An infographic presentation based on a study by the Adva Center in cooperation with the Friedrich Ebert Foundation on gender pay gaps in Israel.

הפוסט Why Is Women’s Pay Lower Than Men’s? Infographic Presentation הופיע לראשונה ב-Adva Center.

These are the trends behind the phenomenon of low-wage employment. The present study examines the trends vis-à-vis such employment in recent years, as well as the characteristics of the workers themselves. The study was undertaken in view of the high percentage, in international comparison, of low-wage workers in Israel, the increase in the proportion of working families living in poverty, and the reduction of remuneration for work.

Low-wage work is not an inevitable phenomenon, and there are steps that can be taken to reduce its prevalence, as recommended by the OECD. These include periodically increasing the minimum wage,  buttressing public investment in active labor policies, strengthening government enforcement of workplace laws, and encouraging unionization, especially in the private sector.

Main Findings

• In 2021-22, 23.3% of employed persons worked for low wages – the highest proportion since 2015 (with the exception of 2020, the year of the Corona epidemic) and one of the highest proportions among OECD countries.

• Looking at gender, the proportion of women working for low pay is twice that of men – 31.5% compared with 15.9%.

• Throughout the period examined (2015-2021-22), there was an improvement in the situation of workers from peripheral areas, workers employed full-time, and workers who immigrated to Israel from the former Soviet Union. In contrast, the situation of Arab women and men, Haredi men, and workers aged 65 and over deteriorated.

• With regard to occupational sectors, the chances of unskilled workers and individuals employed in sales and services of being employed at low wages was extremely high, and those of skilled workers in both manufacturing and agriculture was also considerable.

• The increase in the proportion of workers with low wages occurred in tandem with the continuing reduction in the share of workers’ income in the national income pie. In 2024, the workers’ share was 56%, the lowest share in 25 years, in contrast to the share of employers, which reached a high of 24% — compared with 18% in 2000. This trend points to the increase in the profitability of employers, at the expense of the paychecks of employees.

• The social groups with the largest proportion of low-income workers include disabled persons, Arab women and men, Haredi women and workers of pension age. Among these groups, the proportion of low-income workers is over 40%.

• A multivariate analysis reveals that the size of the position (full-time, half-time, etc.) is the strongest variable influencing the chances of an individual’s working for a low wage. Controlling for position size and other variables, the chances of women to work for low wages is more than 70% greater than that of men.

הפוסט Work Without Decent Pay in Israel הופיע לראשונה ב-Adva Center.

But there is another explanation: the policy of assisting employers by lowering the cost of labor. This policy, which has been in effect at least since the Emergency Stabilization Program in 1985, has been a “success story.” The cost of labor has indeed decreased; however, this occurred at the expense of the economy as a whole.

A. Low Productivity and Policy to Lower the Cost of Labor
The “success” is evident in the following figures:
• The earnings of a large percentage of Israeli workers are defined as low wages (up to two-thirds of the median wage) – a percentage that is among the largest among OECD countries. Low wages reflect low investments in workers – in the form of vocational training, working conditions, mechanization and automation, which augur low productivity;
• The workplace participation of Israeli women grew during recent decades – but 36% of them received low wages in 2014 (up to two-thirds of the median wage) – a figure that indicates employment that does not require prior education or professional training — and augurs low productivity;
• A significant proportion of Israel’s workforce consists of foreign workers, employed at low wages and under inferior working conditions, in many cases as a cheap alternative to investing in mechanization– also auguring low productivity.

B. Decrease in the share of workers in the national income
In recent decades, the share of workers, both employed and self-employed, in the national income has decreased. In 2015, that share amounted to 57% – the lowest share since 2000, when it was 65%. This is a process that occurred in most OECD countries, but it is no consolation, as the circumstances accompanying that process differed from country to country, and as did the response. The result of the decrease in the share of workers in the national income is a long-term adverse effect on productivity: “cheap” laborers do not require instruction and professional training, and they, in turn, are not able to invest in the education of their children, certainly not when fiscal policy is based on the transfer of a good part of the burden of financing social services from the state to households. All these factors result in low productivity – perhaps productivity that will be even lower in the next generation.
The Central Bureau of Statistics does not publish figures on the division of the national income by income decile. It is reasonable to assume that such figures would point to an even larger shrinkage in the share of workers in the national income, due to the fact that the category of “workers” also includes persons with especially high salaries, like senior managers in public corporations, whose salaries have experienced significant growth during the past decade. Figures published by the State Revenues Authority at the Ministry of Finance based on the tax model of that authority reveal that between 2007 and 2015, the average income for individuals in the top one percent grew by 7% – from some NIS 130.6 thousand per month to NIS 139.5 thousand per month (in 2015 prices). During the same period of time, the average salary in the economy as a whole hardly changed. In 2015, the income of the top one percent amounted to 13% of all earned income.

