End to gender wage gap would boost country’s GDP

If men and women earned the same salaries on average, the economy would be a whopping 7% bigger in the long run, according to a study the Finance Ministry Chief Economist’s office unveiled on Monday.

The study assumed that the monthly wage gap would drop from its 2014 level of 39% to “just” 22% by 2039, which would lead to the 7% bump in the economy.

In 2015 terms, that 7% GDP increase would amount to about NIS 82 billion, or roughly a NIS 8,000 per capita increase in GDP.

The gender wage gap in Israel stems in part from the fact that women work fewer hours on average than men, and also because they tend to work in lower-salary industries. Women are underrepresented in the hi-tech sector, for example, and overrepresented in education and health services.

Women also tend to move up the ranks less frequently than men, accounting for another portion of the wage gap. That’s why even in Israel’s public sector, where wages are, for the most part, assigned by a formula, there was a 21% wage gap in 2014.

The researchers, however, said their finding did not take into account the possibility of women working extra monthly hours, because those might be offset by men working less or other redistributions for child and family care, which tend to fall more heavily on women’s shoulders. In that regard, the researchers said, the study’s findings were conservative.

“Beyond the implications this has on the status of women in society, it is likely that gender segregation in the labor market affects economic productivity, due to an inefficient allocation of resources and skills,” the study concluded.

The researchers based their methodology on previous research done by the OECD and consultancies, such as PriceWaterhouseCoopers and McKinsey in other places. Like those studies, it assumed that men’s salaries would not be altered by the change in women’s income.