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’s Poverty and Social Gaps Index published today. The poverty rate in Israel decreased 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 steady downward trend for nearly a decade. Israeli Arabs are considered the poorest sector in the country, while poverty rates are particularly low among families with two families.

The poverty rate in Israel is relatively high compared to OECD countries. Israel ranks second after 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 to 20.7% in Israel.

The poverty rate among children in Israel decreased from 28.1% to 27.9% (0,872,400 children). The elderly poor rate remained unchanged at 12.8% (about 158,500 elderly people). This is while the poverty line, below which a person is considered poor, actually rose in real terms by 3.2%. The poverty line for a family of six – that is, two parents and four children – currently amounts to a net income of 14,127 shekels per month.

The poverty index issued by the National Insurance Institute is relative, and is calculated on the basis of the average income in the economy. So, as median income rises, the poverty threshold at which a person who earns less is considered poor also rises. To calculate the index, the average household income is divided by two, and the number is normalized to “average person,” based on household size. This calculation is intended to reflect the fact that a family earning a certain amount will be poorer as its size increases, but not directly. That is, each additional child imposes a smaller burden than the previous child. It is accepted in the OECD for this calculation to be done using the square root of the number of people in a family, but in Israel, there is a unique table that gives more weight to large families. This means, in practical terms, that the methodology used in Israel defines large families (and all their children) as below the poverty line.

36% of the poor in Israel are Arabs

The average per capita net wage rose by 3.2% in 2023, raising 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-19 of 4.3%. According to the National Insurance Institute, growth in Israel is inclusive and benefits the poor in particular. The National Insurance Institute reports that “in 2023, as in the previous two years, average economic income rose at a higher rate than average income, with the impact of economic growth on the population at higher rates at the lower end of income as average income rose.” Net income at a rate higher than average.” This is actually a long-term trend. The poverty rate peaked in 2015, when it was 22.3%, and today it stands at 20.7%. The lowest point in poverty was recorded in 2020, at the height of the Covid pandemic, when median incomes fell, in effect lifting many households above the relative poverty line.

Of course, government transfer payments are reducing poverty, but less than the OECD average, and an increase in transfer payments in 2023, partly due to the war, has also 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.

Israeli Arabs are the poorest sector of society. Arabs constitute 36% of the poor, while they constitute 19% of the population. The Haredim constitute 13% of the poor, while they constitute only 8% of the population. In general, there is a strong relationship between the number of children and the poverty rate, with a small majority (50.6%) of families with five or more children considered poor, compared to only 20.6% of families with three children. Going out to work also affects the poverty rate. The poverty rate for families without a breadwinner is 64.8% and for families with a single breadwinner it is 22.2%. Only 8.7% of families with two breadwinners are classified as poor.

Published by Globes, Israel Business News – en.globes.co.il – on December 18, 2024.

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