Labor Income Inequality Trends in Israel

This period witnessed a growing return, or yield, on education, a factor which could lead to a rise in labor income inequality. Israeli labor income gaps actually declined somewhat, though, due to the fact that low-wage earners improved their status relative to higher-wage earners. One possible factor in the narrowing of labor income disparities was the rise in the minimum wage. Workers in income Deciles 7 and 8 experienced a wage decline, relative to lower- and higher-wage workers, and this led to a more polarized labor income distribution. This polarization trend is also evident in the distribution of work-hours by occupation; occupations associated with both low and high wages witnessed an increase in work-hours relative to work-hours in occupations characterized by mid-range wages. A breakdown by occupation shows that the education wage premium for low-income occupations increased, while for high-wage occupations there was a decline in the return on education.

This fact may also explain the relative wage increase experienced by low-wage earners. These trends indicate that higher education is now becoming economically advantageous to those in low-wage occupations.

This paper appears as a chapter in the Center’s annual publication, State of the Nation Report 2014, Dan Ben-David (editor).