Sheltered Labor Markets, Public Sector Employment, and Socioeconomic Returns to Education
of Arabs in Israel
Author(s): Noah Lewin-Epstein and Moshe Semyonov
Source: The American Journal of Sociology, Vol. 100, No. 3 (Nov., 1994), pp. 622-651
Published by: The University of Chicago Press
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Sheltered Labor Markets, Public Sector
Employment, and Socioeconomic Returns
to Education of Arabs in Israel'
Noah Lewin-Epsteinand Moshe Semyonov
Tel Aviv University
This studyexpands the theoreticaldiscussionof ethniceconomies
by focusingon public sectoremploymentand the role the state
plays in affecting
the socioeconomicfortunesof ethnicminorities.
The authorsargue that undercertaincircumstancespublic sector
employment
attainhighersocioeconomicrehelpsethnicminorities
wards. The findingsof the studyindicatethatArab employeesin
Israel receivehigherreturnsto educationin theethniclabormarket,
compared with the dominantmarket,and in the public sector
ratherthantheprivatesector.The latterresultalso holdstruewhen
Arab workersare comparedto Jews,revealingthe benefitsderived
fromthe shelteredlabor market.
INTRODUCTION
constitutes
The Arab minority
just over 17% of the populationof Israel
and is subordinateto theJewishmajorityin everyfacetof stratification.
Arabsattainfeweryearsofformalschoolingand generMore specifically,
education(Shavit 1990),theyholdless lucrative
allyreceivelower-quality
and less prestigiouspositions in the occupational structure(LewinEpstein and Semyonov1986; Semyonovand Lewin-Epstein1989), and
theirincomeand standardof livingare considerablylowerthan thoseof
Arabs are disadvantagedin comparisonto Jews in
Jews. Furthermore,
the attainmentof socioeconomicrewards. That is, theiroccupational
statusand earningsare considerablylowerthanthoseofJewishworkers
' An earlierversionofthispaperwas presented
at themeetings
oftheISA Research
in Trondheim,Norway,May 20-22, 1993. We
Committee
on Social Stratification
wishto thankTami Sagiv-Schifter
forher assistancein data analysis.This paper
fromhelpful
benefited
suggestions
providedbyYinonCohen,YitchakHaberfeld,and
but the authorstake fullresponsibility
threeAJS reviewers,
forany shortcomings
thatstillremain.Correspondence
thisarticleshouldbe addressedto Noah
regarding
Lewin-Epstein,
Department
of Sociologyand Anthropology,
Tel Aviv University,
RamatAviv,P.O. Box 39040,Tel Aviv 69978,Israel.
? 1994by The University
ofChicago.All rightsreserved.
1.50
0002-9602/95/10003-0002$0
622
AJS Volume 100 Number3 (November1994): 622-51
ShelteredLabor Markets
withthesame social and demographiccharacteristics
(Lewin-Epsteinand
Semyonov1992a; Semyonovand Cohen 1990).
The purposeof this paper is to identifylabor marketstructuresthat
are relativelyadvantageous for the Arab population. Specifically,we
examinethe roles of highlysegregatedethniclabor marketsand of the
publicsectorin providingjob opportunities
and higherreturnsto human
capital resourcesformembersof the minoritypopulation.By so doing
we aim to contributeto an understanding
of theimpactof labor market
structure
on ethnicallyrelatedsocioeconomicinequalitynotonlyin Israel
but in othermultiethnic
societiesas well.
BACKGROUND
The Arab minority
is residentially
segregatedfromtheJewishmajority.
Approximately
85% oftheArab populationresidein villagecommunities
and small towns.In fact,onlyseven of the 101 urbanlocalitiesin Israel
are administratively
definedas mixedcommunities,
whileall othercommunitiesare eitherJewishor Arab. This extremeresidentialsegregation
originatedin the "pre-state"period.Jews who migratedto Palestineat
the turnof the centurychose to establishtheirown communitiesand to
interestsof the two peodevelop a separateeconomy.The contradictory
ples fueledbitterconflictsthat peaked in the war forIsrael's independence. While Jewish-Arabrelationsin Israel have undergonemany
changes, the patternsof residentialsegregationhave remainedlargely
the years.
unalteredthroughout
It is safe to say that mostJewishand Arab citizensof Israel endorse
residentialsegregationfornationaland culturalreasons.In a 1985 population survey,30% of the Arab public and 50% of the Jewishpublic
expressedthe opinion that Arabs and Jews should reside in separate
neighborhoods,and an additional30% of eithergroupwere undecided
(Smooha 1992). Althoughsegregationis in largepartvoluntary,theresidential patternsalso reflectthe dominant-subordinate
relationshipof
morethanJewsare
Jewsand Arabs. Arabs are interestedin integration
willingto permit.In the few known cases where Arab familieshave
triedto move intoJewishcommunities,
theymetwithstrongopposition
(Rosenfeld1988).
The separationof Jews and Arabs is not onlyecologicalbut cultural
as well. The populationwe here referto as Arab is comprisedof three
majorreligioussubgroups.Muslimsconstitute
thelargestgroup,accountof the Arab populationof Israel. Approximately
ing forthree-quarters
13% of the Arabs are Christian,and the Druze make up the remaining
10% (othergroups,such as theCherkesse,are rarelyidentified
separately
due to theirsmall numbers).Christiansare moreurbanthaneitherMus623
AmericanJournalof Sociology
limsor Druze. Theyhave lowerfertility,
attainhigherlevelsofeducation,
and have higherlabor forceparticipationrates.
Israeli Arab cultureis deeplyrootedin the broaderArab culture,and
Arabic is consideredthe primarylegitimatelanguage. For Muslimsand
Christians,in particular,use ofArabicservesas an important
expression
of theirnationalidentity(Ben-Rafael1994). Arab childrenare generally
educatedin Arabic-speaking
schoolswhereHebrew is a compulsorysecond language. Arabicis thepredominant
vernacularin all Arab communities, and Hebrew is used when interactingwith Jews (with Jewish
employers,with Jewishclientele,and when shoppingin the predominantlyJewishurban centers).Since mostJewsdo not speak Arabic,the
Arabic languageis not onlya culturedevice but also servesas a barrier
forJewisheconomicactivityin Arab communities
for
(e.g., competition
jobs).
Arab communitiesare generallydistantfrommajor urban centers.
Approximately
half the Arab populationresidesin the northernregion
of Israel, and some 10% are located in the south. Most Arab urban
communitiesare in factoversizedvillages,and theylack the infrastructureneededto promotedevelopment.Consequently,theArab economyis
and an underdeveloped
characterizedby limitedeconomicopportunities
industrialbase. Until recentlythe Arab economywas mostlya village
economycateringto itsown needs. Over theyears,however,theagriculturesectorshrankwhilemanufacturing
and commercegrewonlymarginally. Currently,the privatesectorin the Arab labor marketis minute,
and manyof the privateenterprises
are small family-run
sewingshops
or constructionmaterialproducers(Haidar 1990; Meyer-Brodnitzand
in Arab communities
Czamanski 1986). The scantyopportunities
compel
outsidetheArab economy.Over 50%
manyworkersto seek employment
in Jewish
of theArab workforce
commuteto workand findemployment
communities(Lewin-Epsteinand Semyonov1992a; Semyonov1988).
