Slicing the Pie: State Policy, Class Organization, Class Integration, and Labor's Share of Israeli National Income

In this article, I underline a less commonly acknowledged outcome of the neoliberal revolution. Following the shift from social protection to economic liberalism, in many rich countries workers' share of national income has declined and capitalists' share has increased. To better understand this link between neoliberalism and workers' share of national income, I develop a new political economy approach that stresses the importance of state policy, class organization, and organizational unity for determining how national income is distributed between workers and capitalists. I apply this conceptualization to the dynamics of labor's share in Israel, once a socialist economy with little inequality, which today has become one of the world's most unequal. A detailed account of three stages in the Israeli political economy characterized by distinct inequality outcomes and time-series equations estimating the changes in labor's share from 1955 to 2005 reveal that market-oriented state policies, workers' disorganization, and the growing fragmentation within organized labor led to a decline in labor's share during the current stage of liberal capitalism.