C. “Foreign Workers” – A Permanent Feature of the Israeli Labor Market
Since 1967, workers from the Palestinian Authority have constituted an integral part of the workforce in Israel, and since the first intifadah, they have been joined by persons whom Israelis call “foreign workers.” In both cases, the common assumption is that these workers constitute a temporary phenomenon. However, the figures presented in this report show that they are a significant and permanent element in Israel’s labor market. The government of Israel denies this and continues to fight the phenomenon with one hand and encourage it with the other, without deciding which way to go.
One way would be to recognize the vitality of workers from abroad to the Israeli economy and to equalize their rights and status with those of Israeli workers.
Another would be to invest resources in a long-term program to increase mechanization and automation in construction and agriculture, which would reduce the dependence on cheap labor, and to build an alternative long-term care system so as to make it feasible to employ Israeli care-givers.
Regarding Palestinian workers, in the short term their employment is useful to Israeli employers, who receive cheap, accessible labor, while it is also useful to the Palestinian economy, which benefits from the wages of Palestinians employed in Israel. In 2013 those wages amounted to 12.3% of the Palestinian Authority’s GDP. However, in the long run this arrangement has an adverse effect on both sides. It is an obstacle to the development and maintenance of an independent economy on the part of the Palestinians, and it has a harmful effect on Israeli workers and on the productivity of the Israeli economy, due to institutionalization of the norms of low wages and no professional training.

High Productivity for Senior Managers?
It appears that the only workers with high productivity are senior managers, if one is to judge from their remuneration, which increased between 2014 and 2015, especially that part of their remuneration based on stock options. The cost of the annual compensation of directors general of the 100 largest corporations on the Tel Aviv Stock Exchange was, on average, NIS 5.1 million, or NIS 426 million per month – 44 times the average wage (NIS 9,592 in 2015), and 91 times the minimum wage (NIS 4,650).

Call for Change in the Trend of Lowering the Cost of Labor
After three decades of lowering the cost of labor, it is time to change direction. Increasing productivity in Israel involves increasing investment in the real economy (rather than, for example, in financial products), and in achieving a regional political solution. But it also requires transitioning to a more generous and egalitarian wage policy, on the one hand, and increasing the share of the state in financing social services, including the education and training of workers, on the other.

הפוסט Workers, Employers and the Distribution of Israel’s National Income – Labor Report 2015 הופיע לראשונה ב-Adva Center.

Even if the difference is a few percentage points, the amounts are quite large. In 2014, for example, Israel’s national income totaled NIS 927 billion. One percent of this was NIS 9.27 billion. Had the workers’ share remained the same as it was in 2004 – that is 61% (and not 57% as it was in 2014), workers as a whole would have received in 2014 NIS 37.08 billion more in salary. If we divide that sum by the number of persons in the labor force in 2014 – approximately 3.8 million (including soldiers in compulsory and professional service; not including foreign workers) – we will find that for that year, each worker would have received, on average, an annual addition of NIS 9815, or about NIS 818 per month. However, the addition went to employers, not to workers.

Further evidence of the worsening of the share of workers: between 2004 and 2014, the national income grew by 52%, while the share of employers grew by 78% and the share of workers by only 42%.

Additional findings of the report:

· In 2013, 27.5% of employed persons received salaries defined by the OECD as low – up to two-thirds of the median salary. The share of low-income workers in the national income was 7.2% in 2013. At the same time, the share of the top one percent was 6.9% of the national income – similar to the share of more than one-fourth of workers.

· Among low-wage earners were to be found 35% of women workers, 30.9% of Arab workers, 36.1% of workers lacking matriculation diplomas, and 26.9% of workers who were immigrants from the former Soviet Union.

· In 2014, the average monthly salary bill of top executives of the 25 largest corporations traded on the Tel Aviv Stock Exchange was NIS 417,000, lower than that of 2013. Still it was 44 times the average salary of Israeli workers and 97 times the minimum wage.

· The social security benefits paid by Israeli industrialists are lower than those paid by industrialists in most OECD countries.

Behind the continuing decline in the workers’ share of the national income is the weakening of their bargaining power vis-à-vis employers and the government, which is itself a large employer. The bargaining power of workers has become weaker first and foremost due to the decline in union membership. Following are a number of figures based on research and analysis of the Central Bureau of Statistics Social Survey.

· In Israel, the decline in union membership has been especially rapid: in 2000, 45% of workers were unionized. Six years later, in 2006, the percentage had declined to 34%, and approximately half of the workforce was covered by collective labor agreements. Six years later, in 2012, only 25% of workers were union members and only 30% were covered by collective labor agreements.

