The Income Determination Process of Public Sector Employees in Israel: Individual, Organizational and Labor Market Effects

The present paper investigates the origins of variations in public sector wages using an interdisciplinary approach drawing from stratification and organizational theory. It is suggested here that organizational antecedents (resources and outputs) and labor market distinctions (periphery, semi-urbanized and urbanized localities) produce variations in individual level earnings controlling for various individual predictors. The results show that local labor markets affect wages in two complementary ways. First, by translating organizational level characteristics into differential returns to human capital characteristics according to the size of locality. Second, by applying institutionalized forms of discrimination based on ethnic considerations, into lower levels of organizational level resources which further, albeit, indirectly, produce variations in wages. The results enable the rejection of previous assumptions in regard to homogeneous determination of wages in public sector employment, based on universal criteria of attainments. They rather point to the existence of intra-sector variations along a geographic/ethnic effect and a general/gender effect cross-cutting the ethnic effect. These result in a gender and ethnic effect on individual wages. The gender effect is highest and prominent to both the Jewish and Arab localities whereas the ethnic effect is lowest and restricted to the semi-urbanized areas.