Abstract: Where people live shapes their employment opportunities and living standards. This chapter examines geographic inequalities in labour market outcomes and, in turn, disposable household incomes and income mobility across small regions in OECD countries. It analyses the extent and drivers of regional disparities in employment rates, relating them to the geographic concentration of economic activity and the composition and characteristics of the local population, and discussing the role of labour mobility across regions. It examines regional disparities in median disposable household incomes, their relationship to regional GDP per capita, and their links to regional labour market outcomes – both in the cross-section and over time. It quantifies the contribution of between-region inequalities to overall income inequality across households and examines what regional disparities imply for the prospects of individuals to move up the income ladder over time.

Executive summary: Israel’s middle class has enjoyed robust income growth in the two decades up to 2021, and income inequalities have narrowed – a trend that distinguishes Israel from many other advanced OECD economies. The Israeli median equivalised disposable household income grew by almost 45% between 2001 and 2021 after adjusting for inflation – substantially more than in peer OECD countries such as France, Germany and the United States. The Israeli middle class – proxied here as people living in households with disposable incomes between 75% and 200% of the national median – has expanded since the global financial crisis. Still, it remains among the smallest across OECD countries, at 54% of the population versus an OECD average of 62%. 

Substantial disparities persist in access to the middle class. Despite the overall growth in the size of Israel’s middle class, the share of young people who reach the middle class has stalled since the early 2000s. There are also substantial ethno-religious disparities in access to the middle class: only 37% of Arab Israelis and 33% of Haredim – the ultra-orthodox Jewish minority – made it into the middle-income group in recent years, compared to 63% of the non-Haredi Jewish majority. The middle class is also increasingly out of reach for people without upper-secondary educational qualifications. 

Since earnings from work are the main source of income for most families, access to quality employment is a key determinant of people’s chances of making it into the middle class. Yet having a job does not guarantee equal access to the middle class for everyone: only 49% of Haredi Jewish workers and 56% of Arab-Israeli workers belong to the middle-income group, compared to 66% of workers from the non-Haredi Jewish majority. More broadly, since the mid-2000s, Israel’s workforce, and middle-income workers in particular, have benefitted from considerable occupational advancement. The share of middle-income workers in high-skilled occupations strongly rose, by over 10 percentage points (p.p.) for professional occupations and 6 p.p. for managerial roles, while the share in middle- and low-skilled occupations declined. This trend distinguishes Israel from many other OECD countries, which have rather experienced occupational polarisation. Persistent inequalities in occupational distribution and wages by gender and ethno-religious background endure: among middle-income workers, the share of men in managerial roles is almost three times that of women (11% vs. 4%), and non-Jewish workers remain strongly underrepresented in high-skilled occupations. 

An analysis of consumption expenditures provides an important complementary perspective on middle-class living standards and points to declining inequalities but growing cost pressures on Israeli households. Spending inequalities have slightly narrowed over the last two decades – unlike in most European OECD countries – reflecting declining income inequality. However, housing alone accounts for over one-third of total consumption expenditure, and its budget share increased by 3 p.p. between 2001 and 2018. Prices for housing and food have risen well above the overall inflation rate, and the overall price level in Israel is the second highest across all OECD countries, after Switzerland. Despite rising expenditures, middle-income Israeli households have gradually increased their savings rate, as robust income growth has outpaced growth in spending. Yet the combination of high price levels and rising housing costs weighs disproportionately on low-income households and ethno-religious minorities, pointing to persistent gaps in living standards that mirror the inequalities observed in income and employment.

Abstract: This chapter examines how the place where people are born and grow up shapes their opportunities in life. Opportunities to access quality education, jobs, and services vary significantly across and within countries. These differences matter, because most people stay close to their birthplace well into adulthood. Residents of metropolitan and higher-income regions tend to have better access to services, infrastructure, and employment, which leads to better educational and labour market outcomes. In contrast, people in poorer or remote regions face persistent disadvantages. The chapter documents these disparities drawing on regional and urban typologies based on OECD territorial definitions. It shows how place shapes opportunity and contributes to long-term inequalities in life outcomes.

Abstract: Opposing trends in longevity and fertility imply that the OECD population is becoming older. Without further policy action, the retirement of large cohorts will shrink the pool of productive workers, while the dependent population will expand. This chapter assesses the projected impact of these trends on GDP per capita growth to 2060 and puts them, as well as their implications for public finances, into a context of intergenerational disparities – documenting the diverging income and wealth trajectories across the generations and the implications for poverty among different cohorts. Possible complementary avenues for offsetting the negative growth effect of demographic change are considered and their potential quantified based on alternative simulation scenarios.

Abstract: This document assesses the links between the European National Recovery and Resilience Plans and the OECD Product Market Regulation (PMR) indicators. It examines how the plans, designed to mitigate the economic impact of the COVID-19 pandemic and promote sustainable and digital transitions, address regulatory weaknesses identified by the PMR indicators in EU member states. The analysis focuses on the potential impact of the plans' measures on PMR scores, key regulatory weaknesses not addressed, and the regulatory setup in network sectors where infrastructure investments are planned. The goal is to determine how effectively the plans can improve competition and productivity across the EU economies.

Abstract: A competition-friendly business regulatory environment is essential for the well-functioning of markets. It ensures that important policy goals are addressed, and market failures tackled. However, regulation can also create barriers to the entry and expansion of firms that may limit and distort competition and hinder the efficient allocation of resources, negatively affecting productivity and growth. Some of these barriers are necessary, but others may go beyond what is needed to address the policy objectives and the market failure(s) regulation is intended to solve. This paper relies on the last vintage of the Product Market Regulation indicators to determine to what extent Poland’s National Recovery and Resilience Plan aims to create a more competition-friendly business environment. The analysis suggests that only a limited number of the measures included in the Plan may address regulatory weaknesses identified by these indicators. Therefore, the paper suggests OECD best practices that the country could consider to remove unnecessary regulatory barriers and boost the benefits that the investments envisaged in the Plan could bring about.

Abstract: Appropriately designed Product Market Regulation (PMR) is essential to enhance productivity, boost economic growth and increase welfare. Regulation is needed to address market failures and guarantee the health and safety of consumers. However, by limiting the entry and expansion of firms, a too stringent regulatory environment can hinder an efficient allocation of resources both within and across industries. This paper provides a detailed review of PMR in Indonesia and analyses the country’s performance in this area relative to OECD countries, other G-20 members and regional peers. To do so, it relies on the OECD’s PMR Indicators, which have been recently compiled for Indonesia. These indicators assess the extent to which the regulatory framework of a country is competition-friendly across a range of sectors and regulatory areas. The analysis reveals that PMR in Indonesia is less conducive to competition than in most OECD countries. The scope for improvement is particularly great in areas such as barriers in network sectors, command-and-control regulation, public procurement, the governance of State-owned Enterprises (SOEs) and the extent to which the impact on competition is assessed when designing new regulation. The paper proposes concrete policy measures to align the regulatory environment of Indonesia with that of best performing countries.