The Myth of Ethnic Inequality in Israel

The data that dismantle the leftist lies.

460 It is important to distinguish between salaries and earnings. For example, Israeli Arab males may make on average 50 percent less than Israeli Jewish males in salary, but in earnings (which include income sources such as self-employment), they out-perform Israeli Jews by approximately 9 percent on average.

Arabs also have a disadvantage compared with Jews when it comes to total household earnings (not shown in the table), as opposed to total individual earnings. But the wider gap at the household earnings level is due to factors outside the labor market. Jews have higher savings rates than Arabs, and thus have higher levels of household capital income.[14] Jews are also older and so receive on average higher amounts of retirement income. These disparities in non-labor income at the level of households largely reflect differences between Jews and Arabs in savings behavior and household composition and cannot be attributed to labor market discrimination.

What about disparities across ethnic sub-groups of Israeli Jews? The first notable pattern is this: The main group that over-performs compared with others is native-born Israeli Jews or sabras. Being born in the country confers a distinct earnings advantage in Israel as it does in most other countries. There is a modest advantage in income, about 8 percent for men and 2 percent for women, for those who are native-born Israeli Jews, compared with those who are foreign-born. And this is true for both Ashkenazi and Mizrahi Jews.

When controlling for other non-ethnic factors, Ashkenazim have a small advantage over Mizrahim among men, about 2 percent for total individual income and 4 percent for salary alone, much smaller than the gap in the raw earnings numbers, and much smaller than the premium enjoyed by native-born Jews. For women, Ashkenazim slightly underperform Mizrahim. More generally, because of the advantage of being a sabra, a native-born Mizrahi Jew would generally outperform a non-native Ashkenazi Jew, other things being equal. When men and women are separated in the analysis of earnings, the "natives" retain an earnings advantage among both genders. Mizrahi Jewish women are outperforming the Ashkenazi Jewish women.

Recent immigrants in Israel are at an earnings disadvantage compared to the other population groups. Controlling for age, education, and the other non-ethnic factors, recent immigrants earn about 5.5 percent less in total individual earnings while for salary alone (not shown in the table), they earn 10-14 percent less than other Israelis. The earnings disadvantage is larger for men than for women. Interestingly, immigrants from Africa (mainly Ethiopians) do not suffer from any special earnings disadvantage as compared with the earnings levels of all recent immigrants. All immigrants are at a modest disadvantage in the labor market, but Ethiopians no more so than non-Ethiopian immigrants. When men and women are analyzed separately, Ethiopians slightly outperform the other immigrants.

Are Israeli Arabs Disadvantaged Because of Schooling?

Economists like to describe schooling and degrees as "human capital," and it is possible to measure the returns or market rewards to this capital using statistical methodologies. One issue that has frequently been debated in Israel is whether educated Arabs are at a market disadvantage, since—because of discrimination—they are less capable of capitalizing upon their educational achievements.[15]

Once again, the presumption of discrimination does not survive empirical statistical analysis. The truth is quite the opposite: The return on schooling for Israeli Arabs is generally considerably higher than it is for Israeli Jews. In almost every estimate, using different measures of schooling and of earnings, the return on education appears to be higher for Arabs after controlling statistically for other variables.[16] This is true both for salaries and for all individual earnings. Since the reward for educational achievement is, if anything, higher for Arabs than for Jews, this rules out the claim of systematic discrimination against Arabs who accumulate human capital and capitalize upon it in the labor market.

The return on schooling is not the same, however, as the reward for membership in elite professions. Arabs, like Jews, who are members of managerial or other professional groups (lawyers, doctors, engineers, etc.) enjoy a significant earnings advantage over those who are not members of these groups. The bonus or premium for Arabs, however, is lower than that for Jews. Discrimination cannot be ruled out as a causal factor here although other factors unrelated to discrimination could also explain these disparities, including differences in distribution among professions within the broader elite professional categories.

Where Is the Apartheid?

The most surprising conclusion from the econometric analysis of ethnic earnings disparities in Israel is how many of the stereotypical characterizations of Israel turn out to be false. Ethnicity in Israel simply does not play a large role in the labor market, in contrast with gender or schooling.