In recentyears public services have become the leading economic
branchin the Arab economy,accountingforalmost40% of all jobs in
and stateagenciesare
theArab labor market.Indeed, local government
currentlythe largestemployersin the Arab sector. State agencies (in
suchas education,health,and welfareemploymostly
Arab communities)
forthe
Arabs and henceexertconsiderablecontroloverjob opportunities
Arab population. Expansion of these opportunitiesis oftenpolitically
motivatedand is frequently
responsiveto therequestsoftheArab electorate fromitspartyrepresentatives.
Hence, wheneducatedArabsare faced
withlabor markethardship,expansionof the public sectorin the Arab
also servesas a strategyof co-optationand control(Lustick
community
1980). Local governmenthas expanded with the growthof the Arab
populationand the rise in the demand forservices.Moreover,jobs in
624
ShelteredLabor Markets
local government
have sproutedin partas a resultofpressurefrombelow
(familymembersof the politicallyconnected,university
graduates,etc.)
foremployment
opportunities.
Surprisingly,despite the limitedopportunitystructureof the Arab
economy,researchhas revealed that Arab workersemployedin Arab
communitiesare occupationallyadvantaged relativeto other workers
(Semyonov 1988; Semyonovand Lewin-Epstein1994). That is, Arabs
employedin thesegregatedethnicmarketare able to attainjobs ofhigher
statusand prestigethan thoseemployedin the dominanteconomy(i.e.,
the mainstreameconomyof Israel controlledby the Jewishmajority),
and theyreceivehigherreturnsto theirhumancapitalresources(see also
Shavit 1992). Evidently,the spatial and culturalsegregationof Arabs,
oftheethniceconomy,yieldscertain
coupledwiththeparticularstructure
advantages,the natureof whichwe pursuein thisarticle.
Ethniceconomiesare embeddedin the social, political,and economic
contextof each society.Hence, the case of the Arab minorityin Israel
to contributeto the literatureon
providesus with a rare opportunity
ethniceconomiesfroma comparativeperspectiveand to extendtheapplication of thisabstractionto additionalphenomena.In the analysisthat
followswe evaluate the pertinenceof the different
marketmechanisms
that operate in the ethniceconomyto provide subordinateminorities
with socioeconomicadvantages. The specificstudyreportedhere will
enable us to highlightthe impact of the public sectorin the sheltered
economyon the distributionof socioeconomicoutcomesand rewards.
Beforeturningto the empiricalexamination,however,it is necessaryto
describe in detail the theoreticalunderpinningsof the perspectives
broughtto bear on the presentcase.
PERSPECTIVES ON ETHNIC LABOR MARKETS
Studentsof ethnicinequalityhave long viewed spatial segregationas a
structuraldevicethroughwhichminorities
are deniedaccess to economic
and rewards.Subordinateethnicpopulationsare likelyto
opportunities
residein places withlimitedindustrialbase, scarcityofjobs, and peripheral industries.Consequently,employment
in theethniceconomyis generallyassociatedwithlowerearningsthanemployment
outsidetheethnic
labor market.Indeed, a seriesof studieshave repeatedlydemonstrated
a negativeassociationbetweenminority
concentration
and economicoutcomes (e.g., Lewin-Epstein1986; Lewin-Epsteinand Semyonov1992a;
Nachmias 1979; Tienda and Lii 1987; Tienda and Wilson 1992).
At thesame time,however,spatialand social segregation
can facilitate
the developmentof a shelteredeconomy.One way in whichsegregation
to a subordinateminority
is throughlimitingcompemayprovidebenefits
625
AmericanJournalof Sociology
titionfrommembersof the superordinategroup. For example,Aldrich
et al. (1985) pointedout (withregardto ethnicretailtradein urbanGreat
Britain)thatresidentialconcentration
and culturalaffinity
of the ethnic
minorityare powerfuldeterminants
of protectedethnicmarkets.Since
membersof the dominantethnicgroup are not likelyto seek jobs in
the minority
ethnicmarket,competition
is minimized.In the absence of
membersoftheminority
competition,
populationcan enjoyjob opportunitiesotherwisedeniedthem(Semyonov1988; Waldinger1987).
Not onlyis theethnicminority
in residentially
concentrated
areas shelteredfromcompetition
withthesuperordinate
group,but concomitantly
thedailyneedsin theethniccommunity
across
generatejob opportunities
the entirerange of the occupationalhierarchy.In Lieberson's words
(1980, pp. 297-98), "As the group gets larger it is likelyto develop
certaininternalstrengths
that will supportsome occupationalactivities
even if outsidersare totallyagainsttheirholdingthe position.Hence, if
theblack populationbase is largeenough,therewill be supportforblack
doctors,black clergyand so on, even iftheyremaintotallyunacceptable
to others.Likewise,therewill develop certainentrepreneurial
possibilitiesand otheremployment
shiftswill occur."In theethniclabor market,
membersof the subordinategroupfillnot onlylow status,manual jobs
and professional
but also managerialadministrative
positions.According
to thisview,places withhighminority
concentration
can provideworkers
witha measureof protectionfromdiscrimination
and can serveas shelteredlabor markets.
Research on ethnicsegregationhas traditionally
utilizedthe general
notionof competitionwith the dominantgroup(or absence thereof)to
members(Blalock 1967; Frazier
explicatethe social positionof minority
1957; Lieberson 1980). Recent work on ethnic minoritiesin North
and ecoAmerica, however,has drawn attentionto entrepreneurship
as a particularmechanism
nomicorganizationof theethniccommunities
by which ethnicgroupscan mitigatesocioeconomicdisadvantage(e.g.,
Light and Bonacich 1988; Model 1992; Portesand Bach 1985; Wilson
and Martin 1982). In thisbody of literaturethe achievementsof ethnic
minoritiesare examined within the context of "ethnic economies."
These ethniceconomiesare oftenreferredto as "ethnicenclaves," and
theyoccupy a unique and somewhatautonomouspositionwithinthe
largereconomy.Ethnicenclaveshave variouslybeen definedin termsof
place of residence(Sandersand Nee 1987),place of employment
(Portes
and Jensen1987),or in termsof industrialconcentration
(Zhou and Loon ethnic
gan 1989). However,thekeyconceptualfactorin theliterature
enclaves appears to be ethnic entrepreneurship
(Light and Bonacich
1988): that is, ethnicminorities'abilityto create theirown economic
on smallbusinessesownedby ethnicentrepresubsystembased primarily
626
ShelteredLabor Markets
neurswho employcoethnicworkers.Underthesecircumstances,
ethnic
and solidarityensurethattheantiminority
discrimination
exsentiments
periencedby ethnicworkerselsewherein the economywill be absent
fromthissetting.
The emphasison theprivatesectorand theimportancegivento entrepreneurialactivityin the sociologicalliteratureon North America are
not surprisingin view of the predominanceof the free-market
economy
in theUnitedStates.In thecase oftheArab minority
in Israel, however,
the public sectorseems to play an importantrole in mediatingthe relationshipbetweenethnicgroupmembership
and socioeconomicoutcomes.
in Israel providesus withan opporHence, thecase oftheArab minority
tunityto evaluate theways in whichthe public sector,embeddedin the
ethniceconomy,affectssocioeconomicrewardsof the minoritypopulain lightoftheimportancea sepation.This issue is especiallyinteresting
rate body of literatureattributesto the public sector,and government
in particular,as a mobilitychannelforminority
employment
populations
(Eisinger1986; Jones1993; Maume 1985; Moss 1988; Wilson 1978).
