Income Inequality in Israel Widens in 2021, Despite a Drop Last Year

Israel's National Insurance Institute says standard of living rose 2.4 percent in 2020 due to COVID aid from government. But after aid was halted, income disparities increased to 2019 levels

Bar Peleg
Bar Peleg
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Homeless person sleeps at an intersection in Tel Aviv
Homeless person sleeps at an intersection in Tel AvivCredit: Hadas Parush
Bar Peleg
Bar Peleg

Income inequality in Israel is believed to have widened 3.3 percent this year from 2020, the National Insurance Institute reported Wednesday in its annual poverty report.

The report said the drop in income inequality Israel enjoyed in 2020 had been due to the financial assistance the government provided in the first year of the coronavirus pandemic. But as the government cut back on aid during the first half of 2021, income disparities widened back to 2019 levels, prior to the COVID outbreak.

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Contrary to projections, Israel’s average standard of living rose by 2.4 percent in 2020 from the year before, but this was also as a result of government intervention and the increased financial support Israelis were given to ride out the pandemic. If it had not been for government intervention, the standard of living would have plummeted 10.2 percent in 2020, the NII said.

Israel’s official measure for standard of living and poverty are calculated based on per capital median income.

Government support came mainly in the form of unemployment benefits to salaried employees who were put on leave without pay and other jobless benefits, as well as grants to families, the elderly and the self-employed.

The aid’s biggest impact was felt by Israelis whose income was in the bottom 10 percent, where per capital income increased by 12 percent. The 10 percent of the population just above that group also saw a significant increase in income after government assistance of 5.6 percent.

Nevertheless, the NII’s preliminary estimates for trends in 2021 indicated that poverty and income inequality increased this year. Economic growth that emerged as Israel the impact of the pandemic waned did not trickle down to all income groups, the NII found.

“These estimates highlight the need at this time for a government policy that supports growth … [but is] also inclusive,” wrote Nitza Kaliner Kasir, NII’s deputy director for research and planning. “In addition to the effort to assist families to attain economic independence via the job market, it’s important to remember that there are people who cannot achieve independence and whose needs also have to be addressed through a system of allowances.”

In 2020, Israel’s poverty line was set at a monthly income of 2,811 shekels ($904), meaning that a household with two people was considered poor if it had an income of less than 5,623 shekels. According to the NII, in 2020, Israel was home to 1.92 million people living in poverty, about a fifth of the population. Fully 864,000 of them were children.

The poverty rate declined in 2020 from 2019, particularly among the elderly. In 2019, 15.8 percent of the elderly were deemed poor, with the number falling to 13.8 percent in 2020. The decline in the poverty rate was spread across nearly every sector of the population, the NII reported, except for households headed by someone who was self-employed. Among those households, the poverty rate increased in 2020 to 13.7 percent from 12.6 percent in 2019.

For the first time since 2016, the report included opinion survey data on food insecurity, based on responses from roughly 3,500 families. In 2021, the situation improved, with about 10 percent of Jewish respondents who are not ultra-Orthodox saying that they suffered from food insecurity, compared with 13.2 percent in 2016. Among ultra-Orthodox Jews, the figure in 2021 was 15.8 percent, down from 22.6 percent in 2016.

On the other hand, among the country’s Arab population, the share of respondent reporting food insecurity remained almost unchanged at 43 percent, a figure that is close to the poverty rate in the Arab community.

“The [report’s] Excel spreadsheets and data don’t show people,” Inbal Hermoni, chairwoman of the Israel Union of Social Workers. “Social workers in the field have been dealing for many years with a reality of poverty, which in the past two years has grown and deepened. That means children, elderly, women who are victims of violence and families who don’t know what they will be eating tomorrow morning or whether they will have a place to live next month.”

Hermoni characterized the government’s current policy as heavy-handed and neoliberal and called for what she said would be a change to one that provides socioeconomic security, including a stable government-funded network of social services. Otherwise, she said, “people will continue to be in poverty.”

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