The Earning Inequality in Israel - Assignment Example

THE EARNING INEQUALITY IN ISRAEL Introduction Israel has been a of discussion on many platforms, particularly on equalities that are the core sources of most of the domestic tensions (Plaut, 2014). Among the common occurrences is the discernment towards the Arab citizens by the Jews, who make up the larger part of the country’s population. Such discrimination has been the key attribute used to characterize Israel organizations and their stature in the labor markets. Definitely, this is a challenge and an issue reflecting on the flaws of the Israeli government and prominent institutions in the country. Often, the media houses have covered this story focusing on issues relative to Israeli’s economy. The United States, a close follower of Israel’s practices, has acted against the discrimination challenge in the past as it reflects negatively on the countries well-built reputation (Plaut, 2014). Naturally, Israel is the only state in the Middle East lacking an apartheid regime and looking at its success, as a developed country; it faces no threats from rivals and defamers. This condition makes Israel’s practices a dream for most of the western countries. A decade ago, discrimination was the country’s most pressing challenge but today, things have taken an influential step. The most worrying characteristic of Israel is the growing income inequality. It became prevalent a few years ago and in 2015, it attracts the attention of most states, organizations and international corporations (Filut, 2015). General Survey As from April 2015, Israel ranks at number 15 in labor productivity of the international economies. This fact is from the Organization of Economic Cooperation and Development (OECD) most recent report. Israel has had a record increase in labor productivity for a limited time with more than three million people in the country having standard jobs. World’s leading countries such as China, United Kingdom or even South Korea are yet to attain Israel’s current labor productivity. However, the OECD claims as much as Israel has made improvements, the country’s economy is in an awkward position because they are 4% out of their constant track as depicted in the past two decades (Filut, 2015). The economic growth continues to increase gradually because of the variations in labor productivity - over three times that of the major emerging markets. This might seem impressive but China, Indonesia, Brazil and Russia have had over 100% productive increase in less than a decade, which shows they are most likely to surpass Israel in due time (Matthew, 2015). According to the OECD’s report, the main cause of Israel’s increase in income inequality is their constant inability to close the previous gaps in per capita income hence it widens with time. However, this is a common attribute for most developing and developed countries. Relative to this notion, the best approaches for the affected countries is increasing the expenses on novelty and espousal of the international and local economic variations (Filut, 2015). These are the key solutions to changes in the capita income gap. However, these approaches do not guarantee a solution to Israel’s stature since the inequality continues to grow adversely. Moreover, the OECD specifies the best states to implement the productivity measure are those with narrow gaps in the standards of living. In a dissimilar report, OECD’s economists formulated predictions of some countries economic statuses come 2060 and Israel’s condition was among the issues aforementioned to affect most of the developed countries. Government intervention in markets would be a major contributor to this problem with United States and Israel taking the top two positions. The measurement technique used in the projections was comparing the low-income earners with the highly paid in every country today and their developments for the past five years. In Israel, the ratio difference in 2010 was 5 times and the United States followed with a 4-ratio difference. Unfortunately, given the increase for the past five years, Israel will have a capita income gap of up to 8 times, meaning the income inequality in the country today might just be the start of the economies downfall (Lipson, 2013). Israel and the United States Relative to the history of its relationship Israel, most people in the United States only know and follow the occurrences resulting from the obstinate conflict between Israelis and Palestinians. However, in March 2015, the story in most media houses about the country’s prime minister losing his position caught the attention of most people. As reflected in the parliamentary polls, Prime Minister Benjamin had limited support resulting from the Israel’s stature and happenings during his regime, particularly the increased economic issues. Among the core complaints was the augmented cost of living, limited affordable houses and the prevalent earning inequality in the country. Israel is among the few countries that benefited from the technology revolution having many bonuses and constantly avoiding challenges resulting from international and transnational financial crises (Bellan, 2015). However, the problems have caught up with the country and it is among the few countries suffering from the influences of income inequality. The Ministry of Economy in Israel is in the forefront of bodies to face these challenges and according to an analysis of their recent report. Israel and the United States have more similarities when it comes to tackling economic challenges. The key elements are the continuous increase in earning inequality and affordability of house for citizens in both countries. Relative to the income inequality crisis, Israel has made certain progresses in countering the challenge. The Minister of Economy in Israel claims the country is in a better state than United States in a few aspects and they are using this to their advantage. The first advantage, relative to the Israel’s size was the limitation of big players in the countries market unlike the United States that has increased government intervention into the markets. Relatively, Israel’s focus as of early 2015 was making the market