The nature of socio-economic data is that they become known with the passage of time – some after a few months and others after a year or two or more. In the meantime, the latest socioeconomic data for Israel published by state institutions – the Bank of Israel, the Central Bureau of Statistics (CBS) and the National Insurance Institute (NII) – are, at best, for 2021, while some are for 2020 and others for 2019.

And during those years, we were subject to another worldwide crisis with socio-economic implications – the Corona epidemic. That epidemic, which has yet to run its course, though it was shunted to the margins of the news by the sights and sounds of the Russian war against the Ukraine, caused the death of millions, the closure of numerous businesses, unemployment rates unknown since the 1929 crash, as well as huge government outlays for aid to individuals and businesses and, of course, on health.

At the same time there were individuals who not only were not adversely affected during the Corona crisis, but actually profited.

This was the case of the ten richest persons in the world, whose combined worth prior to the epidemic stood at 700 billion dollars, a sum that had doubled by 2022 to 1.5 trillion dollars.

Israel’s wealthy partake of the same phenomenon: according to the financial newspaper “The Marker,” the wealth of the 500 richest persons in Israel quadrupled over the last four years and grew by 32% between 2020 and 2021.

The figures presented below reflect the first chapters of the story of the epidemic, which is also a story of the widening of inequality in Israel and elsewhere. This, in hope that the war currently raging in eastern Europe ends quickly and will not become the main story of Israel: A Social Report next year.

הפוסט Israel – A Social Report 2022: The Inequality Epidemic Still Rages הופיע לראשונה ב-Adva Center.

Israel’s top one percent received the most expeditious state protection and benefits. The Bank of Israel supported big corporations by purchasing 15 billion NIS worth of corporate bonds. This aid contributed to the fact that while the real economy shrunk, the Tel Aviv 90 Index increased by some 18% in value during the first year of the corona epidemic.

The government exempted the wealthy from the burden of participation in financing the costs of the corona crisis. Israel expended an estimated NIS 137.3 million on aid to businesses and citizens. As this sum was not budgeted, it increased the budgetary deficit and the national debt. The Netanyahu-Gantz coalition did not consider raising taxes, despite Bank of Israel declarations that tax increases were unavoidable.

If tax increases are not imposed on the wealthy, such increases will either fall to the lot of the middle class or, alternatively, result in the privatization or reduction of public services – moves that will hurt middle and low-income families. In light of these possibilities, the report recommends imposing a wealth tax.

Hi Tech in Times of Corona: Like its ultra-rich, Israel’s hi tech sector has not been adversely affected by the corona epidemic. In fact, the hi tech sector continued to grow despite the corona crisis. For example, the financial newspaper The Marker reported in January 2021 that “the 13,500 hi tech workers employed in the ten largest technology companies listed on the stock exchange gained no less than 2.5 million dollars in income.”

Small Businesses in Times of Corona: Small businesses are the main reason for the increase in employment in the Israeli economy that occurred over the past two decades and the concomitant decrease in unemployment. While the businesses in question are small, together they constitute the largest employer in the Israeli economy. In 2018, small and medium sized businesses accounted for 1.92 million employee posts, or 60% of the 3.17 million posts in the private sector.

Small businesses were the main losers in the corona crisis, primarily service providers, many of whom had become upwardly mobile due to increased consumption in the decades preceding the crisis. In 2020, private per capita consumption in Israel decreased by 11.1%, more than the average in OECD countries – 6.3%.

Dun and Bradstreet estimated that in the first half of 2020, 37,600 Israeli businesses shut down, among them 1,550 restaurants, bars and coffee shops; more than 1,000 construction and renovation firms; some 600 transportation companies; and 450 clothing shops. Their estimate was that by the end of the year, 80-85 thousand businesses would close down – an increase of 85% over 2019.

The chief economist of the Israel Ministry of Finance estimated in May 2020 that 54% of workers furloughed were employed in small businesses.

Food Insecurity in Times of Corona: The highest proportion of persons reporting food insecurity during the corona epidemic was found among Arab citizens of Israel. In April 2020, 23.5% of Arabs reported that they or members of their family had reduced the amount of food or the number of meals during the previous week, compared with 14.1 % among persons in the general population of Israel aged 21 and over.

Inequality in Health in Times of Corona: Israelis of low socio-economic status sickened more than Israelis of high socio-economic status, among other things due to the higher incidence of health risk factors like high blood pressure and diabetes among them.

The corona epidemic threatens everyone, but the threat is especially acute for persons whose living conditions promote contagion. Housing density and household size are larger among Haredi Jews and Arab citizens of Israel than among others, resulting in greater susceptibility to infection from the virus.

Another factor influencing the rate of illness from the corona virus is the sense of alienation of these same two population groups from the central government of Israel and its institutions, resulting in indifference or non-compliance with official instructions issued as to how to keep safe from contagion.

The result: the death rate of Arab citizens of Israel aged 60 and older from the corona virus was three times that of non-Haredi Jews; and the death rate of Haredi Jews four times that of non-Haredi Jews.

Mental Health in Times of Corona: The corona epidemic has had an adverse effect on the mental health of Israelis. During the first lockdown, about one-third (34%) of persons aged 21 years and over suffered from tension and anxiety. That proportion rose to 42% when the lockdown was lifted in July 2020. In November 2020 the proportion decreased to 37% — still quite high. Those reporting the greatest suffering from tension and anxiety were women and Arab citizens.

Feelings of loneliness and depression were revealed by the Citizen Resilience Survey conducted by the Israel Central Bureau of Statistics, which showed that in April 2020, 30% of interviewees aged 65 and over reported loneliness and 19% reported depression, compared with 24% and 16%, respectively in the general population.

Housing in Times of Corona: Before the outbreak of the epidemic (2018), Israeli households from the bottom income decile living in rental housing expended 54% of their disposable income on rent and related outlays. For households in the second lowest income decile, that expenditure constituted 34% of their disposable income; in both cases, housing expenditure was higher than the 30% considered the maximum households should have to pay for housing. The economic hardships of the epidemic for households residing in rented housing led to an increase in requests for rent assistance, along with an increase in the number of eligible households waiting for public housing units.

