The Bank of Israel today published an excerpt from its 2009 Annual Report on working families. The central bank reiterates what the National Insurance Institute is saying: "finding employment does not guarantee escaping from poverty."
The Bank of Israel states that incidence of poverty in Israel among individuals in families with one wage earner rose from 20.4% in 1997 to 36.3% in July 2008-June 2009. For the sake of comparison, the average poverty rate among individuals in families with one wage earner in the OECD was 7.7% in the mid-2000s.
The poverty rate among individuals in families with two wage earners is substantially lower, but the trend has been steadily worsening, rising from 2.1% in 1997 to 5.1% in 2009. In other words, tens of thousands of Israeli families with two wage earners are unable to escape the circle of poverty.
The Bank of Israel notes that the cuts in benefits, instituted in 2003, was necessary to increase the incentive to join the labor force, but that it resulted in non-working poor finding jobs at the bottom of the wage scale, because they had low earning capacity, due to a lack of education or inappropriate jobs skills.
Whereas in Europe, no clear correlation has been found between low wages and poverty, except for low work hours, in Israel, low wages has a clear contribution to poverty levels, together with large family sizes, and weak enforcement of labor laws, which results in many people working for less than the minimum wage. The Bank of Israel cites an OECD report on Israel, which said that the number of inspectors dealing with labor-law enforcement is less than a quarter of the ILO benchmarks for the number of workers per inspector.
The Bank of Israel says that one of the main policy measures, which has marked positive effects on the welfare of individual workers is the negative income tax, or earned income tax credit (EITC), and was introduced into several locations in Israel in October 2008. However, two factors mitigated its effect in Israel: it only operates in a few locations (the Ministry of Finance insists on linking expansion of the negative income tax to expansion of the Wisconsin program, which is stuck in the Knesset), and the relatively low level of the grant, compared with other countries.
Published by Globes [online], Israel business news - www.globes-online.com - on April 6, 2010
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