Employee Unionization in Israel, 2014–2018
- Following a sharp decline in unionization rates in previous decades, the rate of employees paying membership fees to labor unions (hereinafter unionized employees) increased slightly between 2012 and 2018, as part of the wave of unionizations in the economy. In 2018, about one-quarter of employees in Israel paid membership fees to unions, totaling more than NIS 1 billion. In contrast, the unionization rates in most OECD countries declined moderately during that period.
- Unionized employees in the public sector and in companies and nonprofit organizations providing public services generally enjoy higher wages than their nonunionized colleagues. Wage gaps between unionized and nonunionized employees in business sector industries are narrower than those in the public sector and public services. Wage gaps between unionized and nonunionized women are wider than the wage gaps between unionized and nonunionized men. These wage gaps may reflect different professions, vocations, and various other workplace characteristics.
The study was written by Haggay Etkes and Guy Almog of the Bank of Israel Research Department, and will be published in the upcoming Selected Research and Policy Analysis Notes. It maps the unionization trends and the characteristics of unionized employees between 2014 and 2018 using a new statistical source: employer reports to the Israel Tax Authority on the deduction of employee membership or coverage fees from wages. Thus, using an administrative database that contains a random sample of 10 percent of salaried employees in Israel, the study sheds light on unions. In the past two decades, these unions have been improperly studied using surveys of limited scope. This descriptive study presents statistical correlations—not causal connections—between unionization and the characteristics and wages of employees who pay membership fees, thereby filling in a hole in labor market statistics.
Unions in Israel experienced a drop in membership numbers beginning in the 1980s, particularly after the disconnection between union membership and health insurance following the legislation of the Public Health Law in 1995. However, in the past decade, unions’ recruitment activity expanded. The establishment of the “Koach LaOvdim” (Power to the Workers) organization in 2007, and the establishment of an employee unionization department in the Histadrut (2009), reflected intensive union activity to unionize employees at nonunionized workplaces, including in cellular communications, finance, public transit, colleges, and even in the high-tech sector. Employee unionization were also encouraged by legislative changes (2013) and judicial rulings such as the Pelephone ruling (2012).
This study indicates a moderate increase in the rate of unionized employees (identified in this study by payment of membership and union coverage fees) between 2014 and 2018 (the star and the blue line in Figure 1), after the downward trend in union membership rates from about 45 percent in 2000 to about 23 percent in 2012—which was found in previous studies—was halted. This is similar to the findings of previous studies that were based on more limited datasets relating to the 2012–2016 period (the blue triangles in Figure 1). The increase in the unionization rate in Israel, although it was moderate, is prominent when compared to the moderate decline in union membership rates in the OECD. Among OECD countries, the unionization rate increased between 2010 and 2019 only in Turkey, South Korea, and Iceland (Figure 1).
The study also documents the gaps in unionization rates between economic sectors: About 65 percent in the public sector (the vast majority of nonunionized workers in the public sector belong to the defense establishment, including the police and the Prisons Service, and to other entities that do not have any unionized employees), compared with about 11 percent in the other public services (health, education, and so forth, that are not in the public sector), and about 15 percent in business sector industries. The unionization rate in the business sector industries increased during the reviewed period (2014–2018) by about one percentage point, partly due to an increase of about 5 percentage points in the unionization rate in the communications, transportation, and finance industries with the wave of unionizations in the cellular communications, insurance, and public transit companies.
A comparison of unionized and nonunionized employees shows that unionized employees are older, less likely to be single, and have more children. Unionized employees also have higher levels of education and greater employment tenure. About 57 percent of unionized employees worked at places that are identified in the database as belonging to the public sector, compared with about 12 percent of nonunionized employees. The annual labor income of unionized employees in 2018 was about 16 percent higher than that of nonunionized employees. This was due to employment stability, which was reflected in an additional 0.8 work months per year, and due to a monthly wage gap of about NIS 1,600. The monthly wage gap is partly explained by the rate of workers with higher education, which is much higher among unionized workers. In addition, employer deductions to pension and advanced training funds for unionized employees are about NIS 4,800 higher per year than employer deductions for nonunionized employees (Table 1).
A comparison of the average monthly wage of unionized employees to that of nonunionized employees by gender and sector (Figure 2) shows two main patterns. First, the wage difference between unionized and nonunionized employees in the public sector and other public services is greater than in the business sector industries. In particular, the wages of unionized men in the business sector industries is slightly lower than that of their nonunionized counterparts, while among women, the wage gaps between unionized and nonunionized employees in the business sector industries are about half of the wage gaps of their counterparts in the public sector and other public services. As stated, these gaps may reflect differences in the industry composition of unionized and nonunionized employees of different genders, as well as various other characteristics such as education, skills, and experience, and not necessarily the effects of being unionized per se.