accessible for foreign traders as a counter attack measure for the hiking prices in housing (Filut, 2015). The Ministry of Economy also insisted on fostering micro-businesses by offering them incentive and decreasing the market regulations. Housing for the United States and Israel is still an issue and continues to increase. In Israel, the demand of housing directly determines the pricing and unlike, the America, the government of Israel still owns the highest percentage of land. However, even with so much power, the government failed to establish the high demand of houses in the area. Recent projects to address the housing issue are taking more time than expected with the current projections being up to 3yrs (Taub Center, 2015). The housing issue is a big contributor to the rising income inequalities in Israel and United States. The current situation of Israel, particularly the economic inequality might contribute to its rank as the most poverty-stricken OECD state. Due to the income inequality, the growth of Israel is sub-standard with some parts growing at a fast pace and the rest rapidly drowning in poverty. Most of these problems link with Israel’s lack of devoted resources, which means they are not spending the necessary amounts of revenue on enticements to bar or the popular professional training. This is the reason why the country has limited engineers because the government focuses more on direct dividends and financial gains rather than increased education, which is a probable solution to Israel’s problem (Bassok, 2012). Israel has good numbers as compared to other developed countries in terms of growth and development. Currently, very few people in Israel are subjects of unemployment; moreover, the country does not have any substantial debts because they have reduced significantly. These characteristics provide Israel with multiple opportunities such as augmenting expenses on constructive programs or assist the poverty-stricken families. However, the earning inequality is still a challenge because of its correlation with other alarming issues that the government of Israel overlooks. For instance, the conflict between Israelis and Arabs results to multiple security and cultural issues but according to the Minister of Economy; they do not threaten the country’s economy (Matthews, 2015). Most analysts argue that the income inequality increases due to the Israeli government’s obliviousness of the minor but influential factors. Claiming the solution to such a sensitive issue is encouraging Jews and Arabs to participate more in the economy appears unorthodox. Definitely, even with economic advantages, Israel might face the income inequality issue for a long time before making any progress, particularly due to its consistent increase (Dahan, 2012). Currently, the population worries about the cost of living since the earning inequality challenge are beyond their capabilities and the government claims to have it under control. Discussion Israel’s population consists of multiple tribes that are subjects of the highest percentage of poverty in the country i.e. ultra-orthodox Jews, Arab Israelis among others. In fact, the most recent statistics about the various groups in Israel depicts poverty as a predestined attribute for the mentioned groups. All the same, it is a known fact that these challenges and others relate with Israel’s market income elements (Taub Center, 2015). Moreover, the Israeli government only focuses on the developing parts of the country neglecting problems relative to the experiences poor tribes. The low incomes of the Arab Israeli and similar communities are the key influences of the earning inequality. However, analysis of the country’s current conditions indicates that the poverty in some parts in not the sole contributor to the income issue. One of the reports shows that the income discrepancies are still prevalent even after excluding the poverty-stricken communities in Israel. However, the rate of increase in income inequality would definitely decrease if Haredi Jews and Arab Israelis were out of the equation. Nonetheless, the inequality would still be higher than in the United Kingdom and United States (Blejer, 2009). This evaluation is a clear depiction that Israel is yet to find out the key influence to the income inequality crisis. A clear analysis of the economic practices and current stature of Israel’s economy shows the government as the greater facilitator of the challenges, particularly its welfare system. The OECD report indicates countries lower than Israel in the rankings are capable of reduce their inequality by over 30% even with limited resources. However, Israel even with the firm reputation and augmented economic growth were able to reduce the earning inequality by 25% alone in the past; moreover, this was the closest they were to completely countering the challenge (Gabai, 1996). This is another platform where the United States and Israel rank as countries with the smallest inequality reductions. Today, income inequality is a topic of discussion for most analysts around the world and a challenge for most countries. As part of controlling the earning inequalities, countries compare the highly paid citizens and cities having the most impressive economic growth (Taub Center, 2015). In addition, some states insist of comparing the disparities between the high earners and the poorly paid, which might create a better understanding and firm foundation for analyzing the challenge. Earning inequality might be new for most countries but is not unique in Israel. As compared to other countries in the OECD report, Israel alone has a record showing its capital city to have had an impressive economic growth equal to more than 7% of the country’s overall development. This is news to most of the countries ranked under Israel. All the same, the variations emanate from the welfare system by the government, which does not cater for all personnel in Israel. Spain and Norway are the only countries with increased populations with high salaries. Comparatively, these countries have only had particular parts accounting for around 4% of the overall country’s developments (Filut, 2015). On the other hand, the highest earning