Israel's economy is sound but poverty climbs sharply: OECD

Israel has a resilient economy, but it should urgently address its alarming levels of poverty and inequalities, the Organization for Economic Co-operation and Development (OECD) told the Israeli government on Sunday.

The findings, released in two reports on Israel's economy, were presented by the OECD Secretary General Angel Gurría to Prime Minister Benjamin Netanyahu during the weekly cabinet meeting in Jerusalem.

Gurría said that the Israeli economy has strong fundamentals. "Growth rates have exceeded those in most other OECD countries for more than a decade, employment is rising, inflation is low, and the public finances are in relatively good shape," he told the ministers.

However, he warned that large parts of the Israeli society have yet to benefit from this strong growth.

According to the reports, out of the OECD group of 34 nations of developed or emerging economies, Israel has the second highest poverty rates, second only to Mexico, and the levels of inequalities have risen steeply.

Poverty is especially high among Israel's Arab and Jewish ultra-Orthodox minorities. In ultra-Orthodox families, who make up about 10 percent of Israel's eight million population, men often favor religious studies over work and rely on state stipends and the wives low income. Arabs, who make up about 20 percent of the Israeli population, often complain of discrimination and lack of job opportunities in the Jewish-dominated labor market.

Poverty was remarkably high also among the elderly, in part due to a small basic pension.

The OECD advised Israel to increase the spending on education, infrastructure, and poverty reduction by increasing education funding for disadvantaged groups, and developing vocational education and training for young adults.

The OECD also cautioned that Israel's highly concentrated economy, in which a few financial groups control the vast majority of the market and limit the competition.

"Relatively high price levels due to weak competition, in particular in the food sector, impose a greater cost, in terms of living standards, to socioeconomically disadvantaged groups," the report said.

"Rising housing prices impose an additional affordability burden, increasingly even on the middle class," it added.

The organization's economists urged Israel to implement "further protective measures if risks to the financial system rise, especially from the housing sector."

Israel should also reduce its structural budget deficit, currently 2.9 percent of the gross domestic product, remove inefficient tax expenditures and raise environmental taxes, including by establishing a carbon tax, the OECD said. Endit