Ethics@Work: How the other half lives

Statistics mask the fact that poverty and inequality in Israel are not merely an individual phenomenon but primarily a group one.

Business ethics 88 (photo credit:)
Business ethics 88
(photo credit: )
This week the Central Bureau of Statistics announced the publication of detailed statistics on Israeli Arab households. This is an important step in giving us a complete picture of poverty and inequality in Israel. We are accustomed to think of poverty and inequality in generalities; this tendency is reinforced by the use of aggregate statistics such as the "poverty rate" for families, the "Gini coefficient" of income inequality and so on. These statistics mask the fact that poverty and inequality in Israel are not merely an individual phenomenon but primarily a group one. Low-income households in Israel are overwhelmingly from Arab and haredi households, and a "procrustean bed" policy that ignores the structure of the problem is doomed to failure. So a detailed study of the living standards of Arab households is an important contribution. One thing is immediately evident from the survey: Arabs' incomes are not catching up with Jews' incomes. The study shows that while the average real income of Jewish households grew by 15 percent between 1997 and 2006, for Arab households the increase was only 11%. However, we need to adjust this slightly, since Arab households are shrinking more rapidly than Jewish ones; this means that the per-capita figures are more equal. Making the adjustment, we find that the Jewish households saw income per standard person grew by 18%, whereas among Arabs the growth was 17% - not very different, but certainly not catching up. If we look at substantive living standards instead of raw income figures, the picture is somewhat better. For example, Arab dwellings have grown relatively much more than those of Jews. The number of rooms per person among Jews increased by about 10% over the nine years; among Arab Israelis, the growth was more than 20%. This is an impressive gain in a period of only nine years, though the gap is still very large - more than a third, adjusted for standard family size. The number of Arab households with a car grew by more than 10%; currently, the majority of Arab households have a car. The growth in expenditures on basic foods also grew much more among Arabs. Israeli Arabs actually consume much more meat than Jewish ones; their total household expenditure on meat is more than double, and even on a per capita basis is at least 50% more. In fact, it is a general rule that when incomes grow at a comparable rate, substantive standards of living actual get more equal. As you get richer, the differences in consumption become much less significant. Warren Buffett and Carlos Slim are each worth about $60 billion, yet there are plenty of comparative paupers worth a mere $60 million (one-thousandth as much) with more extravagant lifestyles. One important figure relates to public support. While there is a common stereotype that Arab families are disproportionately living off of public support, this does not seem to be borne out by the study. The average Jewish family actually obtains more of their monthly income from allowances and assistance than the Arab family, even though the average Jewish family is much better off. Some of this difference may be due to the disproportionate amount of assistance given to old people, given that Israeli Arabs are a very young community with a much smaller fraction of elderly. The main story is in the number of earners per household. In Jewish households, the number of earners per household rose almost 10% from 1.15 to 1.25, even as the number of household members declined by more than 5%. In Israeli Arab households, the mean number of earners actually dropped, from 1.08 to 1.02. The larger drop in family size among the Arabs doesn't come close to closing the gap in number of earners, which has tripled in the last decade. The Central Bureau of Statistics has done an important service by drawing attention to the economic situation of Israeli Arabs. The overall picture is that the Israeli Arab community has made progress in closing the gap with Jews in basic living standards such as dwellings and staple goods, but further progress will be dependent on reversing the trend toward fewer two-income households. Asher Meir is research director at the Business Ethics Center of Jerusalem (, an independent institute in the Jerusalem College of Technology.