Poverty and Inequality in Israel: An International Perspective

This chapter examines the rates of poverty and inequality in Israel over time and in comparison with other OECD countries. It looks at two main groups: those aged 59 and under and those aged 66 and over. In the age 59 and under population, Israel’s poverty and inequality rates are among the highest relative to other developed countries in both market income (household income from work, occupational pensions and capital, before taxes) and gross disposable income (including transfer payments) minus taxes. From 2002-2011, employment rates among the population in Israel rose, leading to a reduction in market income inequality (though this was not accompanied by a substantial decline in poverty rates). Disposable income inequality rates rose until 2006 and have since stabilized, while poverty rates have increased fairly consistently, especially among Arab Israelis and Haredim. Among the retirement-age population, disposable income poverty rates are substantially higher than in OECD countries. Nevertheless, the overall resources (public and private pension arrangements) that are available to the elderly, place Israel in a relatively good position among the developed countries. That is, the level of public and private pensions is not low compared to the rest of the world, but its distribution among the elderly is not equitable. The relative tax revenues in Israel are among the lowest in the Western world, and this is one of the reasons that the average overall public expenditure is relatively low. This inseparable relationship between tax revenues and public expenditure has critical implications for the closing of poverty gaps.