THE PUBLIC SECTOR AND ETHNIC MINORITY EMPLOYMENT
itsroleas a
Two featuresofthepublicsectorare centralto understanding
forethnicminorities
in liberaldemocratic
preferred
locus of employment
societies.The firstqualityderivesfromthebureaucraticnatureofgovernmental organization(see Viteretti1979; Eisinger 1986) and its greater
to universalistic
criteriaof recruitment
commitment
and promotion(see
Blank 1985; Maume 1985; Zwerlingand Silver 1992). Wilson(1978) has
sectorin the United
pointedout that the expansionof the government
States has meantthat a greaterpercentageof high-paying
jobs became
available to the black middle class (see also Boyd 1991). Indeed, the
public sectorwas foundto be more open and to generallyoperate accordingto principlesof equality.Blank (1985), forexample,has pointed
in enforcing
out thatthestateappears to be moreeffective
universalistic
guidelinesconcerningthe employmentof disadvantagedgroups (e.g.,
ethnicminorities
actionpolicies
and women)and in adoptingaffirmative
in the public ratherthan the privatesector.Hence, minority
employees
are morelikelyto be attractedto the public sectorand are morelikely
to be foundin federal,state,and local government.2
2 We proposeherethatwhether
or notdiscrimination
exists
againstethnicminorities
inthepublicsectorhas todo primarily
withpoliticalandsocialagendas(e.g., affirmativeactionin theUnitedStates).Precisely
becausegovernment
agenciesdo notseek
to maximizeprofits,
theycan pursuea policyof equal pay to ethnicminorities
and
in excessoftheminimum
can offerthemcompensation
to attractthemin
necessary
termsof thecompetitive
marketwage (e.g., Abowdand Killingsworth
1985;Asher
and Popkin1984).
627
AmericanJournalof Sociology
In recentyears closerattentionhas been givento the role of governmentin labor marketperformance
and specificallyto the centralityof
statepoliciesin accountingforinternational
differences
in service-sector
employment(Esping-Andersen1990; Rein and Rainwater 1987). The
public sectorofferslabor contractsand pays wages like any otheremployer,but lack of a profitmotive"and the sheer inoperability
of the
conventionalproductivity-logic
mean thatorthodoxeconomicmodelsof
the labor markethardlyapply" (Esping-Andersen
1990, p. 157). Consequently,the statemayfosterpublicsectorexpansionin orderto achieve
politicalgoals. Hence, the second featureof interesthere concernsthe
political leverage that oftencharacterizesthe public sector (Dye and
Renick 1981; Bobo and Gilliam 1990). To the extentthat the public
sectoris controlledby politicalactors,constituents
may affectallocation
decisionsby applyingpressureon electedofficials.
can
Politicalallocationmay help explainwhythe federalgovernment
make betterjob offersand have higherminority
employment
relativeto
otheremployers.Indeed, thismaybe a deliberatepolicyto accommodate
in regionswherethe minority
the minoritycommunity
politicalclout is
greater(e.g., Abowd and Killingsworth
1985, p. 81). In the contextof
segregatedcommunities,the ethnicminorityhas considerablecontrol
over local governmentand the jobs it provides.In the contextof the
UnitedStates,forexample,Eisinger(1986, p. 170) has pointedout that
"it is possiblethat the local civil service,withits moreabundantjobs,
swifterrateofjob growth,and greatersensitivity
to local politicalconditions than the federalsystem,has functionedas a true mobilitychannel."
Eisinger's(1986) findingsindicatedthatblacks employedin thepublic
sectorachieved,on average,higheroccupationalstatusthantheirsiblings
employedin theprivatesector.Similarly,Asherand Popkin(1984) found
that the U.S. Postal Service (unlikethe privatesector)paid nonwhites
and women wages similarto thosepaid to whitemen withcomparable
qualifications.They attributedthe Postal Service wage "premium"to
its nondiscriminatory
wage policy.Maume (1985) has furthersuggested
thatwhen local government
makes up a substantialportionof the local
ofminorities
is likelyto increasedue to affirmative
economy,employment
actionpolicies.
In Israel the governmenthas long practicedwhat Kretzmer(1990)
termed"institutional
discrimination"
againstArabs, manifestin budgetarydecisionsand resourceallocation,at thegrouplevel. Withrespectto
action
the governmenthas not establishedan affirmative
employment,
policy.Yet, it is illegal in Israel to discriminate
againstworkerson acof governDue to thesensitivity
countof age, sex, religion,or ethnicity.
ment to domesticpolitics,and the greaterscrutinyof its actions, the
628
ShelteredLabor Markets
public sectoris morelikelythan the privatesectorto adhere to formal
the considerable
equalityin treatingArab employees.More importantly,
segregationof Jewsand Arabs and the localizationof manypublic services,such as educationand welfare,have providedtheArab population
substantialleveragein demandingpublicsectorjobs.
The above conceptualization
of the public sectorin the contextof an
ethniceconomydraws out some similaritiesto the theoreticalconstruct
of "ethnichegemony"proposedby Jiobu (1988), althoughhis concept
was developedwitha view to ethnicentrepreneurship.
The idea of hegemonyplaces substantialemphasison ethniccontrol.It refersto economicactivitycontrolledby an ethnicminority,
wherethemarkethas a
disproportionately
large numberof ethnicemployers(particularlysmall
entrepreneurs)
and employeesand whereinternallabor marketsemerge.
Jiobuplaces strongemphasison theabilityofthegroupto interfacewith
the majorityand to concentrateon producinggoods or servicesthatare
in highdemand in the majoritypopulation.Under theseconditionsthe
minority
can succeedeconomicallyeven in theface of adverseattitudes.
In the ethnichegemonicmarket,it is argued,ethnicemployeesreceive
higherreturnsthanin thedominanteconomy.
We proposethatundercertaincircumstances
theabove notionmaybe
applied to the public sectoras well. When ethnicminoritiesare segregated and the public sectorreachesa large enoughsize, the ethniccommunitymay gain hegemonyover portionsof the public sector,and this
in turnprovidesindividualsaccessto opportunities
otherwiseunavailable
to them. Indeed, the presenceof a large public sectorin communities
where ethnicminoritiesmake up a large proportionof the population
generallyprovidesminority
memberswithbetteraccess to opportunities
(Maume 1985).
HYPOTHESES
The analyticalmodelsutilizedin thisstudyderivefromthestatusattainmentand thehumancapitalframework
(Blau and Duncan 1967; Becker
1975; Mincer 1974). In view of the emphasisthis paradigmplaces on
education(a centralindicatorof human capital) and the significance
of
differential
labor marketregimesforthe outcomesof ethnicminorities,
we focusin the presentstudyprimarily
on statusand earningreturnsto
education.Followingthe logic embodiedin the perspectivesoutlinedin
the previoussection,it is possibleto deriveexplicit,althoughnot necessarilycontradictory,
hypothesesregardingthe socioeconomicreturnsto
educationin different
marketsituations.
Accordingto the shelteredlabor marketperspective,we expectthat
socioeconomicreturnsforArab workerswould be higherin the ethnic
629
AmericanJournalof Sociology
economythanin thedominanteconomy.This resultshouldholdforboth
the publicand theprivatesectors.3In the absenceof competition,
workers employedin the ethniceconomywill commandhigherreturnsto
human capital resources(e.g., education).Accordingto the perspective
that regardsthe public sectoras a mobilitychannelformembersof the
subordinateminority,we would expect returnsto human capital resources to be higherin the public sector,both in the ethnicand the
dominanteconomy.
