ISRAEL: A SOCIAL REPORT 2012 Dr. Shlomo Swirski | Etty Konor Attias ||| December 2012 2 Israel: A Social Report 2012 مركزأدفا Board of Directors Dr. Yossi Dahan, Chair This report was made possible Gilbert Finkel (M.A.), Treasurer by generous grants from: Professor Ismail Abu-Saad Ford Israel Foundation Dr. Nitza Berkovitch MAZON: A Jewish Response to Hunger Professor Dani Filc Professor Rachel Kallus Professor Hubert Law-Yone Professor Uri Ram The Adva Center is supported by the following: Dr. Yitzhak Saporta Jacob & Hilda Blaustein Foundation Professor Rivka Savaiya Heinrich Boell Foundation Professor Oren Yiftachel CORDAID Professor Yossi Yona European Union Friedrich Ebert Stiftung Audit Committee FordIsrael Fund Attorney Ovadia Golestany Ms. Ruti Gur Hadassah Foundation Mr. Howard Horowitz and Ms. Alisse Waterston Staff Members Jewish Women’s Foundation of New York Barbara Swirski, Executive Director MAZON: A Jewish Response to Hunger Shlomo Swirski, Academic Director National Council of Jewish Women Etty Konor-Attias, Research Coordinator New Israel Fund Adi Sofer, Economist Rosa Luxemburg Foundation Safa Agbaria, Economist Zabar Family Attorney Noga Dagan-Buzaglo, Researcher Yael Hasson, Researcher and Coordinator, Women’s Budget Forum Valeria Seigelshifer, Advocacy Director Shira Pinhas, Community Social Worker Ariane Ofir, Statistician Yaron Dishon, Outreach Coordinator Mira Oppenheim, Office Manager and Press Liaison 3 INTRODUCTION This annual update of the Social Report appears at the height of the Israeli election season, held early because of government fears that it would not be able to mobilize a majority to pass a budget bill that called for harsh cuts in the social services. Election campaigns tend to highlight the issues that capture media headlines. This annual Social Report, on the other hand, looks at long- term socio-economic processes: economic instability, one of whose sources is the absence of a political agreement with the Palestinians; the growth of financial capital, which serves the interests of a small minority; reduced investment in the real economy, in which most Israelis are employed, relative to other developed countries; deepening inequality between the income brackets, with a surge ahead by the highest percentile, the top one percent of earners; the inability to break the 50% barrier with regard to successful high school matriculation rates; greater household spending on health; and wide gaps in the standard of living for retired persons. Most of the figures that appear inIsrael: A Social Report are published by the Central Bureau of Statistics (hereinafter CBS) at a delay of one year; hence, the picture presented here relates primarily to 2011. However, most of the tables and figures also provide data for the previous decade, 2001-2011, which allows for the identification of long-range processes. 4 Israel: A Social Report 2012 THE DOUBLE JEOPARDY OF THE ISRAELI ECONOMY Israel’s economy is subject to double the first and second Intifadas. There primarily in the bursting of the jeopardy. Along with many other have also been more limited flare- high-tech bubble and the outbreak countries, it is exposed to the risk of ups such as the Cast Lead Operation of the second Intifada; the second global economic crises, such as the in the Gaza Strip in late 2008 and occurred toward the end of the financial crisis in the United States early 2009, and Operation Pillar of decade with the onset of the global and the debt crisis in Europe. But Defense in Gaza in November 2012. financial crisis. In between, Israel Israel is also vulnerable to the threat enjoyed five years of economic The adverse effect of this political of violent political conflicts due to growth that averaged a healthy 5% violence on economic stability is the volatile situation in this region, per annum. This period of growth, clearly demonstrated in the figure particularly the absence of a political however, did not compensate for below, which presents growth data solution to the Israeli-Palestinian the losses incurred during the two for the previous decade: The first conflict. Over the past two decades, crises. crisis occurred at the beginning of Israel experienced two uprisings the present decade and was rooted against its continuing occupation – 10 Israel’s GDP 2001-2011 and 9 Forecast for 2012-2013 8 Annual change rates 7 6 5 4 3 2 1 0 -1 -2 % 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* 2013* -0.2 -0.1 1.5 4.9 4.9 5.8 5.9 4.1 1.1 5.0 4.6 3.5 3.8 *Forecast Notes: 1. Figures for 2012 are a CBS estimate; figures for 2013 are a Bank of Israel forecast. 