About a quarter of workers in Israel earn wages of less than 5,864 shekels ($1,580) per month, a new study by the Adva Center found. Of all OECD countries, only the UK has a higher percentage of workers earning less than two-thirds of the country’s median salary.
Between 2015 and 2022, the percentage of low-wage workers in Israel increased from 21.9% to 23.3%, a trend that reflects a growing market of labor disparities due to unstable employment arrangements and the decline of jobs in sectors and regions that once provided a decent standard of living.
The trend is linked to the weakening of organized labor in Israel since the 1990s. The authors of the report also note that workers’ share of the national income has been steadily declining, from 63% in 2000 to just 56% in 2024, the lowest level in 25 years. At the same time, employers’ share grew from 18% to 24%, a trend that indicates increasing profitability for employers at the expense of worker compensation.
The study shows that the decrease in compensation is concentrated among the lower income brackets, deepening the financial hardship of low-wage earners. These processes are happening alongside Israel’s rising cost of living
The decline in compensation in Israel is accompanied by a sharp rise in poverty among working families. In the past decade, there has been an increase in the percentage of families with wage earners among all poor families, today they make up half. In the past, poverty among families with two working parents was rare, but in the past decade there has been a steady increase in the percentage of poor families in which both parents work. In 1997, only 1.7% of poor families had two working parents—by 2022, that rate was 7%. According to the National Insurance Institute’s 2022 report, in half of poor working-age families there was at least one wage earner. In other words, participation in the labor market is no longer a guarantee of escaping poverty.
An analysis of the changes over the years shows that the threshold defining low wages (two-thirds of the median wage) rose by about 18.6% in real terms from 2015 to 2022, a faster rate than the 13.3% increase in average labor income. This trend is especially pronounced among workers, for whom the low-wage threshold rose by about 17.7%, while the average wage rose by only about 8.9%. This means more workers are earning below the threshold, especially the self-employed, many of whom have relatively low incomes. These trends point to the expansion of the low-income bracket and a widening of labor market disparities.
Population groups with especially high rates of low-wage earners include people with disabilities, Arab men and women, ultra-Orthodox women, and workers past the age of retirement. In these groups, the percentage of low-wage earners exceeds 40% and in some cases reaches nearly 50%. High rates were also found among ultra-Orthodox men, youth, and the self-employed.
Among ultra-Orthodox men and Arab women, there has been an upward trend in the likelihood of working for low wages, possibly related to rising employment rates in both groups during the period. Young workers up to age 34 and older workers past retirement age are 30%-40% more likely than workers aged 35-64 to earn low wages.
Women are much more likely than men to work for low wages, with 31.5% of women earning low wages compared to 15.9% of men. One reason for that might be that women are less likely than men to work full-time jobs, since the most influential factor determining whether a worker earns low wages is the scope of their employment—full time or part time. Less than one-tenth of full-time workers earn below the low-wage threshold, and findings indicate that each additional hour of work reduces the likelihood of falling into the low-wage group by about 2%-3%.
Still, even after controlling for job scope and other factors, women are about 72% more likely than men to be low-wage earners. Even after accounting for work hours, ultra-Orthodox men are 70% more likely to earn low wages than the average Israeli. Arab men are 90% more likely, and recipients of disability allowances are 300% more likely.
The jobs most common to pay low wages are in services, sales, industry, and agriculture. The proportion of low-wage workers also rose among groups with relatively strong labor market positions, such as academics and managers. Although their share among low-wage earners remains low compared to their representation in the workforce, their share increased by about two percentage points during the study period, possibly indicating a relative decline in their economic standing.
According to the Adva Center, the OECD recommends measures to address low-wage employment, foremost among them establishing a fair minimum wage, strengthening organized labor and encouraging unionization, tax relief, and an active government labor market policy focused on professional training. Adva emphasized the importance of continuing to increase the minimum wage and recommended stricter enforcement of labor laws in Israel, the strengthening of organized labor, and efforts to increase the percentage of unionized workers in the private sector.
Israel is spending significantly less on active labor market policies than other OECD countries, at only 0.13% of GDP, compared to an average of 0.63% of GDP. Adva recommended significantly increasing this share as well as increasing government investment in earned income tax credits.
This article was translated from Hebrew by Ronen Cohen.
