Income inequality in Israel Momi Dahan Hebrew University
Market income inequality in Israel 0.54
0.52
0.50
0.48
0.46
0.44
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979
0.42
Searching for explanations of the inverted U-shape evolution
Explanations that are not in line with inverted U-shape (+) SBTC (+) Globalization (+) Labor market institutions 1) labor union coverage 2) decentralization of collective agreements 3) minimum wage
20
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
The evolution of minimum wage (minimum to average wage ratio, percent)
55
50
45
40
35
30
25
Explanations that are consistent with inverted U-shape (+, -) Unemployment (+, -) Mass immigration (+, -) Immigrant workers
Unemployment and market income inequality
0.00
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Immigration
(share of the population, percent)
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Immigrant workers (share of total employees)
14
12
10
8
6
4
2
The correlates of market income inequality Unemployment Welfare state generosity index
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
1.02*** (0.184)
1.06*** (0.232)
0.80*** (0.153)
0.60*** (0.197)
1.03*** (0.145)
0.83*** (0.094)
0.68*** (0.113)
0.86*** (0.090)
−0.465 (0.473)
Direct statutory tax rate index
−0.074*** (0.012)
Minimum wage/average wage
25.021** (10.660) 0.245*** (0.081)
Participation rate Arab coverage rate in income survey
0.324*** (0.031) 0.825*** (0.150)
Share of immigrant workers Technical change in income/labor force survey Constant Adjusted R2 No. of observations
3.219*** (0.488) 41.470*** (1.403)
43.539*** (2.298)
50.173*** (2.057)
34.190*** (5.167)
28.018*** (4.048)
38.197*** (0.694)
37.298*** (1.130)
40.909*** (0.771)
0.495
0.426
0.724
0.265
0.606
0.855
0.744
0.791
35
34
35
28
35
32
35
35
Net income inequality in Israel
Market and net income inequality
0.40
0.54
0.38
0.52
0.50
0.36
0.48
0.34
0.46
0.32
Market income inequality Net income inequality 0.44
0.30
0.42
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979
Redistribution and inequality (-) Income tax reducing inequality higher effect on net inequality (?) Income assistance widening market inequality ambiguous effect on net inequality
10
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1997* 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Welfare Generosity Index
(The share of transfer payments in net income based on income survey)
24
22
20
18
16
14
12
60
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Statutory Income Tax Index
140
130
120
110
100
90
80
70
Unemployment and net income inequality
Income inequality in Israel in comparative perspective
0.50
0.00 Ireland Greece Portugal United Kingdom Spain Italy Estonia Germany United States France Latvia Chile Austria Finland Belgium Japan Australia Luxembourg Mexico OECD Slovenia Poland Czech Republic New Zealand Hungary Israel Sweden Denmark Canada Netherlands Slovak Republic Turkey Norway Switzerland Iceland Korea
Market income inequality in OECD (2013 or the latest available year)
0.70
0.60
0.47 0.46
0.40
0.30
0.20
0.10
Market income inequality in OECD (OECD is composed of 16 countries for which data are available for the last decade) 0.53
Israel OECD average
0.52 0.51 0.50 0.49 0.48 0.47 0.46 0.45
2013
2012
2011
2010
2009
2008
2007
2006
2004
0.43
2005
0.44
Israel and US Market Income Inequality 0.55
0.50
0.45
0.40
0.35 United States
0.30
Source: OECD Stat
Israel
Israel and UK Market Income Inequality 0.55
0.50
0.45
0.40
0.35 United Kingdom
0.30
Source: OECD Stat
Israel
Israel and France Market Income Inequality 0.55
0.50
0.45
0.40
0.35 France
0.30
Source: OECD Stat
Israel
Israel and Germany Market Income Inequality 0.55
0.50
0.45
0.40
0.35 Germany
0.30
Source: OECD Stat
Israel
0.40
0.35
0.00 Chile Mexico United States Turkey Israel Estonia United Kingdom Lithuania Latvia Spain Greece Portugal Australia New Zealand Japan Italy Canada OECD Ireland Korea Poland Switzerland France Germany Hungary Netherlands Sweden Luxembourg Austria Slovak Republic Belgium Czech Republic Finland Slovenia Denmark Norway Iceland
Net income inequality in OECD (2013 or the latest available year)
0.50
0.45
0.37 0.32
0.30
0.25
0.20
0.15
0.10
0.05
Market income inequality in OECD (OECD average is composed of 16 countries for which data are available for the last decade) 0.40 0.38 0.36 0.34 0.32 0.30 0.28 0.26 0.24
Israel
OECD
2014
2013
2012
2011
2010
2009
2008
2007
2006
2004
0.20
2005
0.22
Israel and US Net Income Inequality 0.45
0.40
0.35
0.30
0.25 United States Israel 0.20
Source: OECD Stat
Israel and UK Net Income Inequality 0.45
0.40
0.35
0.30 United Kingdom Israel 0.25
0.20
Source: OECD Stat
Israel and France Net Income Inequality 0.45
0.40
0.35
0.30
0.25 Franc e Israel 0.20
Source: OECD Stat
Israel and Germany Net Income Inequality 0.45
0.40
0.35
0.30
0.25 German y Israel 0.20
Source: OECD Stat
Israel distinctiveness • Cultural preferences • Restricted opportunities • Unemployment • Redistribution policy
Labor force participation rate in Israel & OECD (age 15-64, percent) 73
72
71
70
69
Source: https://data.oecd.org/emp/labour-force-participation-rate.htm
2015
2014
OECD
2013
2012
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
67
2011
Israel
68
Unemployment rate in Israel & OECD (age 15-64, percent) 12
10
8
6
4
Source: oecd.stat.
2015
OECD
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
Israel
2014
2
Redistribution policy Social protection (of GDP)%
Direct taxes (of GDP)%
OECD
Israel
OECD
Israel
23.8
16.7
20.5
19.1
1995
20.8
16.2
20.5
19.0
2002
22.0
13.8
21.1
16.0
2014
25
0 Chile Mexico Turkey United States United Kingdom Portugal New Zealand Israel France Greece Estonia Italy OECD Australia Japan Spain Luxembourg Canada Ireland Germany Poland Switzerland Hungary Netherlands Korea Sweden Czech Republic Austria Finland Iceland Belgium Denmark Norway Slovenia Slovak Republic
The net income share of top decile in OECD (2013 or the latest available year)
45
40
35
30
25.6 24.6
20
15
10
5
8
6
0 Czech Republic Denmark Iceland Finland Slovenia Slovak Republic Norway Germany Netherlands Belgium Sweden Switzerland France Luxembourg Austria Ireland Hungary Poland OECD New Zealand Canada United Kingdom Australia Portugal Estonia Italy Korea Spain Japan Greece Turkey Israel United States Chile Mexico
The net income share of the bottom quintile in OECD (2013 or the latest available year)
12
10
7.7
5.5
4
2