Jalel Harchaoui and Colin Powers
The Weak Social Returns of Contemporary Public Employment
Despite public employment’s sizable fiscal footprint— most years, it represents more than 50% of state expenditures—its effects on social welfare are underwhelming ndeed, the reality is that as grand as the budget line is, it fails to fund a decent quality of life for a large share of those collecting a state salary.
Three variables explain the underwhelming social return on investment of public employment in Libya. The first is the devaluation of the Libyan dinar. As a result of fractious politics and a divided government, the interventions of dueling central banks in the post-2013 period led to significant increases in the money supply—and to significant (and not fully accounted for) increases in the volume of physical banknotes in circulation. Russia’s printing of billions of unauthorized currency in 2019–2020 (and again in 2024) is responsible for the latter. The effect has been to lower confidence in the value of the Libyan dinar and to decrease the currency’s purchasing power. By extension, this has reduced the quality of life that can be sustained on a public sector salary.
The second variable is imported inflation. This was largely set in motion by the supply shocks and commodity price jumps triggered by the outbreak of the coronavirus pandemic and Russia’s war on Ukraine. (The official devaluation of the currency in 2021 did not help matters, of course). Measured against the Minimum Expenditure Basket—which considers the prices of essential goods and services—inflation topped 10.5% in 2021 before jumping to 21.1% in 2022. Price increases were worst in the west, and for food products.
The third variable is inherited from the Qadhafi era. Though public sector workers were entitled to significant nonwage benefits such as housing, utilities, and food allowances under the former dictator, salaries were relatively depressed by a rigid and fixed wage system.
By 2012, the average wage of those working in the public administration was just LD 755 per month (USD 600 at the time), and the average of those employed by SOEs was only LD 934 (USD 741). In subsequent years, salary increases were implemented. Nevertheless, state wages remained relatively low. This is evidenced by the fact that it is not at all uncommon for public sector workers to either take on a second public sector job, operate an informal business, or borrow to cover essential expenses.
The inadequacy of the state wage for a large share of today’s public workforce is illustrated by comparing public sector wages with average household spending. When it comes to earnings, official figures reported by the Central Bank in 2023 determine an average public sector wage of LD 2,272 per month and a minimum public sector wage of LD 900.
At current exchange rates, these wages translate to USD 470 and USD 186, respectively. Median wages in the public sector cannot be calculated without access to the Central Bank’s data. An estimate in the area of LD 1,700–2,000 per month seems generous, however. With regard to household spending, the Bureau of Statistics and Population Census—a division of the Ministry of Planning—documented average household expenditures of nearly LD 3,100 in 2023.
It therefore just takes a simple calculation to establish that a public sector salary is not enough to cover a family’s bills at this point in time. As such, regardless of the enormous fiscal burden generated by public employment policies, it is clear that the state’s spending is not yielding a commensurate social return.
This is of grave importance. Even if we ignore the implications of public employment policies for economic development—the opportunity costs of allocating such significant shares of annual budgets to public sector salaries are immense—the weakness of the social return on investment alone would justify the need for reform.
Public Employment’s Uneven Geographic and Demographic Reach
Making matters worse, public employment’s efficacy as a social policy is also not demographically or geographically consistent, with younger people and those living in peripheral regions of the country having comparatively less access public. These social groups are therefore disproportionately excluded from one of the main systems by which oil rents have been, and continue to be, redistributed within the country.
One may question, of course, the wisdom of making public employment a social policy in the first place. That the state should be directly responsible for ensuring the welfare of the population by providing employment indeed seems a dubious proposition in this day and age.
Be that as it may, the proposition in question is one that is supported by a wide segment of the Libyan population, and with good reason: The Libyan state has dominated the national economy since the Qadhafi era. It is also the case that for many decades, the Libyan state proudly accepted the responsibility of acting as an employer of first and last resort. Both of these historical facts anchor popular expectations today when it comes to public employment:
According to Wave VII of the Arab Barometer—based on survey data from the spring of 2022—62% of Libyans want the government to create public sector jobs, and 69% express a preference for public sector employment. The extent to which the current government is fulfilling its responsibility as employer of first and last resort—and the extent to which different segments of the population benefit from public employment—is therefore essential to understanding the contemporary social and political dynamics in Libya.
Regarding the demographic unevenness of public employment, the data establishes that public sector opportunities are disproportionately limited for younger generations. This can be seen by examining aggregate measures such as growing youth unemployment and labor force participation rates.
We can rely on these non-discriminating statistics because, due to the weakness of private sector labor demand, the public sector employs an estimated 85% of salaried, formally employed people in Libya (and 75% of the national workforce). Consequently, unemployment rates of specific social groups and age cohorts is predominantly a function of access to public sector jobs.
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Jalel Harchaoui is a political scientist specializing in North Africa, with a particular focus on Libya. Before joining the Royal United Services Institute as an Associate Fellow in 2022, he worked with the Global Initiative Against Transnational Organized Crime and the Clingendael Institute in The Hague. His research primarily centers on Libya’s security sector and political economy.
Colin Powers is the Scientific Coordinator and Chief Editor of Noria Research’s Middle East and North Africa Program. He earned his doctorate from Johns Hopkins SAIS in 2020 and was a postdoctoral researcher at Sciences Po Paris in 2022. A political economist by training, his work focuses on issues of development, distribution, finance, and power.
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