Study: Israeli standard of living rises, escaping poverty still challenging

Employment rates and labor market participation have continued to rise, with unemployment at an historic low - approximately 3.5%.

June 5, 2019 05:58
4 minute read.
People play paddle ball, known in Hebrew as "matkot", a popular Israeli sport, at a beach in Ashkelo

People play paddle ball, known in Hebrew as "matkot", a popular Israeli sport, at a beach in Ashkelon, Israel May 7, 2019.. (photo credit: AMIR COHEN/REUTERS)


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Citizens have enjoyed a sharp increase in standard of living in recent years, according to a report published Wednesday by the Taub Center for Social Policy in Israel, but the poorest residents are among those most struggling to escape poverty in the developed world.
Between 2012 and 2017, there was a large increase in both household income and consumption, the annual report revealed.

Middle-class households (middle quintile) witnessed a 22% increase in real disposable income during that time. Lowest quintile households saw an increase of approximately 19% and the upper quintile just 14%. Most of the increase is attributed to rising income from work, stemming from rapid growth in wages and employment.

“Among the general population, consumption increased to a lesser extent than income – a situation indicating an increase in savings,” said Prof. Avi Weiss, president of the Taub Center and author of the report.

“At the same time, rates of poverty and inequality have declined, alongside a rising poverty threshold.”

According to preliminary estimates, gross domestic product (3.3%) grew faster than the OECD average (2.9%) in 2018.

Yet GDP per capita, the most significant indicator of the standard of living, grew by just 1.3%, below the 2.2% OECD average.

After enjoying a steady rise in employment, further improvement in the standard of living will require an improvement in labor productivity, the report said. The annual growth rate of labor productivity since 2000 stands at 1.2%, compared with expectations of 2%.

One of the major challenges facing the next government, the report highlighted, will be tackling the growing fiscal deficit, which currently stands at 3.8%.

Employment rates and labor market participation have continued to rise, with unemployment at an historic low – approximately 3.5%. Increases in employment, however, are not universal across all population groups.

“In both groups where employment rates are historically low, there have been conflicting trends in the last two years,” said Weiss.

The percentage of Arab women in employment is continuing to steadily rise and stands at approximately 40%, just shy of the government’s 2020 target of 41%.

In the case of haredi (ultra-Orthodox) men, however, upward trends at the beginning of the decade have come to a halt. Employment rates currently stand at 49%, far from the government’s 2020 objective of 63%.

“The integration of ultra-Orthodox men in the labor force remains, therefore, one of the major challenges facing the Israeli economy,” Weiss said.

Significant gaps also remain in the employment of men and women in hi-tech, the key engine of growth for the local economy.

Mirroring international trends, only about one-third of hi-tech employees in 2017 were women. Although most female employees are secular Jews, ultra-Orthodox women working in hi-tech has risen from less than 1% of the workforce a decade ago to more than 3% today.

Despite the encouraging employment and income figures, the country’s poorest citizens are among those most struggling to escape poverty in the developed world.

Households in the lowest decile seeking to rise above the poverty line require a greater number of hours of work than all other OECD countries, except for Norway.

“Israel’s high ranking reflects the large inequality in income compared with other OECD countries, which results in a large gap between the income of households in the poorest decile and the median income according to which the poverty line is calculated,” said Weiss.

Among lower decile households in debt, annual arrears stand at 8% more than annual income, making it doubtful whether they will be able to repay money owed.

The report also reveals that fertility patterns in Israel, both among religious and secular women, are higher than all other developed countries. In 2015, the fertility rate stood at 3.1 births per woman, nearly one full child above the next highest fertility developed country.

The fertility rate among secular and traditional Jewish women has never fallen below 2.2 per woman, also higher than any other OECD country. Similar to global trends, the highest fertility rate for Arab women was found among those with low levels of education. Lowest rates were among those with academic degrees. In contrast, fertility rates among non-religious Jewish women are similar for those with high school and university education.

Surprisingly, among Jewish women, the rising average age of first-time mothers has not led to a decrease in fertility rates. Between 1994 and 2016, the average age increased by 2.8 years, and the fertility rate rose by 0.4 children.

During the same time period, the average age among Christian and Druze women increased by approximately three years, and Muslim women by one year. Fertility rates have decreased sharply among all three groups since the mid-1990s, in parallel with neighboring Arab countries.

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