Israel’s Annual Poverty Report: Decline in Arab Poverty Meets Increase in Depth and Severity

In December 2018, the National Insurance Institute (NII) of Israel published its annual poverty report (Hebrew), presenting data on the scope, degree, and characteristics of poverty in the country for 2017. The report shows that along with economic improvements in several areas, the incidence of poverty in Israel is lower compared to 2016 and has continued its downward trend for the eighth consecutive year. However, the depth and severity of poverty have increased significantly since the previous year, and Israel maintains its position on the OECD scale with the highest poverty rates compared to other developed countries, and second highest poverty rates among children.

The general trends indicated by the report apply to Arab society as well, where an overall decrease in incidence of poverty has paralleled a rise in its depth and severity.

The poverty line was slightly higher in 2017 than in 2016, and stood at incomes of NIS 3,423 for individuals, NIS 5,477 for couples, and NIS 10,270 for families of five. Based on these parameters, 18.4% of families and 21.2% individuals were considered poor in 2017, compared to 18.5% and 21.9% in 2016, respectively. This means that 466,400 families or 1,780,500 individuals, among them 814,000 children, lived in poverty in 2017.

The incidence of poverty among Arab families declined at a greater rate than the overall population in 2017, dropping from 49.2% in 2016 to 47.1% (a milder drop compared to the 4% decrease between 2015 and 2016). While labor market changes have factored into this decline, it is also attributed to government benefit payments (such as welfare or allowances for children and senior citizens), which helped 9.7% of Arab families recover from poverty in 2017 versus 6.1% of families in 2016.

However, if residents of East Jerusalem and Bedouins are not included in calculations, the number of Arab citizens of Israel living under the poverty line dropped by 9% in 2017. These communities actually saw a spike in poverty during 2017, with Bedouin poverty rates rising from 58% to nearly 65% and East Jerusalem Arab poverty rising from 70% to roughly 75%. Without the Bedouin community alone, poverty incidence in Arab society would be lower by 1.5%.

Arab families, which comprise 15% of families in Israel, represented 37.4% of poor families in Israel in 2017, versus 39% in 2016.

Poverty Depth and Severity Rise 

Along with the lower incidence of poverty and socio-economic improvements pertaining mainly to the working population, 2017 also saw socio-economic regression: The depth of poverty, measuring the gap between household income and the poverty line, increased by 4.4%, while the severity of poverty, measuring the degree of deprivation among the poor, rose sharply by 10%. This was largely attributed to insufficient government aid and national insurance allowances for the populations unable to properly integrate into the labor market, among which the incidence of poverty has increased significantly from 69% in 2016 to 76%.

In Arab society, the depth and severity of poverty both rose significantly in 2017 in line with nationwide trends, by 10% and 22%, respectively. This stands in contrast to the drop in these indicators in 2016 by 7 and 8 percent.

Nationwide, poverty incidence among working families decreased as well for the first time since 2013, from 13.5% to 12.6%, though these too experienced increased depth and severity of poverty. Much like in 2016, more than half of Israel’s poor families are still working families. Within the ultra-Orthodox Jewish community, the poverty rate declined from 45.1% in the previous year to 43.1% in 2017. However, like in 2016, this demographic still accounts for 15% of poor families in the country despite comprising slightly over 6% of the population.

On an international scale, the report states that Israel at the end of 2017 was only 5% behind the OECD average for income inequality, compared to an 11% difference in 2016.

Data on Economic Classes 

The 2017 poverty report provides data on economic classes in Israel for the first time, indicating that the Israeli middle class has grown in recent years from 47.9% of the population in 2009 to 53.4% in 2017, while 21.2% of households are lower class, 16.4% middle-lower class, 7.1% middle-upper class, and 1.9% upper class as of 2017. According to the report, non-Orthodox Jews comprise most of the middle class at 60.2%, while Arab households account for the largest portion of the lower class at 50.3% and 26.5% of the middle class.

Overall, Arab, ultra-Orthodox, and large families (a category that overlaps with both demographics) remain the poorest in Israel. Within Arab society, this is attributable to a range of socio-economic gaps, a major implication of which is Arabs’ overrepresentation in lower-paid jobs and underrepresentation in higher-skilled positions. This partly explains why, while 80% of Arab households are working households—a percentage in line with general employment rates in Israel—Arab society continues to lag economically.