While the economic crisis accompanying the corona epidemic had an adverse effect on renters as well as on home owners with mortgage payments to meet, the benefits given by the government in the area of housing were directed not to them but rather to persons purchasing housing units as investments. With the expressed purpose of stimulating business in the real estate sector by incentivizing investors,  in July 2020 the purchase tax for investors was reduced, thus abrogating the increase made in 2015 to discourage real estate investments in favor of the purchase of own homes.

The full report is available in Hebrew here

// The report was produced in cooperation with the Friedrich Ebert Stiftung, with support from MAZON: A Jewish Response to Hunger and The New Israel Fund

הפוסט Social Report 2021 – Corona: Epidemic of Inequality הופיע לראשונה ב-Adva Center.

Thirty-five years ago, on July 1, 1985, the national unity government led by the Labor and Likud parties announced an emergency stabilization plan, which came to be known as the program that reduced inflation from three digits to two. The plan called for reducing the role of government in the economy, for adopting economic growth as the main goal of economic policy and for transferring responsibility for economic growth from government to the business sector. Economists praised the change to “an economy based more and more on market forces and open to the whole world.” The CFO of the Ministry of Finance crowned the date as “the economic independence day of Israel.”

The data presented in the present report question the accepted wisdom that “an economy based more and more on market forces” is obviously best.

Economic growth did indeed become the main goal of economic policy, but today it has become abundantly clear that growth alone does not necessarily lead to an improvement in the general standard of living. During most of the last three decades, GDP per capita grew faster than wages. In other words, the economy grew, but most people did not benefit from economic growth as expected.

Free market forces led, among others, to the development of a stratum of families and business groups that accumulated wealth and public power enabling them to influence the directions of Israel’s economic  development, its taxation policy and its employment patterns. We are speaking of the “top one percent” and within it, the top 0.01 percent – about which there are no official statistics, and thus the whole picture of inequality in Israel is sorely skewed.

The emergency stabilization plan did reduce the weight of government in the economy; in actuality, it succeeded over and above, as today government civilian expenditure in Israel is among the lowest among OECD countries. The concrete result is that the government does not fund social services like health and education at the same level as western European countries. Instead, the burden of payment is transferred to individual pockets, especially those of the middle class.

Another stratum, comprising a little more than a fourth of the population, is of persons living in poverty or near poverty. This stratum, which during the years 2006-2009 comprised 28.3% of Israeli households, declined to 26.0% in 2018. Still, the poverty rate in Israel is one of the highest among OECD countries.

The present report is based on household expenditure surveys of the Israel Central Bureau of Statistics. These data are adequate when it comes to the population as a whole, as income disparities within each income decile are narrow. But the data are sorely lacking when it comes to the top one percent, which includes both millionaires and billionaires.

Shlomo Swirski, one of the authors of the report, calls for “placing the public interest at the center of public policy. This does not involve weakening the business sector, but rather strengthening the arms of the state. The national budget,” Swirski adds, “needs to include engines of equality and not just engines of economic growth. The Israeli government needs to invest in regions of the country neglected by the business sector. It needs to establish higher wage norms for minimum wage earners employed in its own services. The Israeli government needs to upgrade the public education system and increase higher education opportunities. It needs to deal with the growing needs of the public health system and to halt the process of privatization taking place within it. It needs to develop a public housing option for long-term rentals, and to strengthen the social safety net.”

Following are selected figures from Israel: A Social Report 2020:

• Greatest Growth: The Top One Percent: The average income of the top one percent of Israeli households headed by salaried persons – NIS 138,000 per month (2018), is not only 8 times higher than the average income of the middle (fifth) income decide, but also 2.4 times higher than the average income of the remaining 9 percent of the top income decile.
• A comparison between the top one percent, the top income decile (10%) without the top one percent, and the middle (fifth) income decile for the years 2012-2018 reveals that the income of all three groups increased; at the same time, between 2016 and 2018 the income of the top one percent increased by 20% while that of the two other groups increased by 10%.
• Total Household Income: Top Income Decile Gets 12 Times Bottom Decile: There are four sources of household income: wages, capital, income transfers and pensions. In 2018, the average monthly gross income of households headed by salaried persons from all four sources amounted to NIS 66,584. This sum is 12 times the income of households in the bottom income decile – NIS 5,501.
• Salary Growth Lags Behind GDP Growth: During the two decades between 1968 and 1989, GDP growth was accompanied by a parallel growth in real salaries. However, beginning in the 1990s, the paths of growth diverged, with GDP per capita increasing more than the average salary.
• More than 20% of Israelis Earn Low Wages: According to data published by the OECD for 2017, 22.6% of wage earners’ pay was considered low. This figure is high, compared those of other OECD countries, in which the average is 15.4%. The OECD defines low wages as not exceeding two-thirds of the median wage; it includes only persons working full-time.
• Increase in Minimum Wage Earners: In 2017, the proportion of Israelis receiving no more than the minimum wage was 33.6%. Two years before, in 2015, the proportion was 30.8%, evidence that many of the new jobs created are paying no more than the minimum wage.
• Largest Increase in Minimum Wage Earners – in Arab Localities: The proportion of persons making no more than the minimum wage grew in all locality groups; the largest increase was in Arab localities. Following is the proportion of minimum-wage earners by locality groups: Haredi settlements – 55%; Arab localities – 45%; development towns – 37%; non-Haredi settlements – 31%; affluent localities – 26%.
• Salary Pyramid by Ethnic Origin and Gender – No Change for the Better: In 2018, Ashkenazi first-generation men who immigrated to Israel prior to 1989 topped the scale, with an average wage of NIS 18,772; following were second-generation Ashkenazi men, with NIS 16,483; second generation Mizrahi men, with NIS 14,153, first generation Mizrahi men, with NIS 13,578; Ashkenazi men who immigrated after 1990, with NIS 13,179; and first generation Ashkenazi women who immigrated before 1989, with NIS 11,918. At the bottom: Arab women and Jewish women of Ethiopian extraction – NIS 5,722 and NIS 5,619, respectively.
• In 2018 Nearly Half of Elderly Households Had No Pension Income: In 2018, fewer than half of households headed by salaried or self-employed persons in the bottom income decile were saving for retirement – 47.2%. In the second decile the percentage was 63.8%; in the third, 74.9%. In households in the fourth decile or higher the proportion was between 83% and 88%. A total of 20.7% of households were not saving for retirement in 2018. That same year, 44.7% of households headed by persons aged 67 and over had no pension income.

