The new poverty

Israel’s jump to capitalism has left some 1.7 million Israelis are below the poverty line.

A poor woman poverty impoverished homeless 311 (photo credit: Marc Israel Sellem/The Jerusalem Post)
A poor woman poverty impoverished homeless 311
(photo credit: Marc Israel Sellem/The Jerusalem Post)

The numbers look awful. According to the latest Poverty and Social Gaps Report released by the National Insurance Institute in November, 433,300 families – 19.8 percent of the country – were under the poverty line in 2010.

In absolute numbers, that covers about 1.7 million people, among them 873,000 children. And that was after counting welfare transfers and other benefits; if these are not taken into account, 32.6 percent of Israelis are officially poor.

Some small comfort might be found in the fact that the 2010 figures reflected a modest improvement over the 2009 situation, when 20.5 percent of families lived below the poverty line after taking into account welfare transfers. (The 2009 figure for prewelfare poverty was 33.2 percent.)

Many observers, however, dismissed the small measured improvement as statistically insignificant. “There is no clear trend in the poverty numbers [over the last several years],” says Barbara Swirsky, executive director of the Adva Center, an institute advocating for social justice.

“The numbers are more or less marching in place, with 20 percent of the population at or below the poverty line for many years.”

Despite this nominal improvement over the past year, Israel continues to be categorized as one of the countries in the OECD (Organization for Economic Cooperation and Development) with the biggest gaps between rich and poor, along with the United States, Mexico and Chile.

Even more disturbingly, only a few weeks after publishing the annual report on poverty, the National Insurance Institute revealed that a survey it had conducted of 5,000 families showed that 10 percent of the population suffers from some level of “nutritional insecurity."

Thirteen percent of those questioned said they had sometimes been forced to go without enough food, and 4 percent had been forced to forgo meals. One-third of respondents said they had used money earmarked for food to make other essential purchases, and 20 percent said they had to turn to friends or family members for help in buying food.

The government of Prime Minister Binyamin Netanyahu routinely points to macroeconomic figures that indicate Israel is doing well economically, experiencing GDP growth at a time of world economic difficulties while firmly holding down unemployment and reducing its international debt.

Economic advisers to the government tell The Jerusalem Report that at least some of the current economic stability is due to a decision taken by Netanyahu when he was finance minister in 2003 to institute deep cuts in government spending, which included reductions in welfare and poverty programs. Others, however, draw a straight line from the 2003 cuts to today’s poverty figures.

Rabbi Yehiel Eckstein, director and founder of Keren LeYedidut, one of the country’s largest social welfare non- profits, tells The Report that although the poverty numbers are shocking, he does not find them surprising given what his organization is seeing in daily contact with the needy throughout the country. “There is no government food program here, no responsibility taken by the government for the poor and the elderly to live with dignity,” says Eckstein. “That is what it is like in Ukraine and Russia, but this is Israel. This is shameful for Israel.”

Poverty is not a simple subject to study. In fact, there is no universal agreement on how it should be measured.

“In [sub-Saharan] Africa, people are classified as abjectly poor if they live on one dollar or less per day,” points out Swirsky. “In Egypt, a significant number of people live on two dollars or less per day. That is not the case in Israel. Here poverty is measured by how a family stands in relation to other families in income; it is not measured in absolute numbers. That is the way poverty is measured in most OECD countries.”

The United States stands out in the OECD because it defines the poverty line in absolute terms, using a “minimal basket” of items that a family is deemed to need to be able to afford in order to be considered “not poor.”

A family that earns less than the amount of money needed to buy this minimal basket is then said to be living under the poverty line. Swirsky, however, points out that “the OECD redoes the figures for the US to compare it to everyone else,” thus making the distinctions between the definitions in different countries less significant than they might appear at first glance.

“In Israel poverty is defined as an income that is lower than one half of the median income, further adjusted to take into account the number of people in a family living on that income,” continues Swirsky. “That means that not everyone considered poor does not know where the next meal is coming from. Poverty is relative, measuring who is lower than others on a national scale.

A poor person in Sweden or Japan may have more than a poor person in Israel, who will [typically] have more than a poor person in, say, Turkey. In some OECD countries living on less than 60 percent of the median income is considered living in poverty, and if Israel were to adopt that standard the [official] number of poor would be even higher.”

Measuring poverty in relative terms has been criticized by some observers, who point out that using a relative scale means that, theoretically, if everyone’s real income were to double overnight, the poverty level would still be 20 percent, because the same percentage of the population would be earning less than half of the median income.

“Median income in a country can be rising, even rapidly, with living standards for everyone rising, while the poverty remains the same,” Swirsky explains. “But that is the right way to measure poverty, because what matters to people is not the absolute amount they have but what they have relative to others in society. For example, there are studies that show that for health, comparative income makes a difference. And by that measure Israel is not doing well.”

