Reuben Gronau Comments on Dahan The Evolution of Income Inequality

Comments on Momi Dahan, “The evolution of income inequality: the ”.Israeli Exceptionalism

Reuben Gronau Conference on Social Mobility and Inequality in Israel June 14-15, 2017

We Are the Champs!!!

The Net Income Gini Coefficient of Israel and the OECD Countries (2013) 0.5 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0

And We Can’t Even Blame the Arabs!

The Net Income Gini Coefficient of the Jewish Non-Orthodox Population of Israel and the OECD Countries (2013)

But Not Everything is Bad!!!

The Gross Income Gini Coefficient of Israel and the OECD Countries (2013 )

‌..and Things are Improving!!!

The Gross Income Gini Coefficient of Israel and the OECD, 2004 - 2013

More People Have Started Working!

Distribution of Households by Head of Household Employment Status 1997 - 2014 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Wage and Salary Employee

2008

2009

2010

Self Employed

2011

2012

Not Employed

2013

2014

‌.Especially Among the Poor!

The Average Number of Earners in the Household by deciles of Net Income per Standard Person, 1997 - 2014 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 1997

1998

1999

2000

2001

2002

2003

2004

Deciles 6-10

2005

2006

Deciles 3-5

2007

2008

Deciles 1-2

2009

2010

2011

2012

2013

2014

The Average Number of Earners in the Household by deciles of Net Income per Standard Person, 1997 - 2014

2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 1997

1998

1999

2000

2001

2002

2003

2004

Deciles 1-2

2005

2006

Deciles 3-5

2007

2008

2009

Deciles 6-10

2010

2011

2012

2013

2014

The Labor Income of the Poor More Than Doubled!

Index of Labor Income by Quintiles 1997 - 2014 (1997=100) 230.0

210.0

190.0

170.0

150.0

130.0

110.0

90.0

1997

1998

1999

2000

2001

2002

Top quintile

9

2003

2004

4-6 decile

2005

2006

2007

Bottom quintile

2008

2009

2010

Population Average

2011

2012

2013

2014

and Their Gross Income Grew Faster than That of the Rich!!!.‌ Index of Gross Money Income by Quintiles 1997-2014 (1997=100) 150.0 145.0 140.0 135.0 130.0 125.0 120.0 115.0 110.0 105.0 100.0 95.0 1997

1998

1999

2000

2001

2002 Top quintile

2003

2004 4-6 decile

2005

2006

2007

Bottom quintile

2008

2009

Population Average

2010

2011

2012

2013

2014

Index of Income from Receipts from the National Insurance Institute by Quintiles, 1997 – 2014 (1997=100)

140.0

Index of Compulsory Payment by Quintiles, 1997 – 2014 (1997=100)

150.0

135.0

145.0

130.0

140.0 135.0

125.0

130.0 120.0

125.0

115.0

120.0

110.0

115.0 110.0

105.0

105.0

100.0

100.0

95.0

95.0

90.0

90.0 85.0

85.0

80.0

80.0

199719981999200020012002200320042005200620072008200920102011201220132014

Top quintile Bottom quintile

4-6 decile Population Average

75.0 Top quintile Bottom quintile

4-6 decile Population Average

!!!and That’s Where We Are….

155.0

Index of Net Money Income by Quintiles of Income, 1997-2014 (1997=100)

150.0 145.0 140.0 135.0 130.0 125.0 120.0 115.0 110.0 105.0 100.0 95.0 1997

1998

1999

2000

2001

2002

Top quintile

2003

2004

4-6 decile

2005

2006

2007

Bottom quintile

2008

2009

2010

Population Average

2011

2012

2013

2014

Looking at Wage Discrepancies From a Different Angle: The Wage Differential by Industrial Sector, 1994-2011

(Relative to the average wage per employee jobs) 2.60 2.40 2.20 2.00 Average wages Construction Wholesale, retail trade and repair Accommodation and food service activities Banking and financial services Public administration Education, health and social work activities Manufacturing (Mining and quarrying) Electricity and water supply Business services Transportation, storage and communication Community, social and personal services

1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

!The Schooling Differential Increased but Not Dramatically The Wage Differential by Years of Schooling, 1999-2014 )Relative to average wage and salary( 1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00

0-8

9-10

11-12

13-15

16+

!That is Also True for Occupational Wage Differences…

The Wage Differential by Occupation, 1999 – 2012 )Relative to average wage and salary( 3.00

2.50 Unskilled workers Skilled workers 2.00 Sales and service workers Clerical and support workers 1.50 Practical engineers, technicians, agents and associate professionals

1.00

Professionals Managers

0.50

0.00

However, the Mean May Not Tell the Whole Story: Cornfeld and Danieli (2015):

• The main source of the increase in wage dispersion is the increase within-group dispersion (age, schooling and occupations) • Schooling has lost much of its signaling value • The increase in the dispersion was positively correlated with the group’s average wage, leading to an increase in the asymmetry of the wage distribution

…and at the End of the Day it’s the Story of Skills!!!!

The Survey of Adult Skills (Programme for the International Assessment of Adult Competencies -PIAAC)

:Key findings • Israel shows one of the strongest positive relationships between skills proficiency and wages and one of the largest wage penalties associated with skills mismatch • Though Israel ranks among the highest in terms of the years of schooling of its labor force out of the 34 countries that participated in the survey, it ranks 24-28 in terms of skills.

• More than one in three adults in Israel scores at the lowest levels in literacy or numeracy. A large proportion of adults show poor proficiency in using common computer applications.

• While the proficiency of Israeli adults in literacy and numeracy is lower than the average across OECD countries, a relatively large proportion of adults in Israel performs at the highest levels in literacy and numeracy.

• The relationship between low performance and parents’ low educational attainment is particularly strong in Israel.

• Israel’s 25-34 year-olds score closer to the OECD average than 55-64 year-olds do.

Back to the Gini Coefficient!

The Distribution of Skills (PIAAC Tests): Literacy Proficiency Problem Solving in Numeracy Technology-Rich Environments