Taub Center: Israeli welfare system ineffective in reducing poverty among elderly

According to the research about half of Israel’s elderly are living below the poverty line as per their market income.

By DANIELLE ZIRI
DAN BEN-DAVID 370 (photo credit: Courtesy Tau.ac.il)
DAN BEN-DAVID 370
(photo credit: Courtesy Tau.ac.il)
Israel’s tax and welfare systems are ineffective in reducing poverty among the elderly, a study released by the Taub Center for Social Policy Studies on Monday revealed.
According to the research – expected to be published as part of Center’s upcoming State of the Nation Report 2013 – about half of Israel’s elderly are living below the poverty line as per their market income – before taxes and welfare.
While the number seems discouraging, this is in fact the lowest marketincome poverty rate in the developed world.
When looking at disposable income after taxes and welfare, however, it was found that Israel had the highest disposable- income poverty rate in the developed world, with 21 percent of Israel’s elderly below the poverty line.
Researchers Dan Ben-David and Haim Bleikh, who conducted the study, said that the findings were “surprising” and that Israel is one of the great anomalies in the developed world when it comes to poverty among the elderly.
“The case of poverty among the elderly – those aged 65 and over, who are at or above what is generally still considered retirement age in most countries – provides what is perhaps the most striking illustration of the ineffectiveness of Israeli tax and welfare programs in reducing poverty,” Ben-David stated.
He explained that while the problem of market-income poverty among the elderly is considerably less in Israel than in the rest of the developed world, once each country’s social-welfare safety net takes effect, the situation reverses, with disposable-income poverty among Israel’s elderly rising to the top of the developed world.
“In fact, while 50.2% of Israel’s elderly would have lived under the poverty line had they been dependent only on market income, over three-quarters of the elderly would have lived under the poverty line in 15 of the other 21 countries,” Ben-David wrote. “In other words, a smaller share of Israel’s population is elderly, and a smaller share – considerably smaller, compared to most countries – of Israel’s elderly would have lived under the poverty line if left to their own devices.”
The study also showed that despite the relatively large elderly populations in the other OECD countries examined, the assistance provided to the elderly is substantially more effective in reducing poverty than it is in Israel.
Ben-David and Bleikh found that the differences between Israel and the study’s other countries regarding poverty reduction among the elderly are substantial and that welfare and tax policies nearly eliminate poverty among the elderly in 12 of the 22 countries.
According to the report, there are a number of reasons for the large discrepancies between Israel’s relative levels of market-income poverty and disposableincome poverty among the elderly.
As the Taub Center pointed out, Israel has traditionally had one of the highest rates of private pensions among OECD countries, with about 50 percent of Israel’s elderly having a private pension in 2011. This has contributed to the relatively low rates of market-income poverty among them.
In addition, it was stated that Israel’s average pension “replacement rates” – generally referred to as public pensions – which combine private and government benefits, are slightly above the OECD average, meaning that earning the mean wage throughout their career will yield a retired Israeli 78% of his preretirement wage, compared to an average of 69% in the OECD.
The figures also showed that welfare benefits provide about 22% of an average worker’s earnings in Israel, compared to an average of 50 percent in the OECD.
According to the researchers, Israel’s welfare and pension policies are designed to promote self-sufficiency in older age, but they are the least effective in the developed world at reducing poverty among the elderly.
The Taub Center’s complete State of the Nation Report 2013 is expected to be presented to the Knesset’s Economic Affairs Committee on Wednesday.