2013年-世界发展银行全球_Republic_of_Lebanon___Economic_and_Labor_Force_Impact_of_the_Change_in_the_Wage_Structure_of_the_Public_Sector_35页_415kb

Summary of Report No. 79324-LB: Economic and Labor Force Impact of the Proposed Change in the Wage Structure of the Public Sector in Lebanon

Core Content

This report evaluates the economic and labor market implications of a proposed increase in public sector wages in Lebanon, including a cost of living (CoL) adjustment and a salary scale revision. It analyzes the potential consequences of these measures, both with and without offsetting revenue reforms, using two complementary models: the Computable General Equilibrium (CGE) model under the MILES project and the World Bank's RMSM-X macroeconomic model.

The report outlines five scenarios to assess the impact of the wage increase, considering different levels of implementation and the extent of wage pass-through to the private sector. It emphasizes the importance of balancing wage increases with fiscal sustainability and structural reforms to mitigate negative economic effects.

Main Views

• Wage Increase Impact: The proposed wage increase would significantly affect public finances, labor markets, and economic growth.
• Fiscal Challenges: Without revenue measures, the wage increase would worsen the fiscal deficit and public debt, leading to higher inflation, interest rates, and reduced competitiveness.
• Sectoral Impacts: Construction and manufacturing sectors would be most affected due to their reliance on investment and capital-intensive nature.
• Labor Market Effects: Unemployment would rise, especially among unskilled youth and skilled non-youth, while informality and outmigration might initially decrease.
• Revenue Compensation: Introducing revenue measures could reduce the negative impact of the wage increase and help maintain macroeconomic stability.
• Pension Reforms: Reducing the salary scale adjustment and reforming the pension system could improve fiscal sustainability and reduce the burden on public finances.

Key Information

1. Proposed Measures

• Cost of Living (CoL) Adjustment: Implemented in February 2012, retroactive to that date.
• Salary Scale Adjustment: Proposed in March 2013, with a planned reduction in the total cost through offsetting measures.
• Offsetting Measures:
  • Revenue Package: Includes one-off taxes, new fees, and permanent tax reforms.
  • Expenditure Reforms: Reduction in salary scale increase and pension system adjustments.

2. Economic Impact (Without Revenue Measures)

• Fiscal Deficit: Would increase by 0.8 to 3 percent of GDP annually from 2013 to 2019.
• Public Debt-to-GDP Ratio: Would rise by 14pps of GDP by 2019.
• Imports and Reserves: Imports would increase, leading to a decline in foreign currency reserves by US$6.4 billion by 2019.
• GDP Growth: Would decline by 1.1pps by 2019.
• Unemployment: Would rise by 0.5pps by 2019, with further increases in the long term.
• Sectoral Effects: Construction and manufacturing would be most affected, with a drop in investment and economic activity.

3. Revenue Compensation

• Estimated Revenue Gain: LBP3,952 billion in 2013, but includes large one-off measures.
• Permanent Revenue Measures:
  • Increased stamp fees for construction permits (LBP600 billion).
  • Additional stamp fees on phone bills, travelers, and commercial transactions (LBP281 billion).
  • VAT on luxury goods (LBP251 billion).
  • Excises on alcoholic beverages (LBP275 billion).
  • Taxes on lottery gains and real estate capital gains (LBP56 billion).
• Benefits of Revenue Measures:
  • Reduce the negative impact of wage increases.
  • Help maintain macroeconomic stability.
  • Limit the increase in the debt-to-GDP ratio to 0.9pps by 2019.
  • Keep imports moderate and reserves stable.

4. Expenditure Reforms

• Reduction in Salary Scale Increase: 5 percent cut from the original proposal.
• Pension System Reform: Includes increased contributions and revised benefits.
• Estimated Savings: LBP800 billion over 2013–2019.
• Positive Outcomes:
  • Improved macroeconomic and structural outcomes.
  • GDP growth would be only 0.2pps lower than the baseline.

5. Structural Reforms

• Need for Comprehensive Reforms: Wage and revenue increases must be accompanied by structural reforms in public employment, social protection, and health insurance.
• Public Sector Reforms: Should define the mission of the public sector, its functions, and the roles of its staff.
• Social Safety Nets: Strengthening them is essential to reduce the distortions caused by wage increases and improve the attractiveness of private employment.

Conclusion

The report concludes that increasing revenues to accompany the wage increase is crucial for maintaining macroeconomic stability. Without such measures, the economic impact would be severe, including higher debt, reduced growth, and increased unemployment. Revenue compensation and expenditure reforms can mitigate these effects and allow for sustainable fiscal consolidation. However, these measures should be part of a broader structural reform agenda that includes the modernization of public employment and the expansion of social protection and health insurance systems.

Annexes Overview

Annex 1: Importance and Limitations of the Models

• CGE - MILES Model: Focuses on sectoral and labor market dynamics, but does not capture distributional or asset reallocation impacts.
• Macro - RMSM-X Model: Provides insights into macroeconomic aggregates and variables but lacks detailed sectoral differentiation.

Annex 2: Baseline Scenario

• Assumes no CoL increase and no offsetting measures.
• Projects a gradual decline in current spending to GDP and an increase in capital spending.
• Growth recovers to 4.0 percent by 2014, with a slow decline in unemployment.
• Debt-to-GDP ratio declines to 119 percent by 2019.

Annex 3: Scenario 1 – CoL Increase with No Revenue Measures

• Simulates the impact of the 2012 CoL increase.
• Highlights the negative effects on public finances, inflation, and employment.
• Suggests the need for complementary revenue measures to offset the fiscal burden.

Annex 4 and 5: Scenarios 2–4

• Scenario 2: Full salary scale adjustment without revenue measures.
• Scenario 3: Salary scale adjustment with revenue measures.
• Scenario 4: Salary scale adjustment with both revenue and expenditure reforms.
• Each scenario is analyzed under two wage pass-through assumptions: 10% and 37%.

Overall Assessment

The proposed wage increase in the public sector poses significant challenges to Lebanon’s economic stability. To ensure sustainability, the government must implement complementary revenue and expenditure reforms. These reforms should not only address the immediate fiscal impact but also contribute to long-term structural improvements in the labor market and public sector efficiency.