Israel No. 2 in West in Social Inequality

Israel is now rated second in the Western world, after the United States, in terms of social gaps in income, property, capital, education and spending, as well as in the extent of poverty.

Ruth Sinai
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Ruth Sinai

Israel is now rated second in the Western world, after the United States, in terms of social gaps in income, property, capital, education and spending, as well as in the extent of poverty. While many countries have suffered from a widening of social gaps caused by the influence of globalization and the technological revolution over the past 20 years, this trend is more pronounced in Israel than elsewhere.

This is the picture that emerges from a report presented yesterday to the president and Knesset speaker by a special committee that studied the extent of the phenomenon in Israel over the past two decades and the reasons behind it.

The extreme gap between rich and poor was evidenced, first and foremost, by the capital held by the uppermost percentiles of the population as compared to the lowest percentiles. Some NIS 800 billion in private capital is in the hands of the upper 10 percent of the population while 90 percent of the population divides the remaining capital - some NIS 340 billion.

"For 20 years, Israeli governments have had blatantly anti-social policies. The result is horrendous findings that should shake anyone with a conscience," said MK Ran Cohen (Meretz) who headed the committee.

The findings were collated from reports of the Central Bureau of Statistics, the National Insurance Institute, witnesses who appeared before the committee and academic studies. They found that the number of poor children in Israel rose by 50 percent over the past 14 years and the number of poor families went up by almost 30 percent.

The committee's members see the roots of the problem, inter alia, in the low growth rates in gross domestic product per capita; in the low percentage of men who participate in the labor force; in the high unemployment rate versus the high number of foreign workers in the labor force; in gaps in education levels; and in high birth rates, particularly among families that do not participate in the labor force.

These gaps and the ensuing poverty widened despite the fact that social welfare budgets almost doubled over the past 20 years - from 28 percent of the state budget, to 54 percent. The increases were in the education, health, housing, absorption and NII budgets.

"The conclusion is that radically different means are required to deal with the gaps and the poverty," the committee members said.

One of the most tellings measures of inequality was found in income. According to the CBS, the gross income per family in the top decile is more than 12 times higher than in the bottom decile - NIS 39,130 as compared with NIS 3,225. According to the NII, the gap is even wider - 20 times more between top and bottom.

But this gap is minute when compared with income from dividends and interest on capital. Some 81 percent of this income is in the hands of 10 percent of the households while the other 90 percent share the remainder. By comparison, in member states of the Organization for Economic Cooperation and Development, "only" 77 percent of capital is in the hands of the top decile. In Israel, most of the capital is in non-taxable savings programs or stocks, while in the OECD, these gains are taxable by about 50 percent.

One of the major problems identified by the report is the low percentage of men in the work force - 86 percent here as compared with 94 percent in the OECD countries. A similar percentage in Israel would push the GDP up by NIS 8-19 billion annually, the committee was told by experts who testified.

The dearth of working men was explained by factors such as low levels of education among men, preference for foreign workers, military service - and the participation of only some 20 percent of ultra-Orthodox men in the labor force, as compared with 33 percent eight years ago.

The report also examines the gaps in education which are among the greatest in the world. For example, Israel is fourth in the world when it comes to the gap between good and bad grades in mathematics in eighth grade. The number of pupils entitled to a matriculation (bagrut) certificate in schools with an economically established population is almost double that of schools in the poor sectors. While 96 percent of Jews aged 14-17 study in high school, only 79 percent of the Arabs of that age do, and among the Bedouin, a mere 43 percent complete high school.

Among Jews of Ethiopian origin, only 30 percent are eligible for a bagrut certificate, as compared with 44 percent in the general population. At university, only 7 percent of non-Jews graduate with a bachelor's degree although they are 20 percent of the population of that age-group.

"The education system in Israel... helps to perpetuate the gaps, deepen them and pass them on to the next generation," the report states.

While the key to closing gaps in the long run lies with making education available to all, the report notes that this will not solve all the existing problems. The number of unemployed among people with academic education has risen in the past few years and this raises the possibility that "we are facing an era when education is no longer a guarantee to finding employment and a high income, as it was in the 1990s."

In addition to improving educational opportunities, as the engine of social change, the committee proposes a number of complementary and immediate steps: creating work places; reducing the number of foreign workers by making it less worthwhile to employ them; introducing a wage policy that will encourage working; increasing the number of Haredi men and Arab women in the labor force; making social services more accessible to the poor; taxing capital gains more significantly; developing train links from peripheral areas; and legislating basic laws to ensure education, housing and employment.

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