Lebanon's cabinet referred a draft law on a new public wage scale to parliament early on Friday, bowing to popular pressure but endangering efforts to control a runaway budget deficit.
Finance Minister Mohammed Safadi said the draft law, which would raise the minimum wage 35 percent and cost around $1.2bn a year, would be "economically devastating" for Lebanon.
An eight-hour cabinet session ended just after midnight with agreement on the bill, which stipulates that the measure would be funded by increasing working hours to 35 per week, raising the retirement age to 69 from 64, and increasing some taxes, including an import tax on luxury items.
Public pay demands backed by several strikes and protests in the past month are complicating the struggle to curb a budget deficit which soared by 67 percent to $3.93bn last year.
Lebanon's economy has slowed sharply in the past two years, mostly due to the conflict in neighbouring Syria which has hit its tourism sector and deepened divisions in the tiny country.
The government has asked for international aid to help it host 370,000 Syrian refugees.
Political jockeying and sectarian tensions have slowed or stalled action needed to tackle Lebanon's financial problems.
About 4,000 people protested outside the presidential palace during Thursday's cabinet session and air traffic controllers halted flights at Beirut's international airport for four hours.
The Union Coordination Committee, which represents public workers, said in a statement that it would meet on Friday to recommend the suspension of the open-ended protests.
Safadi reiterated his objections to the bill, saying it did not secure proper funding and would expand the deficit.
"Is the national economy able to bear the implications of the ... draft law and how we will face the inflation rise?" he said in a statement.
Lebanon's inflation rate stands at around 10 percent.