Report: 80 Percent of Israeli Families Live in Overdraft


odAccording to the annual report released by the Taub Center for Social Policy Studies in Israel, the four lower income quintiles (households of their gross income, including other income sources such as non-work study funds revenue, for example income from renting an apartment, etc., is up 19.5 thousand NIS per month), are in constant overdraft in the bank, a sort of built-in overdraft that follows them from month-to-month. Only the families in the top fifth, with an average monthly salary of 36,000 NIS gross for the household are not operating in a deficit in the bank. The overdraft continues to increase as a family’s monthly income decreases.

If one analyzes the data by population group we see that on the average, all groups are in chronic overdraft.

Chareidim and Arabs are generally in more serious shape

Non-chareidi Jews for example spend 864 NIS monthly more than they earn on the average. The chareidi household is generally in a far more serious situation. According to the statistics, because their monthly overdraft continues to grow that may spend 3,200 NIS monthly more than they earn. The same holds true in the Arab sector where the average monthly overdraft is 1,920 NIS.

According to Eitan Regev, a researcher at the center who is a doctorate student and has a masters in economics, it is clear that there is a serious issue here because normative families cannot continue existing for a prolonged period of time if there is a chronic deficit in the bank that increases with each passing month. It is entirely possible that the incomes in the chareidi and Arab sectors are higher than reported by the Central Bureau of Statistics (CBS), with the facts in this report based on the CBS data. Hence, it appears there is also a significant unreported income that cannot be calculated in the analysis.

Regev uses data provided by the CBS, but not the data regularly taken for such an analyses, which is usually found in the CBS annual report, but Regev uses data released periodically and expand and modify the fashion in which the figures are studied.

Taub Center seeks a deeper analysis of the facts

For example, he analyzes regularly monthly income including allocations (such as child allowance or senior citizen or other funds) and income from investments or capital (such as investments, renting an apartment, pension fund, the value of a vehicle one receives from one’s place of work and the like), and redeeming education funds (generally every 8 years).

When analyzing monthly expenses he not only includes the ‘regular’ expenses such as basic (food, housing committee costs, utility companies), but he includes other payments one is obligated to make (IRS, health tax, Bituach Leumi) and the money taken off one’s monthly gross salary (one’s pension or mortgage payments or other investment payments, car payments and other money owed) which the CBS categorizes under total savings.

Regev has attempted to broaden the scope of the report to better reflect reality regarding income and expenses. After completing the work of gathering all the data he divided it into five groups in line with the highest to lowest earnings of the household and he discovered that most of the population is in overdraft. He explains that his method of calculating assists in focusing the search to the question – why is the average family in chronic overdraft?

Housing prices are at the heart of the issue

The answer to this question is related to the price of housing, which in recent years has increased tens of percent, even more so than food and the cost of raising children, and more than fuel and even more than the problems associated with one’s revenue.

Regev admits it is possible that a portion of the overdraft is less than it appears because of working off the books. “These contributory factors are insufficient to explain such large gaps. He feels that it is quite possible that households today, especially young couples, are dependent on the assistance of the money their parents have saved if they will ever succeed in purchasing an apartment.

If this is indeed the situation, this means that the savings, which were viewed as positive in the past, have now become negative. That is to say when the little brother of the young couple that has purchased an apartment wishes to buy an apartment with the assistance of his parents, they will have reached a time that they too wish to buy an apartment and it is doubtful if they will have enough money based on the constantly increasing cost of housing.

The sharp increase in housing costs, over 50% from 2007-2013 (in realistic terms) is the largest stumbling block to buying an apartment for many families. This is especially true in young households with limited income.

The Taub Center State of the Nation Report from 2014 includes a broader analysis of the problem of buying an apartment, which may very well be the most urgent matter for the government to address and solve. Three years after tens of thousands of Israeli took to the streets in protest over rising housing costs that continue today, the center has undertaken to release its own evaluation. The bottom line of this report is that the prices have risen considerably, land plots are a limited in number, and there are many governmental bureaucratic impediments that prevent changing housing industry realities in the immediate future. Low interest rates by the Bank of Israel just kindles the demand for mortgages and the situation continues to worsen.