• Israel Has One of the Most Diminished Middle Classes in the OECD: Israel’s middle class has shrunk more than those of other OECD countries, with the exception of Estonia and Lithuania. Only 53.8% of Israeli households are considered middle class.
• 26% of Israeli Households Live in Poverty or Near Poverty: Between 2003 and 2012, households living in poverty or near poverty comprised 28% of total Israeli households. In 2016 the figure was 26.6% and in 20-18, 26.0% – about one out of four. However, it appears that part of the decrease in the poverty rate in 2018 may be attributed to insufficient sampling of the population of East Jerusalem.
• Inequality is Slightly Lower but Still High: The latest Gini Coefficient published by the National Insurance Institute is for 2018: 0.3559. This is the lowest figure registered over the last two decades. At the same time, it is still higher than that of most of the member countries of the OECD.
• Higher Education – Only One in Three Make It: Only 32.6% of young people who were 17 years old in 2010 were admitted to one of the institutes of higher learning in Israel in 2018.
• Large Disparities in Investments in Informal Education: In 2018, outlays on children up to the age of 18 for private lessons and extra-curricular activities rose with the economic status of households. In Jewish households, the average outlay for those in the top stratum was NIS 401 per month – 10 times that of poor and near poor households. In Arab households, the average monthly outlay for those in the middle stratum was about NIS 100 – 5 times that of poor households.

• Public Health System: Infant Mortality Very Low But Still Double Among Arabs: Israel’s public health system gives it an honorable place among developed countries. Infant mortality in 2017 was 3.1 for 1,000 live births, placing Israel well on the OECD scale. At the same time, in 2018 infant mortality for Arabs – 4.8 – was more than twice as high as that for Jews – 2.5.
• Supplemental medical insurance marketed by health funds and private insurance offered by insurance companies have become a huge financial enterprise: In 2000, household expenditures on both types of medical insurance, along with co-pays for medications and treatments, amounted to NIS 4.6 billion (in 2018 prices); in 2018 they totaled NIS 14.4 billion.
• 70% of Housing Rental Income Goes to Households in the Top Three Income Deciles: In 2018, rental income for housing totaled NIS 17.06 billion. Of this amount, NIS 7.18 billion was paid to households in the top income decile, NIS 3.1 billion to households in the ninth income decile and NIS 1.7 billion to households in the eighth income decile. That is, the three top income deciles received, together, 70% of the total income from housing rent, with the top income decile alone taking in 42%.

הפוסט Israel – A Social Report 2020: The Public Interest Needs to Return to Center Stage הופיע לראשונה ב-Adva Center.

The report presents figures for some of the main aspects of inequality in Israel. As such, it also points to some desired socio-economic goals: inclusive economic development that involves all areas of the country and all segments of the population, expansion of the middle class, a significant decrease in poverty, a broadening of access to higher education, the development of a public housing option that is both universal and long-term, and public financing of all health services considered normative, eliminating the need for private health insurance for essential services.

Following are some of the main findings:

1. Household Income

Households have four sources of income: work, capital, social security and assistance transfers, and pensions.

The share of income from work grew between 2000 and 2017 on average in all of the first seven income deciles, and mainly in the two lowest: in the bottom decile it increased from 31.7% to 52.3% and in the second from the bottom decile – from 47.9% to 60.0%. This increase, although it reflects moderate pay increases – like the rise in the minimum wage and the work credit, along with other programs designed to encourage employment, it is mainly the result of an increase in the number of wage earners in these income deciles. Between 2000 and 2017, the number of wage earners in the bottom decile grew by 65%, and in the next to the bottom, by 56%; in the third decile by 54% and in the fourth by 43%.

In contrast, significant income from capital is reported mainly in the top income decile. In 2017, such income constituted 6.6% of the total income of households in the top decile, an increase over 2016 (5.5%), but a decrease in comparison with 2015, when it was 10.9%. A good proportion of such income derives from housing rents. In 2017, the top income decile took in 44% of total rents in Israel.

Regarding income from social security and other transfers, in 2017 these amounted to half of the income of households in the bottom decile, 37% of the next to bottom decile and about one-fourth of the income of households in the third decile. Over the last two decades, household income from transfers in the bottom two deciles decreased considerably, following large cuts made in the wake of the financial crisis brought on by the second intifadah. The main losers were the bottom six income deciles. In the bottom decile, for example, income from transfers decreased from 66.6% to 45.8% of total income, and for the second to the bottom income decile, from 50.4% to 37.2% of total income. Another factor contributing to the increase in the number of wage earners was the 2004 change in the age of entitlement to old age and work pensions, from 60 to 62 for women and from 65 to 67 for men.

Although the increase in the number of wage earners added to household income, the increment was not large enough to create a significant change in the income ladder. Many of the new wage earners got jobs with low wages or part-time work, in service sectors like sales, food service, care work, security work and the like. A high rate of poverty was found in industries like construction (22.5%) and transportation (12.2%)

In 2017, the average gross monthly income from all four sources of income for households headed by employed persons in the top income decile was NIS 60,484 — 12 times that of the average gross monthly income of households in the bottom decile – NIS 5,079.

Households in the top two income deciles received, together, 43.3% of the total household income of households headed by employed persons. The remaining eight deciles received, together, 56.7%. This proportion has hardly changed over the last decade.

2. Wages of Top Executives

In 2017, the compensation of CEOs and top executives in large corporations decreased in comparison with 2016. The most significant decrease was in the element of salary, while bonuses, stock options and “other” payments remained quite stable. Part of the decrease may stem from the law limiting the salaries of senior management in the financial sector that came into effect in October 2016.

Still, the compensation of managers of the large corporations was very high. CEOs in the 100 largest corporations traded on the Tel Aviv Stock Exchange received, on average, the annual sum of NIS 4.45 million, or NIS 371,000 per month – 36 times the average wage.

3. Gender Pay Gaps

Between 2000 and 2016, the proportion of women earning more than the average wage grew from 18.6% to 26.8%, while for men the increase was from 37.7% to 46%.

Despite this lessening of the gender gap, Israel still finds itself in an unflattering position amongst OECD countries. The OECD presents figures on gaps between the median wages of women and men: Israel is amongst the countries with the highest gaps, with a disparity of 21.6%.

