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Strong growing stronger, weak becoming weaker
Photo: Zvika Tishler
Growth rate in Israel one of lowest in world
Report published by Adva Center for Information on Equality and Social Justice finds growth rate between 1998 to 2007 was 40%, compared to global average of 72%, growth rate of 182% in Gulf states. Report also says Sephardic hired workers earn 40% less than Ashkenazim
A report published Saturday night by the Adva Center for Information on Equality and Social Justice in Israel found that an inequitable division of the economic growth and cuts in the social budgets throughout the decade between 1998 and 2007 have led to a withdrawal and radicalization on the social justice front, in spite of the economic prosperity in most of these years.

 

The survey paints a grim picture of the economic and social trends which have characterized the discussed decade, as the Israeli society prepares to deal with a financial crisis which is about to become deeper.

 

The wages of senior managers in the big listed companies was more than doubled – from NIS 4.5 million (about $1.16 million) a year at the beginning of the decade to NIS 8.43 ($2.17 million) at the end of it. Meanwhile, an increase was recorded in the incidence of poverty – from 17.4% to 19-20%.

 

Families in the lowest echelons were paid a monthly salary increment which was only enough for adding a handful of products to their food basket. Another characteristic was an ongoing shrinkage in the middle class, in the number of families and their part in the total income.

 

The report also notes that the picture of the growth is incomplete. In the past five years the economy saw an annual growth rate of more than 5%, which is high compared to the West. However, an overall summation of the decade shows that the growth rate totaled only 40% due to the heavy recession following the intifada – one-third lower than the West's growth rate (about 60%) and half to a quarter of the growth rate of India (112%) and China (176%).

 

The report stresses that even during the year in which a significant growth was recorded, its fruit did not infiltrate all layers of the society equally, causing the prosperity to have a difference impact on the periphery areas, which were inferior to central Israel, and on society's groups, with the strong growing stronger and the weak becoming weaker.

 

Leap in banks' growth

The growth in the central regions focused on several industries. The banking, insurance and provident funds grew by 102%, while the high-tech industries saw a growth of 47%, but the traditional industries grew by only 6%.

 

The inequitable division of the fruits of the growth was expressed in the following grim picture: The average monthly income of a household in the top echelon received an additional NIS 5,222 ($1,344), which were enough to finance half of the annual tuition fee of a university student.

 

In contrast, the sixth echelon received an addition of only NIS 1,486 ($382), which were enough to purchase a number of clothing items, while a family in the second echelon got up to NIS 507 ($130.5) for the purchase of a small amount of food products.

 

The survey also found that the monthly and hourly wage gaps between men and women have not changed in the past decades.

 

Ashkenazi hired workers living in the city earned up to 37-39% more than the average salary in the economy. The wage of Sephardic people who earned a little less than the average salary at the beginning of the decade saw a slightly increase towards the end of the decade, while Arab hired workers living in the city continued to earn less than 30% of the average salary.

 

Allowances cut

Barbara Svirsky and Dr. Shlomo Svirsky, heads of the Adva Center, stress that the abandonment of the low-income population in favor of the market forces was not the only thing which contributed to the expansion of social inequality. Another cause, they say, was the economic policy and governmental legislation, particularly during the crisis which broke out following the intifada.

 

"This is the same government that benefited the high income earners through tax reductions, which added NIS 2,000 ($514.8) to the net salary of those earning more than NIS 50,000 ($12,870) a month.

 

"On the other hand, the disadvantaged population was the one particularly hurt by the commands derived from unprecedented cuts to the annual budgets, which undermined a number of the basic socioeconomic orders."

 

The child allowances were cut by 45%, the unemployment allowance by 47%, and the pension funds and income support pensions were cut by about 25%.

 

In total, the National Insurance payments saw a drop of NIS 3 billion ($772,000) in recent years (from NIS 50.1 to NIS 47.1), while the poor's needs have increased, especially the need to upgrade the population's education in light of the ongoing deterioration in students' grades.

 

The teaching hours' budget per student dropped from NIS 8,920 ($2,296) to NIS 7,553 ($1,944), despite repeated government statements that improving the level of education would lead to growth.

 

Thus, in the discussed decade more than half of Israeli youths have not receive a matriculation certificate despite the increase in the number of students eligible for a certificate, which was only recorded in well-established communities and not in the periphery.

 

Among the 17 year olds, some 80% reached the 12th grade in 1999, but only half of them were found eligible to a matriculation certificate (some 41%), and only 26% went on to study in universities and colleges in the eight years which followed.

 

The survey also found that the erosion in the health basket budget doubled the burden of payments on households from an average of NIS 436 ($112) per capita to NIS 894 ($230).

 

"Everyone paid more, but families with a high income could have at leased purchased complementary health insurances – private and expensive ones. Those of the top echelon who could afford it spent up to NIS 313 ($80.5), compared to NIS 163 ($41.9) in the sixth echelon and only NIS 70 ($18) in the second and lower echelon, and the service they received was in accordance to the price," the report said.

 

The Svirsky couple also discussed the damages caused by the privatization of the new pension funds and the transfer of provident funds from the banks' control in 2003 to investment banks while changing the pension savings' investment channels.

 

The percentage of savings protected in government bonds with a guaranteed interest rate dropped from 70% to 30%. The funds' managers were required to refer 70% of the investments to the capital market. The damages of this move were exposed following the heavy loses suffered by the savers in the current financial crisis, and will mostly harm people who plan to retire in the coming years.

 

The Adva Center heads conclude the report by expressing their regret over the grim picture presented in it. "At this time of all times, at the start of a deep financial crisis, we missed the opportunities of the growth periods by failing to take advantage of the prosperity in order to improve the situation of all layers of society in Israel in a concrete manner."

 

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