Poverty in Israel Isn't as Bad as Thought, Says Treasury Economist

Ministry chief economist peeves panel with claims that Israel should not raise stipends.

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The extent of poverty in Israel is not as terrible as is thought, said Finance Ministry chief economist Dr. Michael Sarel at a recent meeting of the ministerial committee charged with combating poverty. Sarel attempted to show the committee, headed by Eli Alaluf, director of the Rashi Foundation, that poverty in the country isn’t all that bad, especially when compared to other nations around the world, and when taking demographics into account.

From Sarel’s perspective, the data he showed at the end of his presentation seemed to be the most important: The senior treasury representative told those present that they’re mistaken; there is no need to set specific financial goals for reducing poverty, and also government stipends must not be increased.

According to the figures presented by Sarel, poverty was on the rise in Israel until 2005, but since then, levels have been rather stable, with even a slight decrease over the last year (according to a recent report published by the National Insurance Institute, in 2012, 19.4 percent of Israeli families and 33.7 percent of children were under the poverty line).

“There is a limit as to how much the government can get involved in [dealing with] economic inequality,” said Sarel, adding that in 2003 cuts in stipends and other income-support measures pushed many impoverished people into the work force.

“By definition, we see that income inequality began to decrease,” he added. “There are of course people whose situations got worse, but on average, the situation for impoverished people improved between 2003 and 2012.”

Sarel repeatedly stated that “the solution to the poverty problem can be found in the job market in the short term, and in education, over the long term.”

The stated goal of Alaluf’s committee is to “formulate recommendations to decrease the number of people living in poverty, and to reduce poverty in general so as to be in line with the average levels of the Organization for Economic Cooperation and Development within the next 10 years.”

A few months ago, the OECD stated that the poverty rate in Israel is the highest among 34 nations with developed economies. However, according to Sarel, reducing poverty to a rate that would be acceptable to OECD is “too ambitious a goal, and could foster frustration, and unnecessary pressure.” In addition, he stated that “it’s even possible that attempting to keep the poverty rate where it is also represents too ambitious a goal.”

Furthermore, Sarel said that increasing income subsidies in the country – which are much lower than average in comparison to OECD countries – “foster a culture of poverty, and reliance on welfare systems.”

Sarel’s presentation was met with fierce criticism from members of the panel. “I hear Sarel, and have trouble believing the fact that he is satisfied that we’re at the highest level of poverty among Western nations over the last 10 years,” said National Insurance Institute official Miri Endeweld.

Social Affairs Minister Meir Cohen, who also spoke at the meeting, said “the prime minister told me ‘I’m waiting with bated breath for the committee’s recommendations’ ... The prime minister and finance minister are committed. Your recommendations can be critical – but they also must be clear, and geared toward budgetary sources.”

On the other hand, Cohen also stated that questions of “sources of money don’t need to restrict you. It’s not a ‘zero-sum game.’” He urged committee members "to dream, to go forward and find out how we solve poverty.”

When Dr. Daniel Gottlieb, assistant director of the NII, told Cohen that the committee needs to see a change in government policy, Cohen answered: “Take my word for it – I tell you, it will change.”

Some 1,755,000 Israelis are living in poverty.Credit: Eliyahu Hershkovitz

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