4. Ethnic Pay Gaps

In 2017, second-generation Ashkenazi men received the highest pay, with an average monthly wage of NIS 16,961, while the monthly wage of second-generation Mizrahi men was NIS 13,291. In recent years the gap between the two was smaller, after years of slow convergence. At this point we cannot tell if what we are seeing is a change in the trend or an ephemeral change. In 2017, the average monthly pay of Arab citizens was significantly lower than that of most wage earners: NIS 7,723 for men and NIS 5,370 for women – about two-thirds the average wage of Jewish men and women. Another group receiving less than the average was first-generation Ethiopian Israeli men who arrived in Israel after 1990 – NIS 8,247 – 70% the average wage of men. At the bottom of the scale were first-generation Ethiopian Israeli women who arrived after 1990 and Arab women, whose average wage was NIS 5,568 and NIS 5,370, respectively.

5. Gini Index

The latest Gini index published by the National Insurance Institute is for 2017 – 0.352. This is a decrease of 1.6% in comparison with 2016 and is the lowest in two decades. Still, Israel remains with one of the highest degrees of inequality among OECD countries.

6. How Many Go to College?

Only 32.2% of persons who were 17 years old in 2009 were admitted to one of the institutes of higher learning in Israel by 2017 – about one in three.

In 2009, only 79.8% of 17 year olds were enrolled in high school in tracks leading to matriculation. The proportion of the age cohort matriculating was 46.1%; not all matriculation certificates were at the level of college admission. The result: those eligible were 39.4% of the age cohort. Only 32.2 % of the age cohort had entered college 8 years later.

7. Housing

In 2017, 28.3% of households did not own a home. Most of them rented in a largely unregulated market. The percentage of households residing in rented units rose from 24.3% in 1997 to 27.9% in 2017.

Private rental is basically an arrangement whereby low-income strata transfer capital to high-income strata. In 2017, the income from home rentals in Israel amounted to NIS 15.68 billion. Of that, NIS 6.85 billion went to the top income decile, NIS 2.63 billion to the ninth decile, and NIS 2.02 billion to the eighth decile. In other words, the three top income deciles received 73% of the total income from housing rental; the top decile alone received 44%.

8. Health

Private health insurance marketed both by health funds and insurance companies has become a huge business. Household outlays on these policies and on user fees for medications and treatments, grew from NIS 4.6 billion in 2000 (2017 prices) to NIS 13.9 billion in 2017. This could be conceived of as a tax added to the health tax collected by the National Insurance Institute: NIS 13.9 billion is equivalent to 60% of the health tax.

To sum up: Today’s labor market does not offer all Israelis a decent standard of living, due to a deep split between the small “start-up nation” and the large periphery. Israel needs to break down the barriers between the “start-up nation” and all the rest by investing much more in all sections of the country and all sectors of the population.

הפוסט Israel: A Social Report 2018 הופיע לראשונה ב-Adva Center.

Dr. Shlomo Swirski, co-author of the report, contends that “the economic miracle of which the government boasts is relevant mainly for a minority of Israelis, whose achievements raise the general average. A real miracle will occur if and when Israel jettisons its policy of budget austerity and limited responsibility in favor of a balanced economic growth that benefits the general public. Dependence on the private sector with hi-tech at its head as the engine that will pull the whole economy forward has no basis in reality. The research and development centers that multi-nationals established here are interested mainly in “milking” the ability of Israelis; the present supply of educated manpower is sufficient for them and they have no incentive to expand the limits of the “start-up nation” located in Tel Aviv and its environs.”

Economic Growth
The Israeli economy did experience growth; however that growth was based to a great extent on an increase in private consumption – car imports, for example – which it can be assumed reflected the demands of the upper income deciles and led to their upgrading their own standard of living. The other side of the coin is the expansion of employment serving, usually at low wages, the increasing consumption of the upper income deciles, like saleswomen, waitresses, security officers, and the like.

“Let Them Go Out and Work” – and They Did
As Minister of Finance, Binyamin Netanyahu was responsible for widespread cuts in social security, under the slogan, “Let them go out and work.” The cuts, together with various programs designed to encourage employment, did indeed push many people into the job market. Between 2000 and 2016, the number of bread winners in households in the bottom income decile grew by 58%, in the second lowest, by 73%, in the third, by 45% and in the fourth, by 35%.

From the perspective of the new bread winners, there is much to be said for being in the job market, as living from work is considered more respectable than living from social security payments. However, the addition of more bread winners, even if it did increase household income, did not lead to a significant change in the distribution of income. Many of the new bread winners found workplaces hiring on a part-time basis paying low wages. In some instances this was done at a high social cost, for example, for men and women working at exhausting jobs in which they experience burnout.

The top income decile earned 12 times the bottom income decile; the top centile – 23 times the bottom income decile
Since 2012, the gross income of households in all income deciles grew by between 10% and 17%. At the same time, income gaps remained high: in 2016, the average gross monthly income of households in the top income decile was NIS 58,846, 12 times the average income of households in the bottom decile – NIS 4,898.

Discussions of income inequality usually focus on gaps between the different income deciles, but the gaps within the top income decile itself are especially high. In 2016, the average monthly income of the top centile of households – NIS 113,621 – was 2.2 times the average income of the nine other centiles in the top income decile, and 23 times the average income of the bottom income decile. In other words, households in the top centile are worlds away from the economy of the remaining 99% of households in Israel.

Tell me How Much You Earn and I’ll Tell You Where You Came From
The recent improvement in salaries is more notable among women than among men. Between 2000 and 2015, the percentage of women earning more than the average wage increased from 18.6% to 25.9%, while for men the increase was from 37.7% to 43.9%.

In 2016, the top of the income ladder was occupied by first generation Ashkenazi men who had arrived in Israel by 1989, with an average monthly wage of NIS 17,640; next were second generation Ashkenazi men, with NIS 15,099; followed by second generation Mizrahi men, with NIS 14,406; first generation Mizrahi men who had arrived by 1989, with NIS 12,761; Ashkenazi men who arrived after 1990, with NIS 12,005; and first generation Ashkenazi women who had arrived by 1989, with NIS 11,037.

