Of the 34 member countries of the Organization for Economic Co-operation and Development (OECD), Israel ranks twenty-sixth poorest when discussing gross income, or before government intervention. However, when poverty is discussed in net terms or income after government intervention, it is ranked second-poorest. According to a report by the Taub Center for Social Policy Studies in Israel, 31 percent of the country is living below the poverty line. Why is there such a discrepancy and what are the causes of poverty in Israel? There are a number of reasons.
- System of allowances
The first of the causes of poverty in Israel is its system of allowances. While Israel, compared to other countries, collects a significant amount of income from the wealthy in the form of taxes, it lacks in its system of allowances. The government’s influence in curtailing poverty is at around 30 percent. Other countries’ participation is at around 60. Of the allowance payments made by the government, most are handled efficiently. Part of the solution lies in more system of allowances by the government.
- Low participation in labor market
Another one of the causes of poverty in Israel comes from low participation in the labor market, specifically with two minority groups: ultra-Orthodox Jews and Arab Israelis. As of 2011, only 48 percent of ultra-Orthodox Jewish men and 28 percent of Arab-Israeli women were employed.
According to a report by the Bank of Israel in 2015, “the dilemma [of poverty] becomes greater because about half of the poor in Israel belong to the ultra-Orthodox (Haredi) community – a population sector that attributes great value to devoting time to studying the Holy Scriptures – and the traditional Muslim community, in which there are cultural restrictions on the employment of women.”
For these cultural reasons, some of the ultra-religious in Israel choose not to search for jobs and therefore fall into poverty. This is also one of the reasons why the government’s influence on curtailing poverty is so low; it believes it will encourage living on allowances instead of looking for other means of income.
These main contributors work in conjunction to create a difficult environment for the government to control poverty. Between the low participation in the labor market and therefore lower system of allowances by the Israeli government, the population has suffered from impoverished conditions.
To combat these issues, the OECD has offered some recommendations that will hopefully decrease the poverty rate, the first of which includes increasing competition and efficiency in the domestic economy. An OECD survey noted that the banking industry is inefficient and concentrated. Therefore, should allow the entry of new competitors into the market, particularly in non-banking credit entities.
Another way to improve the apparent disparity in the labor market is to boost “investment in infrastructure and promoting skills, particularly among disadvantaged groups [which] can both enhance social cohesion and raise long-term growth.” One of the last recommendations given was improving education for those disadvantaged groups like Arab women and the Haredi population so that they may increase their income levels and contribute to the economy.
– Sydney Roeder