Inter-country comparisons of poverty in the OECD place Israel, with its 20 percent poverty rate, in a negative light. In Japan, which has suffered through nearly two decades of economic stagnation, about 15 percent of the population lives under the poverty line. In New Zealand and Canada the comparable figures are around 10 percent. The lowest rates are in Scandinavian countries, with Finland ‘s poverty rate at 5.4 percent, Norway at 6.4 percent, and Sweden at 6.5 percent.

However, an economic adviser to the Netanyahu government, who requested anonymity because he was not authorized to speak to the press, tells The Report that looking solely at that single poverty figure of 20 percent does not reflect the true complexity of the issue of combating poverty in Israel. “We are not like Norway, because from the economic perspective this is not one country but three countries,” he says. “The population can be divided into the ultra-Orthodox Haredi sector, the Arab sector, and ʽthe rest,ʼ mostly secular Jews.

“Among the Haredi population, 55 percent of families live under the poverty line, and 53 percent of Arab families live under the poverty line. That skews the figures because if we could count only the rest of the population, our poverty level would put us in the middle of the OECD countries, which would be a very different picture.”

These figures on differences between the major segments of the population are borne out by many studies conducted by the Central Bureau of Statistics, the National Insurance Institute and independent researchers. Swirsky agrees that the differences are so striking that “some consider these [the Haredi and Arab sectors] almost to be separate economies within Israel.” Swirsky, however, points out that there is another sector with very high poverty rates: the Ethiopian immigrant population, which according to estimates suffers a poverty incidence of between 50 to 60 percent.

According to the government economic advisor, the distinctions between the different sectors comprising Israel’s population make the fashioning of policies to combat poverty a challenge, because different policies are required for each sector. “In the Haredi sector, women tend to work while the men do not, and in the Arab sector it is reversed: the men work but the women often do not,” he says.

“In general, in families in which two members of the family work, the poverty rate is only 3 percent, while having only one family member working immediately lifts the poverty rate to nearly 25 percent. But making significant changes in entire sectors will take time. It takes time to change attitudes, and to undo decades of bad incentives that sustained attitudes.”

Those who are familiar with poverty from direct contact with the poor, as opposed to discussing abstract statistics, report that even among the secular Jewish population, poverty is a complex phenomenon with many layers and causes.

“It is important not to look only at the numbers, and to say that someone who has one shekel more or less than the poverty line is in this or that category,” says Michal Krumer-Nevo, professor in the Social Work department at Beersheba’s Ben- Gurion University and director of the Israel Center for Qualitative Research of People and Societies.

“We need to look at groups of people, and at the networks of support they can draw on. Someone with a social network is better off than someone who is isolated, at the same income levels, for obvious reasons. There are measurements of family spending, as opposed to family income, and they are not quite the same, presumably because people can rely on support networks to help them.

Krumer-Nevo dislikes the way the term “culture of poverty” is sometimes presented in the media or polemics. “Conservatives often try to use the concept to prove that there is some moral failing that is passed from one generation to another leading to dependency,” she says. “But empirical studies do not bear this out. It is not ‘moral values’ that are most important for leaving poverty, but opportunities.”

Krumer-Nevo has published studies detailing how lack of opportunities can stifle the possibilities for rising out of poverty. “I have studied poor women who want to fight their poverty, but have limited means for doing so,” says Krumer-Nevo.

“This includes 16-year-olds who know quite well that their opportunities are limited, due to bad schooling, dire conditions and violence that they have suffered. They want to join normative society, but cannot easily do that.

They do not serve in the army, and have no chance to complete their studies because they do not have a supportive environment. They need to put all their time and energy into finding a safe place where they can have a roof over their heads. Many turn to marrying and having children quickly as a way of attaining ‘social status,’” she explains.

“But whom are they marrying? Men who are also poor, lacking education and jobs, because those are the only men available to them, continuing cycles of poverty.” Eckstein uses harsh words to describe the conditions that his organization, Keren LeYedidut, sees in its daily activities.

“The sheer number of people who have dropped below the poverty level has risen in recent years,” Eckstein asserts. “The main reason is that government allocations to the elderly and people at the poverty level were cut in 2003, across the board. And since then they have not increased in relation to the cost of living. There are people from the lower middle class who have fallen below the poverty line.”

The 2003 allocation cuts that Eckstein refers to took place when Netanyahu, now prime minister, was serving as finance minister At the time, Israel was reeling from the effects of a recession in 2001-2002, and the Finance Ministry argued that sharp reductions in government expenditures were the only way to restore the economy to stable growth.

“Let’s not forget that at the time, unemployment was 11 percent and the debt-to-GDP ratio was 105 percent,” says the government economic adviser, in defending the 2003 reforms. “Unemployment is now half what it was then – which is itself a significant factor in reducing poverty. The debt-to-GDP ratio has been reduced by more than 20 percent, moving us in the opposite direction to most of the rest of the world, which is suffering from too much debt. Our credit rating is considered by some better than France’s at this point; who would have believed that?”

