Worsening Income Inequality Could Lead to Social Explosion | Prof. Yair Zimon and Oded Shorer

The Adva Center's 2026 report presents a grim picture of social gaps in Israel and points to the collapse of the welfare state. The top decile's income is 13 times that of the bottom decile, and the top two deciles concentrate 45% of income. The authors warn that worsening inequality could lead to a social explosion, blaming destructive fiscal policy, across-the-board cuts in public services, and redirecting public spending to emergency needs instead of strengthening civilian services.

The Adva Center's 2026 report on income inequality in the economy presents a grim picture of social gaps and points to the collapse of the welfare state in Israel. The report highlights that while the Israeli economy has grown over the past decades, the fruits of growth have not trickled down to the average citizen but have concentrated at the top of the economic pyramid. Household income in the top decile is 13 times that of a household in the bottom decile, and the top two deciles concentrate 45% of household income headed by employees. The authors, Prof. Yair Zimon and Oded Shorer, warn that worsening inequality could lead to a social explosion and alienation of parts of the population. They argue that since the outbreak of the war, public spending has expanded, but most of the increase was directed to emergency needs, evacuation, compensation, and initial rehabilitation, not to strengthening broad, universal, and stable public services. It is also written that per capita civilian spending in Israel is significantly lower compared to OECD countries, a gap translating to a shortfall of about 110-120 billion shekels per year. The authors criticize the government's policy of cutting civilian services and budgeting controversial sectoral goals, as well as a long-standing macroeconomic policy of shrinking the government and reducing direct taxes. They note that public debt generates high interest payments, and that raising indirect taxes such as VAT harms the weak. They also mention that political shocks like the 2023 judicial reform led to credit rating downgrades for Israel.