Israel’s Poor Worse Off in 2017, Says Government Report

Despite decline in numbers, Israel continues to have highest proportion of poor people in the OECD

A homeless man in Israel, May 2016.
Alex Levac

Israel had fewer poor people in 2017 compared with the year before, says the Poverty Report for 2017 published by the National Insurance Institute on Monday. However, the poor that it did have became worse off, it said.

The report also stated that among the countries belonging to the OECD, Israel continued to have the highest proportion of poor out of the whole population in 2017, though inequality was slightly reduced.

The number of impoverished households dipped to 18.4% of all households in 2017, from 18.5% the year before.

Altogether Israel had 466,400 impoverished households, translating into 1,780,500 people, in 2017. The proportion of children living in poverty decreased by 2.8% to 814,000, or, 23.8% of all children in Israel.

Disposable income increased by 4.6%, the NII report said.

The NII ascribed the decrease in poverty rates to the rising employment rate and increase in wages.

However, the “depth of poverty” (the discrepancy between household income and the poverty line) increased by 4.4%. Based on the criterion of depth of poverty, the worst off (in 2017) were families in which the main breadwinner is elderly; families that had immigrated to Israel since 1990 were another group that did worse in 2017, though their situation had been improving in recent years.

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In any case, the decrease in poverty rates in Israel did not improve Israel’s situation by international comparisons, said Prof. Daniel Gottlieb, the deputy director general of Research and Planning at the NII. Though there were improvements, he said, the socioeconomic situation did not improve. NII stipends do not grow in tandem with the rise in the standard of living in Israel. “Thus a gap is created between the rise in the general standard of living and the standard of living of people who need support,” he said.

Welfare state, somewhat

Israel has remained at the top of the OECD poverty list because other countries did more to improve the situation, say the Poverty Report authors.

In 2017 the total poverty rate in Israel was 17.9%, compared with the average of 11.8% in developed nations. Following Israel in order were the United States, Turkey, Mexico and Latvia. Turkey was the only country with a higher rate of poverty among children than Israel.

Israel’s income inequality based on the GINI index narrowed by about 1.3%. Inequality in Israel is now about 5% higher than the average for OECD countries, better than the 11% gap in 2016.

The report described how the developed nations take various action to affect income distribution. Poverty rates in countries with generous welfare policies such as Iceland, the Netherlands, Denmark, Sweden and Norway remain low, the report says. On the other hand, poverty based on disposable income is higher in countries with stingier welfare policies, such as Turkey, the United States, Mexico and Israel, the report said.

They concluded that poor families who work for low pay do so, among other things, because of the absence of economic security, which in turn stems from the overly limited welfare policy. “Other reasons for this situation include unfair business practices, such as employment by hour, hiring employees for the minimum wage even if they have education and skills, and sparse compliance with the minimum wage law, a low level of unionization, and so on.”

Leaving poverty behind

On the upside, for the first time since 2013, poverty among people who work decreased, as did the proportion of families with breadwinners out of all poor families. Families with breadwinners swung down again, decreasing in 2017 to 55.1% of all poor families, compared with 58.6% in 2016 and 55.6% in 2015. This change reflects two trends: the occurrence of poverty among families with one breadwinner fell to 24.9% in 2017 from 27% in 2016. However, the occurrence of poverty among families with two breadwinners rose from 5.2% to 5.4%. Among both groups, the depth of poverty increased by 5% and 8%, respectively.

“A possible explanation is the considerable increase in the minimum wage which may have had a beneficial influence on people who earn slightly more than it,” the report stated.

On the other hand, the proportion of poverty continued to rise among families with no breadwinners despite haing members of working age, from 69% to 79%. “These findings indicate the importance of adopting a program to improve income assurance stipends,” stated the National Insurance Institute. “A vigorous policy is required to relieve the proportions of poverty among these families, whose bad state to begin with continues to deteriorate with the years in parallel with the rising standard of living among working families,” the report said.

Examination of poverty rates by gender shows that the discrepancy between poverty among men and among women has narrowed. The poverty rate among women decreased from 18.6% in 2016 to 17.9% in 2017. Among men, the rate rose from 16.2% to 16.3%.

According to the report, the average monthly net income per person was 6,680 shekels. The report authors say that a single-parent mother with one child lives in poverty, if she works for the minimum wage, even if she works full-time and gets a child allowance from the NII. A couple in which both work full-time for the minimum wage will live in poverty if they have three children. Every additional child means they will live deeper in poverty. To avoid poverty, a family of five needs to earn just over 10,000 shekels a month.

The poverty rate among Arab families dropped from 49.2% two years ago to 47.1% last year. This decrease is due to the steep drop (about 9%) in the poverty rate among Arab families that are not residing in East Jerusalem and do not belong to the Bedouin tribes living in the south. Alongside the drop in poverty occurrence among the Arab families, however, there was a 10% increase in the depth of poverty and a 22% increase in its severity.

Among ultra-Orthodox families, the poverty rate fell from 45.1% to 43.1%, bringing their “share” of all impoverished families to 15%. The poverty rate among ultra-Orthodox children decreased by 0.3%. The report’s authors say that among the ultra-Orthodox and single-parent families, the employment rate increased in 2017, while among Arab families, families whose chief breadwinner is young, and big families, the employment rate decreased.

The middle class grows stronger

This year, for the first time, the poverty report broke down Israel’s population into classes. People whose income is below the poverty line fall into the category of lower class. People who earn between the poverty line (50% of the median) and 75% of the median are considered low middle class. People who earn 200% to 300% more than the median pay are considered upper middle class. People who earn more than 300% of the median wage are considered upper class.

“A large, strong middle class is considered important to economic growth, to political stability and to increasing trust in society and in the national institutions,” the report stated.

The report showed that 53% of Israelis belong to the middle class, 38% are poor or in danger of poverty (lower middle class), 7% are upper middle class and 2% are upper class.

Looking over time, it seems that as the government instituted a policy of cutting back the welfare system from 2002 to 2006, the middle class shrank to less than 50% of the population. It remained that way until 2011, when the proportion began to gradually recover.

Labor and Welfare Minister Haim Katz said in response to the report that the decrease in poverty rates is encouraging, but at the international level, he said, Israel’s situation is not good. He hopes that things can improve, noting that living conditions for the disabled and geriatric adults have improved. He hoped that the government hopefully will be able to do more for the elderly in the next term. He is promoting a 700-million shekel ($186.5 million) plan to lift all the elderly above the poverty line, Katz said. “We know what is needed and we will know how to bring it about ,” he said.