A significant reduction occurred in the gap between second generation Ashkenazi and Mizrahi men. In 2016, the average salary of second generation Ashkenazi men was NIS 15,099, 55% above the overall average, compared with the average salary of Mizrahi men, which was NIS 14,406 – 48% above the overall average. Second generation Ashkenazi women earned an average of NIS 9,017, 93% of the overall average, compared with NIS 8,640 – 89% of the overall average, for their Mizrahi counterparts.

The average salary of Arab citizens of Israel was very low, compared to the overall average: in 2016 the average salary of Arab women was 51% that of the overall average and the average salary of Arab men was 76% of the overall average.

The average salary of Ethiopian Israeli men was similar: In 2016, the average salary of men was NIS 7,233 – 74% of the overall average.

Ethiopian Israeli and Arab women were at the bottom of the salary scale, with averages of NIS 5,376 and NIS 6,004, respectively.

A College Education Does not Always Promise Escape from Poverty
In 2015, Arab households living in poverty headed by persons with at least 16 years of schooling constituted 7.3% of all Arab households living in poverty, up from 2.6% in 2000. Jewish households living in poverty headed by persons with at least 16 years of schooling constituted 23.7% of Jewish households living in poverty, up from  14.5% in 2000.

And There are Some Who Forego Even Food
The economic situation of some Israelis is so dire that they are forced to forego the most basic of human needs: food. The proportion foregoing food grows with declining income: in 2013, 38.5% of persons of 20 or older in the lowest income bracket (households earning on average up to 2,000 per person) reported foregoing food.

Income Gaps are Higher after Retirement
In 2016, 25% of Israeli households headed by persons aged 25-54, most of them in the lower income deciles, were not saving for retirement. That same year, the average income from pensions of the top income decile of households headed by persons aged 68 and above was NIS 14,822. That was 25 times higher than the income of households in the third decile – NIS 562.

Only One-Third of the Cohort Goes to College
Looking at the cohort that graduated from high school in 2008, we find that only 79.2% of the age cohort was enrolled in the last year of high school leading to matriculation. That year only 44.4% of the age cohort passed their exams. Among those who passed, some had diplomas that did not entitle them to admission to institutions of higher learning. The result: only 32.4% of persons who were 17 years old in 2008 entered a university or an academic college by 2016 – 8 years after they graduated from high school.

The education gaps among different socio-economic groups are far from closing. Among students from localities in socio-economic clusters 1-4, the proportion going on to academic studies, which was quite low in 2000 – 22.1% — remained low 8 years later, in 2008 – 23.6%. During the same time, students living in localities in socio-economic clusters 8-10 went on to college at greater rates – increasing from 45.3% in 2000 to 53.1% in 2008 – an improvement of 17%. The four middle socio-economic clusters showed an improvement of 14%.

Most Israelis Cannot Purchase an Apartment in High-Demand Areas
For 60% of Israelis, purchasing an apartment in areas of high demand without significant capital of their own results in a lowering of their standard of living, due to high monthly mortgage payments.

Purchasing apartments as an investment is the prerogative of the affluent. In 2016, 29.1% of households in the top quintile owned at least two apartments – compared with 1.6% of households in the bottom quintile, 2.5% in the second quintile and 6.8% in the third quintile.

Health Has Become a Financial Matter
Private health insurance has become a huge financial bonanza: household expenditure on private health insurance (of both the health funds and insurance companies) and users’ fees for medications and treatments amounted to NIS 4.6 billion (2016 prices) in 2000; in 2016 the amount more than doubled to NIS 13 billion. One could argue that this is a tax just like the health tax paid to the National Insurance Institute (in 2016 the National Insurance Institute collected NIS 21.9 billion). However, in contrast to the health tax, which provides universal care, the tax paid by purchasers of private health insurance benefits only those who can pay more.

The Government Fails to Balance Market Forces
In 2015, civilian expenditures amounted to 30% of GNP. As everyone knows, Israel’s defense expenditure is high, compared to that of other western countries. Still, the low civilian expenditure can be attributed more to the policy of fiscal austerity than to high defense expenditures, which have declined in recent years as a percentage of GDP.

Civilian expenditures include, among others, monies designed to assist households and individuals in times of distress, like old age and disability pensions, services for infants, the elderly and the disabled, and tax benefits. In 2016, civilian expenditures in Israel amounted to 16.1% of GDP, compared with the average of 21% in OECD countries.

הפוסט Israel: A Social Report – 2017 – An Economic Miracle for the Few הופיע לראשונה ב-Adva Center.

Over the past 2-3 years we have seen a rise in wages which is, inter alia, the result of wage agreements the government signed with the teachers’ unions (“Ofek Hadash” and “Oz LaTmura”) and with public sector employees —  and of an increase in the minimum wage.

Yet, wage disparities are significant. In 2015 the gross monthly income of a household headed by a salaried employee was NIS 4,644 in the lowest decile and  NIS 58,293 in the top decile. The top two deciles (9 and 10) were responsible for some 43.9% of total household income, while the other 8 deciles shared the remaining 56.1%. It is important to note that there are huge gaps within the top decile between the uppermost one percent and the rest.

The problem is rooted in the fact that Israeli governments reduced their capacity for action and primarily their budgetary capacities. The result is the shrinking and narrowing of the social services the state provides: education, health, welfare and social security. In 2014, the total state expenditure (including local government) of 41.2% of the GDP placed Israel alongside the eastern European countries and nations with a tradition of low government expenses such as Canada and New Zealand (which spend less than Israel on security).

Furthermore, Israeli governments are concerned primarily with political and security problems, mainly the Palestinian conflict, expressed in frequent outbursts of violence. Israeli governments do not invest in the development of long-term plans to increase success rates in the matriculation exams, to enlarge the student population or to include the entire Israeli population in the “start-up nation”.

