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:
- The ability to buy a specific basket of goods needed for living at socially accepted minimum
- People receiving Social Security payments or “income insurance” (bituach hachnasa in Israel)
- 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
- 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|
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.
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