How Many Poor People Does Israel Really Have? Depends Who You Ask

Two different reports produce different sets of results, but there's one thing they have in common: Israelis feel they are not doing well.

Alex Levac

Last week, a doctoral student published a blog post, “Lies, damn lies and statistics: How can Israelis think their situation is deteriorating when the opposite is true?” At great length, Uri Katz of Tel Aviv University laid out seven items in which, he says, the Israeli press is painting the wrong picture.

Katz taps analyses by the Central Bureau of Statistics, the Bank of Israel and others to show that, if anything, the economic situation of Israelis has been improving over the long-term. Real wages have been rising for decades. Inequality has been diminishing since 2002, a Taub Institute report shows. According to the National Insurance Institute, indices tracking poverty and inequality have been trending down since 2009, and the Central Bureau of Statistics reports an increase in appliance ownership in the last decade.

The press picks and chooses among data and trends to whip up a hysterical urgency that “something must be done” about the economic situation here, says Katz, who studies social mobility. And he isn’t alone in saying that. Every country has poor people, and so does Israel. But the press is reporting that a vast proportion – 3 million out of 8 million Israelis – are living in poverty.

Politicians famously skew statistics. They can pick a convenient starting date for their study; choose to relate to absolute or relative numbers; pick countries of comparison that make Israel look better, or worse.

Take the change in real wages. There’s a reason people who want to show that wages are eroding start their measuring in 2001, says Katz. Start at a different time and you get improvement, he says.

Now, Latet – an umbrella organization of food donation associations – has published an “Alternative Poverty Report” that paints a sorry picture. It says that 29.8% of Israelis live in poverty, with 13.8% living in severe poverty. It also says that 35.1% of Israeli children are poor.

The Latet report was based on a survey conducted by the research company Tack Research and Insights, in turn based on a new poverty measure developed for Latet by another research institute, ERI – Research for Social Impact. Latet is negative, while the National Insurance Institute is positive.

The NII says the proportion of Israelis living in poverty fell from 23.5% in 2012 to 21.8% in 2013, and that the standard of living (in terms of median disposable financial income) increased by 4.4% in 2013, in real terms. Poverty and inequality have been declining in Israel because employment has been increasing and wages have been rising, by enough to overcome the cuts to child allowances (which should have, on the face of it, made poverty even worse).

‘The middle class is shrinking’

So which is right? Well, the thing is, the two reports are different, measuring different things.

Latet executive director Eran Weintraub points out that someone may live above the poverty line but still be poor. He also points out that the NII figures are from 2013 and Latet’s from 2014, and postulates that the NII figures for 2014 may show deterioration.

Both reports are based on surveys. But the NII has access to hard data on the public’s income and spending, while Latet relies on subjective surveys.

Also, the two measure poverty differently. For the NII, the “poverty line” is based on the median income of Israeli residents – meaning the line above which 50% of Israelis earn more and 50% earn less. The poverty line is half of that median. Latet’s is subjective.

You can’t compare the two reports and say the NII is wrong, says Gilad Tanay, founder and CEO of ERI, who put together the Alternative Poverty Report with Or Kremer, ERI’s director of research. Tanay agrees with NII director Shlomo Mor-Yosef, who commented that the two measurements of poverty do not necessarily collide but complement each other.

Tanay, however, doesn’t think that merely defining the poverty line as half the median wage is meaningful – it’s completely arbitrary, he argues. Yet since that’s how the NII has defined things for years, it is convenient and also useful in making international comparisons.

“The NII relates only to income,” adds Tanay. “We relate to the broader sense of poverty: deficiency when it comes to basics.”

Latet’s survey lists five basics: housing, education, food security, health care, and the ability to cope with the cost of living in Israel. Latet then defined indicators by which deficiency can be measured. For instance, regarding housing, the respondents were asked if they have shelter; how many people live per room; and the quality of their residence – does it have serious, unrepaired problems? And what is the family’s probability of winding up without shelter?

“To measure if a person is poor, one has to directly measure if he is in want of the basics to live with dignity,” Tanay says. Want is relative, but can also be absolute,” he notes. If somebody is hungry every day, that is a state of absolute want, for example. Other things are more a matter of values. “Is it okay for four people to live in one room, for instance? And if its ceiling leaks? We chose conservative value assumptions,” he explains.

The poor remain poor

Whichever report you rely on, the fact is that hundreds of thousands of Israelis took to the streets to protest the cost of living in Israel in 2011, and keep on looking for a savior – Yair Lapid in 2012, and now maybe Moshe Kahlon.

Tanay thinks the issue lies in the absolute numbers. “If 32% of the population really is in bad condition, it doesn’t matter if things are getting better as the NII claims; the situation is still intolerable,” he says. “A country with the resources Israel has could eliminate poverty if it set itself ambitious goals.”

The right comparison, Tanay feels, isn’t to the previous year but to the ideal. “I have friends with two children, both work – the husband in high-tech; the wife is an organizational consultant. But they live on overdraft,” he says. Put otherwise, he qualifies, Israel’s middle class feels it should be living better.

Prof. Dan Ben-David of the Taub Institute says the gap between the richest and poorest has narrowed in the last 10 years. However, the gap between the richest and the people in the middle has not narrowed. The bottom line is, the trend supports the improvement argued by the NII. However, says Taub, although the situation of the poorest has improved somewhat, it isn’t enough to impress them. Meanwhile, the situation of the middle class hasn’t improved.

Just about everyone up to the best-off 20% are living beyond their means, Ben-David adds. However, the figures are not entirely real. “Take, for instance, the ultra-Orthodox Jews who get support from all sorts of charities, but that isn’t defined as income. Some of that money comes from money laundering, some from parents, some at the expense of future income.”

There is also a claim that the improvement in real wages isn’t genuine, because the basket of goods and services based on which the cost of living in Israel is measured does not reflect reality. There is some truth in that, acknowledges Ben-David.

Oh, build me a home

Ben-David then touches on another reason why statistics show improvement, while the people feel things just get worse – the climb in housing prices. Even if real wages haven’t eroded, rental prices have doubled and the cost of buying a home is now out of reach for too many. People in that situation aren’t about to tick the box of “things are better now,” he notes.

As for the inequality indices, they have been declining but can also get warped. The uppermost 1% tend to draw pay through companies they set up with only themselves as employees. This can skew the whole index – for instance, during periods they decide to accrue profit at the company rather than withdraw money through pay, which can give the misleading impression that wage gaps are narrowing.

At the end of the day, statistics matter less than the fact that vast swathes of the public feel they’re not doing well, whether because they’re living beyond their means, or they’re making fruitless comparisons with richer countries. This is what bears deeper examination.