Report: Austerity measures to plunge 90,000 into poverty

National Security Institute warns expected budget cuts to widen socioeconomic gaps, drive additional 19,000 families into poverty

Omri Efraim|Published: 05.28.13 , 18:18

A report published by the National Security Institute (NSI) on Tuesday warns that the expected cuts in the State Budget would plunge an additional 35,000 children into poverty.

The NSI said the austerity measures - including reduced child stipends, a 1% increase in the income tax and raising the VAT to 18% - would drive an additional 19,460 families into poverty (a 4.4% rise in the number of poor Israeli families). Some 90,000 people would fall into poverty as a result of the budget cuts, the report cautioned.

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The Organization for Economic Cooperation and Development recently published a report saying one in five Israelis and one in three Israeli children live in poverty.

According to the NSI's director, while the expected austerity measures are aimed at reducing the deficit, the damage they would cause to families with children will be long-lasting. He said some 45,000 poor families would be affected by the measures.

Archive photo: Roni Schutzer

The report further determined that the bottom decile would suffer most from the proposed measures, as its disposable income would be reduced by 6.5%. The disposable income of the top decile, on the other hand, would decrease by only 1.4%.

The NSI report also stated that the Gini Index, which measures inequality, would increase by 1.3%. It warned that low-income families would be driven into poverty as a result of the expected drop in disposable income and the tax hikes.

The report criticized the government's decision to impose a health tax and subject housewives to a social security tax. It said the poverty rate among housewives was particularly high – more than double the poverty rate among the rest of Israel's population.

The NIS said all echelons of society would suffer financially from the budget cuts, but the lower echelons would suffer more. Thus, said the Institute, "the government's policy will widen the (socioeconomic) gaps."