Beirut pulses with expatriate lives. Foreign nationals come from everywhere for lots of different reasons. Some of them are here to teach, others come to learn Arabic, and still others come to write. Few of them stay for 62 years.

It was at an expatriate gathering – an early evening Fourth of July rooftop barbecue – that I met a Palestinian-German woman. We spoke about city life for a few minutes before the conversation turned to the topic of her MA thesis. She was here from Germany to investigate the naturalisation criteria for Palestinian refugees in the immediate post-Nakba era. This, it turned out, was partly an economic story.

According to her, the few Palestinians who were naturalised in Lebanon during the late 1940s and early 1950s were Christians. But only a small number of Palestinian Christians gained citizenship – wealthy people, chiefly. That underlined the fact that while Lebanon is sectarian, economic considerations also bedevil this mélange society.

Palestinian refugees in Lebanon are mostly relegated to society's fringes. A history of violence, poverty and state-sanctioned discrimination combine to beget more violence and poverty. These refugees are traumatised. Theirs is a psychology of besieged dispossession – and they yearn simultaneously for home and a better life now, in Lebanon.

Much has been made of the Lebanese government's recent decision to ease the barriers to dignified work for Palestinians here. But Palestinians I've spoken to in the penurious Shatila camp don't expect much to change.

The new law fails to address the causes for discrimination and inequality. For instance, parliament waived work permit fees, but the process of applying for those permits remains prohibitively cumbersome. Before hiring a Palestinian, a Lebanese employer must demonstrate to the ministry of labour that a Lebanese national cannot perform the job. It's this bureaucratic hurdle that forces many unskilled Palestinian labourers to work without permits – and the new law does nothing to mitigate its effects.

Furthermore, many Palestinian professionals are prohibited from working as doctors, lawyers or engineers because the professional syndicates here disallow their participation. The government can remove all barriers to employment, but if organised labour doesn't do the same, the effect will be minimal. That's why the new law hasn't changed the status quo in meaningful ways.

Lebanon's responsibility to those residing within its borders is principally a humanitarian one. But this humanitarian imperative is accompanied by an economic opportunity: Lebanon will benefit when Palestinians can fully access the labour markets.

There are 422,000 registered Palestinian refugees in Lebanon (10% of the total population). Roughly half of those live in one of the 12 recognised refugee camps (the remainder are dispersed among unofficial camps and Lebanese urban centres).

Of course, there are the familiar arguments that these people constitute an economic burden, that they sap state resources and, to the extent that they do work, compete with Lebanese nationals.

But macroeconomic theory shows that an influx of people into the job market tends to cause economic activity to surge. That's because aggregate demand – the total demand for goods and services in a country – increases, and increased competition also results in more efficient capital allocation and greater value for consumers.

For better or worse, capital re/investment is one of the engines of economic growth. After 62 years in Lebanon, some Palestinians have accumulated savings yet at present they lack the kinds of secure investment opportunities that would promote broader economic development.

Opponents of extending economic rights to Palestinian refugees are correct on one count. Palestinians will compete with Lebanese citizens for jobs once they're permitted to freely participate in the labour market. However, they won't be competing against Lebanese people for the low-wage unskilled labour. Syrians hold those jobs (and are often exploited – another problem that ought to be addressed).

Nevertheless, those Palestinians with university degrees will compete against the Lebanese professional class. This may be an uncomfortable reality for the Lebanese doctors, engineers and financiers who will face increased competition, but the economy will be more robust for it.

Of course, there is a sectarian element to the Palestinian problem here. Naturalising Palestinians wrecks what is ostensibly a delicate demographic balance – never mind that a census hasn't been conducted since 1932. But Palestinians don't want to be naturalised. They just want their human rights and dignity.