Middle Class Claim of Hardship Is Specious, BoI Finds

Bank of Israel finds that the middle class does save, a lot, and that saving by the top 50% of earners has been trending upward.

Based on a study of savings statistics by the Bank of Israel, the plaint of middle-class families that they can't live on their income is questionable. The central bank found that the middle class does save, a lot, and that saving by the top 50% of earners has been trending upward.

The data, from the Central Bureau of Statistics, is for 2000 to 2009 - more recent figures are not available.

At the end of 2009, the sixth decile (the decile just above the halfway mark ) saved 12% of its net income - up from 8% in 2000.

The richer seventh decile saved 15% of its net income, the eighth decile saved 23%, the ninth decile saved 28% and the top 10% of earners saved 44%, the statistics show. All increased compared with 2000, by between 4 and 7 percentage points.

The fact that the middle class increased its savings shows that it could make ends meet without running into an overdraft - in general. This needs qualification at two levels, though. One is that the figures are correct as of 2009, before the huge spike in housing prices (and rent ). The higher housing prices are, the bigger monthly mortgage payments are, which may well have diminished savings by the middle class. The recent numbers aren't in yet, though.

And the second qualification? In absolute terms, the state of the middle class has improved, from the perspective that it saved more (until 2009 at least ). But relative to the richest class, the middle class' condition deteriorated.

Moreover, the Bank of Israel found that when it comes to gross income, the middle class saw little growth from 2000 to 2009.

The Israeli tax system corrected for the absence of growth, to a degree, hence net income among the top deciles increased from 2000 to 2009. Also, consumption among the top deciles (reflecting their standard of living ) increased by between 2.3% and 3.9% in real terms - not much for nine years, but not negative.

As for the top 10%, they did best. Their gross income grew 3% in the nine years but their net income jumped 17.8% and their consumption expanded 4%. Why? Because of the tax system, which became less progressive through tax cuts that widened social gaps, the Bank of Israel concludes.