The top wage decile of workers in Israel

The remarkable success of Israel’s high tech sector, particularly during the COVID-19 pandemic, have brought the income gaps from work in Israel to the center of public discourse. Beyond the differences in standard of living and working conditions, research shows that during the COVID-19 pandemic, people with high incomes from work were less negatively affected than their low-income peers. A new Taub Center study examined characteristics of those workers with the highest incomes, who are in the top ten percent in terms of wages in Israel, and what has to happen in order to select into this group.

For the most part, the professional literature discusses income inequality from the perspective of the low-income wage earner and tends to ignore the other extreme – the group of high-income workers, and, in particular, the top decile. This study, written by Michael Debowy, Prof. Gil Epstein, and Prof. Avi Weiss, focuses on these high-income earners. Who are the highest income workers in Israel? What characterizes the members of this group and what does the distribution of wages look like in this group? This innovative and unique study answers these questions and sheds light on the group of high-income workers in Israel. The findings of this research can help light the way for workers towards greater economic success, and thus contribute to improvements in society as a whole.

What are the characteristics of the top income decile in Israel?

Among the top decile are workers who earned more than NIS 20,180 and more than NIS 21,480 gross per month in 2017 and 2018, respectively. Most of the workers in the top decile – 73% – are men and only a minority are women, even though women make up half of the working population. This gap in representation between men and women in the topmost decile exists in all groups in the population, but it is particularly pronounced among the non-Jewish population. Women in the top decile earn a gross average of NIS 32,500 a month, while men earn an average of NIS 36,300, with the gap mostly explained by the difference in working hours between men and women. The study also shows that the top decile consists mostly of Ashkenazi Jews – 34% (their share of the study sample was 25%) and from Jews whose parents were either born in Israel or on different continents – about 40% (36% of the sample). The share of Mizrahi Jews at this wage level was 21% (the same as their share of the sample), and the share of non-Jews was only 6% of the group (18% of the sample). The monthly wages of Ashkenazi Jews are on average NIS 2,000 higher than that of Mizrahi Jews, and about NIS 4,000 higher than that of non-Jewish workers.

The top decile is also characterized by the wide range of education of workers who select into it. The study found that three-quarters of the top decile consists of workers with an academic education, and the share of those with advanced degrees in this decile is particularly high. In terms of occupations, the top decile has a high share of managers, engineers and technicians, and those in academic professions. The data further indicate that time is needed to reach the top decile, something that is reflected in the average age of workers in this group: the share of workers in the top decile peaks among those aged 40–60 and then declines slightly. Another issue in which workers in the top decile differ from those in the rest of the deciles is the employment status of workers – self-employed or salaried employees. The self-employed – about two-thirds of whom are men – constitute 15% of the top decile (12% of the Israeli labor force), and their average wage is higher than that of salaried employees (NIS 42,500 versus NIS 34,000 gross per month on average). In addition, the percentage of self-employed in the top decile is higher among the non-Jewish population than in any other group.

What affects the probability of selecting into the top decile and the position within it?

First, education (and specifically higher education) corresponds with a high probability of the individual belonging to the top decile. Each successive degree increases the chances of the individual selecting into this decile relative to the previous degree. In contrast, within the top decile, the level of education barely predicts the income level of the individual. Experience is also a factor that influences the likelihood of becoming part of this decile, but its influence is not uniform among the various population groups and its contribution to workers’ wages within the decile is very limited. As one ascends the wage ladder, education, origin, nationality, and other characteristics of the individual lose their ability to predict wages, and more weight seems to be attributed to talent, status, or other factors that cannot be easily quantified.