parties in Israel make up only 5% of the overall income. The government has records accounting only for this sub-section. Definitely, this is a small number as compared to other players in the OECD rankings. The government’s welfare systems need to acknowledge the possibilities and effects of challenges in the total incomes. Currently, even though the Minister of Economy in Israel gave a layout of the Israel’s strategies to counter income inequality in the country, especially the government (Taub Center, 2015). The country lacks rational explanations to aspects/factors that augmented the increase in income inequality. For instance, the middle class of Israel is a brilliant example of how Israel’s income inequality is vast, which prompts the questioning of the government’s contribution to its eradication. In this explication, the middle class definition bases on assumptions derived from the countries current income gap (Matthews, 2015). However, this group lies between the highly wealthy and poor populations. Normally, the middle and top social classes have minimal discrepancies and the income gap is relatively narrow, especially in developed countries. The gap between these two classes in Israel is higher than all the other countries in the OECD report as depicted by the OECD report; surprisingly, the ratio is double that of some of the developing countries (Filut, 2015). Israel does not only top the list of the earning inequality increase but also tops the list of largest gap between these classes. Conclusions Decisively, Israel has the most complex question under the earning inequality because approaches applied other countries in countering it are most likely to fail in the country. The income gaps continue to increase with analysts comparing the different percentiles to understand why Israel tops the list, especially on Israel’s situational outcomes and influences. Shedding of light and expanding on the challenge of earning inequality in Israel should be a prevalent matter requiring keen and critical evaluation from all angles i.e. Israeli economic analysts, the government. Typically, some communities or groups in Israel being subjects of poverty do not augment the income inequality. On the other hand, extended concentration on economic growth or wealth among the country leaders is also not a problem; in fact, Israel needs to emphasize on the inequalities among all people in the country. Nonetheless, the ranking of Israel before the other 22 countries shows the sensitivity of the state’s large gaps relative to earning inequality, public attention and economic policies. Recommendations Relative to Israel current economic stature and attributes of its population, there are measures the government could implement as a foundation for countering the income inequality earning. The first program could entail the introduction of more edification initiatives, particularly under higher education platforms (Bjorklund, 1991). This could reduce the gaps between the educated and non-educated employees, which definitely contributes to the increased income inequality. Moreover, the gender inequality problem also affects the economy because of the gap between salaries for men and women. However, the government and Israeli economy has made vast progress in narrowing the gap. All the same, educated workers continue to experience an increase in income while the uneducated employees have fixed salaries. The Bank of Israel formulates reports about the country’s economy and their recent studies established a link between technology industries in the state and its impressive economic environment. Definitely, coming up with such information means the bank clearly understands the economic Israel. The government should work with the Bank of Israel to acquire relevant information in countering the earning inequality (Blejer, 2009). In fact, the Bank of Israel has extended information on the different levels of human capital. However, it only focuses on economic development and establishing the problems experienced in the country. Decisively, working together to improve equality and social mobility could be the amendment needed for Israel to attain economic stability. References Bassok, M (2012) Income Inequality Growing Faster in Israel than in Other Developed Countries: Israel News, Haaretz. Retrieved from http://www.haaretz.com/business/study-income-inequality-growing-faster-in-israel-than-in-other-developed-nations-1.421277 Bellan, B (2015). Income Inequality among Israelis – A Growing Problem: Jewish Post and News. Retrieved from http://www.cfhu.org/news/jewish-post-news-article-income-inequality-among-israelis-growing-problem Bjorklund, A. (1991). Unemployment and Income Distribution: Time-Series Evidence from Sweden: Scandinavian Journal of Economics, 93(3): 457–465. Blejer, M (2009). The Impact of Macroeconomic Policies on Income Distribution: An Empirical Study of the Philippines: The Review of Economics and Statistics, 72: 414–423 Dahan, M (2012). The Rise of Economic Inequality: Foerder Institute, 21(3): 2-70 Filut, A. (2015) OECD Warns Inequality in Israel Will Worsen: Israel’s Business Arena, Globes. Retrieved from http://www.globes.co.il/en/article-oecd-warns-on-inequality-in-israel-1000951256 Gabai, Yosef (1996), Influence of Fiscal Policy on Income-Distribution Inequality in Israel: Economics Quarterly, 43(4): 753-943 Lipson, N (2013). Report Shows Grim Trend toward Income Inequality in Israel: The World Post and Huffington Post. Retrieved from http://www.huffingtonpost.com/nathan-lipson/israel-income-inequality_b_2821531.html Matthews, C (2015) Israel’s Other War- Income Inequality and Rising Prices: Fortune, Retrieved from http://fortune.com/2015/03/25/israel-income-inequality/ Plaut, S (2014) Myth of Ethnic Inequality in Israel: Middle East Forum. Retrieved from http://www.meforum.org/3839/israel-inequality Sussman, Z (1983). Changes in Wage Structure in General Government during the Rising Inflation Period 1974–1981: Bank of Israel, Research Department Taub Center (2015) Gaping Gaps- Income Inequality in Israel: Taub Center for Social Policy Studies in Israel. Retrieved from http://taubcenter.org.il/gaping-gaps-income-inequality-in-israel/ Read More