While it is widely presumed that the Arab minority underperforms in the labor market of the Jewish state, either because of discrimination or other structural or cultural disadvantages, this turns out not to be so. That accusation is central to the claim that Israel is some sort of apartheid regime. While the raw mean earnings of Arabs are considerably lower than those of Jews, the two populations differ in many significant ways, including age and schooling, and little can be concluded from this raw comparison on its own. When education, age, marital status, geographic location, and professional group membership are taken into account, Arab-Jewish earnings disparities all but disappear, and in some cases, they even invert, so that the Arabs outperform the Jews. This is particularly true of male earners.If the data fail to show a clear pattern of Arab underperformance in earnings compared with Jews with similar levels of schooling, the stereotype of Ashkenazi Jews outperforming Mizrahi or Sephardic Jews appears just as inaccurate. Once education and the other explanatory variables are controlled, there is very little difference between Ashkenazim and Mizrahim earnings, and in a few cases, particularly for women, Mizrahim outperform Ashkenazi women. The Ashkenazi-Mizrahi distinction certainly appears to be less important in explaining earnings differences than the distinction between native-born Jews and foreign-born Jews or recent immigrants. Here again, there are differences between men and women. Ashkenazi women slightly underperform Mizrahi women, other things being equal, while Ashkenazi men slightly outperform compared with Mizrahi men. The bottom line is that the data do not support the presumption that Mizrahim are systematically disadvantaged in Israeli labor markets.

While new immigrants underperform relative to other Jewish Israelis, other things being equal, Ethiopians do not appear to suffer from any special earnings disadvantage compared with other immigrants. If Ethiopian immigrants earn low levels of salary, it is because they have low levels of schooling. But given their level of schooling, they earn the same on average as immigrants from Russia, South Africa, and Argentina. When estimating total individual income separately for men or for women, the Ethiopians even slightly outperform the other immigrants.

In spite of what statistical analyses have to show, the subject of discrimination in Israel continues to fill the media, which seem to be obsessed with it even while refusing to examine actual data. For example, in the summer of 2013, a television documentary on Israel's Channel Ten, produced by popular journalist Amnon Levy, triggered considerable media debate inside Israel. It claimed to have investigated and discovered that anti-Mizrahi discrimination is as bad as it had been back in the early decades of Israeli independence.[17] Real data show otherwise.

The problem is not just in the media. The academic careers of many in Israel, particularly in sociology, have been constructed entirely upon unsubstantiated allegations of Israeli racism. Israeli sociologists in general tend to accept at face value the notion that any documented disparity in earnings or numerical representation between Israeli Jews and Arabs must be due to discrimination.[18] Perhaps the most notorious example is that of Yehouda Shenhav, a sociologist at Tel Aviv University. Shenhav is father of the notion that "Oriental Jews" are in fact "Arabs of the Mosaic faith," and together with Arabs, share a victimhood imposed upon them by racist Ashkenazi Zionists.[19] Shenhav and those of similar ideological orientation operate the Mizrahi Democratic Rainbow, dedicated to liberating "Oriental Jews" from Ashkenazi bigotry and capitalism.[20]

In Israel's media, it is considered common knowledge that Arabs, Mizrahim, and Ethiopians are victims of harsh discrimination.[21] The accusations of apartheid may be malicious, disingenuous, and over-the-top—or so most Israeli commentators and sociologists would agree—but the presumption of an underlying widespread pattern of discrimination is, to their minds, undeniable. The extent to which some in Israel go to manufacture evidence of discrimination can be awe-inspiring. For example, the ordinarily prestigious Israel Democracy Institute (IDI), a left-wing think tank, published a study in May 2013 that claimed to have discovered unambiguous proof of widespread discrimination in Israel against Arabs.[22] Composed by IDI legal staffer Tanya Steiner under the supervision of Hebrew University professor Mordechai Kremnitzer, the study's evidence was the number of complaints about discrimination submitted to the Israeli Commission on Equal Opportunities in Employment. Yet while numerous complaints from women reached the commission, only 3 percent of the complaints it received were from Israeli Arabs, who represent about 18 percent of the labor force. Of these, only three of the complaints received in the entire 2011 year by the commission about alleged anti-Arab discrimination were deemed worthy of investigation. So instead of concluding that the evidence points to an absence of discrimination, the IDI's conclusion was that it all proves how badly discriminated Israeli Arabs are in Israel; after all, they are so victimized that they do not even file complaints about discrimination.

Conclusion

There is no evidence that points to ethnic discrimination against Israeli Arabs or Mizrahi Jews in Israeli labor markets. Recent immigrants appear to be the one group in the country at an earnings disadvantage. But it would be difficult to make a case that even their disadvantage is due to discrimination since immigrants in all societies are at a competitive disadvantage compared with natives.

There could be other groups in Israeli society that are victims of discrimination, but the data are not available in a form that allows for investigation. In particular, a plausible case for such discrimination may be that against ultra-Orthodox Jews. Gender discrimination also cannot be ruled out, but that is a separate and difficult methodological question beyond the scope of the discussion here.