The result of today’s marketplace is that fewer and fewer households can afford to buy an apartment. This is especially visible in the 25-34 age group in which the number of homeowners has dropped by 20%; from 57% in 2003 to 43% in 2012. The researchers point out that there may be other demographic factors too, including the reality that many now get married at a later age.

Food Prices Continue Rising

Most food items in Israel were less expensive by 16% on the average as compared to other OECD (Organization for Economic Cooperation and Development) nations in 2005. However, in the past six years the Israeli food industry has become 19% more expense on the average, Taub points out.

For example, if one takes dough and bread, which sold for 19% less in 2005, today they are 26% more costly on the average. Meat and poultry were 8% less expensive in 2005 and are now 21% more expensive. Dairy products were 6% more expensive on the average back in 2005 and today they are 51% more expense than in 2012.

The average household spend 800 NIS per person each month and 2,260 NIS for the household. This figure is 17.1% of disposable income and 21.4% of total monthly costs. The vast social gaps are reflected on the amount spent on food too. Homes in the bottom quintile spend 36.5% of their income on food as compared of the homes in the top category, which spend an average of 11.2% on food. The distribution of expenditures by category shows that expenditure on vegetables and fruits is the highest – 18% of food expenses followed by eggs and milk (15%), meat and poultry (14%) and bread and pastry products (13%).

The researchers also examined just what comprises the essential food basket. This refers to items Israelis will buy even when they salary erodes. It was learned that first they will abandon whiskey and eating out, sugar and sweets, dairy products and then fruits and vegetables.

Unreported income

The unreported income in Israel is estimated to be 20% of the GDP, which amounts to 200 billion NIS as compared to 17% on the average among other OECD nations, Dr. Noam Gruber of the Taub Center reports. Lowering the unreported income by 10% would add 30-40 billion NIS to the state coffers, an amount that is roughly the annual education budget.

Most of the unreported income is generated by small businesses and self-employed people. According to Dr. Gruber, the high tax burden imposed on them is a major cause of this. There is a direct connection between higher taxes and the motivation to hide income Gruber explains.

Unreasonable taxation

The marginal tax rate imposed on companies in Israel today can reach nearly 60% (including 18% VAT) as compared to 51% among OECD nations. Such a tax rate results in an increased temptation not to report income and therefore, the author of the report suggests changing the law to encourage capital investments and investment in small businesses.

Gruber also points out the absence of transparency by the tax authority in Israel contradicts accepted standards in the USA and Britain for example, for the authority in Israel does not publish data on the scope if its audit activities (for example investigation and the number of indictments that are filed). Based on limited data available, tax officials spend less than 1% on enforcement. As a result, the amount of audits dropped from 8.8% in 2004 to 2.4% in 2011.

A state comptroller’s report criticizes the deterioration in the level of enforcement and punishment and prosecution by the authority against tax evaders. “It seems that short-term savings to the state at the expense of enforcement and punishment lead to a loss in the long run due to the deterioration of reporting norms’ the report cited.

(YWN – Israel Desk, Jerusalem)


  1. So the Israelis use overdraft whereas most Americans prefer to carry credit card balances. That proves very little except that Israelis, like most people in industrialized countries, live beyond their means.

    To evaluate “poverty” look for things such as: 1) Do people frequently buy new clothes? 2) Do they money to spend on lavish simchas? 3) Do they appear hungry and emaciated? 4) Are there many families (meaning married couples with children) forced to share a home with other families?

    If you compare the standard of living today with 50 years ago (in Israel, that would be towards the end of Labor party rule, prior to the Six Day War), or 100 years ago (in Israel, that would be at the outbreak of World War I, under Turkish rule), you will see that even the poorest of the poor today are living well above what would have been considered “middle class” in the past.