Poverty, inequality decline in Israel

child poverty

A National Insurance Institute report says that the number of poor children in Israel fell in 2017 for the first time in many years.

The National Insurance Institute (NII) published its report on poverty in Israel in 2017 today. The report stated that the number of children living in poverty declined during the year for the first time in many years, while the incidence of poverty among haredim (ultra-Orthodox Jews) and Arabs fell. At the same time, poverty worsened among groups not in the labor market, especially senior citizens and the unemployed. NII deputy director general for research and planning Prof. Daniel Gottlieb submitted the report to the Minister for Social Equality.

There were 1,780,500 poor people, including 814,800 children, in 466,400 families in 2017. The NII highlighted the fact that the absolute number of children living in poverty fell by 23,700, the first such decrease in many years, although the total number of children in Israel grew by 47,900 during the year. The proportion of middle class people in Israel rose from 47.9% to 53.4%.

The Gini Index of inequality in disposable income was down 1.6% in 2017 and the index of inequality in market income fell 1.3%. The Gini Index of inequality has thus fallen 11% since 2000. The decline in the index of inequality in disposable income was similar, but began only in 2007.

Israel still leads the developed countries in the per capita poverty rate, despite the reduction in the dimensions of poverty and income inequality. The report credits government policy with a number of substantial achievements. The first is the decline in the number of poor children in Israel, although the poverty line was raised and the population grew. 17.9% of Israelis live below the poverty line (according to disposable income), a slightly higher proportion than in the US, Turkey, and Mexico. Israel is in second place with a 23.8% proportion of poor children (Turkey is in first place). It is important to note, however, that the poverty line in Israel, which is linked to the standard of living, rose 4.6%, in tandem with a similar rise in per capita disposable income.

Together with its unflattering poverty rate according to disposable income, Israel has substantially improved in recent years in other international comparisons. The most prominent achievement is in the Gini Index of income inequality. Israel is currently in 12th place with a 0.33 mark in this index, only three places higher than the OECD average of 0.31. Reduction of inequality was achieved as a result of a 4.7% increase in income in the bottom two income deciles, while income in the top two deciles grew by only 1.3%.

The incidence of poverty fell in 2017 as a result of higher employment rates and wage increases. For the first time since 2013, the incidence of poverty among working people fell, as did the proportion of working families in the poor population. The proportion of households with only one breadwinner dropped significantly in 2017. One possible explanation is the 6.1% increase in the minimum wage between 2016 and 2017, which probably had a positive impact on people with wages slightly higher than the minimum wage.

The incidence of poverty among Arab families fell from 49.2% in 2016 to 47.1% in 2017. The NII attributes this decrease to a 9% drop in the incidence of poverty among Arab families who neither live in East Jerusalem nor are part of the Bedouin population in southern Israel (two areas in which the incidence of poverty rose in 2017). Together with the fall in the incidence of poverty in the Arab sector, the depth of poverty rose 10% and the severity of poverty jumped 22% in this sector.

Among haredim, the incidence of poverty fell from 45.1% in 2016 to 43.1% in 2017, and the incidence of poverty among children also dropped 3%. 15% of poor families are haredi, far higher than the proportion of all families who are haredi.

On the other hand, the incidence of poverty among the non-working population rose from 69% in 2016 to 76% in 2017. The NII says that the difference in the dimensions of poverty in this population group in comparison with the general population increased because this group was unable to fit into the labor market, and because the allowances for people in such circumstances have become lower and lower in comparison with the general standard of living, while the proportion of people entitled to such allowances who actually take them up is usually low. "The fact that the improvement in the social situation consisted mainly of higher employment rate and wages highlights the weakness in this process for people either unable or not expected to fit into the labor market: people having difficulties finding work because of various disabilities, people with large families whose salaries cannot cover their basic expenses, and senior citizens with low income. The lack of appropriate revision of subsistence allowances and universal allowances for senior citizens and children makes these people the main victims," Gottlieb wrote.

The report also finds that the increase in the allowances lags behind the rise in salary and standard of living among Israelis.

What is the poverty line?

Unlike most NII allowances, the poverty line in Israel is linked to the standard of living and rises together with it. Gross monthly monetary income per family in Israel reached NIS 20,027 in 2017, 4.4% more than in 2016. Net monthly per capita income rose from NIS 5,223 in 2016 to NIS 5,477 in 2017, a 4.6% increase, and the poverty line rose accordingly. The poverty line is defined as income is at least 50% lower than the median per capita income, adjusted for size of family.

Published by Globes, Israel business news - en.globes.co.il - on December 31, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

child poverty
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