Israel’s poor are better off than ever, think tank reports

According to report, the real disposable income of the lowest 20% of wage earners rose by 8.2% from 2002 to 2008.

By RUTH EGLASH
soup kitchen 311 (photo credit: Ariel Jerozolimski)
soup kitchen 311
(photo credit: Ariel Jerozolimski)
Israel’s poor are significantly better off than they were a decade ago, with the number of people living in absolute poverty fallen by 18.8 percent in just four years, a report published Sunday by the Jerusalem Institute for Market Studies (JIMS) has revealed.
Released to coincide with International Day for the Eradication of Poverty on Sunday and one day before policymakers in the Knesset discuss Israel’s poor in its various committees, the report calls into question the annual figures published by the National Insurance Institute (NII), which show that poverty rates are continually rising, and suggests that the situation is not as grim.
RELATED:Survey: Israelis' disposable income stayed put in 2009Marketplace: Made in (China) IsraelStudy finds link between considerate behavior and incomeAuthored by economist Yarden Gazit and based on consumer trends data taken from the Central Bureau of Statistics (CBS), the JIMS report is the first to measure absolute poverty as opposed to relative poverty in Israel and it shows that Israelis, even those with the lowest salaries, were able to purchase their basic needs and even allow themselves luxuries and savings.
“The poor are better off now than they were five years ago, more poor people can afford cell phones or a car and more are home owners, this is what we measured,” Corinne Sauer, the institute’s Executive Director told The Jerusalem Post.
She explained that under the classic way of measuring relative poverty, “if Bill Gates suddenly made aliya that would lead to another 10,000 people being declared poor because he would increase the average wealth by so much.”
“In Israel people get confused by the definition of poverty and the social gap, they look only at the social gap but when you are talking about poverty its good to go back to basics and see what people have,” said Sauer.
According to the report, despite claims by some that the lowest wage earners have not benefited from Israel’s economic growth, the real disposable income of the lowest 20% of wage earners rose by 8.2% from 2002-2008.
In addition, based on purchasing power, poverty fell by 23% between 2003-2008, indicating that more and more Israelis were able to provide for basic needs and even allow themselves luxuries and savings, said the report.
The institute’s research also showed that a total of 450,000 people moved from the “unable” to the “able” to provide group and cell phone ownership in the lowest 10% of households increased from 52.3% in 2001 to 80.3% in 2008. This increase was similar in degree to that of Internet subscription, which increased from 2.5% in 2001 to 27.6% 2008 and computer ownership from 23.3% in 2001 to 49.3% in 2008.
Similarly, the research found that home ownership among the lowest 10% of net wage earners increased from 36.7% to 41.3% from 2001-2008. “In other words, even as home prices were rising, there was a rise of 12.5% in the number of poor families owning their own homes,” the report noted.
JIMS’ findings directly contradict those of the NII, which showed in its most recent report earlier this year that 420,100 families or 1,651,300 individuals live below the poverty line, with some 783,600 children considered poor. All figures that have been steadily increasing in recent years.
The report explained the contradiction by saying that the poverty line identified by the NII is “relative and as income rises over the years, so does the line, meaning many people are categorized as “poor” even if they are earning enough to live adequately.”
“Israelis are much better off than the NII statistics show,” said the report. “38% of those called “poor” by the NII in 2009 (600,000 people) would have been called middle class a few years ago.”
Professor Leah Achdut, former Deputy Director General for Research and Planning of The NII from 2001-2006, responded to the report by saying that there are different ways to measure poverty.
“The National Insurance Institute has its own way, the Bank of Israel has another way but the best way is to first check where a person fits into their society and then look at whether their standard of living improves faster or slower than the average,” said Achdut, currently a lecturer at the Rupin Academic Center and a member of the economics and social program at the Van Leer Jerusalem Institute.
“The goal is to check whether a person has enough money to obtain the basic basket of needs and even within in that marker, there are many different ways to measure this,” she said, highlighting that the results will always change and could even be contradictory depending on the time span used to check the poverty rate.
However, Achdut maintained that “since 2000 poverty in Israel has grown and so has the gap between rich and poor.”
“Its only when you use alternative methodology that you get a different result,” she said.
“It is not just semantics, we just approached it using a different idea. Everyone was being so overdramatic and saying there are so many poor, we just had to make a distinction,” said Sauer.
She added: “Within every group there is always going to be a cluster of people whose lives are not getting any better and I am not saying there are no poor in Israel, just that they are less poor now than they are five years ago.”
Asked about the reports of soup kitchens and aid charities that continually struggle with increasing demands, Sauer responded: “they all need to make a living. If they reported that their needs were less then less people would donate to them.”