+This is a translated and edited version of the executive summary of a longer paper entitled "Poverty in Lebanon," prepared in 1995 for the United Nations Economic and Social Council for Western Asia (ESCWA). It was prepared for the International Summit for Social Development held in Copenhagen in March 1995. The figures used in the paper are for the period up to 1995.
*Antoine Haddad is a researcher specializing in development issues.
Although poverty appears to be among the oldest of phenomena, the interest in studying poverty as such is relatively recent in Lebanon. In Lebanon's modern history, a large segment of the population has been affected by deprivation. Nowadays, there is a common belief that the expansion of poverty is a result of the war. This is only half the truth. There are structural causes particular to Lebanon's social and economic system that have engendered serious discrepancies in the society, particularly as regards income distribution. We will attempt to outline some of these causes in what follows,
The absolute poverty line, which is defined in Lebanon as the income level at which an average family of five can meet its food requirements and other basic needs such as health, education, housing and clothing, was estimated at $618 per month at the end of 1993. In the same period, the extreme poverty line, defined as the income level at which a family of five can meet only its food requirements, was estimated at $306 per month.[1] Given these figures, 28% of Lebanese families are estimated to live below the absolute poverty line, while, of these, 7.25% live below the extreme poverty line. This implies that around one million Lebanese live in poverty, while 250,000 of them live in extreme poverty.[2]
In rural areas, 75% of families whose primary provider works in agriculture are poor, and 40% of these are extremely poor. Two thirds of the extremely poor - around 165,000 - live in rural areas and represent more than a quarter of the population in these areas.
In urban centers, namely Beirut, Tripoli, Sidon, Tyre, Zahleh, and their suburbs, there are around 750,000 poor, around 90,000 of whom are extremely poor. The urban poor mainly belong to families whose primary provider works in the civil service (31% of which live below the absolute poverty line) or in industry (26% of which live below the absolute poverty line). Some 8% of urban families live below the extreme poverty line, 5% in the civil service and 3% in industry.
According to preliminary estimates based on non-statistical field research, the size of a poor family in Lebanon ranges between 6.5 and 7 members, higher than the national average, which nowadays is thought to be 5 members.[3] On the other hand, the size of the poor family declines with time, following the general national trend. In addition, the size of poor rural families or urban families of rural origins is larger than that of urban families. The dependency ratio for families (family members/working family members) is also high at 4, while the national average is 3.3.
Poverty places an additional burden on women and exacerbates discrimination against them. Thus, poor working women's salaries and incomes are lower than those of their male counterparts. Women who head poor families are exposed to continuous exhaustion owing to the accumulation of their workload both inside and outside the home. Moreover, poor women and young girls are discriminated against regarding access to health care and nutrition.
The educational level of the poor, both men and women alike, is low, since few heads of poor families have received secondary or higher education - except for civil service employees - or adequate vocational training. As for the children of poor families, a high percentage of them are enrolled in schools; however, a correspondingly high percentage drop out after a period of time. This is caused by several factors, including (a) the insufficient number of government schools in poor neighborhoods, (b) the low standards of both government as well as many private schools, (c) the low occupational and economic return of education, and (d) the constraints of higher education costs on family budgets.
The access of poor families to primary and secondary health-care facilities is limited because of their high costs, and most poor do not enjoy effective health coverage. Chronic or recurrent diseases are common, and the incidence of physical handicaps, mental retardation, or sickness-related death is higher than the national average because of the incapacity to bear treatment costs and negligence and ignorance.
Poor neighborhoods, especially in the cities, are overcrowded and suffer from random urbanization, scarcity of green spaces, and the absence of sewage systems or, where they exist, their intermixture with water supply systems which are not adequately connected to houses. These neighborhoods also suffer from a lack of, or frequent interruption of electrical power. Garbage is often left to accumulate in the streets and between buildings, while at times individuals live in homes run down as a result of negligence or partially destroyed by the war. The mount of living space per individual is estimated at less than 10 square meters, below the 14 square meters internationally approved as necessary for the physical and psychological well-being of an individual.
