Social Inequality In Israel: Taub Center Study - Adva Center Report

23 December 2010

By Stephen Lendman 

An earlier article explained neoliberalism's impact on Israeli Jews, beginning in the 1980s. In 1985, the Knesset amended the Bank of Israel Law, prohibiting it from printing money to finance industrialization, full employment, and immigrant absorption. 

It was part of a neoliberal takeover, embracing a massive power shift from various government agencies to the Finance Ministry and central bank (the Bank of Israel), similar to American financialization that empowered Wall Street, the Federal Reserve it controls, and US FIRE sector overall (finance, insurance, and real estate).  

In 1985, Israeli policy included: 

-- efforts to reduce budget deficits to near balance; and 

-- dampen inflationary pressures by cutting wages, prices, credit, the currency's value, public benefits, pensions, and union power to establish a secondary, exploitable, temporary worker market. 

The same year, the Arrangements Law established an emergency Economic Stabilization Plan. It sidestepped the normal legislative process, became a permanent budget adjunct, and kept Knesset members from debating its destructive effects on democratic values and social justice. 

As a result, a race to the bottom followed, especially since the 1990s, as evidenced by mass privatizations, cutting welfare and social benefits, and, like in America, shifting wealth to the rich. The results were predictable. Israel not only flaunts democracy, it's a land of extreme and growing inequality. 

Taub Center Study 

The Jerusalem-based Taub Center's 2009 State of the Nation Report sees disaster ahead for Israel's economy based on three basic measures: 

-- its standard of living; 

-- poverty rate; and 

-- extent of social inequality. 

When "a major problem" exists in one or more of these variables, "the society is in danger of a potential crisis." Moreover, when their root causes aren't addressed, it's "on an unsustainable long run trajectory." Compared with other Western countries, Israeli income inequality and poverty "are among the highest...." A growing crisis exists from failure to deal with them. 

"What are Israel's national priorities," Taub asks? "The answer lies in its government's budget" compared with other developed countries. "Although Israel's standard of living has risen in absolute terms since 1973, it has declined in relative terms, compared to that of the leading countries in the world." Moreover, benefits  disproportionally favor the rich, a continuing trend that bodes ill ahead because of misguided priorities, producing greater inequality, unemployment, and poverty for failure to address root causes. 

Study editor Professor Dan Ben-David explained, saying: 

"In the last year I realized the gravity of the situation. In economics there's the absolute level, and....the pace of change. I've long been aware of Israel's bad situation regarding important parameters such as the employment rate and the quality of education. What I learned in the last year is the pace of change. I discovered that we are moving down the problematic trajectories much more quickly than I'd realized." 

On employment, for example, headline numbers are misleading. They show how many job seekers are unemployed. "The main problem is those who are neither working nor seeking work, and here the figures are frightening." Excluding ultra-Orthodox Jews and Israeli Arabs, it's 18.9%, about 25% higher than for developed nations on average.  

For Israeli Arab males, it's 27%, and for ultra-Orthodox ones, it's a staggering 65.1%. The average per capita income for working Israelis is $19,150 compared to $6,756 for Israeli Arabs. Moreover, they get less than 4% of the education budget and 8% of welfare benefits. As a result, 50% of poor children are Arabs, but Jewish poverty is serious and growing. 

In addition, non-employment is compounded by the "astonishing data....about (Israel's) education system. Here, the surprise is in the direction and intensity of the changes." 

In the last decade, the number of students in mainstream state education dropped by 3%, while enrollment in "national-religious" schools rose by 8% and 51% in ultra-Orthodox ones. Arab ones increased by one-third. "These are astounding figures - and that's just in a single decade." 

If the trend continues, by 2040, 78% of Israeli children will be in religious, not secular, schools. Already, Israel's education system is in decline. For Arabs, it's "Third-World," and for Jews "it's among the lowest in the West." School performance is eroding because Israel's education system "is in a state of anarchy." 

