Who are the highest wage earners in Israel and how far away from them are you? A new Taub Center study examines characteristics of workers in the top wage decile. The workers in the top decile of the labor market in Israel include those whose monthly gross salary exceeded NIS 20,380 in 2017 and 21,430 in 2018. Among the study’s findings are that the share of women in the top decile is only 27%, and, on average, they earn NIS 32,500 per month, as compared to NIS 36,300 for men, though they also work fewer hours. Education and experience have a critical effect on the likelihood of being in the top decile; 74% of the workers in the top decile have an academic education and their salaries peak after about 32 years of experience. Among non-Jews in the top decile, about 27% are self-employed, which is more than twice the rate for the first to eighth deciles. The effect of education and experience on one’s position within the top decile is negligible.
The full study, which is being released today by the Taub Center, is the first to focus on the upper end of the wage distribution in the economy. The study, which was conducted by Michael Debowy, a Taub Center researcher, Prof. Gil Epstein, Taub Center Principal Researcher, and Prof. Avi Weiss, the Taub Center President, examines the identities of workers in the top wage decile in Israel and which factors have an impact on the distribution of salaries within that group. The research was based on the Central Bureau of Statistics Survey of Household Expenditure and Income 2017–2018 and analyzed the data for about 25,000 workers who reported being employed. Prof. Epstein points to a main finding of the study, according to which, “Education plays an important role in selecting into the top wage decile. Academic achievements of a potential employee provide employers with an indication of abilities and help in setting salary level. However, within the top decile education has little impact; the important thing is performance, particularly among the self-employed.”
The factors that determine the likelihood of getting to the upper decile:
- An academic education and experience are the main determinants of high earning power — The combination of education and experience is what makes it possible to improve one’s earning power. About 74% of workers in the top decile have an academic degree, with 34% having a master’s degree and 7% a doctorate. An academic degree similarly affects the likelihood of workers reaching the top decile in all ethnic groups. Therefore, it can be said that education is an engine for reducing gaps between workers from different populations. In addition to the impact of academic diplomas, a professional certificate is also expected to increase the likelihood of non-Jews and Mizrahi Jews to select into the top decile. With respect to experience, due to the time required to reach the top decile, most of the workers with high earning power are in the 40–60 age group.
- The top wage decile tends to be Jewish and Ashkenazi — The share of Mizrahi Jews selecting into the top wage decile is 21% (equivalent to their share among workers in the sample – 21%); the share of Ashkenazi Jews is 34% (25%); and Jews whose parents were born in Israel or on different continents constitute 40% (36%). In contrast, non-Jews make up only 6% (18%) of this group.
- The share of women the top wage decile is low — Women constitute only 27% of the highest earners (as opposed to 50% of the sample work force). The likelihood of women getting to the top decile increases with the level of their academic education. The reasons for the gender and population gaps are likely to be, among other things, the effect of the “glass ceiling,” occupational choice, and historic employment patterns.
- The most common occupations in the top wage decile — The vast majority of workers in the top decile, about 88%, are managers; academic professionals; and practical engineers, technicians, agents and associate professionals.
- The employment status at high wage levels — About 15% of all workers in the top decile are self-employed. Among non-Jews, the share of self-employed in this decile is 27%. Researcher Michael Debowy explains: “More than one-quarter of the non-Jewish workers in the top decile are self-employed, as opposed to about 15% of Jews in this decile. In the bottom eight deciles, the share of self-employed among non-Jews is 10%. Even after controlling for background variables, the likelihood of a self-employed non-Jew reaching the top decile is about 6 percentage points higher than the likelihood of a salaried worker.”
- Average monthly income in the top decile — Men earn an average gross wage of NIS 36,300 per month while women earn NIS 32,500, but they also work fewer hours on average. However, the gender gap in terms of both earnings and hours worked is relatively smaller in the top decile than in the bottom eight deciles.
The factors that determine wages within the top decile:
- Education level does not predict wages — The findings of the study show that the effect of education within the top decile is limited. A worker with a bachelor’s degree is not expected to earn more than a worker who only finished high school.
- Nonetheless, the earning ability of degree holders increases with every additional year of experience, and reaches a peak after about 32 years.
- The higher the wage, the lower is the weight of characteristics such as education, experience, origin, and sector in predicting wages.
- The hourly wage of a self-employed worker within the top decile is higher in most cases that that of his salaried peer. Thus, a self-employed worker earns a gross hourly wage of NIS 290 on average while a salaried worker earns an average of NIS 150 per hour, although this finding does not hold for every group.
“In general, it is interesting that in the top decile, self-employed non-Jews are not expected to earn more than their salaried peers, while the wage of self-employed Jews is expected to be significantly higher than that of Jewish salaried workers,” explains Debowy. Prof. Epstein adds that, “In contrast to the findings of previous research, our study found that the achievements of Mizrahi Jews in the top decile in terms of wages are no less than those of Ashkenazi Jews (according to the study’s definitions).” Prof. Weiss summarized by saying: “The relative difficulty of women and non-Jews in reaching the top decile is likely to reflect historical factors, factors connected to the worker such as occupational choice, work hours, or willingness to be mobile, and factors dictated by employers or customers, such as discrimination. To the extent that the explanation involves factors related to discrimination, there is a need for intervention by various agencies, including governmental bodies, in order to uproot this phenomenon.”
The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.