Private Sector Does not Demand Enough Skilled Labor

November 01, 2012 | Mary Kawar and Zafiris Tzannatos
Private Sector Does not Demand Enough Skilled Labor

Lebanon suffers from a 24% youth unemployment rate, which hinders economic growth and the formation of an inclusive society. Two major culprits of youth unemployment are the inequality of the
educational system that affects labor supply, and economic policies that affect labor demand.
This policy brief argues that high youth unemployment rate is due to the weak demand for skills by the private sector, which remains locked in a low productivity and low-wage equilibrium. The labor supply side only accounts for a small part of the youth unemployment rate, as Lebanon still produces more educated job seekers than the domestic market needs.
To reduce unemployment, this brief recommends that the government adopts a two-pronged approach:
One, it must increase education spending to improve access to high-quality education as well as strengthen linkages with employers; Two, it must improve accountability, reduce rent-seeking opportunities, and encourage high value-added activities by firms through fiscal policies, regulatory reforms, better infrastructure, and improved migration management.