently, the issue of high unemployment in Lebanon is deeply ingrained in the country's economic system, which relies heavily on foreign migrant and refugee labor for unskilled roles in various sectors like crafts, agriculture, and construction. Moreover, unemployment rates are notably higher among Lebanese women compared to men, further exacerbating their vulnerability in society. In 2022, the International Labor Organization reported a 32.7% unemployment rate among women compared to a 28.4% rate among men within the Lebanese labor force.

In the face of a continuous financial and economic crisis with no clear signs of structural political and economic reform, the Lebanese regime's strategy of exporting young people abroad has become increasingly futile. The educational sector in Lebanon is now at a near standstill in public schools and the Lebanese University, with private education emerging as the dominant and more expensive alternative, often exceeding the means of the average Lebanese citizen. This crisis extends to the remuneration of schoolteachers and Lebanese University professors, affecting the regular conduct of the academic year.

Shockingly, the government currently allocates a disproportionate 64% of its aid and resources to private education, which primarily benefits higher-income individuals, while a mere 16% is directed towards public schools, as indicated by a study conducted by the Center for Lebanese Studies. This underscores the government's preference for undermining the formal educational sector, which serves most of the population.

Addressing Lebanon's unemployment crisis at its core requires a political solution, primarily because the ruling class has shown little willingness to cooperate with international organizations like the International Monetary Fund or pursue political reforms that could encourage foreign investment in Lebanon. Any economic recommendations pertaining to Lebanon's situation cannot be enacted without political consensus among stakeholders or the establishment of a specialized government with extraordinary powers committed to addressing the root causes of the issue, free from the constraints of sectarian quotas that have historically impeded progress. In the event such a government materializes, dedicated to reforming and revitalizing the Lebanese economy, and restructuring it away from overreliance on the banking sector and financial services, solving the unemployment problem would hinge on two interdependent pillars: a political solution and an economic solution.

Political Will Is Crucial to Resolve the Unemployment Crisis

As demonstrated thus far, the unemployment crisis, much like all other socio-economic issues in Lebanon, can only be solved through a fundamentally political approach. There is a direct relationship between political will and the economic problems that we have seen in many Arab countries, where the regimes keep some vital economic issues, such as unemployment, as political cards that can be played when needed. Therefore, the first step towards tackling unemployment in Lebanon lies in making a political decision: diagnosing the problem, acknowledging losses, holding bank owners and the ruling class responsible for the cost of the collapse, neutralizing state property and depositors from filling the deficit, and drawing a road map for economic recovery. Lebanese youths must be involved in the parliamentary bodies that enact laws that are relevant to the reality of unemployment in the country which mainly affects younger demographics, because they have the ability to diagnose the problem and find a solution to it. Therefore, the presence of youth representatives is an essential recommendation that cannot be overlooked. The entry point to resolving the economic and financial crisis is, then, to form a government of experts with exceptional powers, in which nominations come from outside the political system and partisan and sectarian favoritism, and where youths are well-represented, in addition to ensuring gender parity in decision-making mechanisms. It is essential to create a work team capable of extricating the country from the crisis, not bound by partisan political agendas, and placing young people’s problems, the most important of which is unemployment, as a top priority. If a solution to the political downturn is found, serious talks should begin with the International Monetary Fund and a recovery plan developed for Lebanon, the effects of which its citizens will feel in the short and long term. The political solution has direct effects on the Lebanese economy, the most important of which is providing a suitable environment for foreign and local investment, thus creating new projects and securing job opportunities for the Lebanese youth.

A Youth-Led Economic Plan

In the event of a more effective political landscape emerging in Lebanon, policymakers must undertake a comprehensive study of the crisis and collaborate with the International Monetary Fund to devise a financial recovery plan. This plan should align with the IMF's core conditions, including the implementation of a "floating" exchange rate for the Lebanese Lira, a restructuring of the financial system, and other essential prerequisites to revitalizing the Lebanese economy. Such measures can facilitate the transformation of Lebanon's economy, moving away from a rentier model heavily reliant on banking and tourism sectors and towards a more productive economy that champions agriculture and industry.

This strategic plan serves as the gateway to economic recovery in a country abundant in all necessary components – natural resources, human capital, and vital ports – that are indispensable for a robust economy. Furthermore, the rehabilitation of a nation that has experienced economic collapse demands the creation of new infrastructure capable of attracting investors while concurrently generating employment opportunities for the Lebanese youth.

Lebanon, with its well-structured educational system and considerable untapped potential, stands poised to become a hub for technology companies. These firms can invest in the quality of their highly skilled workforce, and benefit from the favorable economic and political environment, all at a cost that proves compelling in comparison to other developed Arab countries. Simultaneously, understanding the demands of the labor market and incorporating them into educational curricula is essential. Providing state-funded scholarships to support marginalized groups and facilitate their integration into the labor market is imperative.

Investment in the agricultural sector emerges as a necessary step for economic advancement, especially considering the vast fertile lands in regions distant from the capital that have suffered marginalization due to administrative centralization in Beirut. Developing this sector can turn it into a primary source of state revenue and offer employment opportunities to residents of these marginalized areas.

The Lebanese agricultural sector, if properly organized and supported by the government, holds significant potential to create numerous job opportunities, primarily in agriculture and business administration. However, this sector requires protection measures, including the establishment of an agricultural calendar, stringent controls on illegal smuggling, and imposing tariffs on imported goods to safeguard Lebanese production from foreign competition.

The state bears the responsibility of equitably distributing investments to rejuvenate local industries, which have been a distinguishing feature of Lebanon since the early 20th century. Allocating a portion of the budget to revitalize local manufacturing, such as textiles, footwear, canned goods, and soaps, can fortify the Lebanese economy, rendering it more robust and productive. Supporting and safeguarding this industrial sector through financial reforms, incentives, and security guarantees for local capital while also encouraging foreign investments, is vital. These foreign investments should complement rather than compete with local industries, enhancing the overall value of the Lebanese economy.

Additionally, it is imperative to emphasize trade reforms that regulate export pricing and impose customs duties on imports of similar goods produced domestically. This approach ensures the competitive edge of Lebanese products by giving preference in terms of pricing to locally manufactured goods. Balancing funding and support between the agricultural, industrial, and rentier sectors not only creates new employment opportunities but also bolsters the tourism sector by showcasing Lebanese industries and attracting a global audience.

The path to resolving the unemployment crisis in Lebanon, and indeed in any Arab country grappling with similar economic and political complexities, must begin at the very core. Our proposed solutions must transcend superficial measures that merely mask the underlying issue deeply ingrained in a failing political system, one that has demonstrated its inadequacy over the years. Lebanese youth have been denied the opportunity to proactively find solutions aligned with their aspirations, or to actively participate in shaping the legislation that directly impacts their lives. The time has come for Arab youth to rightfully claim their place at the forefront of decision-making processes. It is their vision, energy, and innovative thinking that can pave the way toward a brighter future, not just for Lebanon but for the entire Arab region.

The views represented in this paper are those of the author(s) and do not necessarily reflect the views of the Arab Reform Initiative, its staff, or its board.