The twohypotheses
outlinedabove seemto emphasizedifferent
market
mechanismsthatdeterminesocioeconomicrewardsoftheminority
population. The two hypotheses,however,shouldnot be viewed as mutually
exclusive.Followingthetheoreticalreasoningdiscussedearlier,it is reasonable to expectthat sectorof employment
will interactwith typeof
labor marketto producedivergentpatternsofsocioeconomicattainment.
In fact,proponentsoftheethnicenclaveapproacharguethatadvantages
forworkersin the ethniceconomyderiveprimarilyfromboth cultural
affinity
bindingentrepreneurs
and theircoethnicworkersand fromthe
economiclinkagesbetweenfirmsin the ethniclabor market.According
to thislogic,we expectArabsemployedin theprivatesectorin theethnic
economyto receiverelativelyhigherreturnsthanotherworkers.
On thebasis oftheargumentsconcerning
thepublicsector,we hypothesize thatemployment
in thepublicsectorin theethniclabor marketwill
be mostadvantageousto minority
workers.The highlevel of concentration of the ethnicminorityin certaincommunitiesprovidesthemsome
measureof controlover the politicaland bureaucraticapparatus. This
in
control,in turn,leads to betteraccess to employmentopportunities
thepublicsector,in general,and to positionsofhighstatus,in particular.
Followingthislogic,in theabsence of strongaffirmative
actionpolicies,
on the one hand, and the politicalallocationof public resources,on the
otherhand, the public sectorin Arab communitiesmay serve as a primarymechanismforrewardingmembersofthesubordinategroup.Consequently,we expect that returnsto human capital resourceswill be
3 We proposethatthe advantageholdsforthe privatesectoras well as the public
sector,eventhough,as one reviewernoted,ethniceconomiesare typically
made up
in peripheralindustries
of economicundertakings
(Waldinger,Aldrich,and Ward
1990). It is possible,hypothetically,
thatthe minority
workforce
employedin the
in coreindustries,
in whichcase theindustrial
dominanteconomywouldconcentrate
composition
of minority
workersin and out of theethniceconomywouldresultin
socioeconomic
advantagesforthoseemployed
outsidetheethniceconomy.
We believe,
however,thatethnicminorities
are generally
overrepresented
in peripheral
industries
not onlyin ethniceconomiesbut in thedominanteconomyas well. In the case of
Arabsin Israel we foundthatapproximately
equal proportions
(65%) of thosewho
workedin the privatesectorin and out of the ethniceconomywereemployedin
peripheral
industries.
630
ShelteredLabor Markets
higherin the public sectorwithinthe ethniceconomythan in othersettings.
DATA AND VARIABLES
Data forthisstudywereobtainedfromthepublicuse sampleofthe 1983
Israeli populationcensus (CentralBureau of Statistics1983).4Analyses
are limitedto the Arab populationbetween25 and 64 years old who
Individualsseresidedin communities
withmorethan5,000 residents.5
on edulectedforthe extensiveinterviewprovideddetailedinformation
cation,employment
status,place of employment,
occupation,and earnformsthe basis forthe variablesincludedin our
ings. This information
study.
Two dependentvariables are examinedin the analyses carriedout
in the paper-occupational statusand earnings.Occupationalstatusis
measuredby the socioeconomicindex foroccupationsin Israel (Tyree
classification
level. The scale
1981),and scoresare givenat thethree-digit
rangesfrom0 (low status)to 100 (highstatus).Earningsare measuredas
the naturallogarithmof the grossmonthlyearningsfromemployment
(measuredin Israeli shekels).
The predictivevariablesincludedin theanalysesare thosetraditionally
utilizedin statusattainmentand earningequations.They includeeducation,age, potentiallabor marketexperience,hoursof work,knowledge
ofHebrew, and religiousaffiliation.
Education is thenumberofyearsof
formalschooling.Age is measuredin yearsat thelast birthday.For lack
of morespecificinformation,
we definedpotentialexperienceas [age (education + 6)]; it replaces age in the earningsequations. We added
the square of potentialexperienceto the equationsto tap the nonlinear
relationship
betweenexperienceand earnings.Hours ofworkis theusual
numberof hoursworkedper week. KnowledgeofHebrew is a dichotomous variable with the value of "1" for speakingknowledgeand "O"
otherwise.As notedearlier,Arabicis thespokenlanguagein Arab communities,while Hebrew is generallyrequiredwhen interactingin the
dominant(mainstream)
economy.Hence, knowledgeofHebrewprobably
exertsa differential
effecton the compensationArab employeesreceive
in thetwo marketsegments(fora discussionoflanguageskillsand labor
4 The publicuse sampleis basedon a 20% randomsampleofall households
enumerated in the census.All personsover 15 yearsold in the selectedhouseholdswere
requiredto supplydetailedsocial and demographic
in additionto the
information
standardcensusform.
5At the timeof data collectionslightly
over 70% of theArab populationof Israel
residedin thesecommunities
(CentralBureauofStatistics1984,tableII/10).
631
AmericanJournalof Sociology
marketoutcomessee Evans [1987]).Religionis a dichotomousvariable
forwhich ChristianArabs receivethe value "1," and all others(mostly
Muslims) receivethe value "0." The purposeof includingthis variable
is to controlforunobservedculturaland social differences
thatmay covarywithsome of the otherpredictivevariables.
We definedthe ethniclabormarketon thebasis oflocation;it includes
the 34 urban Arab communities(those with a populationof 5,000 or
more).We classifiedArabs employedin the60 urbanall-Jewishcommunities and in the seven mixed-population
communities(which include
some of the largestcitiesin Israel, such as Jerusalemand Tel Aviv) as
part of the dominantlabor market.6Arab workerswho residein Arab
communitiesand whose place of employment
was not specifiedwe consideredto be part of the ethniclabor market.7We definedthe public
sectoras public servicesand operationalizedit on thebasis of theindustrial classification.It includesall public and communityservices,such
as local government,education,welfare,and health services. Persons
employedin all otherindustrieswere includedin the privatesector.
FINDINGS
DescriptiveOverview
Beforewe examinethe particularhypothesesadvanced in the previous
section,a briefreviewof the major attributesof Arabs employedin the
variouslabor marketsis in order.The figuresin table 1 reveal thatjust
underhalfof theArab workersin our sample(48% of the men and 49%
in what we refer
of thewomen)are employedoutsideArab communities
to as thedominantlabor market.The locus ofthelabor market(whether
in ethniccommunitiesor the dominanteconomy)clearlyinteractswith
sectortypeso that formen and womenalike the public sectorprovides
a largerproportionof jobs withinthe ethniclabor marketthan outside
it. In the ethniclabor market,28% of men and 74% of women are
employedin public sectorjobs. Outside the ethniclabor marketpublic
sectorjobs accountfor24% ofemployedArab menand 51% ofemployed
Arab women.
6 It is important
to notetheethnicoverlapbetweencommunities
and businessowner-
ship. Accordingto Meyer-Brodnitz
and Czamanski(1986), approximately
84% of
manufacturing
workshops
and factories
in Arabcommunities
werelocallyowned,as
werepractically
all retailand servicebusinesses.Arab-ownedestablishments
made
up a negligible
fraction
ofthedominanteconomy.
