Poverty in Israel

Though educational reforms are not the only way, no other single step can make such a crucial impact on lowering poverty rates and reducing income inequalities.

Students in classroom 311 (photo credit: Reuters)
Students in classroom 311
(photo credit: Reuters)
Income inequality and poverty rates in 2010 were bad, but not quite as bad as in 2009. That was the not-so-encouraging message that came out of the latest Poverty and Social Gaps Report released Thursday by the National Insurance Institute.
In 2010, 433,300 families, or 19.8 percent, lived under the poverty line, defined, roughly speaking, as half the median income, down from 20.5% in 2009. Before factoring in welfare transfers and other benefits, 32.6% were below the poverty line, down from 33.2%.
Despite a slight improvement, Israel continues to rank – along with the US, Mexico and Chile – as the OECD country with the biggest gap between the richest and poorest.
The NII’s research department, headed by Dr. Daniel Gottlieb, attributed the modest improvement in the Jewish state’s embarrassingly high levels of poverty and income inequality to a healthy labor market.
Nevertheless, this year’s poverty report does little to cover up Israel’s chronic economic ills.
One of them is the low rate of participation in the labor market. Our low unemployment rate – below 6% this year – is deceiving.  It takes into account only those actively seeking employment. Hundreds of thousands – particularly Arab women and haredi men – are not counted because they are not looking for work. Just 80.5% of Israelis aged 35 to 54 are employed compared to an OECD average of 85.8%.
It should come as no surprise that 55% of haredi families (according to Central Bureau of Statistics data) and 53.2% of Arab families (according to the NII poverty report) live under the poverty line.
And even those who do work are disappointing unproductive. Since the mid-1970s, productivity has trailed behind the G7 – France, Germany, Italy, Japan, the UK, the US and Canada.
Though Israel is at the cutting edge of innovation in a number of fields, a large and growing number of workers are increasingly less productive than their Western counterparts. GDP per capita in Israel was $27,280 in 2009 compared to over $43,000 in the US. And in 2005 GDP per hour in Israel was $35 compared to a G7 average of close to $45.
The Jewish state is in desperate need of an educational revolution to fight poverty. More than ever before, the quality of one’s education determines economic success and separates the haves from the have-nots. In 2010, over 85% of Israelis with 16 years or more of education were employed, compared to 75% of Israelis with nine to 10 years of education. And Israelis with academic degrees enjoyed significantly higher income levels, particularly as they reached middle age. In 2008, Israelis with academic degrees aged 40 to 44 earned on average NIS 14,235 a month, compared to just NIS 7,036 a month for those with 12 years of schooling.
Unfortunately, a disappointingly small percentage of high school graduates are equipped with the requisite skills, as Dr. Dan Ben-David of the Taub Center for Social Policy Studies in Israel showed in a recent paper, from which much of the data presented here was taken.
In 2009, of the total number of Israelis in the 12thgrade age group – including haredim and east Jerusalem’s Arabs – just 39% matriculated at a level that would enable them to be accepted to university.
Since 1999, Israelis have consistently scored below their counterparts in 25 relevant OECD countries in all but one of six international assessment exams. And this was true even after excluding Arabs and haredi boys (who do not even study the material).
Arab Israelis scored below Third World countries such as Jordan, Tunisia, Indonesia, Kazakhstan, Brazil and Colombia. And the top 5 percentiles of Israeli students did not fare any better. In 2009, Israel’s top pupils ranked below the top pupils of every other country except Spain. And the bottom 5% did worse than the worst students abroad.
Though educational reforms are not the only way, no other single step can make such a crucial impact on lowering poverty rates and reducing income inequalities. Unless a significant overhaul of our educational system is implemented immediately – including a demand that the growing number of haredi youngsters learn English, math and sciences and that Arab schools receive significant funding increases – the next generation of Israelis will be unprepared to support their families – let alone compete in an increasingly knowledge-based global market.