Lebanese Middle Class Could be "Wiped Out"
Lebanon’s once-thriving middle class is now shrinking in number as high inflation, relatively low wages and a lack of major investments in productive sectors take their toll on the population.
Lebanon’s recovery from its 1975-90 Civil War has been less than complete, leaving a democratic society with virtually no middle class – normally the group that democratic nations depend on to prosper.
That war “basically wiped out anything that’s called a middle class in favor of a small minority ... about 15 percent of the population, which became very rich,” says economist Simon Neaime.
Neaime, a professor of economics at the American University of Beirut, says that most of the educated class, which used to form the backbone of the Lebanese economy before the Civil War, was forced to seek better jobs abroad to maintain the lifestyle which they enjoyed prior to the conflict.
As of 2011, the World Bank classified the middle class in Lebanon as those people who earn between $15,000 and $27,000 annually.
But the World Bank statistics tell Lebanon’s actual story. Citing its (World Bank) numbers, Neaime estimates that only 5-10 percent fit this category. Seventy percent of the population generates an annual income of less than $10,000 annually while 15 percent live in abject poverty.
Before Lebanon’s Civil War, says Neaime, Lebanon’s middle class made up 50-60 percent of the population, “and then another 20 percent [were] on the two tails, a normal distribution.” That middle class was a vibrant mix of store-owners, small businessmen whose taxes were the backbone of a healthy economy.
Before the war, Beirut was proudly referred to as the Paris of the Middle East, while Lebanon was touted for its leaders as the regional model of tolerance and prosperity – attributes unthinkable without a functioning middle class.
But few things have been the same since the conflict. Western Europe’s middle class rose quickly from the rubble of World War II, helped by massive U.S. aid and support from local governments racing to re-establish healthy capitalism as a bulwark against the Soviet bloc.
Domestic economic rehabilitation programs, such as Solidere – the Lebanese economy reconstruction program – have undoubtedly made a difference in boosting Lebanon’s economy, but at the cost of forsaking the middle and lower class while pampering the upper classes.
Meanwhile, small wage increases imposed in Lebanon by the government as a means of silencing the threat of upcoming strikes are often offset by constantly increasing prices of commodities. “The increase [in wages] will [erode] before it gets in our hands due to rising prices across the board,” photographer Mahmoud al-Tawil recently told the web magazine Al-Shorfa.com, in comments reflecting widely held sentiments.
Alongside rising commodity prices, the would-be middle class is being squeezed by real estate prices that are at an all-time high. Ironically this trend has been fueled by Lebanese who have gone abroad for work due to the lack of good job prospects at home – most companies in Lebanon offer relatively low wages to engineers, architects, MBA graduates and lawyers.
A 2008 Center for Global Development study shows that on average, a Lebanese working abroad earns 31.6 percent more than he would at home. When he does return, he is relatively flush with cash – and his purchasing power on the real-estate market drives prices upward, pushing properties out of reach for those who stayed in Lebanon.
Traditionally, low interest rates expand the real-estate bubble, with investors rushing in and hoping to resell at a higher price within a few years. This speculative market also pushes up prices – a three-bedroom apartment in Beirut that cost $300,000 10 years ago now can fetch a price of more $700,000 or more, depending on the location and condition of the building.
Rents in the capital and the northern Metn have also skyrocketed, prompting newly married couples with university degrees to seek homes outside Beirut.
Inflation further compounds hardships, with an estimated annual inflation rate of 6 percent in 2011, though many economists maintain that the real figure is in fact far higher, due to rising prices across the board.
Neaime says that while the problem is global, “the increase in food prices, the increase in oil and gas prices ... is affecting goods and services locally.”
Lebanese expatriates, especially those who are based in the oil-rich Arab Gulf states, inject an average of $8 billion into Lebanon’s economy and this massive cash flow has helped the balance of payments.
As for restructuring the Lebanese economy, the process included a strong focus on the country’s banking and tourism sectors, a good short-run boost in the Lebanese economy.
As economist Markus Marktanner, previously a professor at AUB, notes, “these are not favorable industries to create a middle class. Both industries have very weak impacts on the labor market.” Tourism can be detrimental to a less than stable economy, Marktanner adds, as it “mostly demands seasonal and unskilled workers.”
“During the Civil War, Lebanon’s economic base as a safe haven eroded and the Gulf emerged as the new hot spot,” explains Marktanner. “The Gulf then also attracted many Lebanese and what could be a middle class in Lebanon became an expatriate middle class of Lebanese outside the country.”
As more and more Lebanese left the country in search of better opportunities, the local economy found less need to cater to the middle class.
Today, Marktanner says, Lebanon is left with no meaningful economic base, as it offers little stability. Those who have the chance to migrate are doing so, particularly college graduates, and perpetuating the cycle by draining the country of a future middle class.
Neaime sees some trend reversal, with salaries for professionals slowly creeping upward at a rate that beats inflation. But some of the revival might be temporary, with those choosing to stay often doing so because the global economic crisis has closed doors of opportunity that were open just a few years ago.
“It’s a combination of an exodus back to Lebanon accompanied by some improvement in the local salary scale,” he says.
Sari Hanafi, professor of sociology at AUB, speaks of a “migration culture” in Lebanon. Lebanese have more opportunity than their neighbors to attain a decent level of higher education, giving them greater mobility than their neighbors to go where the jobs are – including abroad. In Lebanon, Hanafi says, getting a good job is less a matter of skills or education and “more about the connections.”
The country’s open society also means that a young Lebanese college graduate’s goals are defined by Western-inspired consumerist goals unreachable at home.
Hanafi says that a Lebanese male of 25 considers owning a Mercedes and a nice apartment as minimum components of a nice life. Consequently, he will go abroad to support his definition of an “adequate” lifestyle.
In their own words, students at AUB echo Hanafi’s views, with economics student Afif al-Charif summing it up succinctly.
“Of course I plan on leaving Lebanon. Why would I stay?” he said. “Lebanon is not a stable country, everything seems unstable ... I could make three times more money if I worked abroad.”
By Paula Jahn