David A. Robalino is a Lead Economist and Labor and Youth Team Leader at the World Bank
Over the summer I was part of a team looking at the potential impact that an influx of Syrian refugees could have on labor markets in Lebanon. Indeed, as of August 2013, over 914,000 people had crossed the border between Lebanon and Syria because of the Syrian conflict. Most of them, around 710,000, were refugees already registered or awaiting registration with the United Nations' refugee agency (the UNHCR). These newcomers represent close to 21 percent of the Lebanese pre-crisis population.
Beqaa, Lebanon - May 03, 2013: Syrian Refugee women standing in the back of a truck
on their way to work in one of the farms. Photo by ©aicamelbourne
By the end of 2014, it is estimated that there could be at least 1.6 million Syrian refugees in Lebanon — which would be roughly 37 percent of Lebanon's pre-crisis population. Clearly, labor market (and thus social) tensions are to be expected. But how serious will those be? A new impact assessment suggests that the hardest hit will be youth and unskilled workers, with potential sharp climbs in unemployment rates and a far greater share of the population moving into the informal sector.
Profile of Syrian refugees to Lebanon
Not all of the Syrian refugees, of course, are of working age or active in the labor force. Many are children and elderly, and others are simply not looking for jobs. At the same time, the women of working age who are coming to Lebanon are four times more likely to enter the labor market, because of pressures to generate income. Thus, while only 12 percent of women aged 24-34 participated in the labor market in Syria, 47 percent of the refugees do. As a result, we estimate that by the end of 2013 the labor force in Lebanon will increase by 30 percent relative to the baseline (the situation without refugees), and by 50 percent by the end of 2014.
Who are the refugees entering the labor market? It turns out that they have similar characteristics in terms of gender, age, and education relative to the general population in Syria prior to the conflict. Both are young and of low educational level, and with a similar ratio between men and women. Almost 50 percent of the working age population of Syrian refugees in 2013 have primary education or less, 43 percent have a secondary degree, and only a minority have tertiary education. As for the types of skills that the refugees bring, these are mainly routine manual and non-routine manual physical skills that will find demand in mostly low productivity jobs in the informal sector.
Greater competition for jobs
What are the likely consequences? It is impossible to know how labor markets in Lebanon will react. However, the massive increase in the number of workers is likely to shake up the labor market. A recent World Bank report for Lebanon shows that even before the Syrian conflict, the country was already facing considerable challenges in keeping its labor force productively employed. Unemployment was high (11 percent), especially for youth (34 percent), and while the economy was creating jobs – mainly in low productivity sectors (commerce, construction, and low-end services) – it was't happening fast enough.
The new Syrian workers are going to be competing for the existing salaried jobs (even those in the informal sector) and existing business opportunities for self-employment or micro-enterprises. Some ILO studies already suggest that the demand for Syrian workers is increasing because they have minimal demands in terms of working conditions and are willing to accept long working hours. In addition, there is evidence that the Syrians are establishing micro and small enterprises (such as retail shops and small restaurants), with a comparative advantage in terms of pricing (products and equipment are often imported from Syria at lower prices). Plus they don't pay taxes. A number of Lebanese employers already complain that shops and small business are closing down because of emerging Syrian enterprises.
Our own analysis using a general equilibrium model of the Lebanese economy suggests that both unemployment and informality are likely to increase sharply. Youth and unskilled workers would be the most affected, given that the largest increases in labor supply will take place among these workers. We estimate that in 2014 the labor supply of unskilled youth could increase by 80 to 120 percent – leading to an increase in their unemployment rate of 13 to 16 percentage points. Those who are able to work will also be more likely to be self-employed or in informal wage employment. The share of total informal employment for this group could increase by 6 to 8 percentage points.
Stabilize with an eye to the future
What can be done? There are many reforms that Lebanon needs to implement to promote investments and employment creation – such as improving fiscal policy, building and repairing infrastructure, and fixing the business environment. But these reforms, will take time and their effects aren't likely to be felt for several years.
In the short term, more direct interventions are called for that combine social assistance for the most vulnerable workers with active labor market programs aimed at improving earnings opportunities. These can range from large-scale public works and services to targeted programs that facilitate transitions into wage and self-employment. But clearly, stabilizing the current situation won't be easy.