Half the taxpayers earn below $10,000 annually. Informal work worsens income inequality

Half the taxpayers earn
below $10,000 annually
Informal work

worsens income inequality

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The lowest income earners among private sector regular employees (up to $10,000 annually) account for 57 percent of employees, and the highest two brackets (more than $40,000) account for six percent, according to ‘Assessing Labor Income Inequality in Lebanon’s Private Sector’, a recent study conducted by the Ministry of Finance and United Nations Development Programme (UNDP).

Tax records of 369,279 declared employees represented a total income of $5.5 billion in 2014. The figure shows that the average wage is about $15,000.

Tax records of 88,040 business owners, including the self-employed, represent a cumulative income of $1.3 billion. The lowest brackets (as defined above) account for 67 percent of all business owners, while the highest brackets account for seven percent of business owners.

According to the study, these figures reflect a high level of inequality, ranking the country at 129 out of 141 countries in income inequality.

Kamal Hamdan, General Manager of Consultation and Research Institute, said: “Informal employees are around 200,000. This segment, if accounted for, would worsen income inequality, because they are not paid above the minimum wage.”

Hamdan said there is a high portion of companies, especially small and medium enterprises, that do not declare some of their employees, or under-declare their true income. Self-employed persons minimize their declared income even more.

According to the study, the influx of Syrian refugees has contributed to expanding the informal sector, creating a bigger challenge for the labor market environment.

The study recommends that easing constraints for the creation of small and medium businesses can trim down income inequality. Simpler procedures, clear and transparent regulations, and a better-enforced rule of law, will help promote inclusive growth by reducing informality, and regulating the labor market.

Distribution of income among regular private sector employees
Annual Income BracketShare of taxpayers (%)Share of total wages (%)
<$4,00010.61.5
$4,000 - $10,00046.222
$10,000 - $20,00024.723
$20,000 - $40,0001222.5
$40,000 - $80,000518
>$80,0001.414
Source: Ministry of Finance
Reported by Rania Ghanem
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Date Posted: Mar 07, 2017