"Young people in Israel have good reasons to be angry. Clearly, the dominant
aspiration at the time of the creation of the Jewish State - to build a society
that is a prominent symbol of social justice - has failed.” With these
statements, award-winning economist Joseph Stiglitz joined in support of the
almost half a million Israeli citizens who filled the streets this summer,
demanding greater social justice.
Stiglitz’s words painfully recall
another great Nobel laureate, Paul Samuelson, who in the first edition of his
legendary Economics, first published in 1948, said with enthusiasm that the
nascent Hebrew State would quickly lead the global ranking in
Between past hope and present anger, Israel faces a challenge
of a different nature than it has met throughout its history: to improve the
distribution of national resources and return pride to its people, in their
nation’s social structure and economic opportunities.
A recent report on
income distribution and equity by the Organization for Economic Cooperation and
Development (OECD) reveals that the gap between rich and poor in Israel is the
biggest in the developed world. While 19 families earn 34 percent of the annual
income generated by the top 500 companies in the country, most people turn to
various sources of outside financing to pay their bills at the end of the
According to the Survey of Household Income of 2009, prepared by
the Central Bureau of Statistics, the monthly net income of a typical family
rose to $2,887 (NIS 10,690), while its expenditures are estimated at $3,308. The
monthly deficit is even starker for poorer families. The average net income of a
family in the poorest 10% of the population reaches $688 a month, versus
expenditures of $2,014, representing a monthly shortage of nearly twice the
value of their revenue.
Only the wealthiest 30% of Israelis has a monthly
deficit of less than 6% of their income, while the richest 10% of the population
enjoys the rare privilege of saving, on average, a fifth of their revenue. As
for the composition of spending, almost three quarters of expenses in Israeli
society are concentrated in four areas: housing (24.4%), transport and
communications (19.1%), food (16.3%), and education and entertainment (13.9%).
As expected, poorer families tend to devote most of their resources to housing
and food (which account for, on average, half of their expenses), and the
richest families spend 35% of their expenditure on education, entertainment,
communications and transportation, but housing is, even for them, the main
component of their cash outflow.
Demography is also connected to the
distribution of national wealth. Ten percent of the poorest households in Israel
have an average of 4.6 members, while families that make up the richest 10% have
two members less and hence household expenditure is allocated to 43.5% fewer
From a labor standpoint, households of Arabs and Orthodox
Jews exhibit limited integration into the labor market. Increasing their
assimilation into the workplace would create more equity in the distribution of
the tax burden and public subsidies as well. As indicated recently by
Dr. Arnon Soffer, an internationally known demographer at the University
of Haifa, 50.3% of Israeli Arabs and 52% of Orthodox Jews in Israel over 20
years of age are not economically active.
It is estimated that Israeli
Arabs account for 20.4% of the population, while the Orthodox Jewish population
does not exceed 10%. Unequal income distribution is highly correlated with
resistance from Orthodox Jewish men and Arab women to formally join the
workforce. The poorest third of Israeli families have, on average, less than one
wage earner, while the top third have more than 1.6 wage earners per household,
often employed in highly profitable professions.
According to research
driven by TrendIT, 49% of the “outraged” Israelis in the streets demanding
greater social justice belong to the richest 30% of society, and 87% of the
protesters belong to the richer half.
Responding to the protesters’
demands requires understanding of the root causes of the income distribution gap
in Israel. Any genuine solution must cover at least three fronts:
and security: Achieve a reasonable solution with the Palestinian Authority for
the creation and construction of a Palestinian State, offering the Israeli
population greater security at a lower cost.
2. Reallocating resources:
Redirect funds currently used to perpetuate the Israeli influence in the West
Bank to the social sectors that represent the true national interests of
3. Regulation: Coordinate appropriate measures to ensure a
welfare state. In particular, offer public education from a younger age than the
current six years, release more public land to enable more families to acquire
their first property, and allow for increased competition in sectors such as
food and consumer goods in general.
Now is the time to abandon biases and
to start working. Israel’s future depends on it.The writer is managing
director of Bacalor Strategic Consulting.