​Summary:

  • In 2007 and the first half of 2008, the extent of poverty was reduced according to most of the accepted measures: the incidence of poverty, the SEN index and the proportion of the poor consuming below the poverty line. However, the extent of poverty still remains high, both in comparison to the OECD countries and in historical terms.  
  • The extent of poverty is especially high among the Arabs and the ultra-Orthodox, who are characterized by low levels of employment and high birth rates.  
  • The incidence of relative poverty has declined despite a rise of 4.2 percent in the poverty line. This was the result of an increase in per capita median income during the period, due to the high rate of economic growth. This led to an even larger reduction in poverty in absolute terms. (From 2006 until August 2007, the incidence of relative poverty fell by 1.5 percentage points, while it fell by 2.5 percentage points in absolute terms.)  
  • The reduction in the extent of poverty was primarily the result of an improvement in the relative situation of weaker populations in the labor market, particular their increased rate of employment, which reflects on the one hand the trickling down of growth to the weaker populations during this period and on the other hand the effect of the cutbacks in welfare benefits.  
  • The incidence of poverty before transfer payments and taxes fell to a level similar to that during the late 1990s. However, the direct effect of welfare policy through transfer payments remained limited in 2007, further to its continuous significant weakening since 2001. Therefore, the incidence of poverty after transfer payments and taxes was significantly higher in 2007/8 than during the late 1990s.  
  • During the last decade, the extent of poverty has increased among households with at least one income earner. This development reflects the entry of weaker segments of the population into the workforce and the inability of the welfare policy to ensure a reasonable level of welfare for workers. It is important to remember that the very entry into the workforce will have additional positive effects in the long term which will intensify as the new workers become better integrated in the labor market.  
  • In October 2008, an earned income tax credit was introduced in a number of locations in Israel. This will work to increase the welfare of low-earning workers and thus is in line with the overall policy of fighting poverty by increasing employment. The extension of the earned income tax credit (EITC) program to additional locations is expected to increase its positive effects.  


Welfare Policy Issues - Full File