Israel ranks just behind US in largest income inequality rate
According to a study commissioned by the National Economic Council, Israel must take steps to ensure rates of inequality and poverty decrease in order to retain workers and increase labor production to aid the overall standard of living.
According to the study, the state has not yet passed the point of no return, but the writing is on the wall—"a large economic, social or security crisis can add fuel to a fire that there is no coming back from," the study's authors warned.
The study, which was prepared by the Shoresh Foundation at the request of the National Economic Council, details economic issues that have been neglected for years. The report also details future socio-economic challenges the State of Israel will have to contend with, which are "existential issues that will determine Israel's economic future, on which the state's ability to defend itself is based."
According to Shoresh, as the years go by, the gap between what a worker living in Israel can earn and what that same worker could earn in another country is growing. "Labor productivity has a great impact on wages in the country," write the report's authors. "It is impossible to pay a high wage per hour of labor if labor production is low."
Shoresh further warns that if Israel continues to stray from the path of more developed economies, it will be difficult to reduce the amount of educated and skilled workers leaving the country.
The document also examines the inequality and poverty rates in Israel, which are among the highest in the developed world. Compared to other OECD countries, Israel's Gini Index—which represents inequality and wealth distribution—ranks it second, below the US.
More severe is the picture of poverty in income (after transfer payments, income support, child social security payments, unemployment benefits and taxes), since poverty rates in Israel are higher than in other developed countries; almost double the OECD average.
The report claims that increasing the treatment of inequality and poverty is not a root fix, but merely a treating a symptom.
However, an intensive effort at correcting low productivity, poverty and inequality requires focusing on basic problems, which are defined in the report as deficient human infrastructure in the form of education and inadequate transportation.
"The more people have the tools and conditions to deal with a modern economy, the more their personal situation will improve and poverty will decrease, thus allowing the economic engine to benefit more from its existing cylinders. This will be reflected in upgrading the national ability to absorb, implement and develop knowledge, which will increase productivity, and in turn, raise the standard of living and the pace of growth."
However, it is worth noting that statistics concerning Israel are skewed to a certain degree due to poor education and higher levels of poverty within the two fastest growing population segments—ultra-Orthodox Jews and Arabs—each with their own unique social circumstances.
