[Israel] Adva Center: Top 20% got 44% of total income in 2004

From Globes Online

The salary cost of a top executive of a public company in 2004 was 19 times the national average wage.

Dalia Tal

“Israel’s economy is growing unevenly, with only a few benefiting,” states the Adva Center in its annual report for 2005. The Adva Center provides information on equality and social justice in Israel.

The Adva Center says large investment, rapid growth, and high salaries were concentrated in a few industries that employ only a small part of the labor force, mostly in the center of the country. In contrast, other industries suffer from low investment, slow growth, and low salaries.

The Adva Center also asserts that while the country’s leaders and politicians present growth as the main goal of economic policy, it does not guarantee a solution for all of Israel’s economic problems. The Adva Center believes that today’s paramount economic problem is the shrinking middle class, the spread of poverty, and the glittering enrichment of the few.

The Adva Center claims that in order to deal with all these problems, growth should be directed by a policy of dispersing investment throughout the country and all social segments. The government should provide every citizen with the tools needed to participate in economic activity and reap the benefits of growth.

For example, data indicate that Israel’s GDP per capita rose from $5,612 in 1980 to $16,452 in 2003, but that growth was concentrated in only a small part of the economy. High-tech industry grew 100% in 1995-2000 and financial and business services grew 50%, but traditional industries grew by only 4%.

In addition, differences in growth rates reflect differences in investment. Capital in the electronics industry grew by 13% in the past decade, but by only 3% a year in traditional industries.

Salaries have risen accordingly. The average salary cost in high-tech industries was NIS 220,000 in 2004, 1.3 times the salary cost in mixed high-tech industries, double the salary cost in mixed-low technology industries, and 2.3 times the salary cost in low technology industries. It is no wonder, therefore, that the income of the top decile has increased at the same rate as the growth in GPD, while the income of most of the other deciles has not changed significantly.

For example, in 2004, Israel’s top two deciles together received 44% of total income. The average household income was NIS 37,864 a month in the top decile, NIS 9,873 in the fifth decile, and NIS 3,127 in the bottom decile.

Salaries of top executives of public companies are especially noteworthy. In 2004, the salary cost of a top executive was 43 times higher than the minimum wage and 19 times higher than the national average wage.

The Adva Center says that the high road to investment-rich industries and high pay is higher education, but most youths are unable to acquire it. In 2004, only 40% of 17-year olds earned a matriculation certificate that met the minimum criteria of institutes of higher education. The proportion of eligible youths in established towns and cities was 70%, in development towns 40-60%, and in Arab communities 20-40%.

In 2004, only 29.4% of youths who completed high school in the preceding eight years began studies at university or college. The proportion of high school graduate among Ashkenazi Jews entering college or university was 31.1%, Sephardi Jews was 22.4%, and Arabs was 13.4%.