The main damage to the corona: in the weakest workers

A study published today by the chief economist at the Ministry of Finance: The decline in the average wage during the corona crisis mainly affected the weakest workers in the economy.

This figure, although expected, may have implications for determining the minimum wage in the economy, which is a derivative of the average wage.

Confused?

Here is the explanation

Between Ashkenazi

27/03/2022

Sunday, 27 March 2022, 14:21 Updated: 14:36

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A new report published today by the chief economist at the Ministry of Finance shows that the gaps between the various jobs in the economy were sharpened during the Corona period.

The level of the average wage is important because according to the law, the minimum wage must be derived from the average wage in the economy.

The chief economist at the Ministry of Finance, Shira Greenberg, publishes today an economic review that deals with the level of the average wage in the economy during the Corona crisis.

According to the Chief Economist, throughout the Corona crisis there was a more significant decline in the employment of low-wage earners compared to relatively high-wage earners, so a change in the employment mix throughout the crisis led to increases in the average wage in the economy.

These data are of secondary importance because according to the law, the minimum wage should be at least 47.5% of the average wage in the economy, so the changes indicated by the economist may not reflect the situation of the workers as it is.

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The data may be misleading

The corona crisis had a dramatic effect on the labor market, culminating in a decline in employment of about 1.4 million employed people, about a third of those employed in the economy.

This decline in employment was not uniform, with the decline in employment rates among the high income quintiles being moderate relative to that of the low income quintiles.

In recent months, there has been an impressive recovery in the labor market, when in January 2022 there was a full recovery in the participation rate and the employment rate remained only 0.7 percentage points lower compared to the pre-crisis level.

However, the increased decline in employment rates of workers from the low income quintiles during the corona crisis greatly affected the calculation of the average wage in the economy and created in it an increase that would not have been recorded if the mix of employed persons had remained the same.

The economist explained the gaps with an example: "Suppose a high-tech company that employs only engineers and security guards, in equal proportions. The engineers earn an average of NIS 30,000 and the security guards earn an average of NIS 10,000, hence the average salary at the company is NIS 20,000

. The security guards for the IDF while the engineers continued to work as usual, as a result the average salary in the company increased by 50% from NIS 20,000 to NIS 30,000, even though the company did not increase the salary for any of the employees.

A similar phenomenon was recorded in the whole economy, when in April 2020 there was a 17% increase in the average wage in the economy compared to February 2020

Thus, according to the chief economist, the average wage rose from the beginning of 2020 to the end of 2021 in most industries of the economy, with industries with a relatively sharp increase in the average wage characterized by human capital and high levels of productivity - high-tech and finance industries.

On the other hand, there were industries in which there was zero growth in the average wage - such as the hospitality and catering industry;

And industries in which there was a decrease in the average wage - such as the arts, entertainment and leisure industry However, over the last two years (2021-2020) the average wage increased in real terms by 3.2% at an annual rate, compared to an average annual real

increase

of 2% between 2011 and 2019

Wages in the corona crisis stand in contrast to declines in the average wage observed in past crises.

Possible explanations for this difference are the global demand for high-tech industry services intensified during the crisis.

In addition, the policy of government transfer payments to households strengthened private demand.

Also, the need to make rapid and extensive recruitment of workers at the end of closures and a temporary decline in the supply of workers against the background of government policy to deal with the spread of the virus and the fear of workers being infected.

• Of money

Tags

• Corona

• wage

• Chief Economist

• Ministry of Finance