November 27, 2012
Israel’s middle class increasingly squeezed
At Israeli weddings, gifts of china, silver and art are not welcome. Guests are expected to bring their checkbooks and contribute to a young couple’s purchase of their first home, often bought with substantial help from the newlyweds’ parents.
But a new report shows that only 65 percent of young couples in their 20s and 30s are able to buy a home, as compared with over 80 percent a decade ago.
These statistics are part of the State of the Nation Report 2011- 2012 published by the Taub Center for Social Policy Studies in Israel, which examines various aspects of Israel’s economy.
Director Dan Ben-David finds disturbing trends in Israel’s economy. “We are the ‘start-up nation’ with world-class universities, yet our productivity is falling further and further behind Western countries,” Ben-David told The Media Line.
While overall unemployment in Israel is relatively low, and employment rates among young and middle-aged Israeli men is much lower than in leading Western countries, tens of thousands of Orthodox yeshiva students receive government stipends for studying full-time instead of working.
Israel also has a lot of debt. The Taub Center found that the interest the country pays on its debt was more than its entire education budget last year, and double its health budget.
One bright sign is Israel’s national health care system. Almost all Israelis are members of one of four HMO’s and pay a percentage of their taxes for health insurance. Israeli Jews have one of the highest life expectancies in the world. However the report found that the number of hospital beds in Israel is continuing to drop, and is less than half the Western average.
The report also found that the government’s share of total health care spending in Israel has fallen, while private spending has risen.
“In essence, separate health care systems for the rich and for the poor have developed,” the report found.
Transportation is another problem. The congestion on Israel’s roads is 2.5 times higher than the Western average, although the number of cars per capita is much lower. Even though Israel has begun spending more money on its transportation infrastructure recently, traffic jams have gotten almost unbearable during rush hour.
But it is the plight of Israel’s middle class that economists find most disturbing.
Paul Rivlin, a professor of economics at Tel Aviv University, says the middle class is being squeezed all over the world. In Israel, he says, monopolies control important aspects of life.
“There is only one supplier of land because the State of Israel owns practically all of the land,” he told The Media Line. “There is only one supplier of cement. The food we buy is overwhelmingly sold or made or imported by monopolistic organizations that engage in price gouging.”
In the summer of 2011, socioeconomic demonstrations dubbed the “cottage cheese protests” swept the Jewish state. Hundreds of thousands, including Rivlin, went into the streets demanding lower food prices. Many items manufactured in Israel cost less when purchased abroad.
After those protests, prices of many commodities went down although they have crept up again over the past year. Rivlin says economic issues have often taken a back seat in Israel.
“The amount of time you can concentrate on social issues is limited because of security issues,” Rivlin said.
Taxes in Israel are also high, the income tax ranging from 10 percent to a whopping 48 percent.
“There have been some tax reforms that have benefited the bottom and the top, but the middle class still gets hit,” Rivlin says. “As you move up with moderate increases in income, you get pushed up into higher tax rates.”
“We are falling further and further behind in living standards and if we don’t do something soon, fewer Israelis will stay here,” Ben-David told The Media Line. “We are on some long-term social and economic trajectories that are simply unsustainable in the long run.”