Additional key findings:

1. Employment and wages: The CEO of a large corporation earns 91 times the minimum wage.

• The fruits of economic growth continue to “trickle upwards” more than they trickle downwards. This is clearly reflected in the salary bills of senior executives, which increased in 2015 compared with 2014. The most significant increase was in stock options while wages, management fees and bonuses remained more or less the same.
• The CEOs of the top 100 corporations traded on the Tel Aviv Stock Exchange (The TA-100 Index) cost their firms an average annual sum of NIS 5.1M, or NIS 425K per month.
• The average annual salary bill of the 5 most senior executives of these corporations was NIS 4M, or NIS 337K per month.
• The gaps between the remuneration of senior executives and other employees continue to be significant: The average pay of CEOs was 44 times the average wage (NIS 9,592 of Israeli employees) and 91 times the minimum wage (NIS 4,650).
• Inequality in pay exists between genders: women are over-represented in the lower echelons of the salary scale: in 2014, 30.9% of women earned less than the minimum wage, compared to only 16.8% of men.
• Inequality in pay exists also between other population groups, as follows (2015 data):
• Native Israelis of Ashkenazi origin earned about 31% more than the average;
• Native Israelis of Mizrahi origin earned about 14% more than the average;
• Native Israelis from FSU countries earned about average (1% more);
• Arab employees earned about two-thirds of the average;
• Immigrants from Ethiopia and native Israelis of Ethiopian origin earned about half of the average wage.

In November 2016, the average unemployment rate was low – 4.6% – but:

The national rate conceals significant differences among localities and population groups: An analysis by locality shows that Arab localities top the unemployment list, and that the Bedouin localities in the Negev are at the very peak. In the largest Bedouin locality of Rahat the rate of job seekers was 14.4%. Similar rates were found in some of the large Arab localities in the North, including Maghar (14.8%), Sahnin (14.7%), and Umm el Fahem (14.6%). In the majority of Jewish localities, the unemployment rate was lower than 5%, yet, in development towns like Mitzpe Ramon, Dimona and Yeruham, unemployment rates were 9.5%, 9.3% and 8.6% respectively.

2. Education: Twice as many students in affluent localities compared with the periphery

The highest paying professions usually require a college education.

• In 2015, only 29.3% of young adults who were 17 years old in 2007 had begun studying in a higher education institution.  Twice as many young Jewish adults were enrolled compared with the number of young Arab adults.
• In the 2014-15 academic year, 14% of 20-29-year-olds were enrolled in universities and academic colleges. There were significant differences among localities: 21.5% from strong localities vs. 12.6% from Jewish development towns and 9.1% from Arab localities.
• The low rates of college students are the result of the low percentage of high school graduates eligible for a matriculation certificate. In 2013, for the first time, that figure exceeded 50%, and in 2015 it reached 56%. Nevertheless, 44% of 17-year-olds did not matriculate.
• 40.7% of Jewish teens who graduated high school in 2007 and enrolled in academic studies before 2015 were graduates of the academic track. This is compared with 32.8% graduates of the vocational track.
• 77% of high schools in development towns are owned by vocational networks. Any existing vocational high schools in strong localities are usually located in the less affluent neighborhoods.

3. Health: Jews live 3 years more than Arabs

The social gaps also impact health conditions. The level of health is a reflection of the quality of life, and, in general, of socio-economic status: the quality of nutrition, the environment, housing, the level of awareness of health hazards, and the accessibility of public transportation, employment, and health services. Differences in the general quality of life are translated into 2 main indicators used worldwide to mark gaps in health conditions: infant mortality and life expectancy.

• The rate of infant mortality in Israel in 2014 was 3.1 (15^th place in the OECD). Infant mortality has declined sharply since the 1970s among both Jews and Arabs. Yet, nowadays (2010-14) the rate of infant mortality among Arabs (6.4) is 2.6 times the rate among Jews.
• Life expectancy is relatively high in Israel: In 2014, the average life expectancy of men was 80.3 years (ranked 6^th in the OECD). The average life expectancy of women was 84.1. Even though this figure is higher than that of men, it only placed Israel in the 12th place in the OECD. In addition, while life expectancy is on the rise, it is higher for Jewish men (80.9) than for Arab men (76.9). The life expectancy of Jewish women (84.5) is higher than that of Arab women (81.1).

הפוסט Social Report 2016: Wages are Rising but Fail to Match the Increase in Economic Growth הופיע לראשונה ב-Adva Center.

Long-range figures from the National Insurance Institute show that for some 25 years, and especially since the end of the second intifadah, the increase in GDP per capita in Israel has not been accompanied by a corresponding increase in real wages; in 2014, the gap between the two was larger than ever.

Below are some of the main findings of the new report:

1) Rather than trickling downwards, the fruits of economic growth have been trickling upwards, against the laws of nature.

• The share of employers in the national income increased from 14% to 17% over the last decade (2014-2014), and the share of workers decreased, from 61% to 57%.
• The salaries of senior executives increased over time: the cost of the salary of directors-general of the 100 largest corporations traded on the Tel Aviv Stock Exchange in 2014 averaged NIS 5.01 million per year, or NIS 417 thousand per month. The average annual cost of the salaries of the five highest earners in these companies amounted to NIS 3.64 million, or NIS 303 thousand per month. These figures are lower than they were in 2013, but they are still beyond the wildest dreams of the vast majority of Israelis.
• In 2014, the average cost of the salaries of the five highest earners in the top Tel Aviv corporations was 32 times the average wage (NIS 9,373 – Israeli workers only) and 70 times the minimum wage (NIS 4,300).
• 3% of Israeli wage earners received (in 2013) the minimum wage or less.
• 1% of Israeli wage earners received salaries characterized by the OECD as low – less than two-thirds of the median wage. This is a high percentage relative to other OECD countries.
• In the lower echelons of the wage scale, women are over-represented: in 2013, 32.5% of women’s wages were at the level of the minimum wage or below, compared with 18.1% of men’s wages.
• Over-representation in the lower echelons is also characteristic of Arab workers: in 2014, their average wage was 29% below the national average. The average wage of Mizrahi workers was 12% above the national average, and that of Ashkenazi workers 38% above the national average.