Lebanon's experience in the last three decades shows that the improvement in the standard of living generally follows economic growth. However, while growth is a necessary condition for the reduction of poverty, it is not sufficient: this was obvious during the periods 1971-1974 and 1992-1994 when growth rates were high but were not accompanied by a reduction in poverty. In this regard, a more accurate approach would be to study the disparity in the distribution of growth returns among regions and sectors.
There is also a close relationship between poverty and unemployment. In a country where wage earners account for two-thirds of the total work force,[4] and where unemployment compensation is rarely provided, the loss of a job can mean the cutting off of a family's principal, and often only, source of livelihood. According to estimates, unemployment in Lebanon ranges from 12% to 16%.[5] The spread of poverty follows the changes in the structure of the work force, which is reflected in an expansion of the informal economy, the prevalence of disguised unemployment, job instability, and the accumulation of jobs. Poverty can be looked at as both a result and cause of unemployment. In fact, the lack of productive assets often prevents the poor from launching small- or medium-sized projects. Today, given the saturation in employment in traditional sectors, such projects provide the only opportunity for creating jobs.
Those who do not possess liquid financial and productive assets find it extremely difficult, if not impossible, to benefit from banking or financial facilities. Even ownership of land may not provide a way out of poverty if the size of the land, soil fertility, and agricultural markets are insufficient to generate a sufficient added value. The number of agricultural plots in Lebanon is estimated at one million, while only 90,000 people work in agriculture. This suggests that, on average, there is one person for every eleven plots, which makes agriculture a largely unprofitable venture at the national level.
The ownership of built-up real estate, particularly relatively old apartment buildings, also do not guarantee security from poverty. Rents were frozen during the war period and, in real terms, rent values were swallowed up by inflation. Despite relative increases in post-war rents, property owners continue to be paid substantially low rates, with the effect that most small and medium property owners live below the absolute poverty line.
War is seen as the main cause of poverty in Lebanon in the last twenty years. Indeed, the years of violence caused GDP to fall by 60% of its projected value by 1993 had the war not occurred.[6] The war did significant damage to Lebanon's means of production and infrastructure, with losses estimated at over $25bn.[7] It also led to the destruction of hundreds of production units, declining national productivity, a lag in administrative and technological advances, and a halt to the regional functions of the Lebanese economy. Most important of all, the war caused the death of more than 65,000 people and injury to more than 84,000 others, while several thousand were maimed. It exacerbated emigration and forced the displacement of some 800,000 people - one-third of the estimated resident population.[8] Given these figures, the relation between the consequences of the war and the spread of poverty is obvious.
One of the most significant consequences of the war was hyper-inflation between 1986 and 1992. During this period the inflation rate remained generally above 100% annually, exceeding 500% in 1987.[9] While expanding inflation was provoked by a series of factors, the primary cause was war: it was responsible for the segmentation of the domestic market, fragmentation of the labor market, the migration of skilled workers, a cut-back in exports, the waste of government resources, and a weakening of the state's regulatory role in the economy.
Among the most serious effects of the war was the displacement of large numbers of people from their areas of origin, and the destruction of an estimated 100,000 housing units. This was often accompanied by the disappearance or death of family members, most of the time males, the break-up of families, the loss of job opportunities, and subsequent resettlement in areas not originally set aside for living. At the same time, education and vocational training levels declined, as did primary and secondary health care. The displaced population included a very high percentage of poor: 75% were estimated to live below the absolute poverty line and around 50% below the absolute poverty line.[10]
Post-war governments have not had clearly-defined social policies to combat poverty. Rather, they have considered that Lebanon's social problems would be solved indirectly through implementation of the economic measures pursued in the national reconstruction program. These have centered around currency stabilization and the reconstruction of physical infrastructure. State policy has concentrated on economic rather than social questions, and the government has sought to reduce the effects of poverty and limit its spread rather than neutralize its causes. Indeed, the government has appeared to regard poverty as something inevitable whose negative aspects should merely be brought under control.