The nearly complete absence of evidence of ethnic discrimination in Israeli labor markets does not, of course, preclude its existence in other markets or aspects of society. As was shown here, Arabs earn a higher return on education than Jews. But this does not rule out possible discrimination against Arabs in admissions to universities and colleges. It should be noted, however, that Israeli universities routinely implement affirmative action preferences in favor of Arabs and sometimes in favor of Mizrahim (and women).[23] The only other documented university discrimination is that which grants some preferences to army veterans, a practice found in most countries.

There have also been allegations that Israel discriminates in its fiscal allocations and revenue sharing where Arab towns and villages are underfunded. But an empirical analysis of the question found just the opposite; if anything, the Arab local authorities were being over-funded.[24] Evidence regarding other alleged forms of discrimination by Israel tends to be just as skimpy. Some accusations are based upon Israel's granting automatic citizenship to Jews under its "Law of Return." But such citizenship entitlements are not unusual in the world and can be found in many other countries, such as Armenia, Greece, Bulgaria and Romania, and are guaranteed under the United Nations Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights.[25] Another indictment of Israel concerns the discriminatory nature of its military conscription. Jews and Druse are conscripted into the Israeli military while Arabs may volunteer for service but are not conscripted. Again, this practice may indeed constitute discrimination but that discrimination is against Jews, not against Arabs.

None of this proves that discrimination never exists in Israel against Arabs, against Mizrahi Jews, or anyone else. But the very fact that empirical evidence of discrimination is so hard to discern or observe must itself serve as an important warning indicator about its magnitude or lack thereof.

Steven Plaut teaches at the Graduate School of Management at the University of Haifa.

Table 1: Impact Effect of Various Factors on Salary Earnings for Men and Women[26]

(3)

Individual's Total Income (includes self-employ and "other" income)
– Males and Females

(1)

Individual's Total Income from all Sources
– Males Only

(3)

Individual Total Income
from all Sources
– Females Only

Age Decreases by 1.3% for each extra year Decreases by 1.1% for each extra year Decreases by 1.5% for each extra year
Effect of adding one extra year of schooling -- -- Increases 6.0%
Increment for having matriculation diploma (only) Decreases by 6.0% Decreases by 7.6% --
College graduate dummy (increment over matriculation alone) Increases 39.6% Increases 42.5% --
Postgraduate degree (increment over having BA) Increases 10.6% Increases 12.5% --
Increment for being married Increases 44.9% Increases 56.5% Increases 35.5%
Increment for being male Increases 35.3% -- --
Adding one person to household size Decreases by 3.6% Decreases by 3.4% Decreases by 3.8%
Increment for being Arab Increases 8.5% Increases 9.8% Decreases by 2.1%
Increment for being native born (sabra) Israeli Jew Increases 7.3% Increases 8.3% Increases 2.1%
Increment for being Ashkenazi Decreases by 0.1% Increases 1.8% Decreases by 3.7%
Increment for residence in Jerusalem Decreases by 7.6% Decreases by 15.4% Decreases by 3.2%
Increment for residence in Tel Aviv Increases 17.2% Increases 15.0% Increases 20.6%
Increment for residence in Haifa Decreases by 13.5%. Decreases by 12.0% Decreases by 15.0%
Increment for being new immigrant (arrived since 1990) Decreases by 5.5% Decreases by 7.5% Decreases by 4.3%
Increment for being new immigrant from Africa (over previous increment for being immigrant) Decreases by additional 2.9% Increases by 0.3% Increase by 8.1%
Dummy if employed in "academic" profession Increases 45.7% Increases 45.6% Increases 45.5%
Dummy if employed as "professional" Increases 31.6% Increases 36.3% Increases 23.7%
Dummy if employed as "manager" Increases 75.6% Increases 72.2% Increases 75.9%
Size of sample used for estimates 20,069 10,424 9,703

[1] See, for example, Ayal Kimhi, "Jewish Households, Arab Households, and Income Inequality in Rural Israel: Ramifications for the Israeli-Arab Conflict," Defence and Peace Economics, Aug. 2010, pp. 381-94.

[2] For example, "The Inequality Report: The Palestinian Arab Minority in Israel," Adalah: The Legal Center for Arab Minority Rights in Israel, Haifa, Mar. 2011.

[3] Digital Journal (Toronto), May 1, 2013.

[4] Yinon Cohen, Yitzhak Haberfeld and Tali Kristal, "Ethnicity and Mixed Ethnicity: Educational Gaps among Israeli-born Jews," Ethnic and Racial Studies, Sept. 1, 2007, pp. 896-917.

[5] Knesset member Zehava Galon of the leftist Meretz party recently introduced a bill that would require all proposals of new legislation in Israel to contain estimates of disparate impact. See Haaretz (Tel Aviv), Apr. 17, 2014.

