Income inequality in Israel is at its lowest level in 20 years, according to figures released on Wednesday by the Central Bureau of Statistics. Nevertheless, inequality here remains among the worst in the developed world.
The CBS said that Israel’s Gini coefficient, a widely used measure of income inequality, had fallen to 0.351 in 2017 from 0.359 the year before. The index measures inequality on a scale of 0 to 1, with 1 being the most unequal.
The CBS noted that the one-year decline was modest and not statically significant, though the decline that has occurred in the number since 2009, when it was 0.389, is important. Moreover, the Gini index in 2017 was the lowest since the CBS began measuring it in a revised format in 1997.
Since 2010, the measure of inequality has been in steady decline. Yet it still leaves Israel as one of the most economically unequal countries among members of the Organization for Economic Cooperation and Development.
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In the years 2013 through 2015, Israel was the most unequal among developed countries, but since 2016 it has been surpassed by the United States. Among other OECD countries with poor records on inequality are Turkey and Chile, with coefficients of 0.35 to 0.4.
Israel’s index is far higher than countries like France (0.290) and Finland (0.260).
The reasons why Israel has seen a decline involve several factors. The government prefers to point to its efforts to coax more Israelis into the workforce, a process that has boosted the labor force participation rate to record levels even as the jobless rate is currently at its lowest in decades.
As Prof. Avi Simhon, Prime Minister Benjamin Netahyahu’s economic adviser, told TheMarker a year ago: “The time has come to get used to the fact that the Israeli economy is in good shape.”
Others prefer to point to government intervention, such as the negative income tax, rises in the minimum wage and the restoration of some government allowances in recent years. In any case, much of the job creation in recent years has been at the bottom of the labor market – jobs that pay relatively little and require little skill or training.
In response, to Simhon’s assertion, the left-leaning Adva Center said in its annual report: “To get used to the fact that the state of the Israeli economy is good means to get used to an economy whose growth is unbalanced, led by a minority and benefitting the minority, which means that a large part of the economy and society in Israel are left behind.”
Israel’s poverty rate is also declining but remains high relative to other OECD countries. Last year the National Insurance Institute said 18.6% of all Israeli families were below the official poverty line of monthly income of 8,345 shekels ($2,225) for a family of four in 2016. Its 2017 data are due out shortly.