Every year around this time the National Insurance Institute publishes its
annual Poverty and Social Gaps Report for the previous year. Nearly every year
the news is not good, and this year was no exception.
The poverty rate,
representing the fraction of individuals or families whose adjusted disposable
income (including transfer payments) is less than half the median, was already
among the highest in the developed world in 2008. But it rose even further in
2009, and more than 20 percent of Israeli families are defined as poor based on
However, it gives only one piece of the whole poverty
picture, so it is helpful to look at some other measures.
interesting statistic that has been added to recent reports is a poverty metric
based on consumption expenditure. I believe this is a very important
contribution. The essence of poverty is not low income, which is what the
official poverty measure reports, but rather low consumption.
some countries denote so-called “income poverty” as the rate of “poverty
When a government committee was formed some years ago to consider
changing the way poverty is measured, I proposed to the committee that poverty
be measured solely on the basis of consumption, and some committee members
advocated this same position. This proposal was not adopted, but the reporting
of consumption poverty has become an increasingly prominent feature of recent
The discouraging reality is that the large majority of poor are
also poor based on the consumption measure. Specifically, 59% of poor families
have consumption expenditures that are below the income poverty line. That means
the rate of substantive poverty in Israel is greater than the poverty risk in
the leading Western European countries.
Another limitation of the
traditional poverty measure is that it only counts how many poor people there
are, but it doesn’t measure the poverty gap; that is, how poor the poor people
are. One family may have an income one shekel below the poverty line and another
hundreds of shekels below; the poverty rate does not distinguish. However, the
NII report also displays the so-called FGT measure, which accounts for both the
scope and also the intensity of poverty. Again, the additional information
provided is discouraging. This measure increased even more than the “head-count”
measure, indicating that not only are there more poor people, but they are also
poorer than they were.
Another important issue is that of the “working
poor.” It is often pointed out that the primary reason for Israel’s very high
poverty rate is the very low workforce participation rate. Comparatively few
haredi men and Arab women go to work, so it is hardly surprising that poverty in
these communities is more than three times as high as that of non-haredi
However, the report and recent research show that this is far from
being the whole story. The NII report shows that even among non-haredi Jews, the
poverty rate is far higher than that found in Western European countries, even
though these countries also have less-developed sub-populations who are not
excluded from the poverty statistics.
And a recent study by Ayal Kimhi of
the Taub Center shows that even among Israelis who work full-time, the wage
differentials are among the highest in the developed world.
understandably highlights the contribution of NII’s various programs for
reducing poverty. They undoubtedly have an important role in the war against
poverty, but the persistence and wide scope of the problem demonstrate that the
main effort needs to be directed at the structural causes of Israel’s high
poverty rate: low workforce participation and low wages among many of those who
do go to work.
firstname.lastname@example.org Asher Meir is research director at
the Business Ethics Center of Jerusalem, an independent institute in the
Jerusalem College of Technology (Machon Lev).