How Is Israel’s Middle Class Doing? It’s Complicated

2018 saw a slight decline in its share of the population and total income, but it’s still at its highest point since 1997

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Construction workers in Tel Aviv.
Construction workers in Tel Aviv.Credit: Eyal Toueg

The Israeli middle class’ portion of income declined in 2018 to 60.1%, down from 60.8% in 2017. The lower class’s portion was nearly unchanged for that year, while the upper class greatly enlarged its portion: Its share of income increased from 7.6% to 9.4% that year. These statistics were published as part of the National Insurance Institute’s poverty report for 2018.

The middle class’ shrinking portion of income dovetails with changes in salary distribution: The bottom two deciles’ income per capita increased in 2018 by 6.9%, the highest percentage increase for any economic class. The upper two deciles increased their income per capita by 5.7%, while the the six deciles in the middle – the middle class – saw their income increase by only 2.7% to 4.3%.

Yet before the poverty report rings the death knell for the eroding middle class, it turns out that the middle class is in much better shape than it would appear. The index measuring salary gaps between the ninth decile and the fifth decile declined in 2018 to its lowest level since 1999, which means salary gaps between the upper class and middle class are at a two-decade low.

And when you look at a long-term graph at the middle class’ percentage of the total population and total income, it emerges that there was indeed a slight decline in 2018 but the general long-term trend is that the middle class has been gaining strength, and is ultimately at its highest point since 1997.

So is Israel’s middle class gaining or losing strength? This question emerges as well from the figures regarding available jobs. Here, too, Central Bureau of Statistics data indicate two extremes at play – there’s massive excess demand for high-tech workers, and for blue-collar workers such as construction workers and drivers. Everything in the middle, including a large portion of jobs for people with academic degrees, is in a bit of a fix.

“Excess demand versus worker supply exists for programmers, telephone sales representatives, construction workers, stonemasons and other such vocations. There is major excess worker supply among managers,” the statistics bureau states in its 2019 third-quarter report.

The polarity seen in the statistics’ bureau data is rather striking. Janitors, builders and truck drivers are seeing the most demand, measured in terms of open positions relative to the total number of people in these fields, as are programmers. Also security guards, home health care workers and even garbage collectors are facing high demand for their skills. People in these fields are typically in the economic lower class, or, in the case of programmers, the upper class.

Yet the classic fields of employment for the middle class are lagging way behind, and some are facing major excess supply of workers relative to the number of positions available. Thus, on average, there are four times more workers than jobs in fields that require degrees such as the sciences, engineering and health. There is also a major excess of people seeking work as clerks and managers – classic middle-class fields.

The general picture that emerges doesn’t leave much hope for the middle class. This is backed by Bank of Israel research which found that some 40% of Israeli college graduates took jobs in fields other than what they studied, which translates on average to a 5-6% drop in potential salary, and could also explain the disconnect between supply and demand seen in many professions.

But here, too, there’s another angle. The Labor Ministry and the Employment Bureau take issue with the statistics bureau data, stating that the surveyors asked respondents in what profession they’d like to work, so obviously everyone would respond that they want to be a manager, and thus the responses create an artificial picture of an excess supply of managers. When you look at statistics regarding actual job seekers, the Employment Bureau argues, you see excess supply only of managers and unskilled workers. In all other fiends, supply and demand are rather balanced.

Roni Shnitzer, head of the strategy and planning division at the Labor Ministry, adds that programmers and builders are facing excess demand for very different reasons: There really is an excess demand for programmers, she says, but when it comes to builders, the field’s low pay and harsh working conditions mean that not many people want the available jobs.

Regarding other fields of employment, when you take salaries and the number of available positions into account, the middle class’ situation isn’t that glum, Shnitzer says. The demand for economists, electricians and engineers is growing quickly, as are the salaries in these fields, she says.

So is Israel’s middle class getting stronger or weaker? The picture is confusing, partly due to incomplete data. There is no proper database of statistics on open jobs alongside the salaries being offered. However, the Labor Ministry is currently developing such a database, which should eventually serve as a crucial tool to help citizens decide what to study, while giving them a realistic understanding of what the labor market holds for them. This will help the middle class plan its professional future.

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