The Israeli Labor Market, 1995–2015

Abstract

In Israel, the employment rate in the main working-age bracket, 25–64, climbed from 66.8 percent in 2002 to 77.6 percent in 2016. This dramatic increase followed more than a decade of falling employment rates. It was in 2003 that the trend changed; the employment rate among men began to rise, reaching 81.4 percent in 2016, and among women the rate rose from 56.5 percent in 1995 to 72 percent in 2016. By segmenting the upturn in employment, we find that the most significant increases in employment rates took place among Arab men, ultraOrthodox women, older workers (55–64), and the poorly educated. The increase in employment in Israel stands out particularly against the backdrop of trends elsewhere during that time. American and OECD employment rates plummeted in the aftermath of the 2008 economic crisis, and the slow recovery from it, and have not yet returned to their pre-crisis levels. Israel, in contrast, was hardly affected by the crisis and boasts a very high employment rate today, both relative to its own past and in comparison with other countries. The overall employment rate in Israel, 76.6 percent, exceeds that of the USA (73.9 percent) and the OECD average (73 percent). Today, there is no employment gap between Israel, the USA, and the OECD countries among men (aged 25–64). Among women (aged 25–64) the Israeli rate is 7.8 percentage points higher than that of the OECD average and 4.5 percent higher than the USA. The increase in employment has of course been paralleled by growth in labor income among all types of households and in the share of labor wage out of total income, even as hourly wages hardly changed. In this chapter, we attempt to answer one main question: What brought about the change of trend and the massive increase in employment rates among Israel’s various population groups from