Summary:

  • The level of poverty remained unchanged during 2009–10: the incidence of poverty among individuals, according to the accepted relative definition, stood at 24.7 percent of the population, which represents about 1.77 million poor people. At the same time, there was an increase in the incidence of poverty among families and in absolute terms, in the income gap (which measures the average distance of the poor’s income from the poverty line) and in the Sen index (which is a weighted combination of the incidence of poverty, the income gap and inequality among the poor).
  • The incidence of poverty among the working population has been characterized by an upward trend over the last decade and is substantially higher than in other OECD countries. The growth in the working poor reflects on the one hand the entry of weaker segments of the population into the labor force and on the other hand the lack of an effective policy to improve human capital and the labor income of populations with low earning ability. The lax enforcement of labor laws is an additional factor explaining the low wages of workers at the bottom of the wage scale, which also has an effect on the incidence of poverty among this population.
  • The incidence of poverty and its intensity are particularly high among the ultra-Orthodox and the Arabs, two groups that are characterized by low employment rates and high birth rates. These are also populations in which the extent of poverty has grown significantly over the last decade, while the incidence of poverty among non-ultra-Orthodox Jews has remained stable.
  • The incidence of poverty among the elderly has declined in recent years, after a significant increase at the beginning of the decade. This is primarily due to the fact that the old age pension has eroded to a lesser extent than other allowances.
  • In 2009–10, income inequality continued to worsen, with the Gini index reaching about 39 percent. The indexes of inequality are high in Israel relative to the OECD countries and in historic terms. The increase in the inequality of net income reflects stability and even a reduction in the inequality of economic income, in parallel to a decline in the contribution of transfer payments and taxes to reducing inequality.
  • The direct contribution of transfer payments and direct taxes is very low relative to other OECD countries and it has declined almost continuously during the last decade. In 2009–10, their contribution was stable and even rose somewhat.
  • The earned income tax credit (EITC), which is in its first year of implementation, raised 4.5 percent of its poor recipients to above the poverty line. The EITC is one of the only policy measures that makes it possible to increase the income and welfare of low-income households without reducing the incentive to work and without adversely affecting the demand for labor. It is focused on weak populations and therefore is an effective policy tool for assisting the working poor. It is recommended to increase the size of the grant and applying it nationwide.
  • Affirmative action in the allocation of core teaching hours in primary education for students from weak backgrounds has been reduced in scope since the 2007–8 school year. It is worthwhile to incearse resources to those students.