In December 2019, the National Insurance Institute (NII) of Israel published its annual poverty report (Hebrew), presenting data on the scope, degree, and characteristics of poverty in the country for 2018. The report shows that despite rising employment rates and gradually rising salaries, poverty in Israel “is, to a large extent, treading in the same place” when compared to 2017, after a significant decrease in poverty rates between 2009-2013. As a result, Israel maintains its position on the OECD scale with one of the highest poverty rates compared to other developed countries, with even higher poverty rates among children.
Poverty rates rose among Arab citizens, but the depth and severity of poverty decreased by several percentage points as they did nationwide. However, the data about Arabs may not present a comprehensive picture as the current report includes a “problematically small sample” of East Jerusalem Arab residents, about half the number of interviews from last year’s report. According to the authors, this has “probably led to distortions in the results.”
As in previous years, the poverty line was slightly higher in 2018 than the previous year and stood at monthly incomes of NIS 3,593 for individuals, NIS 5,750 for couples, and NIS 10,780 for families of five. Based on these parameters, 17.5% of families were considered poor in 2018, virtually unchanged from the 17.4% in 2017. The rate increased more for individuals, to 20.4% from 19.4%, and rose even higher for children, of whom 29.4% were considered poor in 2018 compared to 27.4% in 2017. These statistics mean that 469,400 families or 1,810,500 individuals, among them 841,700 children, lived in poverty in 2018. These numbers do not include East Jerusalem residents.
Nationwide, the rate of poor families with two incomes (excluding residents of East Jerusalem) rose this past year from 12.6% to 13. The report cites as a factor the entry into the labor market of economically weaker populations that are employed at part-time rates and at lower wages, which includes Arab citizens. The report authors write that these poverty rates are “disturbing in light of the state’s efforts via a pro-active employment policy, ongoing increases in the minimum wage,” as well as recent increases in a number of state allowances (e.g. for the elderly, for people with disabilities) and campaigns to encourage family savings (e.g. via a “saving for every child” program). The researchers write of “partial and too-hesitant use of these [state] policies,” and they recommend strengthening the welfare system and the National Insurance Institute within it, as well as changes in the government formula that ties government benefits to work while ensuring a safety net against poverty.
The incidence of poverty among Arab families (excluding residents of East Jerusalem) rose at a slightly higher rate than the overall population in 2018, from 42.6% in 2017 to 44.2% in 2018, whereas it had declined in recent years. Similarly, poverty rates rose among Arab individuals and Arab children by 2% and 3% respectively.
Arab families, which in 2018 comprised 14.5% of families in Israel, represented 36.6% of poor families in 2018, a gradual drop from 37.4% in 2017 and 39% in 2016, but at a rate that is still more than double their representation in the population.
Poverty Depth and Severity Decline
Nationwide, the depth of poverty, measuring the gap between household income and the poverty line, decreased by 4.9%, while the severity of poverty, measuring the degree of deprivation among the poor, declined by 4.1%.
In Arab society, the depth and severity of poverty also dropped in 2018, from 39.7% in 2017 to 36.6% and from 21.2% in 2017 to 18.9% in 2018, respectively. This stands in contrast to a significant rise in poverty depth and severity last year.
Nationwide (without East Jerusalem), poverty incidence among working families increased slightly by 0.4 percentage points, though these too experienced increased depth and severity of poverty. According to the report, once explanation for this fact is the integration into the labor market of new employees – for example from the younger population and from Arab society, with significant overlap between these two groups – at minimum wage and part time positions.
Overall, salaries in Israel rose this past year by 3%, except among employees in sales and service positions. Among professionals there was a significant variance in pay increases, as salaries for employees with an academic degree rose 9.4%, and those in technical professions by 6.5%, while increases were more modest for those working in agriculture, in non-professional labor and in administrative positions. As Arab citizens are over-represented in part-time, minimum wage and non-professional jobs, their salaries as a group did not increase at the same rate as the nationwide average. While higher education and employment rates are rising among Arab citizens, these gains have not yet translated into overall economic advances for Arab society.
On an international scale, the report states that Israel at the end of 2018 was 10% behind the OECD average for income inequality, compared to a 5% difference in 2017 and an 11% difference in 2016.
Data on Economic Classes
For the second year, the 2018 poverty report provides data on economic classes in Israel. The data indicate that the Israeli middle class has shrunk a bit after growing gradually between 2011-2017. In 2018, middle class comprised 60.1% of all the population in Israel, compared to 60.8% in 2017, with some of this group moving into the lower-middle class and poor class, which together grew from 16% in 2017 to 16.4% in 2018. The upper-middle class also shrunk from 15.6% to 14.1% while the upper class grew quite significantly, from 7.6% in 2017, to 9.4% in 2018. Thus, while the lower class – which parallels citizens in poverty – remained almost constant, growing by about 0.1% from last year, the upper class grew by 1.8%.
According to this analysis, while among non-Haredi Jews, around 70% of the population is either middle class or higher, in Arab society these groups encompass only 27% of the population while 73% of the Arab population is either lower-middle class or poor.
Overall, Arab, Haredi, and large families (a category that includes both demographics) remain the poorest in Israel. Although 80% of Arab households are working households, a percentage in line with national employment rates, Arab society is economically weaker than Jewish society, with Arab citizens over-represented in lower-paid jobs and under-represented in skilled positions.
Recommendations
The researchers write that the standstill in poverty rates is “disturbing in light of the state’s efforts via a pro-active employment policy, ongoing increases in the minimum wage” and new policies over the past decade that have increased a number of state benefits for groups such as the elderly and people with disabilities, and that have encouraged family savings. The authors contend that there is a “partial and too-hesitant use of these [state] policies,” and they recommend strengthening the welfare system and the National Insurance Institute within it. They also recommend changes in the government formula that ties welfare benefits to unemployment to maintain the incentive to work while ensuring a safety net against poverty.
Among public responses to the poverty report, many writers discussed the government’s role in providing greater social safety nets (Hebrew( and upgrading basic infrastructures such as the Arab and Haredi education systems (Hebrew). At the same time, some writers claimed that the calculation of data about workers in part-time positions in the same way as that about full-time employees distorts the results of the poverty report, and that the results paint a more dire picture than is accurate, especially as some Arab citizens do not report their real economic situation so that they continue to receive government benefits (Hebrew). Others claimed that the close connection between large families and poverty means that entire communities in Israel – such as Haredi and Arab citizens – are poor “out of a cultural or community choice” (Hebrew). Many mentioned the political standstill of the past year as resulting in “a lost year” in the fight against poverty in Israel (Hebrew).