Letter from Israel: Income Inequality Rears Its Ugly Head

By Seligman, Ruth | Midstream, May-June 2000 | Go to article overview

Letter from Israel: Income Inequality Rears Its Ugly Head


Seligman, Ruth, Midstream


Israel has many claims to fame, not all of them worthy of emulation. One of these "claims" is the income gap between its rich and poor. Some economists claim that of all the Western industrialized countries, the bloc called the First World, Israel ranks second in income inequality. Only the United States, they say, where private research studies have indicated that the gap in income has widened dramatically during the Clinton administrations, surpasses Israel. The World Bank, however, claims that the income gap in Israel is "merely" the fourth largest in the Western world, following France, Britain, and the United States.

Whatever figure you choose, the gap is nothing to be proud of. It represents potential dangers for Israeli society, ranging from the "brain drain" of professionals in such fields as medicine, where low salaries for hospital doctors are causing many to consider leaving rite field, even after years of expensive, backbreaking training, to the more horrifying scenario where the possibility of civil war cannot be ruled out, improbable as. I regard this.

In Israel today, the top 10 percent of salaried wage-earners is making more than 10 times as much as the bottom 10 percent. Or, to say it in another equally dramatic fashion, the top 10 percent of Israel's salaried wage-earners are taking home almost a third of all the money earned in Israel, while 30 percent are taking home less than 10 percent.

These figures are, however, misleading. The gap may conceivably be wider. The reason: the statistics as released by Israel's Central Bureau of Statistics only relate to money earned by salaried employees. They do not include income derived from capital, such as savings and stocks and bonds, nor that from rentals or inheritance. In addition, they omit income earned by the self-employed, a sector that includes, inter alia, lawyers, accountants, and consultants of one sort or another. Although the public at large is not privy to these figures, if one looks at the standard of living of many of these serf-employed or "independents," as they are called in Israel, and, for example, the homes and cars they own, one cannot doubt that many are well within the upper 10 percent upper income bracket.

Even without these adjustments or corrections, the economic picture in Israel is far from sanguine. Among Israeli wage-earners, those in the top 10 percent average $4,500 a month, while those on the bottom rung average $220 a month. Remember, however, we are talking only, about averages.

For months now, the media have bombarded the Israeli public with revelations of how rich the rich are -- and how much more they earn than anyone had realized. A general manager for one of Israel's leading banks, for example, took home in 1998 almost $500,000, a sum that included salary plus bonuses. This is over $40,000 a month. Contrast that, however, with a teacher who has advanced degrees and 20 years seniority and who earns less than $1,500 a month, or with a practical nurse with 15 years of experience who is making a little over $1,000 a month.

The real shocker regarding income inequality, however, came when the salaries for civil servants were revealed. Traditionally, government employment has never been fine place where "big bucks" are made. And the thousands of civil servants in Israel who are paid less than the minimum wage of about $750 a month will agree. But even here there is an extraordinary degree of income inequality. Some examples: the spokesperson for a small municipality outside of Tel Aviv (Petach Tikva) is taking home almost $14,000 a month, while the head of Jerusalem's Department of Welfare has to "make do" with a mere $9,000 a month, a figure similar to that earned by the manager of the beaches in Chadera, a medium-sized city halfway between Tel Aviv an Haifa. Note that these salaries for people who are not even holding extremely senior positions come at a time when the municipalities are constantly crying "wolf," complaining of their inability to meet their payrolls, and demanding additional assistance from the central government. …

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Letter from Israel: Income Inequality Rears Its Ugly Head
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