Academic journal article Economic Inquiry

Wage Discrimination across Ethnic Groups: Evidence from Israel

Academic journal article Economic Inquiry

Wage Discrimination across Ethnic Groups: Evidence from Israel

Article excerpt

I. INTRODUCTION

Wage differentials and occupational segregation have been intensively studied and well documented in the economic literature. Empirical analyses have demonstrated differences by gender and ethnicity and theoretical studies have attempted to explain the results. Polachek [1975; 1993] leads the group that emphasizes human capital differences in explaining wage differences and segregation, while Bergmann [1974; 1986] is in the forefront of a second group of scholars who claim that discrimination is the major source of inequality of wages and occupations.

In the United States race differentials in earnings and racial segregation decreased dramatically during the 1960s and the 1970s but sex differentials did not. In 1980 the Duncans' [1955] segregation index, calculated by Fuchs [1989] across 503 occupations, was about 30 for blacks versus whites and about 60 for men versus women.(1) Fuchs [1989] also showed that by 1980 the wage differential between white and black men (15 percent) was less than half the difference between white men and white women (40 percent). Polachek and Siebert [1993, 137-39] present data showing that in 1990 the pay of U.S. women averaged 65 to 90 percent of that of men, depending on the occupational category. The gap has been relatively constant, but there is some evidence that it has been narrowing in recent years. They also find that earning ratios, by occupation, in the U.K. are very similar to parallel ratios in the U.S. Chiswick [1983a; 1983b] and Carlson and Swartz [1988], among others, examine earnings of ethnic minorities. They find that most ethnic groups fare quite poorly compared to the white population, but a few minorities (Jews, Chinese and Japanese) do as well or even better than the white majority. The earnings gap for most groups declined over the 1960s and the 1970s and the portion of that gap that might be assignable to discrimination also declined.

In this study we examine ethnic wage differentials, discrimination and segregation in the Israeli labor market. Israel provides a tailor-made setting for ethnic studies since its Jewish population (4.335 million in 1993) consists of people with a large diversity in their countries of origin. The first wave of Jewish immigrants following the establishment of the State of Israel in 1948, were Holocaust survivors from Europe or refugees from the predominantly Moslem countries of North Africa, the Middle East and Yemen. Others came from North and South America, Western Europe, South Africa and Australia to live a more meaningful Jewish life in "The Homeland." Israel encouraged and assisted these immigrants as part of an active pro-immigration ideology and policy.

The main wave of immigration arrived in the late 1940s and early 1950s. As Friedlander [1975] shows, between 1948 and 1952 the Jewish population in Israel increased from about 630,000 to nearly one-and-a-half million, an annual average growth rate of over 24 percent. Later there were three significant waves of immigration: the first occurred at the beginning of the 1960s, with annual immigration reaching an average of 57,000 per year, an increase of 2 percent per year in population. The second occurred in 1972-73 when 55,000 immigrants arrived annually (an annual population increase of 1.7 percent). The third large wave began in August 1989 with a massive influx of immigrants from the former U.S.S.R., generating about a 10 percent increase in the population in the years 1990-93. The absolute figures are 199,516 immigrants in 1990, 176,100 in 1991, 77,057 in 1992 and 66,145 in 1993 (Israel, Central Bureau of Statistics [1994]). In 1991 about 15,000 Ethiopian Jews also arrived in Israel.

The major ethnic division in Israel is based on the country of origin. Although Jews of various origins speak a number of different languages and perceive themselves as having some distinctive ethnic characteristics, the main distinction is between Jews originating from Asia and Africa (excluding South Africa) (Easterners) and those from America, Europe, South Africa and Australia (Westerners). …

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