Israel has second highest poverty rate in OECD

In Israel in 2023 there were 1.98 million Israelis living below the poverty line, as defined by the National Insurance Institute, according to the OECD Poverty and Social Gaps Index published today. The rate of poverty in Israel fell very slightly from 20.8% in 2022 to 20.7% in 2023.

Relative poverty in Israel is among the worst in the OECD, although it has been on a consistent downward trend for almost a decade. Israel’s Arabs are the poorest sector in the country, while families with two earners have particularly low poverty rates.

The poverty rate in Israel is relatively high compared with OECD countries. Israel is second only to Costa Rica in terms of poverty rate, while in OECD countries, the poverty rate is 11.6% on average. The country with the lowest poverty rate in the organization is the Czech Republic, where only 7% of households are defined as poor, compared with 20.7% in Israel.

The poverty rate among children in Israel fell from 28.1% to 27.9% (872.400 0 children). The rate of poor elderly people remained unchanged at 12.8% (about 158.500 senior citizens). This is while the poverty line, below which a person is considered poor, actually increased in real terms by 3.2%. The poverty line for a family of six – that is, two parents and four children – currently stands at a net income of NIS 14,127 shekels per month.

The National Insurance Institute poverty index is relative, and is calculated in relation to the median income in the economy. So as the median income rises, the poverty threshold at which a person earning less than it is defined as poor also rises. To calculate the index, the median household income is divided by two, and the number is normalized to a “standard person,” based on the size of the family. This calculation is intended to reflect the fact that a family that earns a certain amount will be poorer the larger it is, but not in direct proportion. That is, each additional child imposes a lower burden than the previous child. In the OECD, it is accepted that this calculation be done using the square root of the number of people in the household, but in Israel, there is a unique table that gives more weight to large families. That is, in practice, the methodology in Israel defines more large families (and all their children) as being below the poverty line.

36% of the poor in Israel are Arabs

The median net wage per capita rose by 3.2% in 2023, which raised the poverty line accordingly. This is a higher increase than last year (2.2%), but lower than the average in the previous decade before Covid – 4.3%. According to the National Insurance Institute, Israel’s growth is considered inclusive and the poor benefit from it in particular. The National Insurance Institute reports, “In 2023, as in the previous two years, the median economic income rose at a higher rate than the average income, as the impact of economic growth on the population was at higher rates at the lower end of the income scale. The median net income also rose at a higher rate than the average income.” This is, in fact, a long-term trend. The poverty rate peaked in 2015, when it was 22.3%, and today is 20.7%. The lowest point in poverty was recorded in 2020, at the height of the Covid pandemic, when median income fell, which actually raised many families above the relative poverty line.

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Government transfer payments, of course, reduce poverty, but less than the average for OECD countries, and the increase in transfer payments in 2023, partly due to the war, contributed to the decline in poverty. But in economic income (excluding transfer payments), the poverty rate rose slightly from 30.6% in 2022, to 31.1% today.

Israel’s Arabs are the poorest sector of society. 36% of the poor are Arabs, while they make up 19% of the population. Haredim constitute 13% of the poor, while they are only 8% of the population. In general, there is a strong relationship between the number of children and the incidence of poverty, with a small majority (50.6%) of families with five or more children considered poor, compared with only 20.6% of families with three children. Going out to work also affects the poverty rate. The poverty rate for families with no breadwinners is 64.8% and for families with one breadwinner it is 22.2%. Only 8.7% of families with two breadwinners are defined as poor.

Published by Globes, Israel business news – en.globes.co.il – on December 18, 2024.

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