· High unionization rates can be found in the following industries: water and electricity (86%), education (52%), and public administration (46%). These sectors still remain primarily in public hands. In the private sector, unionization rates are much lower, between 5% and 13% in services, food services, trade and construction. In banking, insurance and financial services, about one-third of workers are unionized. The lowest unionization figures are to be found among contract workers, whose employment mode makes it almost impossible to unionize them.

· High unionization rates are characteristic of academic occupations – 42.3%, and professional and technical occupations, including teachers – 34.1%. High unionization rates also characterize highly educated full-time workers receiving high pay. This can be seen as evidence of the connection between unionization and good jobs and high salaries; the other side of the coin is, of course, the difficulty of organizing workers at the bottom of the salary scale.

In recent years, since about 2008, Israel has witnessed a new wave of unionization. This is the result of the emergence of a new labor union – Koah LaOvdim – and of new unionization initiatives on the part of the General Histadrut and the National Histadrut. This may signal a change in the two-decade old trend of declining unionization, especially in the private sector.

Below are additional findings from the report:

· About 150,000 workers set up workers’ committees and joined unions, most of them in 2013 and 2014.

New unionization efforts occurred in the following sectors:

· In the private sector – in the areas of telecommunications, media, insurance and transportation;

· Among young people employed in fast food industries;

· Among contracted workers and non-governmental providers of social services;

· Among education workers, college lecturers and alternative medicine practitioners.

It should be noted that anti-unionism is the norm among employers, who use a variety of means to hamper unionization initiatives, among others, delaying tactics in negotiations with workers, fragmentation of the bargaining unit to make organization harder, and harassment of leaders. Steve Adler, past president of the National Labor Court, noted that “in Israel as in the United States there has emerged an industry of experts in frustrating unionization efforts.”

הפוסט Workers, Employers and the Distribution of Israel’s National Income – Labor Report 2014 הופיע לראשונה ב-Adva Center.

At the same time, employees’ share in the national income remained at its 2009 level – 63% — which is still significantly smaller than it was at the beginning of the previous decade – 69%. The share of employers stayed at its 2010 level – 13% — significantly higher than it was at the beginning of the previous decade – 8-9%.

Even if the percentage differences are small, the sums are significant. In 2011, for example, Israel’s national income amounted to NIS 735 billion, one per cent of which was NIS 7.35 billion. Had the employees’ share of the national income in 2011 been 69%, as it was in 2001, employees would have received the combined total of an additional NIS 44.1 billion. If we divide this sum by the total number of employees in 2010, approximately 3.204 million (excluding migrant workers from abroad) – we find that in 2011 each employee would have received on average an additional NIS 13,763 per annum, or NIS 1,147 per month.

In sum, the years 2001-2011 were more beneficial to employers than to employees. The national income grew by 35%, but while the share of employees rose by 23%, the share of employers rose by 85%.

Persons in the top percentile received a growing share of the national income. This is evident from the figures published by two different sources.

6. According to the figures of the Central Bureau of Statistics on employed persons, the top percentile of employees held 6.8% of the total income of salaried persons in Israel – the highest percentage recorded for the decade.
7. According to the figures of the State Revenues Authority, the top percentile of both salaried and self-employed persons held 14.1% of all gross income in Israel in 2010 – an increase of 34% between 2005 and 2010. This figure positions Israel close to the top of those countries in which persons in the top percentile are very wealthy (See the following table).

Senior executives are one constituent of the top percentile.  The salary costs of executive directors of the 25 largest corporations on the Israeli Stock Exchange in 2011 amounted to NIS 9.8 million, on average, including NIS 3.0 million in salary, NIS 2.8 million in bonuses, and NIS 4.2 million in stock shares.

The picture that emerges from the foregoing figures shows an increasing concentration of wealth in the hands of a minority. It also shows the weakening of the bargaining power of most employees in Israel. The result is that the labor market fails to deliver a decent wage to a good portion of its employees. The profits of the minority today are liable to turn out as a future loss for the Israeli economy and society, for employees who do not manage to maintain a decent standard of living, including a good education for their children, do not constitute a strong basis for long-term economic development.

Attached is a table of international comparisons of the share of the national income going to persons in the top percentile.

Share of the Top Percentile in the National Income Circa 1949 and 2005,

Selected Countries, By Descending Order in 2005

Sources:

Israel: State Revenues Authority, Ministry of Finance, Annual Report, various years.

Other countries: Atkinson, A., Piketty, T. and Saez, E., “Top Incomes in the Long Run of History,” Journal of Economic Literature, 2011, 49/1:3-71.

