Two-thirds of Israelis Earn Less Than Average Wage

The wage gap is growing wider, new report shows.

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Salary inequality may be increasing in Israel, indicates a new report published by the Knesset Research and Information Center. The report found that the average wage was about 30% higher than the median wage in 2012, a strong indicator of inequality.

A large difference between average and median wages indicates that top wage earners are skewing the average upward, and that the average is less reflective of what most people actually earn. In other words, the average Israeli earns a lower-than-average salary – half of all Israelis earn less than the median salary and half earn more, but a full 68% of all Israelis receive less than the average salary, the data indicates.

The report, drafted by economist Victor Pattel, examines these figures between the years 2003 and 2012, based on Central Bureau of Statistics data.

In 2012, the average salary was 9,149 shekels a month ($2,625), while the median salary was 6,541 shekels ($1,877) – about 71.5% of the average salary. Until 2011, it had been 73.6%, meaning average Israelis were earning slightly closer to the average salary.

This “could indicate that salary gaps increased in 2012,” said Pattel. However, there were some changes in how the salary survey was conducted, which could also affect the numbers, he noted.

Some 70% of all salaried employees received less than 10,000 shekels a month ($2,869), while 57% earned less than 7,500 shekels a month ($2152), and 34% earn less than 5,000 shekels a month ($1,434). Only 6% earned more than 25,000 a month ($7,174).

For Jews, the median wage was 72% of the average wage, while for Arabs, the median was 87.5% of the average – indicating a lower level of inequality within Arab society.

Meanwhile, the median wage for men was 70.1% of the average, while the median wage for women was 75.8% of the average – indicating less equality among women.

However, women and Arabs tend to earn less as groups.

There are two main trends, according to the report: Many wage earners in Israel earn poorly, and the average salary for available jobs is 60% less than the country’s average salary overall. In addition, the average salary has stagnated over the past few years, despite new wage agreements and automatic raises in some sectors, says Pattel.

However, the workforce has expanded significantly over the past decade. Some 63.7% of people ages 15 and up were in the workforce as of the third quarter of 2013, up from 59.4% in 2000. In addition, the proportion of people between the ages of 25-64 who work – the main working demographic – was 78.7% in 2012. The average for OECD member nations is lower, at 76.1%.

Likewise, the unemployment rate dropped from 10.1% in 2000 to 6.1% as of the third quarter of last year.

“These figures indicate the workforce has expanded significantly over the past decade,” states the report.” Yet the researchers note that the new workers are poor: “A large portion of the new workers (some of whom would receive income guarantees) receive low salaries,” they note.

Retirement lowers quality of life

Meanwhile, only one out of three people above age 60 work. The figure is even lower for women.

Some 65% of people age 60 and up are able to cover their household expenses, according to a Central Bureau of Statistics report. For those who work, the figure is 75%.

Of those who are employed, only 39% have a pension of some sort. Some 82% of people with pensions reported being able to cover their household expenses, versus only 54% of people without pensions.

Not all pensions are created the same. Some 54% of people with pensions of up to 4,000 shekels a month ($1,147) say that that’s not enough to live in dignity. Of those who receive 7,500 shekels a month ($2,152) or more, 87% say that this is enough to live in dignity.

Those with pensions also tend to have better health overall – some 67% of people with pensions also report having nursing care insurance, versus 32% without.

Furthermore, a large majority of people over age 60 who aren’t working – 71% -- agreed with the statement that retiring meant a lower quality of life.

Some 47% of people said they retired because they reached the retirement age. Another 26% retired due to cutbacks or layoffs. Another 16% retired due to health problems or family members with health problems.

Meanwhile, a survey of the public at large found that 87% of respondents believe that people should be allowed to work beyond retirement age.

Residents of Tel Aviv apparently enjoy their retirement more than those in Be’er Sheva. Some 48% of people aged 60 and up nationwide said that life after retirement is full and active, while 63% of those in Tel Aviv agreed with the statement, versus 40% in Be’er Sheva.

A worker at Haifa port. Despite automatic raises in some sectors, the average salary has stagnated over the last few years.Credit: Reuters

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