Economists around the world and in Israel had predicted dark days for economies in 2021 that is ending now. In some countries, especially those that were hardest hit by COVID-19 infection and unemployment, it was so.

But fortunately, although poverty persists, the Israeli economy bounced back in 2021. According to the official Poverty Report for this year just issued by the National Insurance Institute (NII), there was an economic recovery, but at the same time, a considerable part of the grants given as special allowances introduced to help during the pandemic were canceled as employers began to reopen and rehire. 

Estimates calculated for 2021 indicate that despite the economic recovery this year, because of the cancellation of grants, there has been an exacerbation of poverty and inequality according to net income.  

“These estimates underscore the need at this time to pursue a government policy that supports growth that other than being sustainable will also be inclusive – growth that will minimize the long-term damage of the crisis on employment, poverty and inequality,” the authors stated.  “One of the main challenges facing us is the integration of the unemployed into the labor market. An investment is required in an active policy to encourage employment in which the total expenditure increase in terms of GDP is low in Israel and stands at one-third of the expenditure in the average of the developed countries.”

Among the steps required are holistic assistance to the unemployed that will include guidance and training programs tailored to the new labor market – vocational training, improvement in understanding and communicating in English and other basic skills combined with job placement. “The labor market has changed and adjustments are required from both employers and employees.” 

This year was the second year in which the NII published a report on the socioeconomic situation based entirely on its administrative data and not on the basis of what was derived from respondent’’ answers in a survey by the Central Bureau of Statistics. This is because the delivery of data from the household expenditure survey according to which the reports were calculated over the years was delayed. 

The pandemic and coping with it led in 2020 to a severe economic crisis. Israel’s GDP fell by 2.5% and the number of employed persons fell sharply by 9.4%. There was a decline in both average and median economic income. The impact on economic income encompassed most of the working populations, but the populations particularly affected were the weak populations in the labor market whose wages were low even before the crisis, the report said. 

Specific sectors including those involved in tourism to Israel – which has been almost wiped out by decisions to try to prevent an influx of new COVID-19 variants. But when foreign tourism is allowed to return, this sector is expected to recover at least partially. The finance minister recently advised tour guides and those working in travel agencies to “change your profession,” which caused great anger among these unemployed Israelis, as the country needs foreign tourism.

The rate of poverty according to family income has widened and deepened, and inequality has increased. Among the second to ninth deciles, the hardship was higher the lower the decile. On the other hand, the average income did not decrease in the lowest decile because of state grants, even among those sectors in which the employment rate was low, and the upper decile was the only one whose average economic income even increased slightly.

Among the measures taken were unemployment benefits, shortening the qualifying period needed to receive unemployment benefits, extending the eligibility period and easing conditions for preferential work for discharged soldiers. The NII even compensated employers for part of the isolation days they paid their employees.

This report presents the dimensions of poverty for 2020 according to the existing administrative data in the National Insurance Institute, in the absence of expenditure surveys on which the calculations are usually based. The previous report (and the first based on administrative data) prepared for 2019 and also including a simulation-based estimate for 2020, was published about a year ago. This year we added estimates of the missing income components in the administrative data (such as income from capital) so that the poverty line reflects all household income.

• The findings of the report show that in 2020 the standard of living in terms of median income per standard person and the poverty line derived from it increased in real terms by 2.4%. These increases are about a third lower than the real increases in recent years. Without government intervention in the form of allowances and grants, median per capita income would have fallen by a real rate of 10.2% in 2020. 

A week ago, the Latet (“To Give” in Hebrew) organization – the largest non-governmental organization fighting poverty and food insecurity in Israel and an umbrella organization for 180 local associations in the country – issued its own “Alternative Poverty Report.” 

It found that the had worsened poverty in Israel, with the almost 700,000 households (24.1%) who suffered economic hardship in January to March 2020 jumping to 1,121,000 households (38.6%) at the height of the crisis between July and September 2021. The figure declined a bit to 932,000 households (31.6%) between May and July 2021 

The proportion of households that are close to the poverty line (but did not fall below it also rose from 14% before the crisis to 23.6% today, Latet said. Fully 18.1% of the population declared that the food they bought was not enough for them, and they did not have enough money to buy more or have adequate heating in winter.

Latet stressed that its annual Alternative Poverty Report is designed to better and more fully reflect the scale of poverty in Israel than NII because “one of the methodological problems in the NII report is that it is based on how far Israeli household income is from the median income – which is half above it and half below it. But during the COVID-19 crisis, the median income of the entire the State of Israel fell, so households that were considered poor in the past are no longer considered as such according to the NII’s methodology.”