The Economic Condition of the Elderly Population in Israel
Author: Taub Center Staff
April 29, 2015
A recent study by the Taub Center demonstrated that having a pension significantly improves the economic condition of households with elderly members. Researchers also found that poverty rates are reduced when the elderly live with younger family members.
The population of the West is constantly aging. This trend is linked to poverty and inequality, since most elderly no longer participate in the labor market and live for the most part from their savings – whether from pensions or from personal capital – or on entitlements from the welfare system. A study published in the State of the Nation Report 2014 by Prof. Haya Stier (Tel Aviv University and Shoresh Institute), and Taub Center researcher Haim Bleikh, examines the issue of poverty among the elderly population in Israel.
The study divided the elderly population into three main groups: long-time Israeli residents (65 percent of the elderly population), immigrants from the former Soviet Union (21 percent), and Arab Israelis (8 percent). Over the years, the percentage of FSU immigrants within the overall elderly population has grown. Many of these immigrants arrived in Israel when they were already older and unable to accumulate full pension rights, and therefore their growth as a percentage of the elderly population increases the share of the population reliant mainly on state support.
An examination of the poverty rates among the elderly in the years 1997-2011 in the first figure shows the substantial differences between the various populations. The poverty rate among elderly Arab Israelis is the highest – about 60 percent of them are beneath the poverty line – in comparison to much lower poverty rates in the Jewish population of about 18 percent among FSU immigrants (similar to the overall elderly population) and only 11 percent among the long-time Israeli citizens. A look at the long-term trends shows that here, too, the condition of elderly Arab Israelis is worse. In recent decades, there has been some decline in the poverty rates among elderly long-time Israeli residents, and in recent years, the same is true among FSU immigrants. In contrast, among the elderly Arab Israeli population, poverty rates have remained stable and even risen, with the rate sitting at about 50 percent in most of the years measured, although declines were noted at the start of the period. The poverty rate rose to 60 percent in 2010, and since then, the rate has seen a slight decline.
The Taub Center’s study shows that entitlement to a pension is one of the major factors in preventing poverty among the elderly. The poverty rate among households in which at least one household member is entitled to a pension stands at only about 2 percent over the period in the last two decades. In contrast, in households with elderly members who have no pension income at all, the poverty rates are relatively high.
The drop in the poverty rate among households of long-time Israelis apparently reflects the growing percentage of elderly who accumulated pensions during their work life. As can be seen in the second figure, about two-thirds of all the elderly in the long-time Israeli Jewish population enjoy a pension as a portion of their household income. In contrast, only 20 percent of elderly FSU immigrants and less than 15 percent of elderly Arab Israelis reside in households with income that includes some form of pension payments. Among the immigrants, there is a rise in the rate of entitlement to pension payments that parallels their length of time in Israel and a corresponding decrease in the poverty rate.
The study’s conclusion on this subject is that without income from a pension it is very difficult for the elderly to live at a reasonable standard of comfort, further supporting the significance for future generations of the implementation of the Compulsory Pension Savings Law (2008). Special attention should be paid to the population groups – mainly Arab Israelis and to some extent elderly FSU immigrants – in which many members do not benefit from this added income.
One of the ways to contend with poverty and economic deprivation among the elderly, as well as with various physical and social difficulties, is joint living arrangements of the elderly with their extended family members of working age. There is a question as to whether such living arrangements can be viewed specifically as a strategy employed by families to cope with the hardships of poverty.
From a comparison of the rate of poor households in the various groups as measured by disposable income (i.e., after taxes and transfer payments from the government are taken into account), it emerges that in extended families headed by a working-age member, the rate of poor households is significantly lower than among households headed by an elderly person. As the third figure shows, this picture of differences in the poverty rates according to living arrangements has remained consistent in all the groups. Among the long-time residents, the rate of poor households headed by an elderly person is 13 percent, in comparison to a rate of 8 percent among households in which elderly reside, but which are headed by a working-age individual. Among FSU immigrants, the corresponding poverty rates are 21 percent as opposed to 5 percent, respectively, and among Arab Israelis, the rates are 68 percent and 40 percent, respectively.
These findings indicate that extended family living arrangements contribute substantially to improving the living conditions of the elderly, especially among the more economically vulnerable groups – as in the case of Arab Israelis and immigrants, who have not accumulated any real income from pension savings. This conclusion holds even when taking into account the fact that, among these groups, a large portion of the households headed by younger persons in which elderly reside are not necessarily well-off. Furthermore, the extended family living arrangement contributes to improving the standard of living not only of the elderly individual, but of the younger family members as well, due to the addition of a pension and state transfer allowances to the family income. Therefore, this type of living arrangement can be seen as a strategy for avoiding poverty for all the family members, younger and older alike.