The urgent imperative to tackle poverty

It is possible to fight poverty without increasing welfare transfers that discourage people from getting off the dole and into the labor market.

October 19, 2010 05:26
3 minute read.
Some 750,000 children suffer from food insecurity.

soup kitchen 311. (photo credit: Ariel Jerozolimski)

Data published by the Central Bureau of Statistics on Sunday to mark the UN’s International Day for the Eradication of Poverty should serve as a wake-up call for the government’s economic policy- makers.

Socioeconomic indicators show that Israel ranked worse than any of the 27 countries that belong to the EU. For example, in 2008, 29 percent of Israelis were at risk of poverty, compared to an EU-27 average of 17%.

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This means that after various welfare benefits nearly one-third of Israelis were living under the “poverty threshold,” which is defined as 60% of a country’s median income. Only Latvia (26%), Romania (23%), Bulgaria (21%), Greece, Spain and Lithuania (all 20%) came close to Israel’s worryingly high poverty rate.

Another problematic figure was income inequality. Israel ranked highest in this category as well. In 2008, the top 20% of wage earners made 7.5 more than the bottom 20%. In contrast, the EU average was just 4.9.

Israel’s struggle with rising poverty and income inequality is nothing new. In January of this year, Mexican OECD Secretary-General Angel Gurría, a friend of Israel, presented his organization’s economic survey as a precursor to Israel’s acceptance to the OECD. Gurría criticized the fact that one-fifth of Israelis live under the poverty line, which is defined as half of the median income. This is much higher than the OECD average of 11%.

Particularly unsettling is the fact that nearly half of all Israeli Arabs are poor. And though they make up just a fifth of the population, one-third of Israel’s poor are Arab.

The low level of participation in the labor force, particularly among Arab women and among older Arab men, is a partial explanation. Over the past few years, Arabs’ poverty rates have gradually fallen due to higher employment rates. But more needs to be done to provide the Arab population with better and more education. High-school dropout rates, while falling, are still over four times higher, at 36%, among Arab Muslims aged 25 to 34 than among Jews.

Also, though the 2000 Fair Representation Law was supposed to integrate more Arab Israelis into the public sector, they remain just 6% of a work force of about 57,000, about the same proportion as a decade ago. Security concerns might explain part of the underrepresentation, but not all.

Haredim are another chronically poor population. About 60% live below the poverty line, due in large part to low employment rates. This week’s declaration by haredi spiritual leaders that they would refuse to introduce English, math and science into their schools’ curricula was the latest reminder that our fastest growing population sector – which will soon make up a quarter of all Israeli 18-year-olds – is producing students unequipped for the modern labor market.

Bank of Israel Gov. Stanley Fischer warned in July that the high rates of haredi unemployment were “unsustainable,’ and it is clear that considerably more efforts need to be made to streamline the transition of yeshiva students into the job market, after they perform military or national service.

IN THE past decade, economic policy-makers – including Prime Minister Binyamin Netanyahu – have successfully reduced inflation, introduced fiscal discipline and improved competition in the economy. Now a concerted government effort must be made to fight poverty.

It is possible to fight poverty without increasing welfare transfers that discourage people from getting off the dole and into the labor market. Expanding implementation of a negative income tax – which we have advocated in the past – and enforcing wage laws for Israeli as well as foreign workers are just two examples.

Sadly, the government has postponed until 2013 a plan aimed at fighting poverty by ensuring that the net incomes of our lowest wage earners would grow no slower than GDP per capita. The plan was an example of how the government should set a specific goal and take steps to realize it.

We hope that the CBS’s poverty figures and the upcoming National Insurance Institute’s Poverty Report will persuade economic policy-makers that the time has come to adopt a coherent, goal-oriented plan of action to reduce, if not eradicate, poverty in Israel.

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