Falling into the Wage Gap

In order to have a functional economy, a country should utilize all of its citizens. To do so, it needs to encourage the Peggy Olsens of the world to participate in the labor market. Otherwise, the men of the world get complacent and you get an inconsistent seasons 5-7. How do Israeli women fare in our market?

Women in Israel are employed at higher rates than in the OECD and are within 10% of male employment. However, there is a 21.83% difference between male and female median wages in the country (the difference persists at the highest and lowest levels of salary). Why is this? What can be done, if anything, to fix it? Will Joan ever find a man to treat her right? Let’s look at the numbers.

There are a number of known reasons that women are making less than men throughout the market.

1) Women in Israel work fewer hours than men – Men tend to work about 45 hours a week while women work about 37. This difference explains 60% of the wage gap and when you look at money earned by hour, Israel is well below the OECD average. The larger number of female part time workers also hurts their ability to accrue seniority.

2) Childcare – Women may work fewer hours due to childcare. While we see that women don’t drop out of the labor market due to children (see chart below), 41% of women who work part time say that they do so for childcare reasons as opposed to 3% of men. There are policies that could help women around this problem including giving men more access to leave (Men may take up to 5 days of leave after the child’s birth) or maternity leave that can be distributed over a longer period. I’ll hopefully write a separate article about this at a later date. It is important to note that generally, high birthrates are good for an economy and should be encouraged.

3) Education – Education levels effect both employment rates and wages. Math plays a particularly large role in wages. Unfortunately, girls tend to not take high level math and science, for reasons documented by this helpful video and while women are receiving more college degrees than men, they tend to choose less lucrative fields. The government could take steps to encourage girls to study math at a young age, which could impact their choices in college.

4) Occupations – The last two matters are universal issues that effect pay gaps around the world. Besides for math and science proclivities allowing them to enter better paying fields, men tend to choose riskier and therefore higher-paying professions than women and are more likely to hold onto these jobs after having a child (probably because we have some strange death wish imbued within us from the mammoth days, but hey, I’m not a psychologist. It is not to be envied). According to the Ministry of Finance occupation choice explains 30% of wage inequality.

5) Negotiations – For a number of reasons, women tend to fail to negotiate raises in their salaries even when they deserve to do so.

So there it is. Largely, the wage gap is a product of women working fewer hours in lower paying jobs. From the government side, programs to encourage women to go into STEM fields may be helpful. Other programs to make childcare cheaper would help as well, though Israel already does a decent job of that. Paternity leave could also help equalize wages.

What do you think?

(This article was based off of a number of Taub Center studies, but especially this one. The education section relied on this article from the Shoresh institute.)