25.05.2010
 
The ratio of women's wages to men's wages in Israel and the OECD
This following is a summary of an issue discussed in Economic Developments in Recent Months no. 127, January to May 2010, to appear shortly.
 
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  In Israel the ratio of women's average wage to men's is 64 percent, higher than the average in the OECD.
  In Israel, women's integration in the labor market relative to men's and the minimum wage compared with the average wage are relatively high. These aspects are characteristic of countries in which the women's/men's wage ratio is relatively high.
  Women in Israel marry relatively young, and the birthrate in Israel is relatively high, features generally associated with countries in which the men–women wage differential is relatively high, i.e., the women's wage/men's wage ratio is low.
In Israel women's average gross wage is 64 percent of men's; in 128 countries around the world the ratio is 50 percent, on average; and in the 31 OECD countries (including Israel) [there were 31 members before the accession of Israel, Estonia and Slovenia], the ratio is 59 percent, on average. These figures are based on an international database of gross wages in the years 2004–06. It is worth noting that there is great variation between the OECD countries the standard deviation of the wage differential between men and women is 10 percent (Figure 1).
 
 
The columns in Figure 2 represent the correlation between the different variables and the ratio of women's wages to men's and (columns above the zero horizontal axis show a positive correlation, and those below the axis, a negative correlation), and the line shows Israel's position, in percentiles, for each variable, relative to the OECD countries. The figure shows only those variables for which a statistically significant correlation with the wage differential was found. Thus, for example, the higher the age at which women marry, the higher the ratio of their wage to men's, and the higher the average number of hours worked weekly per employee, the lower the women's/men's wage ratio.
Figure 2
The correlation between different variables and the ratio of women's wages to men's in OECD countries
 
 
To explain the factors relating to the wage differential in different countries, two separate variables were designed: one is "cultural", including average fertility per family, average age of women at first marriage, degree of traditionalism in each country (a dummy variable given the value one for countries with a Catholic majority, and for Israel, Japan and Korea. For Germany, with a more or less even split between Catholics and Protestants, the value assigned was 0.5), the proportion of women in parliament, and the country's geographical latitude (a geographical variable taken to represent cultural values, and distinguishing between, for example Northern European and Southern European countries). The second variable is made up of various aspects of the labor market, including the average number of years of education among women, the difference between the number of women's and men's years of education, the rate of employment among women, the difference between women's and men's employment rates, and the average number of hours worked per employee. Various policy variables were added to the above two variables; only the minimum wage was found to be positively and robustly correlated with the dependent variable.
According to the model, the wage ratio between women and men should be 59.4 percent, compared with the actual ratio of 64 percent, and the OECD average of 59 percent. This means that according to the variables taken into consideration in the model, the ratio of women's wages to men's wages should be close to the average in the OECD countries.