Worst-ever poverty report shows one-third of children below poverty line

One in three Israeli children is poor, according to the 2004 poverty report released yesterday. The report is the most severe yet prepared by the National Insurance Institute (NII).The number of poor children increased by 61,000 to 714,000 or 33.2 percent of the country's children, up from 30.8 percent in 2003.

Since 1998, the proportion of poor children in Israel has increased by 50 percent. According to NII director general Dr. Yigal Ben-Shalom, the rate of poverty among children in Israel is the highest in the developed world. In 2004, it exceeded the rate of child poverty in the United States for the first time.

"Damage to children is damage to Israel's economic future," Ben-Shalom said at the press conference called to present the report.

"We are a poor people," said Deputy Labor and Social Affairs Minister Avraham Ravitz, who presented the report.

In 2004, more than 107,000 people dropped below the poverty line, bringing the number of poor in Israel to 1.53 million, or 23.6 percent of the population, as opposed to 22.4 percent in 2003. The percentage of poor families is now 20.3 percent - or one in five - which amounts to 394,000 families, as opposed to 19.3 percent of families in 2003.

The timing of the report's release was not coincidental: The NII decided for the first time this year to publish an additional report in an attempt to impact the preparation of the 2006 State Budget, which the cabinet will discuss today.

Ravitz has called for a halt to the continuing cuts in child allowances, which began in 2003 and are to end in 2009. Ravitz also called on the cabinet to reject the Finance Ministry's proposal that it rescind its promise to restore the NIS 24 per month cut from allowances for the first and second child, and to link the allowance to the consumer price index. "It is inconceivable that child allowances should be cut by NIS 9 billion while taxes are reduced by NIS 21 billion - a step that mainly benefits the upper deciles," Ben-Shalom said.

According to Leah Ahdut, NII deputy director for research and planning, the NII should not only be working against cuts in allowances, but also in support of a negative income tax, which would subsidize the working poor. The treasury has proposed limiting the negative income tax to NIS 50 a month, which Ahdut called "paltry and ineffective."

Poverty has hit all sectors of society. The percentage of elderly poor grew from 22.3 percent to 25.1, and the proportion of poor large families increased from 49 percent to 54.7 percent. The rate of single-parent poor families has risen from 27.6 percent to 31.4 percent, while the rate of poor families with one wage-earner rose from 10.3 to 11.4 percent.

The figures indicate that one-third of all poor families are Israeli Arabs, constituting one-half of the Arab population according to Mossawa, the Advocacy Center for Arab Palestinian Citizens of Israel. The group estimates that 60 percent of all Arab children in Israel live below the poverty line.

Not only has the number of poor increased, but the poor are getting poorer: The income of an average poor family is now 33.3 percent below the poverty line, as opposed to 30.5 percent in 2003.

More than 40 percent of the poor were in families with one wage-earner. More than 5 percent of the poor were in families with two wage-earners. Among the working poor, 58 percent were employed full time.

The widening and deepening of poverty is especially noticeable among large Jewish families and families whose heads are unemployed, because of cuts in NII benefits that went into effect 2003 but whose impact was not fully felt until 2004. Child allowances and guaranteed income benefits eroded at an average cumulative rate of 15 percent per family in 2003 and 2004.

Although the general standard of living in the country rose in 2004, the gap between the rich and poor widened. The income of the top three deciles rose by 5-6 percent, but that of the lowest decile fell by 9 percent, and of the second-lowest decile by 2 percent.

"The treasury declared a policy of `from benefits to work,' but the situation is going from `benefits to distress,'" Ben-Shalom said.

The benefit cuts also weakened the ability of the NII to extricate the weakest segments of the population from poverty. In 2003, benefits brought 43 percent of the poor and 25 percent of poor children above the poverty line, while in 2004 they caused only 40 percent of the poor and 19 percent of poor children to rise out of poverty.

Unemployment decreased in 2004, but pay and employment were not enough to compensate the newly employed for their loss in benefits. According to the report, the income tax reform did not benefit the poor, and actually widened gaps; the disposable income of a family in the top decile went up in 2004 by NIS 500 a month, and in the ninth decile, by NIS 250.