Poverty Report

Israel Has Highest Poverty Rate in West

Most poor Israelis are neither Arab nor ultra-Orthodox, shows new report that found poverty in Israel increased last year.

Olivier Fitoussi

The level of poverty in Israel remained the highest in the West last year, with about one in three children living in poverty, according to a report released Wednesday by the National Insurance Institute.

The number of poor families grew in 2014 compared to 2013, the annual poverty report states, and the poor became poorer, with their situations substantially worsening despite growth in employment in the country. There was also more poverty among working families and generally greater inequality in the country. The situation follows cuts and other austerity measures instituted by the previous government headed by Prime Minister Benjamin Netanyahu, in which then-Finance Minister Yair Lapid reduced government child allowances.

Last year, 444,900 families, including 775,500 children, lived in poverty, the NII report states, all told including more than 1.7 million residents of the country. The incidence of poverty among families increased slightly last year to 18.8 percent, compared to 18.6 percent in 2013. Thirty-one percent of children were living in poverty last year, compared to 30.8 percent the year before. The number of households of elderly residents living in poverty rose last year from 22.1 percent in 2013 to 23.1 percent.

Among ultra-Orthodox families, where the number of children is generally very large and workplace participation among male heads of household traditionally relatively low, 54.3 percent of the families were poor last year, despite an impressive growth in the rate of employment among ultra-Orthodox Jews, the NII noted. And 52.6 percent of Arab families lived in poverty in 2014, up from 51.7 percent the year before.

Most of Israel’s poor families are neither ultra-Orthodox nor Arab, however. Poverty is most prevalent in outlying areas of the country and in Jerusalem. A growing incidence of poverty was noted particularly in Jerusalem and the south, but in absolute terms, it is particularly high in the Jerusalem area and the north.

Since Israel joined the Organization for Economic Cooperation and Development, the grouping of the world’s developed nations, the OECD has noted, on a yearly basis, that Israel’s poverty rate is the highest in the West and the second highest of all of its member countries.

Poverty among families and children in Israel is currently the highest among OECD members other than Mexico, according to calculations made by the NII based on OECD criteria. The rate of economic inequality in Israel is 17 percent higher than the OECD average, with only three other OECD member countries, Mexico, Turkey and the United States, having higher rates. Over the past 15 years, inequality among the higher income levels in Israel, including relatively wealthy middle class Israelis, has narrowed, but disparities among the rest of the population have continued to widen.

When poverty figures before taxes and government assistance in Israel are compared to other OECD countries, the situation in Israel is not particularly dire, but when measured by income after taxes and after receipt of relatively low government assistance payments, Israel then comes in second to last after Mexico. In other words, government policy designed to reduce poverty is less effective in Israel.

Two years ago, after his economic plans went into effect, then-Finance Minister Lapid (Yesh Atid) predicted that within two years “the country would look altogether different.” Lapid touted cuts in child allowances as a positive step. NII data for 2013 in fact do show a decline in severe poverty, but in the following year, poverty increased even among smaller families, with one to three children, and among relatively highly educated families in which the head of household was employed.

Lapid’s move to cut child allowances, which previously provided enhanced benefits per child for families with many children, was designed to encourage ultra-Orthodox Israelis to enter the workforce. In practice, poverty among all Israeli families with children grew from 23 percent in 2013 to 23.3 percent in 2014, although most of the families had no more than three children. In addition to the effects of the child allowance cuts, which disproportionately affected poor families, poverty rates were also pushed up by the Gaza war in the summer of 2014 and higher housing costs.

Last year an official poverty panel convened by then-Social Affairs Minister Meir Cohen submitted a report to the government, but the panel’s conclusions have never been fully debated and only a small number of its recommendations are due to be implemented — and they are not expected to substantially reduce poverty. The government is expected to increase child allowances through a savings plan for families for their children, but the NII contends that child allowances in Israel will remain low compared to other OECD countries.

It is not just the unemployed who are poor. Poverty among families in which at least one head of the household was working climbed from 12.5 percent in 2013 to 13.1 percent last year. Even families with two breadwinners can’t always escape being poor. Last year, they represented 5.6 percent of poor families, a figure that has risen over the past decade from 2 percent.

The situation of younger adults also worsened slightly last year, with a 21.9 percent poverty rate among heads of households under 30 years of age, compared to 21.7 percent in 2013. There was also an increase in the incidence of poverty among Israelis with at least 13 years of education, to 13 percent, but ironically the poverty rate among those with no more than 12 years of education declined to 21 percent.