Israel: a divided society Results of a review of labour-market and social policy Two large minority groups in Israel – Arabs and the ‘Haredim’ (ultra-Orthodox Jews) – are much less likely to have jobs and more likely to be poor than the general Jewish population. But nearly half of children entering primary school belong to these two disadvantaged groups. Will their parents’ disadvantage be passed on to this generation and beyond? Israel has enjoyed strong economic growth for most Families with a large number of children are over- of the past two decades. Despite a slowdown in the represented among the poor. This means that almost early 2000s and the global financial and economic one in three children in Israel live in poverty, crisis in 2008-09, economic output grew by at least compared with an OECD average of just 12%. There 4% a year. However, the benefits of economic is an urgent need for policies to combat such growth are distributed unevenly. widespread poverty. Poverty in Israel is more widespread than in any of Poverty and work the 30 OECD countries. Almost one in five Israelis The high rate of poverty in Israel is a consequence of lives in poverty on the OECD benchmark measure: the fact that many people of working age do not they live in households with income less than half of work. About 40% of Israelis aged between 15 and 64 the national median. This poverty rate is nearly are not working, compared with an average in OECD double the average in OECD countries of just 11% countries of 33%. (Figure 1). Some 60% of Arab men are employed, but only 20% 1 Poverty rates: Israel and OECD of Arab women. In contrast, among the Haredim, Denmark 5.3 nearly half of women have jobs but only one in four men. The remainder of Haredi men are engaged Sweden 5.3 full-time in religious study. France 7.1 Furthermore, Israel has a highly segmented labour United Kingdom 8.3 market, with Arabs and Haredi workers frequently OECD 10.9 having low-paid jobs. Overall, the proportion of people with relatively low earnings – two-thirds of the Germany 11.0 economy-wide median – is, like Canada, Hungary, Italy 11.4 Korea, Poland, the United Kingdom and the United Canada 12.0 States – in the 20-25% range (Figure 2). But Arab women and Haredi workers earn an average of Japan 14.9 around 70% of the economy-wide average wage. For United States 17.1 Arab men, this figure is just 60%. Turkey 17.5 The dynamic high-tech sector, which accounts for 40% Mexico 18.4 of Israel’s exports, offers attractive working conditions, but only provides 7% of jobs. Blue- and Israel 19.9 white-collar workers in long-established enterprises 0 5 10 15 20 25 and civil servants also have good working conditions. Income poverty rate % of population in households with But many workers outside these sectors – particularly incomes of less than half national median those in low-skilled jobs in agriculture, construction Note: OECD countries’ data from mid-2000s; Israel’s from 2008. and tourist services, for example – have low pay, few Source: OECD (2010), Labour Market and Social Policy Review of Israel. training opportunities and little job security. 2 Low-paid work: Israel and OECD Because Arab and Haredi families are frequently jobless or are one-earner families in low-paid Sweden 6.4 employment, poverty rates are around 50% for Arabs Italy 7.5 and close to 60% for Haredim. These two groups, which together constitute less than 30% of the France 14 population, make up more than 60% of the poor. Japan 14.4 Moreover, the socio-economic chasm between the Germany 15.8 general Jewish population and the two large minority OECD 15.9 groups is widening. Since 2000, employment has increased and poverty declined among the majority Poland 22.1 population (albeit only slightly). By contrast, poverty Canada 22.3 rates for the Arab and Haredi populations have United States 23.3 increased by nearly 20 percentage points. The proportion of these groups in employment has United Kingdom 23.4 remained stable (Figure 3). Israel 24.3 Social divisions go deeper than differences in incomes Hungary 24.4 and employment. Arabs and Haredi generally live in Korea 24.5 separate communities and their children go to different schools. They do not typically serve in the 0 5 10 15 20 25 30 Israeli Defence Force, which sometimes causes Prevalence of low-paid work % of employees with earnings resentment among the majority. It also affects their of less than two-thirds national median job prospects because it excludes them from the Note: OECD countries’ data from mid-2000s; Israel’s from 2007. public employment support provided to Source: OECD (2010), Labour Market and Social Policy Review of Israel. ex-servicemen and women. Foreign workers 3 Trends in poverty and employment Working conditions of foreign workers are especially Income poverty rate likely to be poor. Once the largest foreign group, % of population in households with incomes of less than half national median Palestinian cross-border workers have declined from 70 about 8% of the workforce in the late 1980s to 2% 2005 today. This is primarily a result of security concerns. But workers from elsewhere, particularly Asia, have 60 2006 taken their place. Foreigners made up 7% of the 2007 workforce in 2008. 