Adva Center: Official Trend of Reducing Inequality Is Reversed in Reality

A new study by the Adva Center, published yesterday (Wednesday), finds that official data on reducing income inequality in Israel for 2015–2021 were partial and biased downward. After adjusting for capital income, the Gini index did not fall by 1.6% but rose by about 3%. The gap between the indices stood at about 6% in 2015 and rose to 11% in 2021. Capital income in 2022 was 100 billion shekels higher than official figures.

A new study by the Adva Center, published yesterday (Wednesday), finds that official data on reducing income inequality in Israel for 2015–2021 were partial and biased downward. According to the study, titled 'Did Inequality Really Decline?', the calculation used by the Central Bureau of Statistics (CBS) was inaccurate, and after adjustment, inequality actually widened during those years. The study, conducted by Max Grubman and Miri Endbald Sabag, former director of the Economic Research Division at the National Insurance Institute, points to an undercount of capital income, especially in the higher deciles. According to the original survey data, the Gini index fell slightly between 2015 and 2021, from 0.4060 to 0.4000 – a decline of 1.6%. However, after adjusting for capital income, the index rose from 0.4305 to 0.4440 – an increase of 3.1%. The gap between the indices stood at about 6% in 2015 and rose to 11% in 2021. Additionally, in 2022 alone, capital income turned out to be 100 billion shekels higher than the amount appearing in CBS data. Adjusting for capital income also increases income gaps between deciles: the ratio between the top and bottom deciles grew from 13.7 to 18.2, and the ratio between the top decile and the median increased by 29%, from 4.1 to 5.3. The researchers explain that the undercount is not due to a calculation error but to a global research problem: wealthy households tend not to cooperate with surveys and sometimes provide partial answers. The study emphasizes the importance of integrating information sources and links the findings to policies such as the wealth tax (Mas Hisef) and the law on retained earnings.