Munich Personal RePEc Archive

Chapter 8: Issues in Welfare Policy

Gottlieb, Daniel and Nitsa, Kassir (2006): Chapter 8: Issues in Welfare Policy. Published in: Bank of Israel Annual Report (31 March 2007): pp. 317-342.

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The incidence of poverty,as measured by the relative index customarily used in Israel,rose in 2005 to a level of 24.7 percent.Some reduction in poverty was evident in 2006,however,and in the year to June 2006 it reached 24.4 percent. Alternative poverty indices which consider a household poor if its income is lower than that required to buy a basic basket of goods,also indicate a decline in poverty in 2005,after rising in the previous three years. Forty percent of the poor manage to consume more than the amount indicated by the poverty line,but the high rates of poverty prevailing for years make it difficult for the weaker sections of the population to maintain a reasonable standard of living,so that the level of consumption of sixty percent of the poor,as well as their income level,is below the poverty line. The incidence of poverty is high and has risen over the years among large families,those with low levels of education,and families with few breadwinners,especially among Arabs and the ultra-orthodox (Haredi). Growth contributes to the reduction of poverty among those well integrated in the labor market,but no such effect is evident among those with low rates of participation. The extent of poverty is a forceful reminder of the need for an ongoing policy of reducing poverty,together with fiscal discipline that supports sustainable growth.The policy should be directed towards encouraging those capable of working to join the labor force,increasing the return to labor for those on low wages,and directly supporting the poor who have low earning power. At the beginning of 2007 the government decided on steps intended to narrow social gaps in Israel and to increase the rate of participation in the labor market.These steps included the introduction of earned income tax credits (EITCs),compulsory pension schemes,increased enforcement of labor laws,and subsidy of day centers and nurseries to enable mothers to go out to work.These measures are intented to be introduced gradually,by 2010.

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