Moreover, poverty and inequality rates are "very high." At yearend 2008, 32.3% of families lived below the poverty line before tax and welfare adjustments. 

Ben-David compared politicians to slow-boiling frogs. Clueless about a growing crisis, it'll be too late to address it when they "realize the pot is boiling." 

Adva Center Report  

The Tel Aviv-based Adva Center released a December 26, 2009 study titled, "Israel: A Social Report - 2008/2009," presenting disturbing findings like Taub. It showed 2008 was characterized by increasing inequality in salaries, household income, and matriculation success rates. "High levels of inequality were also found in higher education, health and retirement savings." 

Its main findings were as follows: 

-- gross 2008 income increased only in the top bracket; all others declined; working household wages have been falling 3 - 4% a year; 

-- the share of top bracket income increased from 28.3% in 2007 to 28.6%; all other brackets showed declines; 

-- women's average income was 63.1% of men's; 

-- the percent of middle class families decreased from 27.7% in 2007 to 27.1%; other studies show a declining 25% figure; middle class total income also decreased; Adva defined it as "all households whose income is between 75% and 125% of median household income;" 

-- the average compensation for senior Israeli executives employed by the "Tel Aviv 25" listed companies (Israel's largest) increased by 7%; their earnings were 95 times the average wage; for these companies' top officials, it's 500 times; 

-- from 2000 to 2009, Israel's national income grew by 30%; however, it was 17% for employees compared to 59% for companies; 

-- only 44.4% of 17 year-olds passed their matriculation exams, the lowest rate in a decade; however, affluent locality rates increased from 63.8% in 2004 to 67.1% in 2008; "development towns" declined from 54.2% in 2004 to 46.9% in 2008, excluding East Jerusalem;  

-- inequality in access to healthcare increased; and 

-- did as well for pension savings. 

Overall, investments and economic growth benefits "a small section of the economy and only some parts of the country....The blunt of the global financial crisis of 2008-2009 hit employees, not employers" or the rich. 

On April 29, 2010, Jerusalem Post writer Sharon Wrobel headlined, "Gafni attacks excessive pay," saying: 

Knesset Finance Committee Chairman Moshe Gafni said "(e)xcessive salaries paid to banking and corporate executives are widening the gaps in Israeli society." 

Hebrew University's Momi Dahan called Israel's experience "similar to the US (and) UK, where over the past three decades senior management (compensation) increased out of proportion to widening inequalities in the economy and society." 

On October 12, 2010, Haaretz writer Meirav Arlosoroff headlined, "The Israeli middle class is shrinking - but only slightly," saying: 

Planned tax cuts "will mostly benefit the wealthy, (since) it involves reducing the highest marginal" rates, not others or average taxes for most workers. Moreover, a Knesset Research Center study showed only 25% of Israeli households are middle class (based on the above Adva Center definition) because of high poverty, depressed wages, and unemployment. 

For years, middle class wages have eroded, lower class ones even faster. Israel's rich alone are getting richer at the expense of working households. According to Bank of Israel governor Stanley Fischer, about 20 Israeli families control banks, supermarkets, telecoms, real estate, newspapers, high tech companies, utilities, and other basic industries and services.  

The central bank's 2009 annual report showed these families control 25% of Tel Aviv Stock Exchange-listed companies and 50% of total market share, one of the highest concentrations among developed countries. 

According to the 2009 Merrill Lynch World Wealth Report, 5,900 Israelis have at least $1 million in liquid assets, and from 2005 to 2007, Israel produced more millionaires per capita than any other country. The net worth of its 500 richest, in fact, exceeds one-third of total GDP, an extraordinary concentration level, and with it a chokehold on the economy and government policy. 

At the same time, falling wages and social benefit cuts in healthcare, education, and other areas have widened the gap between rich and most others. Among all developed nations, Israel, America and Britain are the most unequal, a trend getting worse, not better.

Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening. http://www.progressiveradionetwork.com/the-progressive-news-hour/.

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