Eckstein, however, has no doubt that the price paid by the poor since the 2003 cuts has been very high. “The allocations today enable the poor to cover only 30 to 40 percent of their basic costs of living,” says Eckstein.

“The country has shifted from a socialist to a capitalist system without providing the necessary safety net for those who cannot make it in the capitalist environment.” Originally from Ottawa, Canada, Eckstein received rabbinical ordination at Yeshiva University in New York.

He founded the International Fellowship of Christians and Jews in 1983 to promote interfaith understanding and build broad support for Israel. Eckstein came to Israel 11 years ago when he founded Keren LeYedidut as a charitable organization to distribute donations collected by the International Fellowship of Christians and Jews (which also distributes charitable donations to Jewish communities in the former Soviet Union). Eckstein also serves on the executive boards of the Jewish Agency and the Joint Distribution Committee.

“Due to meager allocations, Holocaust survivors have to make a decision every day, about how to spend the 1,800 or 2,400 shekels per month they have between rent, food, heating or medical supplies,” says Eckstein. How should one ensure that people get food? Through food stamps?

Direct giving in soup kitchens? The non-profits must be strengthened, many of them have had their incomes go down. Our income has risen in last few years, 10 percent higher last year. We distribute $65 million in Israel, the largest single philanthropy in the country, focusing on the vulnerable and weak, the elderly and immigrants. We run food programs and dental programs for the elderly.”

What philanthropies can do, he stresses, is only a fraction of what he believes the government should do. “There needs to be a government assumption of responsibility for the poor and the elderly to live with dignity,” says Eckstein. “They need food, heating, medical and dental care, prescription drug support and a housing program.

There are layers to poverty. There are people who are capable of working, but what about the elderly, single mothers with small children and the handicapped? How about adding government child allocations to families where at least one person goes to work, as an incentive to get people to work? What the non-profits can give is a drop in the bucket. To what extent even this [philanthropy] is relieving the government of responsibility is a serious question that needs to be addressed. But we cannot let people be hungry and freezing.”

Sari Revkin, the director of Yedid, an organization promoting social justice, tells The Report that food insecurity is indeed more prevalent now than in the past, based on direct contacts that her organization has with needy clients. “In 1997, I had a volunteer working with me in a program assisting women and children,” says Revkin. “She traveled throughout the country, and heard not one complaint about hunger. That is no longer the case. We now have clients who need to decide whether or not to cut back on food purchases to pay for housing costs.”

Revkin regards the elimination of food subsidies as the main cause of the new phenomenon of food insecurity in Israel.

“When I came to Israel 28 years ago, basic foodstuffs, such as eggs, milk, bread, cheese and chicken, were subsidized,” says Revkin.

“Those subsidies have been lifted and that had a dramatic effect; look at the cottage cheese boycott of the summer, which showed that even working people noticed how much food costs have risen.”

The poor today are overwhelmed by the costs they need to juggle according to Revkin, continuously trying to determine which bill they can next pay for housing, heating, electricity, water, and food. “Some of them could be appointed to the job of finance minister,” says Revkin, “because they are experts at budget decisions. They know very well what they can put off in bill paying and get away with. We see clients cutting back on food to pay for housing costs because it has no repercussions, but if they don’t pay electricity or water bills they can have those [utilities] cut off.”

Revkin also criticizes what she regards as skewed incentives currently in place in many government programs. “Take for example a single mother on welfare,” she says. “Such a woman will get in-kind benefits such as municipal tax reductions and low-rent housing. If she starts working those in-kind benefits are taken away. But it is not possible for her to make up the loss of those benefits on minimum wage. This is a disincentive to finding work.

“Another example: if a woman is divorced and the father of her children is not paying child support, the National Insurance Institute can take the money directly from the father’s salary and give it to the woman for child support payments – but only if the woman is earning less than 6,000 shekels a month. This is a ridiculous policy that is a disincentive to work, even for middle-class women.”

What steps can be undertaken to alleviate poverty? Swirsky has a long list.

“Workers need the protection of laws and unions, for better social benefits, better pensions and so on,” says Swirsky. “Not hiring contract workers would make a big difference, making workers less disposable. Bad working conditions and low wages are the cause of a lot of poverty. There are new labor unions emerging in recent years that can make a difference, such as unions for waiters, taxi drivers, artists.”

Revkin is not optimistic, given what Yedid’s employees are seeing in their work. “It takes two minimum-wage earners in a family to get over poverty,” says Revkin.

“We are seeing more and more clients at Yedid who are working people. Our clients used to complain about not receiving benefits. Now it is debts that people are finding it difficult to deal with, even people with higher incomes than in the past.”

Swirsky notes that government services have been deteriorating for a long time, adding to the burdens of the poor. “The education system is a shambles,” she says. “Health, education, housing, all those public services can be improved, and doing so will lower the poverty level. There are many needs."