The Bottom Line / It's a culture thing
According to the Central Bureau of Statistics' latest figures, we can clearly see what we have felt for some time: the gaps between the rich and poor have got wider and wider. The average income of the top 10 percent of households headed by a salaried worker (excluding East Jerusalem) in 2002 reached NIS 42,108 gross per month, while average household income of the bottom 10 percent was only NIS 3,160.
According to the Central Bureau of Statistics' latest figures, we can clearly see what we have felt for some time: the gaps between the rich and poor have got wider and wider. The average income of the top 10 percent of households headed by a salaried worker (excluding East Jerusalem) in 2002 reached NIS 42,108 gross per month, while average household income of the bottom 10 percent was only NIS 3,160 - a gap of a factor of 13.4 that is worse than in 2001 (12.1) or 2000 (11.9).
The Gini index, which measures the income distribution within a society, stood at 0.332 in 1990 (among households headed by salaried workers), but in 2002 this reached 0.395, a regression of 20 percent in income inequality (0 refers to most equal distribution, while 1 reflects the most unequal income distribution).
Looking at the whole of society - salaried workers, self-employed and those not working - the picture is the same. The Gini index jumped from 0.43 in 1979 to 0.53 last year - a rise of 23 percent in inequality.
The most widely-touted solution to this from the politicians has been to tax those better off and give more welfare payments to the weakest. But this policy can go too far, because increasing the tax burden to improve welfare handouts harms economic growth, and has transformed Israel into a country with a culture of not working.
In 1980, there were 10,000 families on income support. Today that number has ballooned to 150,000. Of every five Ultra-Orthodox families, four do not work for a living. Two-thirds of Arab women do not work, and many spouses do not go into the workforce. Foreign workers have driven wages down, forcing Israeli manual laborers out of the market. The end result is that the participation of the population in the workforce is only 54 percent, compared to an average of 65 percent in the West.
The second reason for this income gap is the investment in the territories and the ongoing war situation. Even if Finance Minister Benjamin Netanyahu manages to pull off the best plans with all the reforms and privatization, he has no chance of moving the economy to significant growth. If the state spends billions on the territories, fences, security, guards and bypasses, and if the war situation continues with terror attacks, growth will not arrive.
In war, no one will build a new factory, and no one wants to go to the malls. So new places of work won't spring up, unemployment will get worse as will poverty and the widening of the income gap. In war, most resources go to the IDF and the territories, with not enough left for invest in physical infrastructure and education. The bad news is that in recent years, the gaps in education between children from poor families and those from better-off homes is also growing, which points to a dreadful future of increasing socio-economic inequalities in the coming years too.