In 1993, in an attempt to reduce its dependence on noncitizen Palestinians and despite its official commitment to allow the labor movement to be part of the peace process, the state started recruiting large numbers of migrant workers, primarily from Thailand, Romania, and the Philippines to work in agriculture, construction, and nursing, respectively (Bartram 1998; Raijman and Kemp 2004). This trend, which started small, grew dramatically in the following two decades. For example, between 1992 and 1996 the number of licenses for migrant workers increased from 10,000 to 95,000; this figure was nearly doubled by unauthorized workers, who in 1999 were estimated to number about 80,000 (Rosenhek 1999). By 2010 the estimated number of authorized and unauthorized migrant workers combined was 211,500, or 10 percent of the local labor force. This placed Israel at the top of the industrialized economies most heavily dependent on foreign labor (Raijman and Kushnirovich 2012). Officially authorized or not, migrant workers have been subject to a high degree of regulations and atypical employment relations. Fixed-term contracts, the binding system enforcing the migrants’ direct dependence on manpower agencies and employers, and the threat of automatic deportation have made for a particularly harsh system that sometimes even degenerates into a human trafficking industry (Raijman and Kemp 2011). Besides introducing into the local labor force a large group of particularly cheap, flexible, exploitable, and expendable workers, this state of affairs has created shock waves that have left their mark on citizen workers as well.
A direct outcome of the economic developments over the last three decades is a huge increase in social inequalities. While Israeli society has never been egalitarian, the rising living standards of the population as a whole and the extraordinary affluence that economic liberalization has brought for a small, select group have opened yawning socioeconomic gaps. The following indications, taken from the Adva Center’s annual report (Swirski and Konor-Attias 2012), are unambiguous: the Gini index, which measures inequalities in income distribution, has risen by almost 14 percent since the mid-1980s, so that Israel now scores fifth highest among member states of the Organization for Economic Co-operation and Development (OECD). The middle class has shrunk even faster than in other postindustrial countries. In 2011, top senior executives average wage was about sixty times higher (!) than the national average wage. The incidence of poverty has been steadily on the rise, placing Israel next to worst in the OECD club, above only Mexico. Its incidence among Arabs is almost three times higher than among Jews; other marked groups, notably the ultra-Orthodox, old people, and women, are also particularly vulnerable.
This brings us to the issue of welfare. Israel has been known as a relatively strong welfare state, at least during the first four or five decades of its existence. Some observers (e.g., Doron 2007: 92) regard the Israeli welfare state as a universalistic distribution mechanism that “reflects the institutional expression of the modern state’s commitment to the welfare of all its citizens and their integration into the national community.” A similar presumption regarding the state’s equalizing intentions is implied in other studies as well (Lewin-Epstein et al. 2003; Zehavi 2012). By contrast, critical scholars argue that the Israeli welfare system is an important stratificatory mechanism and has been so from its inception (Maman and Rosenhek 2012; Levi-Faur 1998). Rosenhek (1999) even goes so far as to argue that the role of Israeli welfare in buttressing social stratification is not an anomaly, noting that welfare states operating in capitalist societies exclude subordinate groups as part and parcel of their inner logic.
In Israel, total exclusion from the welfare state has applied to noncitizen workers, first Palestinians from the West Bank and Gaza, and later migrant workers. Palestinian citizens have been partially excluded, with some variations over time. In the earlier decades of the state this was done by channeling important benefits through nonstate Zionist agencies (notably the Histadrut), thus bypassing the ostensible commitment to universal attainment, or by physically preventing the Palestinian citizens from collecting benefits such as the child allowance, through restricting their movement under the military government (Rosenhek 1999). In later years some of these institutionalized forms of discrimination were eliminated or reduced;2 still, the effectiveness of welfare benefits in getting people above the poverty line remains grossly biased in favor of the Jewish citizens.3 Studies have shown consistent patterns of discrimination against the Palestinian citizens in the de facto transfer of welfare benefits, indicating that state welfare was and remains a major tool for ethnonational stratification (Rosenhek 1998, 1999, 2003; Lewin and Stier 2002, 2003; Lewin, Stier, and Caspi-Dror 2006).
Table 1.1 Selected Data on Social Inequalities in Israel
| Discriminatory policy against Palestinian citizens | Gross cumulative investments in construction for industry, 2000–2009 (in billions of Shekels) Total 21.20 Jewish communities 20.06 Arab communities 1.14 |
| Class polarization | The lowest five deciles get 24% of the national pie, compared to 76% that go to the top five deciles. Among self-employed, the lowest five deciles earned less than the average national wage. In 2007, deciles 1–9 made 1.9 billion shekels, as compared to 4.3 that were earned by the top decile, and 13.5 by the top one percent. |
| The Gini Index, measuring social inequalities, places Israel as fifth lowest among 27 highly industrialized countries | |
| Shrinking middle class | Israeli middle class, defined as households with 75%–150% of the median income, is the third smallest among a selection of 22 industrialized countries, consisting of only 36% of the population. |
| Gender wage gaps | Women’s monthly average wage is 66% of men’s, and their average hourly wage is 83%–84% that of men’s. These gaps are stable over more than a decade |
| Ethnic wage gaps among Jews (2011) | – Ashkenazi urban employees’ average monthly income was 33% above the average monthly income of urban employees – Mizrahi urban employees’ average monthly income was 7% above that average, registering an improvement compared to the turn of the millennium, when their income was 5% below the average. |
| Wage gaps between Jews and Palestinians | Arab urban employees’ average monthly income was 33% below the average, registering a worsening of their situation, compared to 2004 when their income was 25% under the national average. |
| Soaring unemployment in the Palestinian communities | In some Arab communities, unemployment in 2011 was 4–5 times higher than the national average. |
Adapted from Swirski, Shlomo and Etty Konor-Attias. 2012.
One important exception here is the National Health Insurance Law of 1995, which set a precedent in terminating the hitherto binding connection between health insurance and membership of health funds. Prior to that law, membership in a health fund was voluntary and nonmembers had no health insurance. Health fees were collected by workers’ unions, and the Histadrut’s ownership of the largest health fund gave it enormous power. By ending this binding connection, the new law granted mandatory health insurance to approximately 1 million citizens, mostly Arabs and low-income Jews, who had not been covered under the previous arrangement. That said, the law’s ability to generate universal health coverage eroded in the years after 1995, largely due to lack of a permanent mechanism to ensures an annual increase in government budget to meet population growth, aging, new technologies, and new medications (Horev and Keidar 2010). The government’s share in financing health costs has decreased steadily while that of the health funds has increased, compelling them to operate complementary insurance programs to cover their rising costs. So for example,