Israel's Income Gap Narrows in 2024 Amid War, Driven by State Aid

In 2024, the net monthly income for the poorest 10% of Israeli households averaged 7,276 shekels, while the wealthiest 10% earned 49,496 shekels. The income disparity between these groups narrowed to 6.8 times, down from 7.3 times in the previous year. However, this statistical improvement is primarily attributed to increased government benefits and aid, according to analysis by journalist Adrien Filut of "Calcalist" based on Central Bureau of Statistics (CBS) data. The year 2024 marked Israel's first full year of war, significantly impacting the economy through mass reservist call-ups, the evacuation of tens of thousands, labor market disruptions, and extensive state compensation payments. The CBS itself noted that these changes reflect a combination of natural economic trends and war-related events.

Overall, the average Israeli household income before mandatory payments in 2024 was 27,173 shekels per month, a figure that remained largely unchanged from the previous year. After taxes and national insurance contributions, the average household was left with 22,555 shekels, a real increase of 1.3% partly due to a reduction in average mandatory payments. Average household expenses rose slightly by 0.3% to 18,695 shekels per month, with overall consumption slightly lower than in 2022 when adjusted for inflation.

For the poorest decile, monthly expenses of 11,902 shekels exceeded their income by about 4,600 shekels. This deficit is likely covered by savings, inheritance, debt, or family support, and the survey does not account for non-monetary benefits like municipal tax discounts. In contrast, the wealthiest households had a significant surplus, spending 21,800 shekels out of their 49,496 shekel average monthly income. While the wealthiest earned 580% more than the poorest, their spending was only 80% higher.

The composition of these income groups differs significantly. The poorest decile averages 4.1 people per household with less than one working person (0.9), and nearly two-thirds have children. The wealthiest decile has smaller households (2.6 people on average) with more workers (1.8 per family) and children in about a quarter of households. Consequently, one working person in the poorest group supports about 4.5 people, compared to fewer than two in the wealthiest group.

While middle-income groups remained stable, the upper-middle class (eighth and ninth deciles) saw their incomes decline. Their share of total net income decreased, with the ninth decile experiencing the most significant drop. This group, heavily reliant on high salaries in the private and tech sectors and often including reservists, was notably affected by the war. Conversely, the share of total income for the wealthiest 10% and the poorest 10% slightly increased.

Average labor income saw a nominal increase but a real decrease due to inflation. However, average benefits and other payments surged by about 15% in real terms, accounting for most of the gross income growth and increasing their share in household budgets. This rise in state aid, including payments to reservists and evacuees, benefited even wealthier families, whose benefit income nearly doubled compared to the poorest households. The Gini coefficient, measuring income inequality, decreased from 0.349 to 0.333, indicating a more even income distribution. However, wealth inequality, particularly in housing, widened, with the value of apartments owned by the wealthiest increasing at a much faster rate than those owned by the poorest. The share of households owning their homes decreased, while rental costs rose.