“Since the beginning of the last decade there has been a slow but continuous drop in gross income inequality,” said Bank of Israel Governor, Dr. Karnit Flug, Flug led a discussion at symposium on the “Causes and Consequences of Inequality,” held by the Taub Center for Social Policy Studies in Israel.
Flug presented data that indicates that, according to the Gini coefficient, there was a rise in inequality in the majority of OECD countries, including Israel, between 1985 and 2008. According to Flug, “Since, already in the beginning of the period, inequality in Israel was among the highest in the OECD, this did not change at the end of the period, and gross income inequality has seen a slow but continuous drop since the beginning of last decade, though disposable income inequality rose until 2006 and then stabilized at high levels.”
Flug addresses the gradual shift in the nature of the job market in Israel since the early ‘90s, over the course of which, “the job market became more flexible. As a result, both the salaries and unemployment rates became very sensitive to economic business cycles. Thus, for example, in the recession of the early 2000s, salaries dropped 10% and unemployment rates rose sharply, and later the trends reversed with the recovery on the macro-economic level.”
Another point that Flug emphasized was the rise in two-income household over the past decade. She said that “There is a clear relationship between the flexibility of the job market and the inequality in disposable income. The process that began in recent years of the reduction of transfer payments on the one hand, and the reduction of direct taxes on the other, contributed to a rise in flexibility of the job market on the one hand, and to a rise in disposable income inequality on the other.”
Published by Globes [online], Israel business news - www.globes-online.com - on October 30, 2013
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