7The overwhelming
majority
ofArabworkerswho residein Arabcommunities
and
and construcwas notknownwerein thetransportation
whoseplace ofemployment
tionindustries,
to specifya singleplace ofemployment.
where,indeed,it is difficult
Hence,we assumetheirbase locationtobe theircommunity
ofresidence
and consider
theseworkersas partoftheethniclabormarket.
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A comparisonof the attributesof employeesin the various market
segmentsrevealsconsiderablevariationsamongthesubpopulations.The
mostnoticeabledifference
is betweenthoseemployedin thepublicsector
in the ethnic marketand all otherworkers.Members of the former
group-whether men or women-attained the highestlevels of schooling,enjoythehighestlevelsofearnings,and holdthehigheststatusjobs.
Concomitantly,
workersin the publicsectorworkfewerhoursper week
thanworkersin othersegmentsofthe economy.By contrast,workersin
the private sector,especiallyin the Arab market,have low levels of
educationand receivemodestsocioeconomicrewards.The low levels of
earningsin the privatesectorare even moreapparentwhen the number
of hoursworkedper week is takenintoconsideration.
Althoughthecomparisonbetweeneconomicsectorsrevealssimilarpatin table 1 also presentsomeinterestternsformenand women,thefigures
women work fewerhoursper
ing genderdifferences.
Not surprisingly,
week than men in everysegmentof the labor market,and the gender
difference
is mostpronouncedin the public sector.Womenin the labor
forceare also moreeducatedthanmen(as a resultoftheselectivenature
of femalelabor forceparticipation),
and theiroccupationalstatusis generallyhigher,especiallyin the public sector.Nonetheless,the earnings
of women are substantiallylower than the earningsof men in every
segmentof the economy.
Figuresin table 1 disclosea higherproportionof Christianworkersin
the dominantlabor market.This reflectsthe factthat ChristianArabs
are morelikelythanMuslimsto residein someofthelargestcommunities
ofIsrael (such as Tel Aviv-Jaffaand Haifa), whichare mixedcommunitiesand are classifiedas partofthedominantlabor market.The proportion of Christiansis especiallyhighamong women,since labor market
participationof Christianwomen is substantiallyhigherthan that of
Muslim women(Lewin-Epsteinand Semyonov1992b).
Returnsto Education
Occupationalstatus.-In orderto examinethe hypothesesconcerning
the effectof the shelteredmarketand the public sectoron occupational
attainment,we estimatethreemultivariatecovariancemodels. Coefficient estimatesfor the models are presentedin table 2 and are listed
separatelyforArab menand Arab women.In model1 we testthehypothand ensureshigher
esis thattheethniclabor marketshelterstheminority
returnsto education.Thus, the model includesthe typeof labor market
and threeinteractionterms,along withpersonalattributes(i.e., educatermscapturethe use of
tion,age, and religion).Two of the interaction
Hebrewinsideand outsidetheethniclabormarket(thecomparisongroup
634
ShelteredLabor Markets
is no use of Hebrew). The thirdterm,the interactionof educationand
labor market,estimatesthe extentto which returnsto educationdiffer
in the ethniclabor marketand outsideit. Model 2 teststhe hypothesis
that the public sectorprovidesthe ethnicminoritywith socioeconomic
advantagesand withhigherreturnsto education.In thismodel, sector
of employment
(whetherpublic or private)and the interactionbetween
educationand sectorare added to the individualattributes.Finally, in
model 3 we computea covariancemodelin whichthepublic sectorand
ethniclabormarketare replacedby a setofdummyvariablesthatclassify
the fourcombinationsof marketand sectortype.The comparisongroup
is the public sectorin the ethniclabor market,and the dummyvariable
thissegmentis excludedfromthemodel. Interactionsofthe
representing
dummyvariableswitheducationare also added to the model. Model 3
tests the hypothesisthat status returnsare higherin particularlabor
marketsegments(e.g., the privatesectorin the ethniclabor market).
The resultsfrommodels 1 and 2 lend supportto the hypothesesthat
returnsto educationare higherin the ethniclabor marketand in the
publicsector.The figuresindicatethatboththeethniclabor marketand
the public sector have significanteffectson occupational status, althoughtheydiffersomewhatformen and women. Occupationalstatus
returnsto educationare substantially
higherin the ethniclabor market
thanoutsideit (onlyformen)and in thepublicsectorthanin the private
sector(forbothmenand women).However,theimpactof sector(public
vs. private)on returnsto educationis substantiallyhigherthan that of
typeof labor market(ethniclabor marketvs. dominantlabor market).
is evidentfromthecoefficients
forthe respectiveinteracThis difference
tion terms(b = 2.37 vs. b = 0.55 for men and b = 2.17 vs. b =
are also manifestin the coefficient
0.30 forwomen).These differences
of
determination
(R2) forthe two models.
Althoughthe data frommodels 1 and 2 are quite revealing,theydo
notinformus whetherspecificcombinationsoftypeof labor marketand
sectorof employmentproducedifferent
returnsto education. Thus, in
model 3 we testwhetherreturnsto educationare higherin the private
sectorwithinthe ethniclabor marketthan in othersectorsand whether
in the publicsectoris moreadvantageouswithinthe ethnic
employment
marketthan outsideit. In line withthe researchquestionraised in this
paper our primaryfocus in model 3 is on returnsto educationin the
various segmentsof the labor market.Since the excludedlabor market
segmentis the public sectorin the ethniclabor market,the coefficient
foreducationin model3 indicatestheoccupationalstatusreturnsto every
year of schoolingfor personsin this segment(i.e., when the dummy
variables = 0). Arab menin thepublicsectorof theethniclabor market
receive3.75 statuspointsforeach year of schooling,and Arab women
635
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AmericanJournalof Sociology
in thesame marketsegmentreceive3.82 pointsforeveryadditionalyear
of schooling.These statusreturnsare higherthanin any othersegment
of the market,as is evidentfromthe negativesign of all interactions
betweeneducationand marketsegments.
The figuresin model 3 also indicatethat statusreturnsto education
are lowestin theprivatesectorof theethniclabormarket(thelargestnegative coefficients),
followedby the privatesectorin the dominantlabor
market.An interaction
effect,then,is apparent,wherebyoccupational
statusreturnsto educationare higherin the publicsectorthanin theprivate sector,and sectoroftheeconomyinteracts
withthetypeoflabormarket(ethnicvs. dominant)
toproducedivergent
levelsofreturns
to education.
For men, statusreturnsto educationare highestin the public sectorin
theethniclabor market.8For womentheimportant
is between
distinction
the publicand privatesectors,and thereappearsto be no significant
diffin the
erence in status returnsto educationderivedfromemployment
ethnicor thedominantlabormarkets(whencontrolling
forpublicsector).