2) In October 2015 the average unemployment rate was low – 5.3%. However,

• The national average fails to reveal the differences among localities and ethnic groups. An analysis by locality shows that Arab localities top the unemployment list, and that the Bedouin localities in the Negev are at the very peak. The largest Bedouin locality, Rahat, had an unemployment rate of 31.4% in March 2015. Similar rates were to be found among some of the Arab localities in the North – Umm el Fahem (29.8%),  Arrabe (28/8%),  Sahnin (25/3%), Tamra (23/7%) and Maghar  (23.4%). In most of the Jewish localities, the unemployment rate was below 5%, but much higher rates were to be found in development towns like Dimona (15.1%) and Yeruham (13.8%).
• The high road to a better socio-economic future goes through education. The highest paying professions require a college education.
• But in 2014, only 29.1% of young people who were 17 years old in 2006 had begun studying in an institute of higher learning recognized by the Council on Higher Education, and the rate of Jews was twice that of Arabs. If we add those who enrolled in either the Open University or teachers’ colleges, we arrive at about one-third of the age cohort.
• In the 2013/2014 academic year, 13.8% of young people between the ages of 20 and 29 were enrolled in universities and academic colleges. The breakdown by locality reveals a high degree of inequality: 22.2% of young people from affluent localities, 12.6% from Jewish development towns, and 8.4% from Arab localities.
• The main reason for the low percentage of young people going on to college is the low percentage succeeding in the matriculation exams. In 2013, that percentage — 53.4% — exceeded 50% for the first time, but it experienced a slight decrease in 2014.
• Graduates of high school academic tracks attend college at higher rates than graduates of vocational tracks – 42.2% compared with 33.1%. Most of the schools belonging to the large vocational networks – 71% — are located in Jewish development towns and Arab localities. Those found in affluent localities are usually located in their southern neighborhoods.

3) All of the above figures are reflected in health statistics. Health status is connected to quality of life and in general, to class differences – quality of nutrition, quality of the environment and of housing,  level of awareness of health hazards, public transportation, employment, accessibility of health services and more. Differences in the general quality of life can be seen in two major indicators of health used throughout the world: infant mortality and life expectancy.

• In 2013, average infant mortality in Israel was 3.1 for every 1,000 live births. This figure placed Israel in 14th place among OECD nations. Infant mortality has declined sharply since the 1970s among both Jews and Arabs. Still, the most recent figures (2010-2014) indicate that infant mortality among Arabs in Israel (6.4) is 2.6 times that among Jews (2.6).
• A similar situation prevails with regard to life expectancy. In 2013, the average life expectancy at birth of men in Israel – 80.3 years – placed it third among OECD nations. The average life expectancy of women in Israel – 83.9, despite its being higher than that of men, placed it in 11th place among OECD nations. While life expectancy is on the rise, it is higher for Jewish men (81.1) than for Arab men (76.8), and the life expectancy of Jewish women (84.5) is higher than that of Arab women (81.2).

4) When it comes to dealing with social issues, the government of Israel looks to economic growth as the panacea, but as we have seen, the fruits of growth trickle up more than down. Reducing inequality requires strong state intervention. The problem is that successive governments have reduced their own abilities to act, especially their budgetary capabilities. The result is a waning of the social services provided by the state: education, health, welfare and social security services. Government expenditures (including transfers to local authorities) amounted to 41.2% of GDP in 2014, placing Israel close to Eastern European countries and others with a tradition of low government spending like New Zealand and Canada (whose defense expenditures are lower than Israel’s).

Not only that: Israeli governments are concerned primarily with security problems, first and foremost with the Palestinian conflict, expressed as it is in frequent violent confrontations. As such, Israel’s governments are not disposed to develop long-term plans to increase success rates in the matriculation exams, to buttress the student population or to broaden the limits of “the start-up nation” beyond “the state of Tel Aviv.”

הפוסט Israel: Social Report 2015 – No Change in Inequality Trends in Sight הופיע לראשונה ב-Adva Center.

Israel is not realizing its potential for economic growth, among others due to the absence of a political settlement with the Palestinians. The two intifadahs were very damaging to the Israeli economy, but more limited confrontations have become more frequent: the campaigns Days of Penitence (2004), Rainbow (2004), First Rain (2005) Summer Rains (2006), Hot Winter (2008) Cast Lead (2009-2009), Pillar of Defense (2012) and Protective Edge (2014). The direct economic implications of each of these confrontations was limited – the Bank of Israel estimates that the Protective Edge campaign reduced GDP by no more than 0.3% — but the accumulated effect of all the confrontations results in long-term harm to the social groups and geographic areas directly affected and creates an atmosphere of macro-economic instability.

Another obstacle in the way of raising the standard of living for all Israelis is that during the last decade at least, instead of trickling down, as the political leadership claims they do, the fruits of economic growth trickle up, defying nature. The share of employers in the national income grew over the last decade from 11% to 15%, at the expense of employees, whose share decreased from 66% to 62%. The only salaries that increased significantly were those of senior managers: the cost of their salaries doubled between 2000 and 2010. In 2013, the cost of the salaries of the general managers of the 100 largest corporations on the Tel Aviv Stock Market was on average NIS 6.158 million per year, or NIS 513,000 per month.

3. Wealth, too, increased: between 2003 and 2013, the financial assets held by the public grew by about 80%, from NIS 1,704 billion to NIS 3,048 billion (in 2013 prices). In the absence of breakdowns by different social strata, one can only estimate on the basis of what is known in other countries that most of the gains are in the hands of the top decile and top percentile.
4. In contrast, many Israelis receive salaries described as low by OECD standards: up to two-thirds of the median wage. In 2012, 22.1% of Israelis were at this wage level, placing Israel nearly at the bottom of the OECD ladder: third last.
5. Women’s average monthly salary was 62.2% of men’s average monthly salary in 2003; in 2013 it was somewhat higher: 68.1%. In contrast, the gender gap in hourly pay remained stable at 15.5%.
6. The average wage of Ashkenazi salaried workers decreased in 2013, from 42% above the overall average wage to 32%. The average wage of Mizrahi salaried workers remained the same at 11% above the overall average wage. The average wage of Arab salaried workers was much lower: since 2008 it has remained at between 67% and 68% of the overall average wage.
7. The national unemployment rate is low: less than 6%. However, this rate reflects mainly the Jewish localities in the center of the country. When one leaves the center, the percentage of job seekers increases considerably, mainly in Arab localities and in some of the Jewish development towns: Rahat (33.3%), Umm el-Fahem (30.8%), Arrabe (27.8%) Sakhnin (24.8%), Tamra (23.9%), Maghar (23.9%), Yeruham (16.4%), and Dimona (15.4%).
8. The government of Israel does not strive to balance the uneven results of economic growth. Government expenditure (including the expenditures of local authorities), which in 2013 amounted to 41.3% of GDP, placed Israel at one with the countries of Eastern Europe as well as those with a tradition of low government spending, like New Zealand and Canada (whose defense expenditures are much lower than Israel’s). Moreover, government social security and social assistance expenditures stood at no more than 15.8% of GDP, close to the very bottom of the ladder of such expenditures in OECD countries.
9. In a recent public debate over whether or not Israel should strive to increase the number of youngsters enrolled in vocational high schools, Development Minister Silvan Shalom challenged Prime Minister Binyamin Netanyahu “Why don’t you send your own son [to a vocational high school] to become a welder.” He was referring to a situation that has been around for a long time – one in which vocational high schools are typically found in low-income communities. An examination of the location of the vocational schools of the two largest networks in Israel, Ort and Amal, revealed that out of 159 such schools, 113 (71%) were located in communities with low socio-economic status: 35 in Arab localities, 43 in Jewish development towns and 35 in localities at the bottom half of the socio-economic ladder. In most affluent localities, if there are vocational high schools, they are located in the poor neighborhoods.
10. Government spending on health is low by OECD standards. As a result of inadequate health budgets, Israeli households are spending more and more on private medical insurance that allows those who can pay more to receive treatment first. Doctors who once spent the whole day serving the public health system now disappear in the afternoons to serve the private system that is growing alongside the public one.

