Neoclassical economics views the rising of inequality due to
arising in value by labor, capital and land. The labor wages inequality in
income distribution is due to different classification of labors. In a market
economy, inequality is caused because of the productivity gap between
highly-paid professions and skilled workers.
Sometimes the wages equilibrium is lower than the minimum
wages that leads to labors are being paid and many which want to work for a
lower wage are not being hired which leads:
Unemployment rate to rise.
Uneducated or freshly educated labors won’t find a job
due to high minimum wages.
Skilled labors will find it very difficult to find a
job due to the standards of wages.
A major cause of inequality is the rate of the income Taxed
with the progressivity of the tax system. Almost every third world countries
wont relay on tax revenues form progressive taxation but rather relay on value
added tax- The tax that is from consumable goods. For example in Lebanon the
Value added tax is 11% which is a very high rate in relation to Europe or USA,
the average tax world wide is 7%. The Lebanese tax system on income is
progressive and will reach to a maximum of 21%; while, the corporate tax is a
flat tax of 17%. Comparing to Lebanon USA’s progressive tax on wages is up to
55%, and the corporate tax is progressive as well to a maximum of 35%.
Education plays a very high role is creating inequality of
diminishing the inequality among the population. The access of individuals to
education varies some are getting very good education while others are being
ignored regardless of their hard working or brilliant mind. The demand for
education by population is very high but due to increasing in private schools
are universities is leading to inequality because of their high tuitions to enroll
in certain teaching institutions.