The findingsreportedthusfarlend supportto our theoreticalexpectations.Nevertheless,it is notclearto whatextenthigherreturnsto education in the public sectorare due to its more egalitarianpolicies or are
to its particularoccupationalcomposition.According
due, alternatively,
to thelatterexplanation,theobservedfindingsmayhave been produced
of Arabs in the public sector.
by the bimodal occupationaldistribution
The public sectoris composedof healthprofessionals,
teachers,and administrators
at thetop, nonmanualunskilledworkersat thebottom,and
relativelyfewoccupationsin themiddle.Consequently,thepublicsector
can accommodateeitherhighlyeducated workersor those with little
schooling.Hence, accordingto this argument,education serves as a
betweenthe two groups.By way of constrongstatisticaldiscriminator
trast,the occupationaldistributionof Arabs employedin the private
sectoris concentrated
at themiddleand bottomofthestatusscale. Thus,
Arabs who are employedin theprivatesector,whethereducatedor not,
face a limitedopportunity
and theireducationcan make little
structure,
difference
fortheiroccupationalstatus.9
In orderto testthispossibilitywe reestimatedthe covariancemodels
predictingoccupationalstatus fora subsampleof the populationwho
had occupationalstatusscoresbelow 70. This procedurein effecteliminatedthehighstatusoccupationsand provideda testofdifferential
status
8 The coefficient
estimates
forreturns
toeducationderivedinthevariouslabormarket
in theprivate
fromone anotherexceptforreturns
different
segments
are significantly
to
returns
sectorwithinand outsidetheethniclabormarket.In thesetwo segments
educationappearto be similar.
outthispossibility.
reviewerforpointing
9 We thankan anonymous
638
ShelteredLabor Markets
returnsto educationin thepublicand privatesectorsfortheintermediate
and lowerstatusoccupations.This analysisrevealeda generaldeclinein
the magnitudeof the effectof education,as mightbe expected,but disreturnsto education.10We can
played the same patternof differential
thatneitherthe shape of the occupationaldistribuconclude,therefore,
tion nor the typeof occupationsgeneratedthe higherstatus returnsto
educationin the public sector.
Earnings.-In table3 we presentfourcovariancemodelsthatestimate
the earningreturnsto educationformen and women. The models are
designedaccordingto the same logic discussedwith regardto occupaofdifferential
earningreturns
tionalstatus.Model 1 teststhathypothesis
in and outsidethe ethniclabor market.It incorporatesvariables traditionallyused in earningsequations-education, potentiallabor market
experience,and hoursof work-and whetherone is Christianor nonChristian.In addition,the model includesa dichotomousvariable for
termsforlabor
typeoflabormarket(ethnicvs. dominant)and interaction
markettype with use of Hebrew and with education. In model 2 we
replace labor markettypewith economicsectorof employmentto test
the hypothesisof differential
earningsreturnsin the public and private
sectors.In model 3 we includea set of dummyvariablesto capturethe
fourcombinationsof labor markettypeby sectorand theirinteractions
witheducation.Model 4 adds occupationalstatusto the earningsequationto evaluate the roleofjob allocation.
Results of the analyses for all models reveal that earningstend to
rise with education,hours of work, and experience(experiencehas a
curvilineareffect).Christianmen earn significantly
more than nondifferences
Christianmen, but we findno significant
among women.1"
10 Amongmen,the coefficient
estimates
fortheeffectof education(representing
returnsin the publicsectorof the ethniclabor market)in the restricted
samplewas
fortheinteraction
termswereb = - 0.17 forthepublic
b = 2.00,and thecoefficients
sectorin thedominantlabormarket,b = - 1.21 fortheprivatesectorin theethnic
labormarket,and b = - 1.18 fortheprivatesectorin thedominantlabor market.
Except forthe privatesectorin and out of the ethniclabor market,the abovementioned
differ
fromoneanother.For womenthecoefficient
coefficients
significantly
estimateforeducationwas b = 2.87, and thecoefficients
fortheinteraction
terms
wereb = -0.15, forthepublicsectorin thedominant
labormarket,b = - 1.89 for
theprivatesectorin theethniclabormarket,and b = - 1.49 fortheprivatesector
in the dominantlabor market.Onlydifferences
betweenthe publicsectorand the
privatesectorare statistically
significant.
" We can onlyspeculateat thispointthatthe highersocioeconomic
rewardsthat
Christian
menattainmaybe attributed
totheirconcentration
inlargeurbancommunities.Theyalso tendto espouselesstraditional
orientations,
enhancingtheirabilityto
in moderneconomics(Al-Haj 1987).Withregardto women,
successfully
participate
ofbeingChristian
thenegativeeffect
on occupational
statusmaybe due to thehigher
ratesofChristian
Arabwomen.Increasedparticipation
participation
ratesare associ-
639
AmericanJournalof Sociology
The coefficients
forHebrew are also of substantiveinterestand clearly
conformto our expectation.AmongArab men, knowledgeof Hebrew
increasesearnings,but theeffectis dissimilarin theethnicand thedominantlabormarkets.KnowledgeofHebrewadds 27%-28% to theaverage
earningsin the dominantlabor marketand only 12%-13% to earnings
in the ethniclabor market.For women,knowledgeof Hebrew has no
effecton earningsin the ethniclabor marketbut
statistically
significant
adds between18% and 22% (dependingon the model evaluated) to the
earningsof womenemployedin the dominantlabor market.
Since thefocusof thispaper is on socioeconomicreturnsto education,
of education in the various
we turn now to evaluate the coefficients
models.Accordingto theresultsin models1 and 2, menemployedin the
ethniclabor marketgain 1% moreforeveryyearof schoolingthan men
employedoutside the ethniclabor market.For men employedin the
public sectorearningsare 2% higherforeveryyearof schoolingthanfor
men in the privatesector.Womenemployedin the ethniclabor market
earn 2% more foreveryyear of schoolingand accrue a similarbenefit
when workingin the public ratherthan the privatesector.Indeed, the
data supportthehypothesesthatreturnsto educationare higherbothin
the ethniclabor marketand in the public sector.
Model 3 gives additionalinsightinto the ways in which education
determines
earningsin thedifferent
segmentsofthelabormarket.Recallforthe variable "education"representearnings
ing that the coefficients
returnsfor those in the public sectorof the ethniclabor market(the
excluded group), we found that everyyear of education adds 7% to
earningsformen and 8% forwomen.Earningsreturnsare substantially
lowerin othersegmentsofthelabor market,as can be discernedfromthe
forthe interactionsof educationand labor market
negativecoefficients
are significantly
different
fromone
segments.For men, all coefficients
another.The lowestreturnsare in the privatesectorof the ethniclabor
market,followedby the privatesectorof the dominantlabor market,
and returnsto educationare highestin the public sectorof the ethnic
labor market.12 In the case of women,earningsin the public sectorare
intolower-status
and withan overflow
jobs (Lewin-Epstein
atedwithlowerselectivity
effectof religionon earningsis consistent
and Semyonov1992b).The insignificant
the lack of race and
witha large body of researchthatrepeatedlydemonstrates
on women'searnings.
effects
ethnicity
12 One mayarguethatreturns
to educationcouldbe higherin thepublicsectoreven
on levelof returns.This wouldbe
ifsectorof thelabormarketperse had no effect
formofreturns
to educationwerenonlinear,
giventhefact
thecase ifthefunctional
thatthe mean level of educationis higherin the publicsectorthanin the private
sector.Our analysis,however,doesnotsupportsuchan explanation.First,themean
640
ShelteredLabor Markets
the same regardlessof the typeof labor market(ethnicvs. dominant),
in returns,then,
and the same is trueforthe privatesector.Differences
are associatedwithpublic and privatesectoremployment,
withthe former providinga "premium"of 3% foreveryyear of schooling.
