Israel's Inequality Decreased in 2024 Amid War, Driven by Government Support

Israel experienced a decrease in income inequality in 2024, according to data from the Central Bureau of Statistics (CBS). While the Gini coefficient for inequality dropped from 0.349 to 0.333, this improvement was largely driven by a significant increase in government benefits and support payments, which compensated for a real-term decline in average household income from work. The CBS noted that these changes reflect a combination of natural economic trends and the impact of the ongoing war.

The year 2024 marked the first full year of war following the October 7th attacks, characterized by widespread reserve duty mobilization, tens of thousands of displaced persons, and economic disruptions. This contrasts with 2023, which was mostly a year of routine. Average income from work per household saw a nominal increase of 1.7% but a real decrease of about 1.4% after accounting for inflation. Meanwhile, benefits and support payments surged by a real 15%.

Overall gross household income remained largely stagnant, but net income after taxes and mandatory payments saw a real increase of 1.3%, partly due to a decrease in average mandatory payments. Consumption expenditure also saw minimal growth, meaning the average Israeli household consumed about 1% less in real terms in 2024 compared to 2022. The gap in net financial income between the top and bottom income deciles narrowed from 7.3 times to 6.8 times, though it remains high compared to other OECD countries.

However, the data reveals a more complex picture. The share of the top income decile in net financial income actually increased slightly, while the share of the bottom decile also rose, with about 40% of their income coming from government support. The middle-to-upper-middle class, earning between NIS 29,000-34,000, experienced the sharpest decline in their income share, particularly those reliant on high salaries in the business and tech sectors, many of whom are reservists.

Furthermore, wealth inequality, specifically in property values, widened. The average value of owned apartments in the top decile increased significantly more than in the bottom decile, widening the gap. The housing market also showed signs of strain, with a decrease in homeownership rates and an increase in average rent. The article concludes that the 2024 reduction in inequality is based on temporary public funding rather than a stronger labor market, suggesting it may be short-lived.