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When Bibi Gets It Right: Poverty in Israel Is Going Down

But considering that Israel's economy has been growing since 2003, it should have gone down a lot more. What's keeping poverty high is politics

David Rosenberg
David Rosenberg
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An Israeli man looks through trash in Eilat, November 1, 2019.
An Israeli man looks through trash in Eilat, November 1, 2019.Credit: Omer Carmon
David Rosenberg
David Rosenberg

Far be it from me to sing the praises of Benjamin Netanyahu, but when it comes to assessing the problem of poverty in Israel he's basically right.

Every year, when the National Insurance Institute issues its annual poverty report, the headlines invariably bemoan the rise in the number of poor, accompanied by stock photographs of people searching for food in dumpsters and self-righteous condemnations of the government for doing nothing about it. And so it was this year.

Not that you would expect the prime minister to join in this orgy of flagellation, but his remarks on the report were entirely unapologetic, praising “the achievements and trend toward improvement” in poverty that the institute's report documented.

Who’s telling the truth? Much like paranoids can have enemies, even our veracity-challenged prime minister sometimes tells things as they are.

As the institute readily admits, the data on poverty in 2018 are not reliable because it had so much trouble surveying Palestinian households in East Jerusalem that year, but the bottom line is that Israel is doing pretty well at addressing its poverty problem.

It is true that, leaving out East Jerusalem, year-over-year poverty in Israel worsened in 2018, by one percentage point among adults to 20.4% and by two points for children to 29.1%. The Gini index of income inequality worsened too. The middle class shrank to 60.1% of Israel’s total population from 60.8% the year before. It was these numbers that the NII and the media focused on.

The big picture

But when it comes to big social trends like poverty and inequality, year-to-year figures don’t mean an awful lot. You have to look at long-term trends, and they tell a different story, a good one.

The poverty rate for adults (including East Jerusalem, since in other years there wasn’t a survey problem) has fallen from its peak of 25% in 2009 to 21% in 2018. Child poverty has followed the same trajectory, dropping from a 2009 peak of 36% to 30% in 2018. The Gini index shows income inequality has been narrowing almost without interruption since 2009.

In the early 2000s, Israel’s middle class had been shrinking, which might go a long way toward explaining the surge of social-justice protests in the summer of 2011. But since then it’s been growing as has its share of national income, which might explain why the protesters never since returned to the street with their strollers. In 2018, the middle class suffered a setback, but so far it was just a blip on the screen.

So, the long-term trend shows poverty in decline, and the simple reason why, is that the economy has been doing so well.

Wages have been rising since 2010 – in 2018 alone salaries rose an average of 2.8% after inflation. Unemployment is bumping along at record lows (it was 4% on average in 2018 and is lower today). Inflation has virtually disappeared, except for home prices.

So the Israeli economy has been pretty good at keeping poverty rates relatively low. If you consider only earned income – not any help families get from the state – Israel’s poverty rate is one of the lowest among the countries in the Organization for Economic Cooperation and Development.

So does that mean you can stop volunteering at the local soup kitchen and shout at dumpster divers to get a job? Hardly.

The first problem is that after factoring in government allowances and taxes, Israel’s poverty rate is the fourth highest in the OECD. The economy is relatively good at keeping people out of poverty, but the government is quite bad at ensuring that those who are poor get enough assistance. Other countries are more generous.

The second thing is although by long-term trend, poverty has diminished, it hasn't fallen by much considering that Israel enjoyed virtually non-stop economic growth since 2003. This has to do with the structure of the economy.

Israeli workers have low levels of productivity: they produce less per hour than their peers in Europe and America. They are woefully undertrained and under-skilled, and until that improves wages can’t rise.

As was recently revealed in a study by the Taub Center for Social Policy Studies, the narrow elite of Israel’s best and brightest gravitate toward medicine and high-tech, two spectacularly well-paying professions, leaving everyone else in the salary dust.

Then there are the problem of trying to drag an unwilling Haredi population into the job market and the obstacles in terms of education and employment that Israeli Arabs contend with. Both groups have incredibly high rates of poverty (42.3% and 45.3%, respectively) that won’t go down until they are fully integrated into Israel’s job market.

So, for now, don’t feel foolish ladling out soup. There are still plenty of needy people in Israel. It’s just not quite the crisis the critics say it is.

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