[6] Ibid., Sept. 12, 2012.

[7] Ibid., June 23, July 30, 2013; The Jerusalem Post, June 8, 2013.

[8] Thomas Sowell, "The American Mosaic," Ethnic America: A History (New York: Basic Books, 1981).

[9] "Projections of population in Israel for 2010–2025, by sex, age and population group," Israel Central Bureau of Statistics (Jerusalem and Tel Aviv); "The Arab Population in Israel," idem, p. 2.

[10] "Economic Characteristics," Israel Central Bureau of Statistics, accessed Dec. 19, 2013.

[11] "Income Survey, 2010," Israel Central Bureau of Statistics, Feb. 2012. Only people earning at least 100 NIS per month in salary are counted in the analysis below, with the others presumed to be absent from the labor force.

[12] Percentages computed by author from data found here: "Income of Individuals (Income survey)," Israel Central Bureau of Statistics, Table 25.

[13] Yossi Shavit and Ephraim Yuchtman-Yaar, "Ethnicity, Education, and Other Determinants of Self-Employment in Israel," International Journal of Sociology, Spring, 2001, pp. 59-91.

[14] Haaretz, June 23, 2013.

[15] See, for example, "Israel Must End Discrimination against Arab College Graduates," Haaretz, June 15, 2012.

[16] Pnina O. Plaut and Steven E. Plaut, "Income Disparities by Ethnicity in Israel," Israel Affairs, forthcoming.

[17] Panim Amitiyot: Pirakim Milayim, Aug. 22, 2013, Nana 10 web site.

[18] See, for example, Noah Lewin-Epstein and Moshe Semyonov, Stratification in Israel: Class, Ethnicity, and Gender (New Brunswick, N.J.: Transaction Books, 2003), pp. 175-281; idem, "Local labor markets, ethnic segregation, and income inequality," Social Forces, June 1992, pp. 1101–19; Sammy Smooha and Yohanan Peres, "The Dynamics of Ethnic Inequalities: The Case of Israel," in Ernest Krausz, ed., Studies of Israeli Society (New Brunswick, N.J.: Transaction Books, 1980), vol. no. 1.

[19] Yehouda Shenhav, "Spineless Bookkeeping: The Use of Mizrahi Jews as Pawns against Palestinian Refugees," +972 e-magazine (Israel), Sept. 25, 2012.

[20] "Hakeshet Hademocratit Hamizrahit," web site, accessed Dec. 10, 2013.

[21] For example, Yitzhak Laor, "The Glorious State of Israel and Its Anti-Arab Discrimination," Ha'aretz, Apr. 15, 2013.

[22] Talya Steiner, Combating Discrimination against Arabs in the Israeli Workforce, Policy Paper No. 97 (Jerusalem: Israel Democracy Institute, 2003).

[23] Haaretz, Nov. 19, 2009; John Rosenberg, "Affirmative Action … In Israel," Discriminations Blog, Sept. 3, 2002; Noga Dagan-Buzaglo, "Non-discriminatory hiring practices in Israel towards Arab Citizens, Ethiopian Israelis and new immigrants from Bukhara and the Caucasus," Adva Center, Tel Aviv, Nov. 2008.

[24] Tal Shahor, "Fiscal Allotment Policy vis á vis Minorities: An Empirical Measurement of the Way in Which Israel's Majority Government Makes Its Fiscal Allotments to the Arab Minority," Metodološki zvezki (Ljubljana, Slovenia), no. 1, 2010, pp. 73-93; Efraim Karsh, "Israel's Arabs: Deprived or Radicalized?" Israel Affairs, Jan. 2013, pp. 1-19.

[25] Universal Declaration of Human Rights, United Nations General Assembly, New York, Dec. 10, 1948, art. 14.

[26] The effects of isolated changes in individual factors while holding all other factors constant. The "default" or base case upon which the ethnic increments are computed is for "Foreign-born Mizrahi Jews." The figures in the table should be taken as the best estimate for changes in earnings caused by isolated changes in each individual explanatory factor (ethnicity, gender, and so on) while holding all other factors constant. This shows the isolated effect for Arabs, for example, on earnings while holding schooling, age, and other factors constant. The schooling variable is measured differently for the men-only column (where the effects of achieving degrees are estimated) than for the women-only column (where the effect of an additional year of schooling is estimated). The estimates allow us to see the "clean" effects or impacts of ethnicity and other factors upon earnings in Israel because these effects are statistically isolated from the many intermingled effects of the other variables. Estimates taken from regression analysis equations that are elaborated and appear in full in Pnina O. Plaut and Steven E. Plaut, "Income Disparities by Ethnicity in Israel," Israel Affairs, forthcoming.

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