Israel's middle class is continuing to shrink, and it currently encompasses only about one-fourth of all households, down from one-third in the late 1980s, according to a report issued Sunday by the Adva Center.

The report, based on income surveys conducted by the Central Bureau of Statistics between 1988 and 2005 also found that the middle class' share of the national income has fallen by 20 to 24 percent.

The study noted that the size of the middle class has great significance, both because this is what most people consider "normal" and because the middle class is generally considered the economy's backbone, both as workers and as consumers.

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Adva researchers defined the middle class using two internationally accepted methods: households whose gross income ranges from 75 to 125 percent of the average income, and households whose gross income ranges from 75 to 125 percent of the median income. In monetary terms, the former encompasses families that earn from NIS 10,510 to NIS 17,520 a month, meaning the fifth through eighth deciles of the population, while the latter covers families that earn from NIS 8,200 to NIS 13,660 per month, meaning the fourth through seventh deciles.

Using the median wage definition, the middle class contracted by 16.4 percent between 1988 and 2005, from 33 to 27.6 percent of all households. Most of those who left the middle class - 56 percent - slid into the lower class.

Using the average wage definition, the middle class shrunk by 19 percent over this period, from 32.9 to 26.6 percent of all households. Here, too, most of those who left the middle class fell into the lower class.

The middle class' share of the national income fell from 32.2 to 25.8 percent, using the average wage, and from 27.9 to 21.1 percent using the median wage. The study noted that the shrinkage continued even during the growth years of 2003-2005, when this proportion fell from 27.5 to 25.8 percent. All of the income lost by the middle class went to the upper class.

Researchers of globalization have found that middle-class shrinkage is widespread, but not universal: While the middle class has contracted in, for instance, England, Taiwan and Holland, it has grown in Canada, Sweden and Norway. Adva attributed this difference primarily to government policies.

Israel, the center said, had the smallest middle class of any of the 11 countries it examined.