The Role ofJob Allocation
The findingsreportedin theprevioussection(models1-3) revealedearnings advantagesin the ethniclabor marketand in the public sector.In
orderto examinetheextentto whichearningsgainsare mediatedthrough
job allocation,we reestimatedthe covariancemodelsforearningswith
occupationalstatus added to the equations (model 4 in table 3). The
resultsof this analysisshed lighton the social processesunderlyingthe
patternsobservedearlier.When occupationalstatusis includedin the
earningsmodels,we findthatthe net earningsreturnsto educationdeclinesubstantially.
For example,formenin thepublicsectoroftheethnic
labor marketthetotaladded earningsforeveryyearofschoolingare 7%
(model3), whilethenetadditionofeveryyearofschooling,aftercontrollingforoccupationalstatus,is 3% (model4). For womenthefiguresare
8% and 4%, respectively.
Examiningthe interactiontermsin model 4, we findthat for men
earningsreturnsin the public sectorof the ethniclabor marketremain
higherthanin all othersegmentsand thatthedifferences
are statistically
withone exception(the privatesectorin the dominantlabor
significant
in earningsreturnsdismarket).Amongemployedwomenall differences
appear once we controlforoccupationalstatus.Hence, forwomenmost
of the effectof educationon earningsis mediatedthroughoccupational
sorting.
Evaluatingthe Extentof Labor MarketSheltering-ComparingArabs
to Jews
Throughoutthe analysiswe consistently
findthatthe public sectorprovidesArab workerswithhigherstatusand earningsreturnsto education,
and formen the benefitsare significantly
greaterwithinthe ethniclabor
levelofeducationin thepublicsectoris quitesimilarin theethniclabormarketand
thedominantlabormarket.Yet returns
to educationare substantially
higherin the
ethniclabormarket.Second,a directexamination
of a nonlineareffect
ofeducation
on occupationalstatusand earnings(notpresented
in thepaper)revealedno higher
returnsto higherlevels of education.Hence, the explanationof the advantageof
publicsectoremployment
withinthe Arab community
shouldbe derivedfromits
unique position.
641
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AmericanJournalof Sociology
TABLE 4
COSTS
IN OCCUPATIONAL
(OR BENEFITS)
RECEIVE
HAD THEIR
RETURNS
STATUS AND EARNINGS
TO EDUCATION
BEEN
EQUAL
ETHNIC LABOR
THAT ARABS WOULD
TO THOSE
DOMINANT LABOR
MARKET
Public
OF JEWS
MARKET
Private
Public
Private
-1.68
11.20
Arab Men:
Occupational
SES
...............................
Earnings
Arab
-3.78
-.21
Earnings.
(controlling
for SES).
-.16
5.65
.07
.15
.35
.08
.11
8.2 7
.37
3.31
.10
5.60
.15
.23
.05
.13
-.07
Women:
Occupational SES .-4.51
Earnings .-.34
Earnings
(controlling
for SES).
-.19
NOTE.-See n. 11 above fora descriptionof the calculationprocedure.
market.It is important,therefore,
to examinewhetheremploymentin
thepublicsectoractuallyofferstheethnicminority
someprotection
from
or whetherthe observeddifferences
economicdiscrimination
simplyreflecta generaladvantage enjoyedby all those who work in the public
sector(Jews and Arabs alike). In orderto explorethis possibility,we
compare the status and earningsreturnsof Arabs in each of the four
labor marketsegmentswiththoseofrelevantJewishworkers(e.g., Arab
men in the public sectorin theethniclabor marketand in thedominant
labor marketare comparedwith Jewishmen employedin the public
sector).
For the sake of parsimonywe focusonlyon the statusand earnings
returnsto education(althoughthe modelsanalyzedincludeall the variables discussedearlierin the text).We evaluate the magnitudeof status
and earningscosts (or benefits)forArabs withaverage educationwhen
comparedto Jewsin thesame industrialsector.Positivevalues represent
socioeconomiccosts, whereas negative values indicate socioeconomic
benefitsenjoyedby Arabs.'3
The resultsof the analysisare presentedin table 4 and provideadditionalinsightintotheroleofthepublicsectorand theethniclabormarket
as sheltersfromeconomicdiscrimination.
The findingsreveal that the
13 The figures
in table4 werecalculatedfromtheformula(bj - bA) XA, wherebj
and bA represent
coefficients
foreducationforJews(J) and
the partialregression
Arabs(A), respectively,
and XA is themeaneducationof Arabs.We performed
the
computation
separatelyforeach segmentof thelabormarket,and themodelscontrolledforall variablesincludedin thecovariancemodels.
644
ShelteredLabor Markets
disadvantageof Arabs (at least with regardto returnsto education)is
greaterin the privatesectorthanin thepublicsector.The disadvantage
in the formersectoris evidentforbothmen and women,whetherinside
or outsidetheethniclabormarket.For example,had Arab menemployed
in the privatesectorin the dominantlabor marketbeen rewardedfor
theireducationto the same extentas Jews in the privatesector,their
occupationalstatus would be 11.2 status pointshigher.Similarly,the
occupationalstatusofArab womenemployedin theprivatesectorof the
ethniclabor marketwould increaseby 8.27 pointshad theirstatusbeen
determinedlike thatofJewishwomenin the privatesector.
The findingsregardingthe public sectorare morecomplexand highlightthe protectivenatureof the ethniclabor market.In general,Arabs
in the
in the public sector.Furthermore,
experienceless discrimination
public sectorof the ethniclabor marketArabs are advantagedeven in
comparisontoJews.The benefitis revealedin thenegativesignpreceding
all figuresin the columnof the publicsectorin theethniclabor market.
For example, had Arab men in the public sectorof the ethniclabor
marketbeen rewardedsimilarlyto Jews, theirexpectedoccupational
statuswould be 3.78 pointslowerthantheiractual statusand theirearnings would decrease by 16%. For women,the benefitsassociated with
employmentin the public sectorof the ethniceconomyamountto 4.5
status points and 19% of theirearnings.We can conclude, therefore,
thatthe public sectoris less discriminatory
towardthe ethnicminority.
Moreover, the public sectorwithinthe ethniclabor marketnot only
sheltersminority
workersfromdiscrimination
but providesabsolutesocioeconomicadvantages.
DISCUSSION AND CONCLUSIONS
The structuralpositionofArabs in theeconomyofIsrael strongly
affects
theirsocioeconomicrewards.The Arabs'abilityto converthumancapital
resources(i.e., education)intooccupationalstatusand earningsdepends
upon the segmentof thelabor marketin whichtheyare employed.Our
analysisreveals that returnsto educationare higherin the ethniclabor
marketthanin thedominantlabor marketand in the public sectorthan
in the privatesector.Employmentsector(publicvs. private),however,
morestrongly
affectsreturnsto educationthanlabor markettype(ethnic
vs. dominant),and in the public sectorArabs are less disadvantaged
when comparedto Jews. In fact,sectorand labor markettypecombine
to produce the higheststatusand earningsreturnsto educationin the
public sectorof the ethniclabor market.
The conceptof a shelteredlabor marketoutlinedat the outsetof the
paper appears to have some validityin the case of the Arab minority.
645
AmericanJournalof Sociology
Employmentin the ethniclabor marketis advantageousforArab workers. These advantages,however,can be attributedin large part to the
industrialstructureand in particularto the predominanceof the public
sectorin the ethniclabor market.Put differently,
thereappears to be a
shelteredlabor marketeffectin the public sectorbut not in the private
sectorof the ethniclabor market.The findingsreveal that returnsto
educationare similarin bothsegmentsof the privatesector.
