OECD warns inequality in Israel will worsen


Israel is already in second place after the US in gross income inequality.

Israel is rated in 15th place among 165 economies in the world in labor productivity (total GDP divided by the number of employed), according to a report published today by the Organization for Economic Cooperation and Development (OECD). According to the report, labor productivity in Israel in 2011 was $78,847, only 5% more than it was in early 2000. The report stated that Israel had three million people in employment in 2011. Labor productivity in Israel is higher than in many developed countries, such as Japan, UK, Canada, and South Korea.

Beyond the small increase over the past decade in one of the most important measures of economic growth, labor productivity in Israel is still lower than the OECD average of $86,000, which is 9% higher than in Israel. Labor productivity in Israel is 3.5 times the average productivity in the major emerging (BRIICS) markets: India, China, Brazil, Russia, and Indonesia, but these economies have doubled or tripled their productivity over the past decade.

The OECD said today that without better productivity, many developing countries would not be able to close the enormous current gap in per capita income. OECD economists recommend investment in innovation and adoption of structural reforms as the key to increasing productivity, with an emphasis on the services sector as a key factor for change. "Only increasing productivity can ensure that countries with medium or high-level income will close the gap in their standard of living by mid-century," OECD Secretary General Angel Gurria said.

In a different OECD study, in which economists presented their economic forecasts up to 2060, the organization warned of serious worsening in inequality in gross economic income (income before taxes and allowances), i.e. excluding government intervention. According to this report, Israel is already in second place after the US according to the D9/D1 index, which measures the ratio between the gross income of an individual in the ninth decile and the gross income of an individual in the bottom decile. According to the figures, this ratio was 5 in Israel in 2010, meaning that the gross income of a rich person was five times the gross income of a poor person in the bottom decile. This ratio was slightly lower than in the US, and far above the OECD average of 3.5.

At the same time, according to the forecasts, this ratio is projected to reach over 7 by 2060, compared with an average of over 4.5 in the OECD countries, reflecting a steep jump of over 40% in inequality, compared with a 30% projected increase in average inequality in the OECD.

Published by Globes [online], Israel business news - www.globes-online.com - on July 2, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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