For the Full Report in Hebrew Click Here

הפוסט Workers, Employers and the Distribution of National Income 2011 הופיע לראשונה ב-Adva Center.

The share of employees in the national income also increased slightly, from 62% in 2009 to 63% in 2010. Still, the share of employees is much smaller than it was at the beginning of the decade: 68%. The share of employers in 2010 was the same as in 2009 – 14%.

Even if the percentage differences are small, the sums are significant. In 2010, for example, Israel’s national income amounted to NIS 688 billion, one per cent of which was NIS 6.88 billion. Had the employers’ share of the national income in 2010 been 68%, as it was in 2000, employees would have received the combined total of an additional NIS 34.41 billion. If we divide this sum by the total number of employees in 2010, approximately 2.938 million (excluding migrant workers from abroad) – we find that in 2010 each employee would have received an additional NIS 11,713 per annum, or NIS 976 per month.

In sum, the past decade was better for employers than it was for employees: between 2000 and 2010, the national income grew by 33%; the share of employees grew by 24% and the share of employers by 44%.

According to Central Bureau of Statistics (CBS) figures, the top percentile (top 1%) received 6.3% of the total earnings of employed persons in Israel. The State Revenues Authority (SRA) set the figure at 8.7%. The SRA also calculated that the top percentile of both self-employed persons and persons employed by others received 12.8% of the total national income.

In contrast, according to the CBS, employed persons earning up to two-thirds of the median income – defined as low income – – constituted in 2009 25.9% of all employed persons. Their share of the national income amounted to 7.7% – only slightly more than that of persons in the top percentile.

The picture that emerges from the foregoing figures is one of concentration of income in the hands of a minority – heads of conglomerations, high-level corporate executives and well-paid employees working in two or three sectors of the economy. At the same time one sees the weakening of the bargaining power of the majority of employees. As a result, the Israeli labor market does not provide a living wage to a large part of its workers. The huge profits reaped today by conglomerate heads are liable to turn into future losses for the Israeli economy and for Israeli society. Employees who find it difficult to maintain a decent standard of living and to provide their children with a good education are not a strong basis for long-term economic development.

הפוסט Workers, Employers and the Distribution of Israel’s National Income Labor Report: 2010 הופיע לראשונה ב-Adva Center.

In 2009, employers’ share of the national income rose, while the share of employees decreased. The employers share increased from 15% in 2008 to 17% in 2009, and the employees’ share decreased, from 62% to 60%. In other words, the blunt of the global financial crisis of 2008-2009 hit employees, not employers.

From a 10-year perspective (2000-2009), it appears that the last decade was good for employers. While it is true that between 2000 and 2002, employers’ share of the national income decreased from 14% to 10%, by 2004 that share had returned to its former level. After that it continued to increase, to 17% in 2009.

For employees, the decade was not beneficial: in 2000, their share of the national income was 66%; by 2009 it had declined to 60%.

While the difference in percentage points is not great, the actual sums are quite significant. In 2009, Israel’s national income amounted to NIS 654 billion. One percent of this was NIS 6.54 billion. Had the employees’ share of the national income in 2009 been 66%, as it was in 2000, and not 60%, employees would have received, as a group, NIS 39.2 billion more in wages. If we divide this sum by the number of salaried persons in 2009 – 3.014 million (including migrant workers) – we find that, on average, each employee would have received an additional NIS 13,000 a year, or NIS 1,083 a month.

Another indicator of the growing income inequality in Israel is the difference between the increase in national income and the increase in the share of employers and employees. Between 2000 and 2009, the national income grew by 30%; while the share of employees grew by only 17%, the share of employers grew by 59%.

· Over the last decade, the net domestic product per work hour increased by 7.3% in the business sector and by 7.5% in the economy as a whole. In contrast, the compensation per work hour declined by 7.8% in the business sector as well as in the economy as a whole. In 2009, this decline was notable: while the net domestic product per work hour rose by 2.9% in the economy as a whole and by 2.6% in the business sector, the compensation per work hour declined by 5%, both in the business sector and in the economy at large.

· In 2009, the salaries of directors-general in companies listed on the Stock Exchange rose by approximately 9% to NIS 2.54 million per year, or NIS 212,000 per month. This is a significant increase since 2008, and it is worth mentioning in view of the fact that it occurred in the midst of a world financial crisis. The growth in the compensation of senior managers is the most significant change in Israel in the area of salaries, and it is especially salient against the background of the fact that the average wage per employee job in Israel declined between 2000 and 2009 by 4% in real terms. In 2009, while the salaries of director-generals rose by 9% in real terms, the wage per employee job declined by approximately 3% in real terms.

הפוסט Workers, Employers and the Distribution of Israel’s National Income Labor Report: 2009 הופיע לראשונה ב-Adva Center.