Late last year, a report published by the National Insurance Institute found poverty in Israel affected 22 percent of the population. In 2013, Israel’s poverty rate grew more than any other nation belonging to the Organization for Economic Co-operation and Development (OECD).
The OECD found that Israel is the most impoverished out of 34 economically developed countries. Why can an economically sound country end up with such high rates of poverty and inequality?
According to Rabbi and social advocate Yechiel Eckstein, the government can better use its assets to help decrease the poverty in Israel.
“The poor in Israel are not of enough interest to the government that neglects poverty and devotes all its energies and resources to promoting the rich and middle class only,” Eckstein said.
The poverty rate of a household with two financial contributors reached 5.6 percent in Israel in 2015, according to the same report released by the National Insurance Institute this month. However, the poor became poorer as the total average income gap reached 35 percent this year.
The disposable income of the richest 20 percent in Israel reached 5.3 percent, compared to 0.4 percent growth in disposable income for the bottom 20 percent of Israelis. The country has the fifth highest income inequality rate in the world.
The Israeli government has taken steps towards alleviating poverty after the release of the National Insurance Institute reported an increase in the poor over the last year.
Finance Minister Moshe Kahlon presented plans to revamp corporate tax rates and provide government assistance to more poor families and the elderly during a cabinet meeting in November.
The cabinet unanimously approved reducing Israel’s corporate tax rate by 1.5 percent, to 25 percent, at the beginning of the year. There will also be “negative income tax payments” provided to people earning the lowest incomes that will add an additional 400 million shekels ($103.2 million) in aid thanks to high tax collections during fiscal 2015.
The negative income tax will act as a government grant that provides working people within Israel with disposable income. Recipients will receive 2,070-6,800 shekels ($534-$1,754) per month, according to Kahlon.
Other tax renovations to alleviate poverty in Israel include increased tax revenues that will help fund old-age allowances to 230,000 elderly people. The tax hike will provide non-working elderly with an extra 6,000 shekels ($1,548) per year starting in 2016.
Despite this increase for the elderly, Israel has not required retirement plan participation until the last few years, so this group still faces economic struggle. Kahlon has called his new plans for reform “another stage in the government’s war on poverty,” according to an article in Haaretz.
Nevertheless, little legislation aims to decrease Israel’s income gap that results from the world financial crisis and its effects on the global job market, according to the OECD.