Study says Israelis can't make ends meet

The share of young people who do not own a home increased from 43% in 2003 to 54% in 2012.

Shekel money bills (photo credit: REUTERS)
Shekel money bills
(photo credit: REUTERS)
Israeli households across all population groups are having trouble making ends meet, according to the Taub Center for Social Policy’s 2014 State of the Nation report, released Wednesday.
The main problem, according to the report, was the high cost of housing, which pushed expenditures over the edge. The problem was bad across the board, but worse for some groups. Non-Orthodox Jews had expenditures NIS 864 higher than their incomes, but for Muslims that gap was NIS 1,919 and for haredi (ultra-Orthodox) Jews it was NIS 3,209, a third of their reported income.
Yet haredi Jews received 60 percent more in monthly benefits than others, NIS 3,256 a month in comparison to NIS 2,000 for other groups.
The section on housing costs found that they increased 53% faster than other prices between April 2003 and July 2013. The increase was a result of both the low interest rate and rigid supply, “rooted in the complex bureaucracy of the construction process, an inherent conflict of interest at the local level, and a high prevalence of condominium apartment living in Israel, which poses an obstacle to urban renewal.”
In the 13 years it takes to get through the construction process, only two years are devoted to construction while the rest are devoted to bureaucracy, the study found.
The share of young people who do not own a home increased from 43% in 2003 to 54% in 2012.
In terms of inequality, the report found that “wage disparities between the 90th percentile and the 50th percentile in Israel are higher than in the rest of the OECD countries,” though the situation between the 50th and 10th percentiles improved in comparison to other countries.
The report placed emphasis on poverty rates among the elderly population in Israel, indicating that rates are decreasing over time.
The reason for this is primarily due to the system of old-age benefits granted to all those who cease work at retirement age, which according to the report operates as an efficient mechanism for rescuing older people from poverty.
“At the same time, despite the entitlement to old-age benefits, not all elderly populations succeed in living above the poverty line. The main finding of this research is the fact that income from pensions is the most central component to improving the standard of living within the elderly population, and in affording economic security during old age,” the report stated.
Lack of a pension among elderly immigrants from the former Soviet Union and among Arab Israelis accounts for the high poverty rates among these elderly population groups.
The poverty rate among elderly Arab Israelis is the highest – almost 60% live below the poverty line, compared to 18% of immigrants from the former Soviet Union and 11% of Jewish veteran Israelis (those born in Israel or who immigrated before 1990).
The findings further indicated that some two-thirds of elderly Jewish veteran Israelis received income from pensions, while only 20% of immigrants from the former Soviet Union received a pension and fewer than 15% of elderly Arab Israelis received pensions.
While the total budget allocated to the elderly increased from NIS 19.8 billion in 2005 to NIS 25.9b. in 2012, a detailed examination revealed a decline in funds in various areas such as housing for elderly people, the report found.
As such, the average rent assistance provided to those eligible has significantly decreased from 40% of average rent costs in 2005 to 25% of average rent costs in 2012. This decrease is mainly due to the vast rise of housing costs compared to the small increase in the budget for housing assistance.
Aside from allowances, many services are granted to the elderly, but they are dispersed among different government ministries, the report stated. This dispersion leads to the wasting of resources and results in diminished uptick of benefits among the elderly population.
For example, the report cited a budget analysis of the Service to the Elderly Unit at the Welfare Ministry, which revealed that actual spending in 2012 was only 46% of the approved budget in that year.
Finally, an analysis of Israel’s shadow economy found that at 20% of GDP, it’s double that of many developed countries. If the unreported transactions were taxed, it would provide the government between NIS 30b. and NIS 40b. a year, and essentially wipe out the deficit.