Israel's Poverty Line: Not What You Think

Israel’s Poverty Line: Not What You Think

Israel's poverty line is supposed to define who is poor and who isn't. But does it?

Just like when another wave of layoffs is announced, you've probably heard about the poverty line in the media when the numbers are shocking enough to make headlines.

How are poverty lines chosen?

Governments and organizations choose their own definitions of who is poor based on one of these methods:

  1. The ability to buy a specific basket of goods needed for living at socially accepted minimum
  2. People receiving Social Security payments or “income insurance” (bituach hachnasa in Israel)
  3. Having earnings equal or below a certain fixed amount, such as a (fraction of a) country's monthly minimum wage or whether people are reaching a “$1 a day” level
  4. Having a monthly income below a number relative to an average income of a country's population

How is Israel's poverty line defined?

Chosen in the 1970's, Israel uses a variation of the last method with the official definition of Israel's poverty line being fixed at 50% of Israeli households' median monthly disposable income. In other words, if you made a long list of each Israeli household's monthly income, sorted the values from highest to lowest and then pulled out the number that was in the exact middle of the list, a poor Israeli household is one earning less than half that number.

To make that definition more meaningful, the National Insurance Institute (Bituach Leumi) publishes tables every year showing how much the poverty line is valued in shekels with the numbers split by family size, age group or other criteria.

For example, here's a table from 2006/7:

Poverty Line by Family Size

Average values for 2006/7 (NIS per month) Percentage of average salary Number of family members
2,028 26.9 1
3,244 43.0 2
4,299 57.0 3
5,191 68.8 4
6,083 80.6 5
6,894 91.4 6
7,705 102.1 7
8,435 111.8 8
9,084 120.4 9

Pros vs. cons of this definition

  • Pro – being based on the median and not the national average monthly disposable income means that if the ultra-rich get ultra-richer, their earnings won't distort the poverty line.
  • Con – if the cost of living in Israel changes drastically e.g. due to inflation, the current definition won't show any difference in the population's ability to cope with the change.
  • Con – this definition doesn't take into account pre-existing assets. If I have a Mercedes-Benz convertible but no monthly income due to a recent layoff, should I be considered poor?

Changes on the way?

People have been pushing for an updated definition for years and according to TheMarker (Hebrew), a government-appointed committee came to some conclusions last year. Based on which, the Treasury will push for a change in the 2009 budget that the poverty line take into account new indicators like household assets and monthly spending.

If you liked this article, you'll enjoy The Ultimate Global Guide to Job Salaries in 2008.

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About the Author Jacob Share

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7 comments
josh says

Another couple of statistics that are widely abused are the amount of full-time vs part-time workers and the lower average female salary.

What does the media make a large part-time workforce a bad thing? Should not this be a good sign that youth and students are working, and that mothers can also find work while the kids are in school?

And given that, there seems to be a growing awareness of ‘misrat em’ which means that some companies find it convenient (and are willing) to give mothers a part-time job in which they can come in during specific hours a day.

and with regard to poverty, Israel can’t be judged on such nominal stats because of two major reasons; Arabs and Haredim. In general, both have a multi-child non-western lifestyle that might not be centred on the pursuit of wealth and consumption. A Haredi family might have eight kids, father studying all day, mother working part-time, and they are getting by with the basics (which most of us would seem primitive) – but considered poor. The Arabs (in general again) also have a lower standard of living and get by with less (besides the ‘natural’ tendency to evade taxes to the Jewish state and/or work under the table). Both groups simply get by with much less. Though, I am not denying that there are real poor people in Israel (in all sectors) with empty fridges.

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noam says

Please clarify if the median is the number in the middle then by definition 50% of households are below the poverty line?

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Jacob Share says

Noam- no, that’s not it. Here’s an example.

If the median Israeli household income is e.g. 8000 shekels bruto (gross) per month, then the Israeli poverty line is 4000 shekels bruto per month i.e. any household with a lower income is considered below the poverty line.

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Kate says

I had no idea statistics were so widely open to discussion, but no one thinks of Israel of being a poor country or of having issues like child hunger, etc, but it happens even in rich countries.

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Kate says

Another issue is that people don’t like having their perceptions changed, even when that means just becoming better educated.

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