2007 50 Arabs Foreigners tend to be concentrated in jobs in domestic services, agriculture and construction. 40 These workers often pay high (illegal) fees to 1997 1997 recruitment agencies and suffer poor, illegal Haredim employment conditions. Unpaid overtime, especially 30 among domestic employees, is particularly rife. All others Israeli society: mind the gap 20 2007 The divisions in Israeli society take many different 1997 forms. First, differences in the labour market – in 10 employment rates and wages – lead to differences in 20 30 40 50 60 70 Employment rate incomes. In the general Jewish population, both % of working-age population in work partners in couples are often in work, which is a key Source: OECD (2010), Labour Market and Social Policy Review of Israel. reason why poverty rates for this group are about 10%, similar to the OECD average. 2 a result of weak enforcement from the centre. The Fighting poverty government can also use its leverage as a major purchaser of private-sector services. For example, in Top priority for labour and social policy tender processes, it could favour equal opportunity Several factors explain why Arabs and Haredim tend employers. to have poorer outcomes on a range of While the government has established an Equal socio-economic measures. There are structural Employment Opportunities Commission, its powers issues, such as differences in education systems. are relatively weak. The Commission needs to be There are regional differences in infrastructure able to assess workplace employment outcomes by investment. Cultural influences, differences in access monitoring staff composition. This could be initially to social support and mistrust between communities limited to examining larger employers to avoid placing arising from the Arab-Israeli conflict also play a role. an undue bureaucratic burden on small businesses. Unfortunately, policies to redress discriminatory One possible model for Israel to adopt is the Fair practices have had limited effectiveness. Employment Commission in Northern Ireland, which International experience shows that work is the best also aims to ensure a fair distribution of employment way of lifting families out of poverty, but tackling the opportunities among different communities. causes of such entrenched and wide inequalities as exist in Israel will not be easy. It will require a 4 Number of workers per labour inspector sustained effort across a broad range of policy areas. Mexico The OECD’s labour-market and social policy review United States 65.0 192.0 of Israel assesses the policy options, discusses the arguments and concludes with a series of Israel 61.7 recommendations to tackle disparities in living Turkey 38.7 standards and job opportunities. France 20.0 Labour laws: better enforcement Czech Republic 14.2 Israel has a general problem of failing to enforce its Korea 14.0 labour laws, such as minimum employment conditions for both resident and foreign workers. This is largely Spain 12.0 because it has not invested sufficiently in enforcement ILO benchmarks: Germany 10.0 Developed country:10.0 capacity: the Labour Inspectorate, for example, is Transition economy: 20.0 underfunded and understaffed (see Figure 4). Poland 9.8 Sanctions for employers who fail to respect labour Slovak Republic 9.3 laws are also weak. Hungary 6.7 This has a particularly acute effect on low-paid 0 20 40 60 80 100 workers in small firms, foreign workers and those Number of workers employed through temporary work agencies or as for each labour inspector (000s) sub-contractors. Such workers (among which are Note: OECD countries’ data from mid-2000s; Israel’s from 2009. many Arabs and Haredim) are generally not in a Source: OECD (2010), Labour Market and Social Policy Review of Israel. strong enough position to take legal action against Inclusive collective bargaining their employers. Employment opportunities for all The trade-union confederation (the Histadrut) and the main employers’ organisation have been working There is evidence that ethnicity affects employment. together on a number of issues in recent years. The government should take the lead by stamping out However, many low-paid workers (including discriminatory practices in the public sector. For employees working for temporary work agencies and example, there are job quotas for minority groups in subcontractors) are not covered by collective- the public sector, with targets of 10% of employment bargaining arrangements.