Lebanon's already teetering economy could soon be dealt another blow, with the country's unions threatening a series of rolling strikes if demands for massive wage increases are not met.

With spiralling inflation eating away at the buying power of salaries, unions have called for a tripling of the minimum wage, which is currently set at $200, a rate that has remained unchanged since 1996.

Labour organisations and the government are at odds over the extent of inflation since the last increase to the minimum wage, with the state saying prices of basic commodities have risen by 24% in the past 12 years, while the General Labour Confederation (GLC), the peak body representing organised labour in Lebanon, says the figure is 63.5%.

The GLC wants to see the minimum wage increased to $640, as well as a 63.3% pay increase across the board for workers in the private sector, rises the government has said are out of the question.

Unions have warned that a failure to meet their demands would result in a general strike and ongoing labour unrest.

Though the government is determined to raise wages, its hands are somewhat tied by its own limited finances, Jihad Azour, the minister of finance, said on May 1.

While the government has yet to officially make public the level of increase it has in mind, media reports suggest the cabinet is contemplating setting the minimum wage at $300, well short of the figure set by the GLC.

Ghassan Ghosn, the head of the GLC, has opened the door to a possible compromise, suggesting that reductions in the prices of fuel and mobile phone rates by the state could be traded against a lower minimum wage increase.

"If the government agrees to return the price of 20 litres of gasoline to $13.33 instead of $18.70 and reduce the cellular rates, then we will consider a minimum wage of less than $640," Ghosn said on April 29.

However, with oil and gas prices being driven upwards by international pressures and revenue from mobile phone operators representing the state's largest source of income, the government is unlikely to pursue this option, especially given the already severe budget deficit.

Fuel prices have been climbing steadily, a major blow to many families who rely on privately owned generators to make up the shortfall in electricity needs due to blackouts and rationing by state supplier Electricité du Liban (EDL).

At the end of April, Prime Minister Fouad Siniora convened a cabinet meeting to discuss an increase to the minimum wage, though any decision on a salary hike had to be postponed due to not enough ministers attending the meeting to form a quorum.

A further complication to the mix is that any wage increase must be signed off on by Minister of Labour Trad Hamadeh, a member of Hezbollah who resigned his post late in 2006. Though back at his desk since late February at the request of parliamentary speaker Nabih Berri, Hamadeh has said he will not sign any cabinet document as he considers the Siniora government to have no legitimacy.

The government will have to balance a multitude of varying concerns in raising wages. While mollifying unions and trying to balance its own books, Siniora's cabinet will also be mindful that increasing public spending power could further fuel inflation.

According to Louis Hobeika, a professor of economics and finance at Lebanon's Notre Dame University, a moderate increase in the basic wage would not have a major impact on inflation and would provide a psychological boost to the public.

"Any modest increase in the minimum wages will definitely have some impact on inflation although the rise will be very small," he said in an interview with the local press on May 1.

However, Fady Abboud, the head of the Association of Lebanese Industrialists, has warned that an increase above $330 would have a negative impact on the economy. While the association backed proposals to increase the minimum wage to what he described as a reasonable level, Abboud said on April 25 that either steep pay rises or strike action by unions could have grave consequences for the country.

Source: Oxford Business Group