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Standard of living dives as middle class pummeled by virus — government report

National Insurance Institute records largest drop in median income in 20 years, resulting in a lowering of the poverty line that ‘occurs only during severe recessions’

A man at the Mahane Yehuda market in Jerusalem on January 10, 2021, during a third nationawide coronavirus lockdown. (Yonatan Sindel/Flash90)
A man at the Mahane Yehuda market in Jerusalem on January 10, 2021, during a third nationawide coronavirus lockdown. (Yonatan Sindel/Flash90)

With the coronavirus wreaking havoc on the economy, the standard of living in Israel saw its largest drop in nearly 20 years, with the country’s middle class suffering the most significant losses, according to a government report released Thursday.

The National Insurance Institute’s annual report, published after a three-month delay, recorded an overall drop in median income — the criterion for measuring standard of living — of 22.7 percent over 2020. Such a drop has not been seen in Israel since 2001 during an economic slowdown caused by the Second Intifada.

The average disposable income, often seen as a measure of the economy’s health, fell by 4.4% while in recent years it has risen by around 3%-4% each year. The biggest losses were seen among middle-income families, the report said, with those in the “middle class bracket” seeing disposable income drop by up to 7%.

The main victims of the virus crisis, the report found, were working families that saw their jobs disappear or their salaries cut, single-parent families, and young families.

According to the report, the decline in the standard of living resulted in a lowering of the poverty line, defined in relation to median income, to NIS 2,403 per person each month. As a result, the total number of people defined as living in poverty dropped slightly to 1,980,309, compared to more than 2 million people in 2019; 907,279 of them were children, the report said.

But the authors of the report made clear that the actual number of people living without sufficient funds to pay for basic needs has gone up.

“The decline in the poverty line itself is an exceptional phenomenon that occurs only during severe recessions,” the report said. “When you calculate the incidence of poverty according to the poverty line of 2019, you [see] that poverty has increased.”

People dine in the Lasova restaurant soup kitchen in Tel Aviv, on September 8, 2019. (Menahem Kahana/AFP)

With a small rise in income gaps, the data placed Israel at 10% higher on the Gini index of income inequality than the OECD average.

At the same time, however, the median income of the non-working population, which is generally characterized by a high level of poverty, saw an increase of some 6% thanks to “various universal grants given due to the coronavirus crisis,” the report said.

“The findings of the report prove the validity of the NII’s claims regarding the state’s obligation to increase the benefits and thereby reduce the large gap between us and what is given in the OECD countries on average,” National Insurance Institute Director-General Meir Spigler said in a statement accompanying the report.

“I hope that following the report’s findings, discussions will be held and decisions will be made that will help address the public, who need it as a lifeline in times of distress,” he added.

According to the NII, 620,000 Israelis are currently relying on unemployment benefits, of whom some 400,000 have done so since the pandemic reached Israel in March, battering the economy.

During the first outbreak of the virus in the spring, unemployment figures issued by the Employment Service spiked as 800,000 people quickly lost work as a result of the initial lockdown. In December, prior to the latest lockdown, 24,000 Israelis returned to their workplaces from furlough, but simultaneously almost 10,000 lost their jobs.

The current closure, set to be eased at the end of the month, shuttered nonessential commerce, leisure and entertainment, and limited workplaces that do not deal with customers face-to-face to 50% capacity.

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