Lebanon suffers from political stagnation, social discontent, and economic collapse. Mismatch between educational choices and labor market needs persists, causing brain drain and high unemployment among university graduates. With a service-oriented market, primarily small and medium enterprises with low job creation prospects, and employer dissatisfaction with university graduates’ skills, the situation for graduates is difficult. This article aims to assess the link between higher education and the labor market amid political and economic instability.

The human capital theory defines the intersection between higher education and the labor market by assuming better employment opportunities and higher salaries for graduates. The theory, developed and tested in advanced economies, stresses government policies for enhanced economic performance and decreased unemployment. In small-size economies that lack efficient government policies but have a higher education system as big as in developed economies, human capital theory assumptions are questionable. Increased demand in developing economies coupled with government financial incapacities has led to higher education massification. Inequalities continue to exist with education liability transferred to students—those from lower social classes with fewer opportunities choose lower-quality higher education institutions (HEIs), thus putting their employment prospects at risk. Empirical evidence proves employers’ dissatisfaction with graduates’ skills, particularly for those from less prestigious HEIs. The period and pace of integration into the labor market does not only depend on education but also on HEI reputation, field of study, social capital, gender, parents’ social status, etc.

The Lebanese Context: Between Unemployment and Brain Drain

Lebanon, a Middle Eastern country with socioeconomic, religious, and demographic diversities, is characterized by a differentiated higher education landscape. The system is divided between public and private HEIs; the private system has the biggest share, and competes with one public university—the Lebanese University (LU). Massive expansion took place during the 1990s, before the establishment of the relevant ministry in 1993, and was led by political ambition to absorb increased demand—ambition that disregarded labor market needs. All universities share a common admission criterion, the Lebanese Baccalaureate Exams. The Lebanese University and elite institutions also have academic tests. For faculties not imposing entrance exams, selection is done after the first year. The mass sector, where admission depends on language exams, is more “corporatized.” Admission rates increased over the years in favor of the mass private sector with 70,722 students in the 2021–2022 school year (5 percent more than the previous year) compared to 60,705 and 43,834 students at LU and across the elite private sector respectively, with a respective decrease of 11.1 percent and 6.06 percent. After the 2019–2020 academic year—the year of the COVID-19 pandemic—admission rates decreased by 12.67 percent (in the 2020–2021 term) and subsequently by 11.1 percent in the 2021–2022 academic year due to financial and logistic challenges. Elite universities, which have the highest tuition fees, saw decreasing admission rates compared to the mass sector and LU with more affordable fees.

Students favor traditional programs and open-access faculties, proving with their recurring choices over the years the glutting theory effect. Literature and humanities faculties, which tend to pursue an open-access strategy, attracted over the past eight years one of the highest student shares, accounting for 26 and 14 percent of students at LU and in the private sector respectively in the 2020–2021 school year. Business administration and engineering faculties have opposite criteria in different sectors of the higher education system. The LU and elite providers have academic exams, whereas the mass sector is more flexible, with no academic exam for business administration and a normative exam for engineering. Both sectors had increasing admission rates across 2020–2021, at 30 and 22 percent for the private sector and the LU respectively. The lowest admission rate was for service-oriented faculties, despite Lebanon being a service-oriented market, with decreasing rates of 0.5 and 1.6 percent at LU and in the private sector.

Locked in low productivity, the labor market offers noncompetitive jobs with limited capacity for development. Around 90 percent of Lebanese companies are small or medium-size. The public sector does not contribute to job creation due to budget constraints and overstaffed administrations, with recruitment led by nepotism and corruption. The impact of multiple crises (the COVID-19 pandemic, economic crisis, and the Beirut blast of 2020) is not improving prospects for university graduates. The aftermath of the Beirut blast has only exacerbated the situation, which was already characterized by deep political tensions and an intensifying economic crisis. Not only did the explosion destroy the port area, leading to major negative economic impact, among other unfortunate human and social circumstances, but it was also mismanaged due to political fractions unable to come together and form a coherent government. The country’s currency also experienced a catastrophic devaluation: The Lebanese pound lost over 90 percent of its value compared to the US dollar. This caused hyperinflation with an increase in food prices of over 500 percent and a rapidly increasing poverty rate, which now affects about 85 percent of the population. Total unemployment reached 29.6 percent in 2022, with about a quarter of all adults (above 25 years old) unemployed. All economic sectors were impacted by layoffs and lower salaries. Approximately 350,000 jobs were lost between October 2019 and June 2020, and the majority of those affected held university degrees. Not only did unemployment increase, but so did brain drain, since skilled graduates were not willing to accept the salaries that they were offered. According to a recent study, the average monthly salary for university graduates is 753 US dollars compared to 600 US dollars for primary education holders. In short, investment in higher education with annual tuition fees between 3,200 and 27,000 US dollars does not pay off.

A little over 56 percent of the working population have qualifications that do not match job requirements. Only three HEIs are producing employable graduates. Empirical studies show employers’ dissatisfaction with graduates’ skills, including employability, behavioral, and social skills. Employers hold HEIs accountable and focus on recruiting from elite HEIs, as they see that the mass sector is failing to provide necessary skills. Despite this recruitment gap, students are still choosing mass sector HEIs, due to financial constraints, and believe that private education might provide some social leverage. Employers dissatisfied with graduates’ skills and the lack of qualified candidates due to brain drain still offer debatable salaries, as most companies are not able to go back to the level of salaries paid before the crisis. Only a very few companies, primarily multinationals or those having activities abroad, have been able to keep up with the crisis and dollarized salaries.

Implications

Lebanon is trying unsuccessfully to cope with the result of systemic governance failure and lack of accountability among its leaders. As a result of a complex interplay of political stagnation, social discontent, and economic collapse, Lebanese citizens are in a state of despair and uncertainty about their future. This leads to large-scale emigration in search of better opportunities. Brain drain is guided not only by macroeconomic factors but also by microeconomic elements relating to the interplay between the labor market and higher education. Most students are choosing the private mass sector in hope of better employment outcomes, yet employers question the quality of their skills, aligning with international trends. HEIs are not to be held solely accountable. Increased brain drain is an implicit indicator of competence, since most graduates are securing employment opportunities abroad. Most employers do not offer attractive remuneration schemes. Having a similar salary range for university and primary education graduates is debatable. Collaboration between universities and companies is required more than ever. The National Employment Office, responsible for employment policy, is invited to play a more active role by assessing labor market needs. To contain high unemployment rates resulting from several crises, it is advisable to introduce short-term actions such as active labor market programs aimed at up grading graduates’ skills through training.

Leila Youssef is an associate researcher - CRED research center, ESA Business School, Lebanon, E-mail: [email protected].