Israel was one of only two OECD countries in which poor families' income grew in 2007-2015 at a faster pace than the increase in income among rich families, Minister of Finance chief economist Yoel Naveh writes in his weekly review. The review focuses on whether economic growth in recent years has been reaching the economically disadvantaged population.
According to Naveh, growth in net income among the bottom five income deciles was 1.5 times as much as income growth among the top deciles. The review showed that net income among the bottom five income deciles has grown by an annual average of 3.3% in recent years, compared with 2.1% growth among the top five income deciles.
Naveh attributes the faster growth among the lower income deciles to cuts in taxation on labor, higher child allowances, negative income tax, and a rise in the minimum wage.
Naveh cited in particular the labor market's strong performance, reflected in a substantial expansion of employment, which theoretically enabled economically disadvantaged people to enter the labor market in 2007-2015. The employment rate in Israel grew by 4.6% as a result of both lower unemployment and a higher rate of participation in the labor force.
"The rise in employment was particularly rapid among economically disadvantaged groups in Israeli society, and improved their situation," Naveh wrote. The improvement among the bottom income deciles stood out especially in an international comparison; the income of the bottom income deciles fell in most OECD countries.
Another interesting finding in the chief economist's survey is that the increase in disposable income was greater than the rise in per capita GDP, thanks to the gradual increase in overseas assets held by Israelis, mainly through pension funds run by investment institutions. "Israel's transition from a borrowing country to a lending country, which began in 2003, has created a growing stream of income from Israelis' overseas investments (through pension funds, for example). As of the third quarter of 2016, Israel's net overseas assets reached a peak of 40% of GDP."
Published by Globes [online], Israel Business News - www.globes-online.com - on February 20, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017