Travel Reference
In-Depth Information
Poverty and Inequality
The rapid economic growth and liberalization that Israel has experienced since the 1990s has
not solved the problems of poverty and income inequality. In fact, the situation has worsened.
The country enjoyed some of the highest levels of income equality in the world in the 1950s
and 1960s. But in the early part of the twenty-fi rst century, 20 percent of all Israelis had in-
comes under 50 percent of the national median (the poverty line). Middle-class consumers
have been squeezed by high prices for homes and consumer goods plus stagnating incomes.
These problems became so acute that in the summer of 2011, Israelis erected tent cities across
the country and staged mass demonstrations demanding that the government address them.
Several factors have contributed to raising the poverty rate. One is the low labor force par-
ticipation rate, especially among Israeli Arabs and Haredi Jews. Those families are less likely to
have two breadwinners and often lack even one. For cultural reasons, both groups have larger-
than-average families, thereby exacerbating the problem of child poverty, which in 2007-2008
was 34.3 percent, almost nine percentage points above the total rate.
A second factor is immigration. While most of the last wave of newcomers — those arriving
from the former Soviet Union in the 1990s —were successfully absorbed into the economy, a
large number remain unemployed or underemployed. Third, the transition of the economy
to technology-intensive industries and the concomitant loss of jobs in traditional sectors have
left a great many Israelis permanently unemployed for lack of appropriate skills or education.
Nor has Israel been exempt from the global increase in income inequality, as those with the
greatest skills and education have captured a growing portion of earnings and wealth.
Poverty is highest among Haredi Jews and Israeli Arabs, both of whom have low rates of labor force par-
ticipation and larger-than-average families. (Data: Bank of Israel; Israel National Insurance Institute. Chart:
David Rosenberg. Drawing by Bill Nelson.)
