Unemployment Rose as New Jobs Failed to Match Expansions in Work Force

According to the World Bank, the private sector in Lebanon failed in generating enough jobs to take in the expanding labor force. This drove a rise in unemployment, particularly among young people and women, and to the formation of a large informal economy, concentrated in small, low productive activities.As it is the case in most countries, young firms and startups are the companies that create the most jobs in Lebanon. Micro-startups, which are firms operating for 4 years or less and with less than 4 workers, accounted for 177% of aggregate net job creation and created about 66,000 jobs in Lebanon between 2005 and 2010. The second largest number of jobs (12,000 jobs) was created by young large firms with 200-999 employees.However, startup creation is low indicating many barriers to starting a business and competition. Although a 1% increase in firm productivity in Lebanon raises job creation by 3.9%, most firms do not improve their productivity. This is due to low competition and poor performance in backbone services such as electricity. To fix these problems and decrease the unemployment rate, the World Bank proposes the following solutions. First, policies that weaken open markets and competition for the sake of a few privileged firms should be reformed. These policies include administrative barriers to firm entry, cumbersome bankruptcy laws, exclusive license requirements to operate in specific sectors, and trade barriers. Moreover, policymakers should reduce the space for discretionary policy implementation and ensure that laws and regulations are enforced equally across firms. Another solution is to create institutions that promote and safeguard competition and equal opportunities for all entrepreneurs. Finally, a process of consultation, inputs and debate between policymakers and citizens should be established.

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