This situation is symptomatic of the government's general approach to policy in general. Not only has it failed to define a social policy, it has not developed a clear economic program either. Instead, the official approach to economic planning has reflected a traditional feature of Lebanese politics: the rejection of planning and prior commitment. This has been reinforced by the government's marked tendency to adopt neo-liberal policies, a trend that has come to predominate internationally.
An adequate policy on salaries and wages is one of the main elements in the fight against poverty. Salary earners constitute 55% to 60% of the total work force in Lebanon. In real terms, the purchasing power of salaries has eroded because of soaring inflation rates in the last two decades, which reached an average of 110% between 1984 and 1992.[11] Salaries in the private sector are decided in accordance with supply and demand, except for the minimum wage and the annual adjustment rate, which are determined by the government. The government has avoided raising salaries to alleviate poverty. Instead, it has accorded priority to controlling the money supply in order to reduce inflation, while arguing that this would improve the standard of living, especially among employees of the bloated and inefficient civil service.
While a tight monetary policy might be appropriate for reducing budget deficits and the public debt, it puts an unfairly heavy burden on salary earners. Thus, over the past twenty years, the share of GDP allocated to salaries has fallen from 58% to less than 40%.[12] During more or less the same period, the minimum salary lost 70% of its value in real terms.[13] Owing to the implementation of a salary adjustment rate, which decreases the higher the salary bracket, the medium salary dropped at a faster rate than the minimum salary. All these factors have led to the spread of poverty among salary earners, particularly in all categories of the civil service.
The government's efforts to implement a policy on employment to combat poverty, involving creating job opportunities, setting up programs for vocational training, and increasing labor productivity, has been largely marginal and subject exclusively to market forces. Official documents outlining economic policy, most notably the different versions of the ten-year Horizon 2000 reconstruction plan, fail to define an approach to employment. The Lebanese labor market is virtually open to non-Lebanese workers, particularly in the construction and informal services sectors. At the same time the labor force grew from around 900,000 workers in 1987 to approximately 101 million workers in 1993, and continues to grow at an increasing rate owing to a reduction in emigration. The number of job seekers is estimated to be growing at an annual rate of 75,000.[14]
All of these factors have added to the pressures on the labor market, and have increased official, veiled*, and part-time unemployment rates, which are all aspects of poverty. This situation requires a more systematic and less improvised approach to employment, one which would seek to protect the labor market and create new opportunities to reintegrate the unemployed, absorb young newcomers into the labor force, and retrain workers in order to increase their productivity. Such measures should also aim to restore the balance between economic sectors in order to strengthen existing small enterprises and encourage the establishment of new ones. It is such enterprises that have the capability of creating new jobs in the short and medium terms and rehabilitating jobs considered marginal and left today to foreign workers.
Real possibilities exist for expanding both the productivity of agriculture and the volume of agricultural production, which are capable of creating new job opportunities. This would have a particularly significant impact in rural areas which are particularly affected by the spread of extreme and absolute poverty and migration to the cities or abroad.
The resilience of Lebanese industry, despite serious damage to industrial facilities during the war, also demonstrates the many relative advantages of developing the sector. Industry remains an especially effective vehicle for achieving economic growth and, therefore, increasing job opportunities.
Figures suggest that the services sector is relatively saturated as far as creating new job opportunities is concerned. The number of workers in the services sector, as a percentage of the total labor force, has been stable since before the war, as has the share of services as an origin of GDP.
