This blog post is atypical in that it's not related to Digital Marketing. However, I thought it is relevant enough to have it published here, as the channels and tools which made it possible to gather the data are a result of our core business activity.
Prelude
Israel, much like the rest of the world, had to face challenging economic times throughout 2020 and 2021 due to the COVID-19 pandemic. During 2020, there were 3 complete lockdowns.
The Israeli self-employed, who make up 60% of the population, and typically own small businesses, had to face the worst of challenges during the pandemic due to the lockdowns, closures of their businesses, decreased economic activity, decreased consumer spending, and cash flow issues to suppliers.
TaxCalc.tax
In early 2018, after making the jump from a salaried worker to a self-employed person, I was faced with a new reality: Taxes. Sure, you pay taxes as a salaried worker, but you never deal with them — Whatever you see is in the bank is actually yours.
However, as a self-employed person, it was more complex. I Googled for a self-employed tax calculator and only found partial solutions. I decided to make my own: https://taxcalc.tax
With some basic formulas and estimations, the website was very effective. It was never meant to be a truly accurate simulator, but it was always close enough as an indicator and for a guidance in making financial decisions. And, compared with my final yearly taxes, it was very close.
With some basic on-site SEO, other self-employed Israelis started to find it and use it.
Enter the Data
Out of genuine curiosity, I decided to anonymously track user activity on the website hoping to gain valuable insight on the Israeli self-employed sector. My logic was based on the fact that most people would enter genuine numbers, and with a big enough sample the trolls would be washed out.
The numbers people enter on the website are (mostly) their own estimation of their net profit (not revenue) for the calendar year, and they become closer to the true net income as the year progresses.
For example, if you had estimated in January that your yearly net income would be 450,000 ILS, but then lost some big clients or work, by May you would surely enter a lower number, and by September you only have 3 more months to guess, meaning the closer we are to the end of the year, the closer theses numbers are to representing your true yearly profit.
This is interesting for two reasons. It allows you to see an estimation of the eventual yearly profit, and it also shows you how people thought COVID-19 would affect their business.
There have been several news articles and studies about the COVID-19 pandemic effect on economic inequality, all seemingly pointing to the conclusion that the rich made more money, and the poor struggled to make ends meet.
I decided to sleeve up, get the event tracking data from Google Analytics, export it to Excel and play with some pivot tables to see if this is also the case in Israel, and if we can infer interesting patterns from it.
Covid-19 economic impact on the Israeli self-employed sector
Here is what the Israeli Self-Employed thought their net yearly income (net profit after all expenses) would be, month by month, during 2020:
The first wave of COVID-19 with its peak in April had the government enforcing a lockdown that started in March and ended in May. You can tell that the lockdown sent panic waves through the self employed sector, with the median diving 33% to ₪176,000 from ₪266,000 at the start of the year and gradually climbing back to almost pre-lockdown levels.
What is more interesting is that many business owners foreshadowed what is to come with manufacturing delays, goods shortages, and in turn decreased their expectations by 21% even before the lockdown.
2020 ended only about 4.5% worse for many of the self-employed. Much better than what they had anticipated in March, all things considered.
Taking a deeper dive
The table tells us the obvious. People feared the economic effect of the lockdown. But I wanted to see how the rest of 2020 shaped up for the different types of self employed.
At the lower end, where most freelancers, small and family businesses are found, we see a reflection of the overall trend. The year ended not so badly, and they forecasted much less profit during the lockdown, before realizing things are not so bad after all.
However, things are less rosy on the higher end where the businesses are more established, and usually deal with import/export and manufacturing and are much more affected by international trade.
It only got worse as the months went by for Israel-self employed who make over 1,000,000 in profit.
Can we then conclude that Israel, unlike the rest of the world, did not see more economic inequality as a result of the pandemic?
Not so fast…
Enter The Vaccines
Stocks rallied in late 2020 as Pfizer-BioNTech announced 90% effectiveness against COVID-19, and for the first time, the end of the pandemic was in sight.
By mid-2021, the pandemic was "officially over" in Israeli and I put that in quotation marks because as I type this the government is reinforcing some restrictions to deal with a new variant.
Let's see how the self-employed think their 2021 will be like:
At the beginning of 2021, many business owners thought it would shape up to be slightly worse than 2020, but as the vaccination campaign kicked on, the majority of business owners increased their expectations for the total yearly net profit their business would generate, reaching ₪294,000 by June, up 15% from 2020 end-of-year numbers and 21% from the start of 2021.
What about the high and low income self employed?
Surprisingly, even though the median of all self-employed shot up in 2021, the self employed with the least income continue to face hardships in 2021 as a result of the pandemic.
Despite the economy reopening and international trade resuming, Israeli self-employed who make up to 145,000 a year profit (about 12,000 per month) see a less rosy picture than their peers who make higher income.
On the other end of the spectrum…
The Israeli self-employed who make over 1 million in yearly profit have forecast a steady rise in their net income this year, by as much as 50%!
Let's see how 2020 compares to 2021 in numbers:
Might be helpful, but not before we actually sort it by percentage:
The biggest losers of the pandemic? The middle class. Where did the money go? To the lower-earning self-employed. And… to those making more than 5 million ils profit per year.
We see a substantial reduction in the middle and higher middle class income, where people earn higher monthly net profit relative to Israeli standards.
On the other hand, we see a big increase in the lower earners category, by as much as 40% in 120-135k group.
But what is most interesting in all of this is that the 1% enjoyed an 8% increase, the largest increase not going towards the lower earning categories.
Conclusion and Caveats
I am not a statistician. In fact, if you are, I apologize for the numerous inaccuracies and assumptions that must have triggered you. However, I think that the data is large enough to be representative, especially that we are working with medians not averages.
We must also consider that perhaps not all types of self-employed Israelis seek a tax calculator, and this might skew the result towards the higher end a little. Also I think some numbers are over-represented, I think many people wonder how much taxes you pay for 1 million, so they enter 1 million etc…
We must also take into account that the 2020 numbers and even the 2021 numbers may be fudged by the government grants scheme which saw many self-employed enjoying bi-monthly payments of up to tens of thousands of shekels.
The data was trimmed to be unique, I took only 1 unique entry form each device for each month, and repeated entries were ignored.
Feel free to mail me for the raw data, I would be glad to see a more professional approach to what I have tried to do, perhaps we can find more interesting information hidden in it.