הפוסט Israel: A Social Report 2014 הופיע לראשונה ב-Adva Center.

A Social Report – 2013 finds Israel at the top of the graphs of inequality

and poverty among developed nations, at a time when inequality has come to be

recognized throughout the world as a social and economic threat. However, this

recognition has yet to be realized in Israel: here the government opts to deal

with it – or to be exact, not to deal with it – by setting up committees to

effect limited changes, like the Trajtenburg Committee, the Committee on the

Concentration of the Economy, or the War against Poverty Committee.

However,

inequality is a macro-economic and macro-social issue that needs to be dealt

with at the highest level. What is

needed is not increasing this or that social security or social assistance

payment by so many shekels or decreasing prices by a few percentages, but

rather a concentrated effort on two fronts:

A.

Creating balanced economic growth that will create jobs that pay a

living wage. Side by side with the “start-up

nation” that provides a generous remuneration to its citizens – who

constitute approximately 10 percent of employed persons – and to an even

greater extent the directors-general of the large corporations and the top one

percent that benefit from large incomes from capital, there is the other side of

the nation, constituting three-quarters of employed persons, who earn less than

the average wage and 30 percent of employed persons who earn the minimum wage

or less. While the political leadership take pride in the law unemployment rate

– 5.8 percent — we find that in Arab localities job seekers comprise 15-30

percent of the work force and that in Jewish development towns job seekers

comprise 10-15 percent of the work force.

B.

Creating an array of social services that balance the unbalanced

effects of economic growth.

Firstly, the general educational level needs to be upgraded: in an era in which

employment with a decent wage requires higher education, less than 50 percent

of Israeli youth earn matriculation (bagrut) certificates and only 28.8 percent

of high school graduates enroll in universities and colleges with 8 years of

graduation. Another example: the Israeli social security system receives a

relatively low level of funding – 15.8

percent of GDP, compared with 20-30 percent GDP in most western European countries.

The long-term

effort to promote and empower the private sector by reducing budgetary

allocations for social services was accompanied by a retrenchment of social

services, services on which Israelis on the margins of economic development

depend if they are to take part in future economic and scientific developments.

Salaries and Household Income

·

In 2012, the annual salary bill of directors-general of the 100 largest

corporations on the Tel Aviv Stock Exchange was, on average, NIS 4.519 million,

or NIS 376.6 thousands monthly.

·

The annual salary bill of the five highest earners in these

corporations was an average of NIS 3.421 million, or NIS 285 thousands monthly.

·

In 2012, the cost of the average salary of a director-general at the

largest corporations was 42 times the average wage (NIS 9.018) and 87 times the

minimum wage (NIS 4,300).

·

The State Revenues Authority publishes figures on income from capital

received by self-employed persons. Unfortunately, the latest figures are for

2008: that year, the total income of self-employed Israelis from capital was

NIS 18.3 billion. The top one percent received 74 percent of the total: NIS

13.5 billion.

·

Israel’s Gini coefficient is among the highest in OECD countries: In

2010 Israel was fifth highest among 35 countries, with a coefficient of 0.376.

Since the middle of the 1980s, inequality as measured by the Gini coefficient

increased in OECD countries by an average of 5.3 percent. In Israel, it

increased by 15.3 percent.

·

In 2012 women’s average monthly wage was 66 percent of men’s,

and women’s average hourly wage was 84.9 percent of men’s.

·

In 2012, the average monthly wage of employed urban Ashkenazi

workers (Israeli-born to fathers born in Europe or America) was 42 percent

above the average monthly wage of all employed urban workers. The wages of employed

urban Mizrahi workers (Israeli-born to fathers born in Asia or

Africa) was 9 percent above the overall average. The wages of employed Arab

urban workers was 34 percent below the overall average.

·

In 2012 households in the top quintile saved an average of NIS 1,168

per month for retirement, compared with NIS 64 per month for households in the

bottom quintile.

Education

·

The education system has yet to see 50 percent of the age cohort

graduate high school with matriculation diplomas. In 2012, the success rate was

49.8 percent. Similar results were achieved at the beginning of the decade,

followed by decreases.

·

Among young people graduating high school in 2004, only 34.6 percent

had enrolled in universities and academic colleges (not including the Open

University and teachers’ colleges) by 2012. The enrollees included:

o

38 percent of women, compared with 30.8 percent of men;

o

43.8 percent of Jewish graduates of academic high schools, compared

with 30.3 percent of Jews from technological tracks;

o

37.8% of Jewish high school graduates, compared with 10% of Arab high

school graduates.

Accessibility to Health

Services

·

In 2012, the monthly outlay of households in the top income decile for

supplemental and private health insurance policies was NIS 499, that of the

sixth decile NIS 243 and that of the second decile NIS 111.

·

In 2011, the gap between full funding and actual funding of the basket

of health services provided by the health funds under the National Health

Insurance Law continued to grow. The actual cost was NIS 32.67 billion, while

cost of full funding would have been NIS 48.83 billion.

הפוסט Israel: A Social Report – 2013 הופיע לראשונה ב-Adva Center.

הפוסט Israel: A Social Report 2012 הופיע לראשונה ב-Adva Center.