Self-Employed Workers in Israel

Not What You Thought about Self-Employed Workers : Most Work Alone, Provide Services to Corporations and Government or to Households, and Enjoy Limited Social Benefits

The population of self-employed workers in Israel changed significantly over the last decades; if in the past most self- employed workers were engaged in household and neighborhood services (67.6% of all self-employed persons in 1983), today most self-employed workers are providers of corporate and public services (52.5% in 2008).

This is the most striking finding in a new Adva Center report, “Self-Employed Workers in Israel,” based on three Central Bureau of Statistics (CBS) population censuses: 1983, 1995 and 2008. The authors are Shlomo Swirski and Ariane Ophir.

The innovation of this study is its categorization of self-employed workers: while most studies divide self-employed workers into the economic sectors utilized by the CBS, the present study distinguishes between self-employed workers according to the kind of services they provide: whether household and neighborhood services (beauticians, electricians), on the one hand, or corporate and public services (lawyers, economists), on the other. The study includes figures on the internal stratification of self-employed workers, by gender, ethnic background and age.

Following are selected findings:

1.       The percentage of the workforce comprised of self-employed persons did not change significantly between the three censuses; it was 12.9% in 1983, 13.0% in 1995 and 13.4% in 2008. What did change were the numbers and percentages of self-employed women: the numbers increased 4.7 fold, from approximately 20,000 in 1983 to about 93,000 in 2008, while the percentages increased from 5.5% to 8.5% of women in the workforce.

2.       In 2008, most self-employed workers — 65.3% — worked alone; 18.8% employed 1-2 persons and 15.9% employed three or more persons. The proportion of men employing additional persons in their business (40.5% in 2008) was greater than the percentage of women employing others (20.9%); 79.2% of self-employed women did not hire another person.

3.       The highest proportion of self-employed persons in the workforce was to be found among first and second-generation Ashkenazim; in 2008, 16.4% and 16.7%, respectively. A similar proportion was to be found among Arabs in the workforce: about 16% throughout the period under study. The lowest proportion was found among new immigrants (from 1990) from the former Soviet Union: in 2008, 6.1%.

4.       In 2008, most self-employed women (41.9%) had a high level of education (college degree) or a medium level of education – high school education + non-academic degree (38.9%); in contrast, most self-employed men had a medium level of education (32.9%) or a low level of education  – 12 years of schooling without matriculation (38.3%).

5.       Among self-employed workers providing household and neighborhood services, there was a gender division of labor: At the top of the professions dominated by women was day care workers (89% women), beauticians and hairdressers (75%) and cleaning workers (72%). The professions dominated by men included electricians (100%), excavation, paving and lifting equipment operators  (100%) and plumbers (100%). In only five professions were women and men equally represented: academicians in the humanities, journalists, accounting workers, doctors/ pharmacists, and veterinarians.

6.       Provision of corporate and public services was common (in 2008) especially among first and second generation Ashkenazim and among third generation Israelis – 65.2%, 72.2% and 67.8%, respectively. In contrast, provision of household and neighborhood services was especially common among Arabs, first generation Mizrahim and first generation immigrants from the former Soviet Union: 67.7%, 62.5% and 59.1%, respectively.

7.       In 2008, there were professions in which second generation Mizrahim and Arabs were to be found in similar proportions, while together they constituted more than half of self-employed persons working in the profession: in the area of mechanics, 30.6% were Arabs and 28.8% second generation Mizrahim; in construction, 28.8% were Arabs and 32.9% were second generation Mizrahim; in sales, 24.9% and 26.9%, respectively; drivers, 22.9% and 34.7%, respectively. In the hairdressing and beautician professions,  immigrants from the former Soviet Union were prominent – 21.2%, while the highest proportion of persons in these professions were second generation Mizrahi women – 31.9%.

8.       The proportion of self-employed workers in the workforce increased considerably for persons aged 70 and over. In 2008, there were 13,316 self-employed persons aged 70 and over in the workforce, and they constituted 35.3% of workers aged 70-74, 46.3% of workers aged 75-79 and 48.9% of workers aged 80 and over.

9.       The study did not go into the issue of the income of self-employed workers, mainly due to problems of reliability with the figures. The researchers point out that existing figures show that the incomes of the majority of self-employed workers are no higher than those of the majority of salaried workers. In 2008, the average wage of self-employed workers aged 25-69 was NIS 7,000, lower than the average wage of salaried workers, NIS 9,564. The median income of self-employed workers of the same age group was NIS 5,100, compared with NIS 6,700 for salaried workers (all in 2008 prices).

10.   The main practical recommendation that emerges from the study is to merge self-employed workers   – certainly those who work alone or employ no more than 2 persons, with salaried workers, for the purpose of official data collection as well as policy making. If we add to the population of salaried workers, which today constitutes 87% of workers, the above self-employed persons, we will  have pooled data for 98% of the workforce.

11.   The distinction between salaried and self-employed workers leads to serious disadvantages for most self-employed workers. Thus, for example, self-employed workers need to contribute to pension funds and to Social Security not only what salaried workers contribute but also what their employers contribute. Most self-employed persons, whose incomes are low, find this difficult to do.  At the same time, they are not eligible for unemployment compensation and for other social benefits to which salaried persons are entitled, like sick leave, annual vacation leave, convalescence pay and severance pay. Abolishing the sweeping distinction between salaried and self-employed workers could lead to acknowledgement of the situation of self-employed workers and subsequently to improvements for most of them.