Fuzzy Math Exaggerates Israel's Working-poor Problem

Government researchers ignore factors like public housing and reduced property tax. Israeli Arabs and ultra-Orthodox Jews are not mired in poverty.

Eyal Toueg

It’s vexing – working yet being poor; heading for your job every morning yet earning a pittance. This doesn’t befit a welfare state, according to the National Insurance Institute’s poverty report for 2014.

According to the document, 25.4 percent of families with one wage earner lie under the poverty line, as do 5.6 percent of families with two wage earners. How could such a scandalous thing happen?

I asked the people at the Central Bureau of Statistics to help me out. I asked what their definition of a wage earner was. The reasonable answer would be anyone working a full-time job, but the stats bureau and the National Insurance Institute have a logic of their own. Their definition is “anyone who in the last three months has worked one day or more.” One day? That’s right.

So if you worked one day delivering newspapers, waiting tables or renovating an apartment, you’re a wage earner. I tried to figure out how many families would remain under the poverty line if the more logical definition of full-time employees were used; the result: Only 0.9 percent of families with two providers would be considered poor, not 5.6 percent.

It’s hard to obtain the NII’s figures for ultra-Orthodox and Arab families. According to the poverty report, 54 percent of ultra-Orthodox families and 53 percent of Arab families lie below the poverty line. This is totally divorced from reality, and we all know it. There is no dire poverty among Arabs and the ultra-Orthodox.

But the data are based on surveys by the statistics bureau, and there’s no way the researchers will get honest answers in the ultra-Orthodox city of Bnei Brak or the Arab village of Taibeh. Actually, they don’t get the whole truth in other communities as well.

World Bank research shows that Israel’s underground economy is among the largest in the Western world, 23 percent of gross domestic product. On the eve of her departure, former NII chief Esther Dominissini mentioned a significant underreporting of income in the Arab and ultra-Orthodox communities and said poverty there was much lower than reported.

“If one uses surveys of household spending instead of income, the poverty rates decrease ... so that core poverty in Israel encompasses no more than 12 percent of households,” she said.

And there’s another problem with measuring poverty. Poor families receive assistance in services, public housing and rebates, and reductions in property tax, utility bills, public transportation and child care, none of which is included in gauging poverty levels.

The poverty solution offered by populist politicians is a mistake. It’s a mistake to increase child allowances and guaranteed income. This actually worsens poverty.

In the first year after such benefits there’s a temporary improvement, but in the long run increased child allowances encourage poor families to make babies. Increased guaranteed income discourages people from seeking work, so the result is more poverty and more misery.

It’s possible and necessary to combat poverty, but realistically. People already working should be encouraged by a higher minimum wage and enforcement of its implementation. Negative income tax should be augmented. Vocational training should be expanded and public transportation to work subsidized.

Also, child care centers should be subsidized while all kids at school should study the core curriculum, including ultra-Orthodox kids. The elderly should be extricated from poverty by an increase in guaranteed income supplements, a move that indeed has been launched. When these measures are taken we will no longer see the disgraceful phenomenon of the working poor.