Leaving Israel’s development to market forces may have led to significant economic growth in recent decades, but a new study claims that most citizens did not benefit from the nation’s success as expected.
According to the Adva Center’s annual report on Israeli society, published on Wednesday, GDP per capita reliably grew faster than wages during the past three decades. While the economy consistently grew in terms of GDP, the general standard of living did not necessarily grow in tandem.
During the two decades between 1968 and 1989, the report detailed, GDP growth was accompanied by a parallel growth in real salaries. Beginning in the 1990s, however, growth paths diverged and GDP per capita increased more than the average salary.
According to data published by the OECD in 2017, 22.6% of Israeli full-time workers were considered as earning low wages, defined as not exceeding two-thirds of the median wage. The figure stood significantly above the OECD average of 15.4%.
The proportion of Israelis receiving no more than minimum wage was 33.6% in 2017. Just two years prior, data showed that 30.8% of Israelis earned minimum wage, demonstrating that many new jobs are paying the bare minimum.
While the share of workers earning no more than minimum wage grew across all localities, the largest increase during the two-year period was in Arab towns.
In haredi (ultra-Orthodox) communities, some 55% of employees earned no more than minimum wage, the report stated. In Arab-dominated localities, 45% of workers earned minimum wage. The figure stood at a more moderate 31% in non-haredi Jewish communities.
As of 2018, the average monthly gross income of households in the top decile amounted to NIS 66,584. The monthly income of top decile households was 12 times the monthly income of households in the bottom decile, which stood at just NIS 5,501.
Israel’s middle class, the report added, has shrunk more than all OECD countries, except for Estonia and Lithuania. Only 53.8% of Israeli households were considered middle class. In 2018, 26% of households either lived in poverty or near poverty.
Shlomo Swirski, who coauthored the report with Etty Konor-Attias and Aviv Liberman, appealed to place the “public interest at the center of public policy.” Rather than weakening the business sector, Swirski says “strengthening the arms of the state” is required.
“The national budget 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,” he said.
“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.”
Other notable findings in the report included a distinct salary pyramid according to ethnic origin and gender. Ashkenazi first-generation men who immigrated prior to 1989 topped the salary scale with an average of NIS 18,772 per month, followed by second-generation Ashkenazi men with a salary of NIS 16,483 and second-generation mizrahi men with NIS 14,153. At the opposite end of the scale were Arab women with earnings of NIS 5,722 and Jewish women of Ethiopian origin who earned NIS 5,619.
The report also highlighted that only 47.2% of bottom decile households headed by salaried or self-employed individuals were saving for retirement in 2018. A total of 20.7% of households across the country were not saving for retirement at all. In the same year, 44.7% of households headed by persons aged at least 67 had no pension income.
Finally, the latest Gini Coefficient – measuring inequality – published by the National Insurance Institute in 2018, showed that inequality had fallen to 0.35559 – the lowest in two decades. The figure remains higher than the majority of OECD member countries.