In the face of such needs, the Horizon 2000 plan allocated only 4.8% to agriculture and 3.4% to industry from a total expenditure of some $11.7bn+. To get a clearer idea of the Hariri government's priorities, one can compare this, for example, to the 25.5% allocated for transport alone.[15] This discrepancy can be explained by the government's underlying approach to economic policy, in which it has limited its own role to rehabilitating the infrastructure needed for economic growth, which, in turn, is to be achieved through private investments. Despite the apparent neutrality of the government's plan vis-à-vis the different economic sectors, it does not promote agricultural and industrial growth which require a measure of planning, intervention, and state support. Furthermore, the government's policy of stabilizing the currency through high interest rates has deprived the productive sectors of the credit needed for growth and expansion.
While steps have been taken to facilitate provision of credit in order to establish small enterprises and expand the labor market, no interrelated plan of action to do this in a systematic way exists. Credit schemes to small enterprises remain marginal and are made available either by international organizations or agencies, or by the Ministry of Social Affairs. The banking sector still lacks the guarantees and incentives for a lending policy that would benefit small and medium enterprises.
In order to improve vocational training and enable the poor to be employed in productive jobs, the Hariri government set up a ministry for this purpose. In addition, a comprehensive study was initiated to determine the requirements of the labor market and to examine ways of linking it to the educational system. The most obvious problem is the decline in the number of students enrolled in vocational training to 13% of the total number of students. Ideally this number should not fall below 20%.[16] Other signs of an imbalance in education include the greater number of students enrolled in private vocational education than public vocational education, the failure of public education to respond to the emerging needs of the labor market, and the dearth of programs designed to both retrain workers and professionals and determine and remedy the shortcomings in their expertise.
To fight poverty it is necessary to insure that the cost of living remains relatively stable. The gap between incomes and prices increased dramatically during the years of the war, with prices increasing by as much as four times as income. After 1992 the government managed to stabilize the Lebanese pound, and even improved its exchange rate vis-à-vis the dollar, reducing the annual average inflation rate to around 12% between 1992 and 1994.
The consolidation of the pound has had a limited social impact, especially as it did not lead to a fall in basic and consumer prices. The government did take some limited steps to control prices, although this provoked the displeasure of some ministers who considered it violated free market principles. These measures, which took place in a largely oligopolistic economic environment, included the establishment of popular markets and intervention with bakery owners to prevent them from raising bread prices. However, the measures did not prevent prices from remaining at levels going back to the period of hyper-inflation before 1993.
The Hariri government has not sought to include a social dimension in its fiscal policy.[17] It has excluded the principles of a progressive tax and a property tax, and has applied a single across-the-board income and corporate tax of below 10%, while compensating for this by substantially raising indirect taxation and fees. The government has argued that low direct tax rates are necessary to promote investment.
Through its fiscal policy, the government appears to be aiming to increase the contribution of citizens to the financing of reconstruction and public expenditures. By contrast, the government has reduced the tax burden on those earning high profits and income, with very large tax exemptions for large companies and those operating in the tourism sector. The result, however, has been a growing negative gap between income and expenditures for a majority of the population.
Safety nets play a significant role in reducing the spread of poverty and dealing with its effects. In this regard, the government seems to have renounced building up a welfare state. Instead, it has preferred using immediate, ad hoc, and temporary financial transfers, or transfers in kind, to establishing mechanisms entrusted with an empowering or developmental role. The number of enterprises registered with the National Fund for Social Security has decreased from 32,000 in 1974 to 26,000 in 1992.[18] For the same period, the number or registered workers has remained unchanged, although the size of the labor force almost doubled. As for family and other allowances, their value fell, in real terms, by 50% between 1984 and 1992.[19] End-of-service compensation declined on average from $17,000 to $4,700.[20] Between 1988 and 1992, basic medical services increased twice as much as the price index.[21] At the same time, the actual capacity of government hospitals dropped to less than 20% of their nominal capacity.[22] A similar trend is evident in government-financed education, which has been provided with a shrinking share of the budget. The result has been a deterioration in the quality of education, rising failure and drop-out rates, and a decline in enrollment rates.[23]
1. Mu'asasset al-buhuth wal istisharaat (The Research and Consultancy Association), "Tatawur al-as`ar wal ajour fi lubnan: 1984-1992 (The Development of Prices and Salaries in Lebanon, 1984-1992), Beirut, September 1993. See also, Le Commerce du Levant, October 21, 1993.
