Israel has widest wage gap in OECD

Mahane Yehuda market Jerusalem photo: Shutterstock
Mahane Yehuda market Jerusalem photo: Shutterstock

Among OECD countries, only in the US, Poland and South Korea has wage earners' share of GDP fallen more steeply than in Israel.

Israel has the highest ratio in the OECD of salaries in the ninth decile (the 10% of salary earners below the top 10%) to salaries in the bottom decile (the bottom 10%): 7.22 in 2016 figures, according to an OECD report published yesterday. The average for this ratio in the OECD was 3.22. In second place after Israel was the US, with 5.05, following by Costa Rica, with 5.

The report also shows that in recent years Israel has recorded one of the steepest declines in the share of GDP received by salaried employees, because of a slow rise in wages compared with growth in productivity. The figures show that in Israel employees' share of GDP fell by 7%, compared with the average in 1995-2013.

According to the report, only the US, Poland, and South Korea had a steeper fall in employees' share of GDP than Israel. The report states that the reason for this lies in the lack of connection between the increase in productivity and the increase in real wages. In almost all OECD countries, salaries rose more slowly after the 2008 global economic crisis than before it. In the OECD as whole, the rate of increase in nominal wages was half of the rate a decade ago: 3.2%, compared with 5.8%.

Israel's 4.2% unemployment rate was one of the lowest in the OECD in 2016. The OECD average was 5.8%. The only countries with lower unemployment rates were Japan (2.8%) Mexico (3.5%), and Germany (3.8%).

The report also shows that Israel was among the OECD leaders in annual work hours per employee, with 1,885, compared with the 1,750 OECD average. Only in Mexico (the OECD leader with 2,257 annual hours), Greece, Russia, Poland, Chile, and Costa Rica do employees work more hours per year.

Israel lags in professional training

The report highlights once again that Israeli lags far behind in active policy on professional training for employees and measures for improving skills and productivity. Israel has one of the lowest ratios in the OECD in this area. Government spending on active promotion of employees is 0.27% of GDP in Israel, higher only than the US and Japan. Denmark was in first place, with 3.22%.

Israel was in first place in the prevalence of low wages in the labor market. The proportion in Israel of employees paid less than two third of the median wage was over 26%, followed by the US with 24.9%. The OECD average is 17.9%.

The OECD report notes that the slowing pace of wage increases had especially affected employees at the bottom of the income ladder. The highest wage increases were in the top one percent of the salary ladder. The figures show that wage gaps in Israel were among the most prominent.

The wage gap between men and women in Israel was 19%, compared with an OECD average of 14%. The gap in income between employees in the 25-64 age bracket and employees in the 15-24 age bracket was 73%, almost double the OECD average. The large gap is attributable to the low income of young people serving in the army in Israel, among other factors.

The report also shows that proportion of employees working at part-time jobs in Israel has remained stable at 15-15.5% in recent years. The proportion of part-time workers in 2017 rose from 7.4% in 2000 to 9% in 2017 among men, while among women it fell from 25.4% in 2000 to 22.4% in 2017.

Published by Globes [online], Israel business news - - on July 5, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Mahane Yehuda market Jerusalem photo: Shutterstock
Mahane Yehuda market Jerusalem photo: Shutterstock
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