Back to Basics: Material Hardship in Israel

While this figure helps illuminate the extent of the poverty problem within Israel, what does it actually mean to live in poverty in terms of daily living conditions? In other words, how much material hardship do the poor experience on a regular basis and how does this hardship differ across income and population groups within society? In The State of the Nation Report 2013, Chair of the Taub Center Social Welfare Policy Program and Tel Aviv University Professor Haya Stier, along with Dr. Alisa Lewin, Taub Center Policy Fellow and Haifa University sociologist, have documented new findings on material hardship in Israel using data from the Central Bureau of Statistics’  2007 Social Survey.

While poverty rates are measured by an individual’s income relative to other individuals in a country, material hardship is a subjective measure based on one’s financial difficulties in several basic areas: paying bills and purchasing food, health services and housing. Previous studies have identified that families with a larger number of children, single mothers, the unemployed, and the lower-educated are more likely to suffer from material challenges. Furthermore, material hardship is not just problematic for those experiencing long-term poverty, but even those who find themselves temporarily or suddenly poor might experience material hardship.

Stier and Lewin’s study shows that Israelis across the income distribution are forced to forgo basic necessities for financial reasons. For example, 40 percent of Israelis forgo dental care and 35 percent do not adequately heat or cool their homes due to the cost. These sacrifices are much more evident in the bottom half of the income distribution. The first figure shows the share of the population forgoing basic needs (food, heating or cooling, telephone or electricity
services) and medical needs (medical care, drugs, dental care) by income quartile. A large share of individuals in the bottom quarter of the income  distribution regularly experience material hardship, with almost half of them (44 percent) limiting food expenses, two-thirds (64 percent) bypassing heating or cooling, and one-third (31 percent) limiting telephone or electricity use. Individuals in the second income quartile also forgo various basic needs in surprisingly high numbers, with nearly half limiting heating or cooling in their homes, and one-third limiting food consumption.

Even with universal healthcare coverage in Israel, out-of-pocket and private spending is still required for various services. Among the lowest income  quartile, one-third bypassed medical treatment due to cost and 38 percent could not afford their medications. About a fifth of individuals in the second income quartile bypassed medical care and medications due to financial reasons. Among medical needs, dental care stands out in particular; because it is expensive and mostly privately financed, it is often neglected. Two-thirds of those in the bottom income quartile, and over half of those in the second income quartile did not seek needed dental care. In this case, even those in the top half of the income distribution are affected by the high cost, with a third of those in the third income quartile and 14 percent of those in the top income quartile going without some dental care.

There are certain groups in Israel that are particularly afflicted with poverty: 50 percent of Arab Israelis and 57 percent of Haredim (ultra-Orthodox Jews) live below the poverty line. However, poverty is not experienced the same way among people in these groups. Stier and Lewin investigated the extent of material hardship among individuals in the lowest income quartile, according to the following three groups: Arab Israelis, Haredim and non- Haredi Jews.

The results indicate that the poorest Arab Israelis experience significantly higher levels of material hardship than other low-income populations in Israel, across all areas studied. For example, while 18 percent of Haredim and one-quarter of non-Haredi Jews in the lowest 25 percent  income group had trouble paying for telephone and electricity, almost half of Arab Israelis did. Similarly, the poorest Arab Israelis were more likely (78 percent) to forgo heating or cooling their homes than were the lowest-income Haredim (55 percent) or non-Haredi Jews (56 percent). When it comes to medical care, the same phenomenon is observed. While over half of the poorest Arab Israelis did not purchase needed medications due to cost, only 21 percent of the
poorest Haredim bypassed medications.

The difference between Arab Israelis and Haredim in terms of material hardship is particularly interesting because these groups share some similar characteristics: they are relatively young, with large families and low levels of employment. Stier and Lewin suggest that certain factors may contribute to the increased hardship experienced by low-income Arab Israelis. One key factor is that a larger share of Arab Israelis than Haredim grew up in a poor household. If the Haredim are the “new poor” compared to Arab Israelis, they may have more existing family resources to rely upon. Poor Haredim are more likely to feel that they have someone to count on in times of need than do poor Arab Israelis (93 percent versus 74 percent, respectively, expressed this
feeling). Haredim are also more likely to feel they can rely on their relatives and friends if they need financial assistance. It is postulated that the strong networks of Haredim and their sense of obligation to support each other and their community may make them better able to withstand the effects of poverty.

This Taub Center study helps illuminate the relationship between income and material hardship in Israel. It demonstrates that economic challenges are not limited to the poor, with even people in the second income quartile suffering substantial amounts of material hardship.

That said, it is nonetheless important to add a cautionary note with regard to the interpretation of these findings. One of the basic tenets in economics is the need for individuals to decide what to purchase and what to do without in view of the budget constraints faced by nearly everyone. Hence, by definition, the existence of a budget constraint for all but the extremely wealthy implies that individuals have to make decisions about what to consume and what to forgo.
Therefore, the question of where simple budget constraint issues end and actual material hardship begins is a very subjective one.

And yet, the forgoing of spending on food, medical and dental care described here is substantial and has important policy implications. It highlights the importance of universal healthcare in the country, without which the frequency and implications of bypassing medical care would be even worse. In addition, the study identifies that poor Arab Israelis suffer from higher levels of material hardship than do other poor populations, and have fewer family
and communal resources to support them. These findings draw attention to the importance of considering material hardship in devising social welfare policies to address poverty and overall well-being in Israel.