2. This is based on a study done on 1,000 families carried out in July 1994 by the Centre d'Information Stratégique et Economique and published under the title, "Enquête Exclusive sur les Revenues des Libanais," Commerce du Levant, August 11, 1994.
3. An unpublished study shows that the average family size in Greater Beirut is 4.4 persons. For all of Lebanon, the number rises to 5 members per family; see Institut d'Aménagement et d'Urbanisme de la Région d'Ile-de-France (IAURIF), "Plan de Transport du Grand Beirut, Enquête Ménages, Premiers Resultats et Commentaire, September 27, 1994.
4. Republic of Lebanon, Ministry of Social Affairs, "Al-taqrir al-watani ila al-qima al-`alamiyyah li-tanmiah al-ijtima`iyya (The National Report to the International Summit for Social Development)," Beirut, February 1995.
5. Ibid. See also Najib Issa,"Al-ta`atul wa i`adat al-`amar fi lubnan (Unemployment and Reconstruction in Lebanon)," in Al-ta`atul fi douwal al-ESCWA: Waqa`i ijtima` al-khoubara' hawla al-ta`atul (Unemployment in the ESCWA Countries: Minutes of the Meetings of Experts on Unemployment), Amman, 1993.
6. Republic of Lebanon, The Council for Development and Reconstruction, " Al-khuta 2000 lil-inma' wa al-`amar, al-taqrir al-tanfizi (The Horizon 2000 Reconstruction Plan: The Executive Report)," Beirut 1994.
7. Unpublished report by the World Bank, "Lebanon: Stabilization and Reconstruction," March 1993.
8. Boutros Labaki et Khalil Abou Rjeily, Bilan des Guerres du Liban 1975-1990, Paris: L'Harmattan, 1993, p. 36.
9. Ecochiffres 1993, Beirut 1994, p. 35.
10. Kamal Feghali, "Qadiyyat al-tahjeer fi lubnan, 1975-1990, al-nata'ij al-awaliyyah al-maidaniyyah (Population Displacement in Lebanon, 1975-1990: Preliminary Results of Field Research)," July 1992, p. 110. See also Robert Kasparian (et al), La Population Deplacée par la Guerre au Liban, Paris: L'Harmattan, 1995.
11. Kamal Hamdan, "Siyasat al-oujour wa al-madakheel (Salary and Income Policy)," Abaad, Number 2, November 1994.
12. Anis Abi Farah: "Siyasat al-oujour wa al-madakheel: ta`qib (Salary and Income Policy: A Commentary)," in Ibid.
13. Kamal Hamdan, op. cit.
14. Republic of Lebanon, Ministry of Social Affairs, op. cit.
*Where employees are officially employed, but are not working.
+The figure for total expenditure has fluctuated, however, reaching as high as $13bn, before being apparently cut down to some $7bn. See the Economics section.
15. Republic of Lebanon, The Council for Development and Reconstruction, op. cit.
16. In 1994, the figure had declined to 8% of all students according to the Ministry of Education.
17. Saad Indari : Al-siyasa al-daribiyya (Fiscal Policy)," Abaad, Number 2, November 1994.
18. Ecochiffres 1993, Beirut 1994.
19. Republic of Lebanon, Ministry of Social Affairs, op. cit., pp. 14-16.
20. See indicators on health services published in Central Bank of Lebanon, "Al-taqrir al-sanawi lil-a`wam 1990 wa 1991 wa 1992 (Central Bank Annual Reports, 1991, 1992, 1993)," Table 8, p. 132.
21. Ibid.
22. Ecochiffres 1993, Beirut 1994, p. 54.
23. Central Bank of Lebanon, op. cit., p. 149.