Israelis as rich as most Europeans – report
Although there is concern about how assets are distributed, people in Israel are doing just fine, Credit Suisse says
Israelis are the sixth wealthiest people in the Middle East and Asia, and as wealthy as the average European, if not more so, according to a report by Credit Suisse. The Swiss bank’s latest Global Wealth Report portrays Israel as a prosperous country — and although the higher socio-economic groups in the country own much of the wealth, the distribution of that wealth is spread more equitably that in the United States, and it’s on a par with many countries in Europe.
“Wealth” is defined by the report as the net assets, meaning after debt is deducted, held by households or individuals in financial instruments and real estate. There is more of it than ever before, Credit Suisse says. Although governments have their hands full trying to pay bills and collect taxes, individual wealth, consisting of savings, property, investments, and other elements of net worth, have been growing steadily over the past decade. Global wealth in 2014 stands at $263 trillion, the report says, increasing by 8.3% over the past year, the highest growth level since 2007.
According to the report, $3,650 net is all an individual needs to be included among the wealthiest 50% of the world’s population, while to get into the top 10%, a person would need $77,000. Israelis easily qualify on both counts; the average Israeli adult is worth between $150,000 and $175,000, taking into consideration exchange rates. That is the sixth highest wealth level in the Asia-Pacific/Middle East region, which includes China and Japan. In this area, Israel is bested only by Australia, Singapore, Japan, New Zealand, and Taiwan. Israelis are also a bit wealthier on average than Europeans. In Europe, the average adult is worth $145,977. North America — the US and Canada — where the average adult has assets worth $340,000, is the world’s wealthiest region.
Israelis were also the eighth biggest wealth gainers in 2014, with assets growing about 14% over the past year.
There was also good news about what kind of assets people owned that made them wealthy. In 2014, financial resources – cash, stocks, bonds, and the like – accounted for 54% of the average individual’s gross wealth, while 45% consisted of non-financial assets, mostly real estate values. That was almost the same breakdown as in 2001 – before the housing bubble that led to the 2008-9 recession got into full swing — when 55% of the average individual’s wealth consisted of financial assets.
The report does not break down how national wealth is distributed to different income level groups in economies, but it does list countries by levels of wealth inequality. The US, Switzerland, and Hong Kong top the list of the most inequitable veteran economies, with 70% of the wealth in those locations held by the top 10% of the population. In the US, that figure is 74.6%. The same situation prevails in a slew of emerging economies, including Egypt, Turkey, India, Russia, Brazil, Indonesia, and Argentina, where the richest 10% own more 70% of the wealth. Russia, at 84.8%, is the dubious “winner” in that category. In Israel, 67.3% of assets are held by the top 10%, on a par with many European countries, including Sweden, Austria, Norway, and Germany, along with China, Mexico, and Saudi Arabia. Most of the rest of Europe falls within the “moderate inequality” category, with the top 10% owning between 50% and 60% of the country’s wealth. Only in two countries – Japan and Belgium – did the top 10% own less than half the country’s wealth.
It should be noted that Credit Suisse’s findings on wealth distribution, in which Israel fares a bit worse than average for industrialized countries, differ considerably from Israel’s Gini Coefficient, a unit of measure that indicates how much of an income gap there is between the wealthiest and poorest members of a society. In that survey, Israel was rated one of the most inequitable of the 34 OECD countries – 30th on the list, just ahead of the U.S., Turkey, Mexico, and Chile.
However, the gap could be explained by the fact that the Gini Coefficient measures only “on the table” income, ignoring money from the “black economy.” According to some estimates, a full quarter of Israel’s economic activity takes place “off the books,” unreported to tax officials and ignored by statisticians. Thus, say economists, it is perfectly reasonable for Israelis to be individually wealthy, despite the low “official” incomes they report to the government.
Africa, as usual, is the biggest loser in a report discussing wealth. Although the continent is home to about 12% of the world’s population, it has barely 2% of the world’s wealth. The average African has $5,080 in assets, but the levels of wealth inequality there are among the highest in the world.
The United States, meanwhile, remains “the engine of growth,” with more economic activity, financial asset ownership, and investor wealth than any other country. Despite the turbulence of the economy since the 2008 recession, Americans are 19% wealthier today than they were in 2006, and prospects for the future are excellent. Wealth in the US is expected to shoot up in the next four years, with total US wealth surpassing $114 trillion by 2019, up from about $85 trillion today. China, too, will remain a major engine of growth, the report says. China is expected to surpass Japan as the world’s second largest economy by 2019, andaverage the Chinese citizen will be as wealthy as Americans were on average in 1990.
And there’s good news for the middle class, those with assets of between $10,000 and $100,000, numbering about a billion people,, the report adds. “We expect the global value of median wealth per adult to rise by 36%, from $3,600 today to almost $5,000 in 2019. While the number of adults with wealth below $10,000 will shrink by 1%, the number will rise by 30% in the middle class wealth range and by 22% in the upper-middle class band $100,000 to $1 million,” Credit Suisse says. “This leads us to expect a substantial expansion of the middle segment in the wealth pyramid, and a corresponding contraction in the proportion of adults with wealth below $10,000.”