2. On the assumption that gas from the Tamar field will begin flowing in 2013. Source: Adva Center analysis of CBS, Statistical Abstract of Israel, various years; CBS, Press Release: Initial Estimates of the Third Quarter of 2011, 16 November 2011; Bank of Israel, Update of the Macroeconomic Forecast for 2012-2013, 24 September 2012, http://www.bankisrael.gov.il. 5 DOUBLE JEOPARDY RESULTS IN LOWER ECONOMIC GROWTH Due to the double jeopardy, Israel Another region showing high growth If Israel aspires to a standard of registered lower economic growth was Eastern Europe, represented living like that of Germany and the rates than many other countries in this graph by Poland, with an United States, as reflected in the during the last decade. average annual per capita GDP per capita GDP, it needs to grow at a growth of 4.2%. much faster pace over an extended The graph below shows the change period of time. It managed to do in the average annual GDP per In contrast, Israel’s average annual this in the years 2004-2008, when capita for selected countries from GDP per capita growth in the decade the per capita rate of economic the beginning of the decade through 2001-2011 amounted to 1.6%. growth was 2.8%. However, during 2011, the last year for which we Although this is higher than that of the Intifada years, 2001-2003, have complete figures. some of the world’s richest countries instead of growing, per capita GDP – the United States with 0.7% and China experienced the greatest decreased by an average annual Germany with 1.2% – the per capita economic growth: Its GDP per capita rate of 1.3%, and in 2009, following GDP in those countries was already increased by an annual average rate the global economic crisis, it shrank much higher than that of Israel: of 10%. India, too, grew by leaps again by 0.7%. As a result, Israel’s approximately $44,000 in Germany and bounds – an average annual average annual per capita growth and $48,000 in the United States, rate of 6.2%. The economies of India over this decade was no more than compared with $31,000 in Israel (in and China are the most prominent 1.6%. 2011, at current prices). in Southeast Asia, many of which experienced high growth rates. 10.0% GDP Per Capita in Selected Countries, 2001-2011 Average change rates in per capita GDP at constant prices in local currency 6.2% 4.2% 2.6% 1.6% 1.2% 0.7% China India Poland Brazil Israel Germany United States Source: Adva Center analysis of IMF, World Economic Outlook, October 2012. 6 Israel: A Social Report 2012 THE PROBLEM IS NOT MONEY BUT INVESTMENTS Fixed and Financial Assets Fixed assets in Israel, 2001-2009 Financial assets 6,000 In NIS billions, at 2010 prices 5,000 4,000 3,000 2,000 1,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Financial assets 3,289 3,314 3,713 4,032 4,668 4,855 5,512 4,826 5,699 Fixed assets 1,354 1,399 1,421 1,491 1,587 1,639 1,709 1,700 1,696 Notes: 1. Fixed assets – buildings (residential and non-residential), machinery, equipment, vehicles, and software. 2. Financial assets – total cash, deposits, tradable bonds, and stock owned by households, the business sector, government, Bank of Israel, commercial banks, and mortgage banks, as well as foreign investment. Source: Adva Center, PowerPoint Presentation: Israel is now richer, so why can’t Israelis make ends meet?, 29 August 2012 [Hebrew]. Growth begins with difference may not be big, but Israel, deposits, securities, pension plans, investments in fixed which aspires to a level of GDP per and life insurance) actually tripled assets – construction of a plant, capita similar to that of European – from NIS 866 billion to NIS 2.6 acquisition of machinery and countries, should be investing more trillion (at 2010 prices). than these countries. Investments in equipment, training of employees. Furthermore, when all financial China and India are double or more Such investments create jobs assets in Israel are taken into that of Israel, but even countries and set the job conditions of the account – not just privately owned that had begun developing earlier, employees. assets, but those controlled by such as Taiwan or Korea – one of the government and banks – what Yet the data reveal that investments the twenty wealthiest nations in the emerges is that these financial in fixed assets in Israel are relatively world (a G20 member) – invest more assets increased more than the lower than in wealthy countries even than Israel.2 though there is currently no shortage fixed assets, i.e., more than the real of financial resources locally. There are many reasons for the economy in which most of us live Indeed, investments are distributed relatively low level of fixed asset and are employed: Between 2001 unevenly in Israel, and they are investment in Israel, but the ongoing and 2009, the fixed assets (non- concentrated in a relatively small conflict with the Palestinians figures financial assets) of the entire Israeli number of economic branches.