Israeli Poverty Falls but Remains the Highest in the OECD

National Insurance Institute finds large increase in poverty rates for children, ultra-Orthodox, declines for Israeli Arabs

Two homeless individuals in Be'er Sheva, June 26, 2016
Two homeless individuals in Be'er Sheva, June 26, 2016 Eliyahu Hershkovitz

The proportion of Israelis living in poverty declined last year and income inequality was the lowest since 2003, but Israel continued to have the highest poverty rate in the West, the National Insurance Institute said Wednesday.

Some 1.8 million Israelis, 18.6% of all Israeli families, were below the official poverty line of monthly income of 8,345 shekels ($2,374) for a family of four in 2016. That represented a decline of half a percentage point from 2015, the NII said in its annual Poverty Report. The Gini measure of income inequality fell 1.3%, it said.

Still, that figure left Israel’s poverty rates above that of all other Organization for Economic Cooperation and Development member states, including Turkey and Mexico.

“Despite the positive changes and a reduction in inequality, poverty is Israel is still significantly higher than in the OECD,” said Labor, Social Affairs and Social Services Minster Haim Katz. “The government is investing significant resources in an attempt to rescue families from the circle of poverty. It seems the main problem is the way resources are allocated.”

Adjusting the figure to meet OECD criteria, Israel’s poverty was fractionally lower, at 18.5%, in 2016, but that was seven points above the OECD average.

Incidence of poverty by population sector

Katz blamed the Finance Ministry, which he is battling over the issue of allowances for people with disabilities. He says treasury officials are more interested in helping the middle class.

“Middle-class benefits are important but we must recognize that if we continue to ignore society’s most vulnerable, fixing it will cost the country a lot more later,” Katz said.

The NII report attributed the decline in poverty to the growing number of Israelis in the work force, falling unemployment and rising wages. Although the government’s contribution to alleviating poverty through allowances and negative income tax is modest compared to most other OECD countries, income support for the elderly has risen, it noted.

The poverty rate for the oldest Israelis declined sharply, to 16.9% last year from 18.2% in 2015.

Although the poverty rate has been trending down in recent years — 19.4% of families were below the poverty linein 2012 — the NII said more work had to be done.

“Significant parts of the public still live below a reasonable standard for a life in dignity. Many of the recommendations of the War on Poverty Committee from 2014 are still awaiting implementation,” the report said. “In recent years there has been a major improvement in the labor force participation rate, but that’s not enough.”

Among other things, the NII found that a family of four with two breadwinners, each earning the minimum wage and working the equivalent of one and a half full-time jobs, would still find itself below the poverty line.

The proportion of families with two breadwinners under the poverty line fell to just 5.3% from 5.6% in 2015 but among families with a single breadwinner the rate rose to 27% from 25.9%.

Other worrying figures showed that poverty among children grew sharply in 2016 by 1.2 points to 31.1% of all Israeli children. The NII found that among ultra-Orthodox Jews, the poverty rate rose to 4.51% from 44.6%. Even though more of them had entered the labor force, there lack of a secular education confined them to low-paying, low-skilled work.

For the first time in several years, the NII poverty report surveyed Bedouin, whose high rates of poverty lifted the nationwide total. Discounting them, the overall poverty rates for families would have been 18.1%. For children, the rate was 29.7%, which would have represented no change from 2015.

Overall for Israeli Arabs, increasing levels of unemployment brought a sharp drop in the poverty rate, although it was still far higher than the average. In 2016, 49.4% of all Israeli Arabs were below the poverty line, down from 53.5% the year before, the NII said.