Study Shows Severe Household Income Inequality in Israel on the Rise

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A Tel Aviv apartment complex with for-rent signs in November, 2017.
A Tel Aviv apartment complex with for-rent signs in November, 2017.Credit: Ofer Vaknin

Reversing a lost decade between 2000 and 2011 when incomes barely budged, Israeli household income has grown at double-digit rates since then, but income inequality remains severe, according to a study due to be released by the Adva Center on Wednesday.

By 2016 compared to 2012, households with at least one breadwinner had income gains of between 10% and 17%, depending on the income decile, as more and more Israelis entered the labor market and amid a rising minimum wage, said Adva, a policy research center.

The biggest beneficiaries of the wage rise were in the second through fifth income deciles from the bottom. But even in the two lowest income deciles, the number of wage earners jumped 58% and 73%, respectively, by 2016 compared to 2000.

Moreover, the contribution of work income to total income for Israel’s lowest earners grew sharply. For the bottom 10%, work income accounted for just under half of total income in 2016, up from 31.7% in 2000. For the next decile it rose to 64% from 47.9%.

Despite all the gains, Adva found that growing employment did little to alleviate income inequality because the Israelis entering the workforce were taking low-skill and part-time jobs with poor pay and few opportunities for advancement. The percentage of Israelis living under the poverty line was higher in 2016 (18.6%) than in 2000 (17%).

Since 2008, Israeli wage earners have been required to set aside money for their pensions. But Adva researchers found that at the lowest end of the wage scale the allocations were tiny at just 0.5% to 1.3% for the lowest 20% of earners. At the top end, the figure was 10.6%.

Education, which is often touted as a route to higher incomes, seemed to be failing a lot of Israelis, the Adva study showed. Among people living under the poverty line, the percentage with 16 years of education grew to 17.5% from 11.3% by 2016 compared to 2000.

The reverse turned out to be the case in Israel: The poverty rate among households led by someone with less than nine years of education actually fell in those years to 22.4% from 35.9%.

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