Severalfactorsmaybe germaneto thelack ofanyadvantageto private
in the ethniclabor market.First,businessestablishsectoremployment
mentsare small(all but a handfulemployfewerthan 10 employees),and
or otherhigh-status
theyprovideverylittlemanagerial,professional,
job
opportunities.
Second, withoutexception,privatesectorworkshopsand
firmsin the ethniclabor marketare in peripheralindustriesthat are
highlycompetitiveand low profit.In particular,competitionwithJewish-ownedfirmsminimizesthe abilityto offerearningsadvantages to
theiremployees.Evidently,outcomesin the privatesector,whetherin
theethniclabor marketor thedominantmarket,are governedby market
processes.
Our data did not permitus to directlyexamine the ethnicenclave
thesis.Nonetheless,we foundno indicationthata networkof exchange
and supportamongfirmshas emergedin theprivatesectorof theethnic
marketto provideadvantages that characterizethe primaryindustrial
sectorof the economy.Indeed, manyfirmsin the Arab marketserveas
firmsand are thusdependenton
forlargeJewish-owned
subcontractors
the termsof exchangeset by the latterfirms.Under these conditions
ethnichegemonyin privatesectoractivitycannotbe achieved and the
ethniclabor marketcannotserveas a shelteredmarket.
Our findingsdemonstratethat the public sectorprovidesthe Arab
minority
withhighersocioeconomicrewardsand higherreturnsto educaand its opennessto
tion. The public sector'sbureaucraticcharacteristics
In the
greaterpublic scrutinycreatea moreadvantageousenvironment.
case ofArabsin Israel, as in othersocial settings(e.g., Rein 1985;Wilson
1978),government
servicesprovidehigherstatusand higherpayingjobs
since theyrequireeducatedand trainedlabor. Of centralimportanceto
our study,however,is thefactthatstatusand earningsreturnsto education are generallyhigherin the public sectorwithinthe ethniclabor
marketthan in any othersegmentof the economy.It should be noted
that these conclusionsmore appropriatelyapply to Arab men than to
Arab women, forwhom public sectoremployment
providessimilarreturnswhetherin or outsidethe ethniclabor market.Possibly,the small
numbersof employedArab women,and the limitedrangeof jobs held
by themin the public sector(mostlyteachingand healthcare), render
such a labor marketeffectuntenable.
646
ShelteredLabor Markets
In consideringthe advantagesassociatedwith public sectoremploymentin theethniclabormarketitis usefulto distinguish
betweenmarket
processesand institutional
processes.As we have seen, mostof the advantages in the public sectorof the ethniclabor marketare mediated
throughjob allocation.Arabs in thissegmentoftheeconomygain access
to jobs of high status and authority(mostlyin education,health,and
welfareservices)with hardlyany competitionfromJewishemployees.
The lack of competitionis both a resultof the ecologicalsegregationof
Arab communitiesand of culturalbarriers.We noted specificallythat
in theArab
languageis likelyto serveas a barrier,sincedailyinteraction
communitiestakes place in Arabic, a language with which mostJews
have littlefacility.Our findingsshed some lighton thisissue fromthe
flipside. Particularly
withrespectto earnings,we foundthatknowledge
of Hebrew added only slightlyto the earningsof men and provided
virtuallyno additionalearningsforwomenin the ethniclabor market.
Yet, knowledgeof Hebrew considerablyincreasedearningsfor those
employedin the dominantlabor market.Hence, Jews would have a
difficult
timecompetingformostjobs in the Arab ethnicmarket.
The circumstancesof extremeresidentialsegregationand substantial
culturalbarriers(e.g., language)thatseparateArabsfromJewsprobably
in Israel. Nonetheless,the phenomeaccentuatelabor marketsheltering
non is by no means unique. In manymultiethnic
societiesthe economic
hardshipof disadvantagedminoritiesis mitigatedby particularmarket
structures.In Britain,forexample,Asian shopkeepersappear to benefit
not onlyfromculturalaffinity
withpotentialpatronsbut as a resultof
ethnicresidentialsegregationas well (Aldrichet al. 1985). Indeed, most
researchin thisarea has underscoredthe importantrole of ethnicentrepreneurship(see Waldingeret al. [1990] fora review).We argue, however,thatgreaterattentionshouldbe devotedto thepublicsector,where
alternativemechanismsmay develop as a resultof special ethnicneeds
(Jones 1993), culturalboundaries,or politicalempowerment.
in the public sectorin Israel is institutionExpansionof opportunities
ally (politically)determined,because the state controlsmuch of local
governmentand public-servicefunding(Al-Haj and Rosenfeld1988).
Hence, when highlyeducatedArabs are faced withlabor markethardis an apparships,expansionofthepublicsectorin theArab community
entstrategyto co-opttheelite.The roleofthestatenotwithstanding,
the
public sectorservesas a major resourceforthe ethnicgroup. It leaves
substantialautonomyin hiringand promotiondecisionsto membersof
the groupand is an avenue forthe mobilizationofjobs formembersof
the minority.Thus, ethnicsentimentsand solidaritycan easily operate
in the public sectorof the Arab labor marketto provide advantages
similarto thosein someethnicenclavesin NorthAmerica.It is possible,
647
AmericanJournalof Sociology
althoughour data do not directlyaddress this issue, that the private
sectorin the ethnicmarketdisplays no effecton status and earnings
returns(similarto thatof the public sector)because the distribution
of
power and resourcesin the ethnicmarketis skewed. That is, in face of
a small and ratherweak privatesector,the public sectormay in fact
expropriatemostresources.Underthesecircumstances,
then,ethnicminority"control"over the public sectorin the ethnicmarketmay be a
primarymeansof effecting
opportunities.
Such controlcan be construed
withinthe conceptualframework
of "ethnichegemony"offeredbyJiobu
(1988).
The hegemonicsituationimplies,first,that the groupachieves some
measure of commandover its economicdestinyand, second, that resources are transferred
to the minoritythroughthe interfacewith the
dominantgroup.The hegemonicpositionin a particulararea ofeconomic
activityin turnminimizesantiminority
discrimination
and helps uplift
theentiresubordinategroup.The case ofArabs in Israel extendsJiobu's
notionof controland accumulationthroughpure marketprocessesto
nonmarketmechanisms.The politicalactivityby means of which the
public sectorin Arab communities
expands,and becomesan important
sourceof jobs and advantages,is one exampleof such mechanisms.
The findingsdiscussedthroughout
the paper clearlydemonstratethe
effectof labor marketstructureon socioeconomicoutcomes.
differential
Moreover,our findingsunderscorethe role of the public sectorin the
formemethniclabor marketin generatingrewardingjob opportunities
bersof theethnicminority.
Not onlydoes thepublicsectorconstitutean
importantcomponentof the ethniclabor market,but it also emergesas
a resourceforthe subordinatecommunity.It servesas a major avenue
of social mobilityfortheArab labor force.On thebasis of thesefindings
we argue thatgreaterattentionshould be devotedto studyingthe ways
forachievein whichthe public sectoraffectsindividuals'opportunities
socioeconomicinequality,not onlyin
mentand affectsethnically-linked
societiesas well.
Israel but in othermultiethnic
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