This chapter examines consumption expenditures and savings patterns of middle-income households in Israel, putting the country's experience in comparison with other OECD countries. It analyses inequalities in consumption expenditures across income groups and how these have evolved over time. The chapter examines how households allocate their budgets across different categories of goods and services, with particular attention to rising expenditures on core necessities such as housing, food, healthcare, and education, and assesses the implications for household savings capacity.
How is Israel's Middle Class Faring?
Income Trends, Occupational Change and the Rising Cost of Living
Abstract
An alternative to the income‑based (or “resource‑based”) approach to measuring the economic well-being of the middle class used in Chapter 2 can be to look at consumption-related indicators, i.e. to take a “standard-of-living” approach. While the two approaches can to some extent be considered two sides of the same coin, they can provide different perspectives of households’ short-term vs. long-term economic well‑being. Following the lifecycle hypothesis, individuals and households will attempt to smooth fluctuations in incomes to achieve a stable consumption path over their lives. To the extent that income‑based measures reflect transitory changes in economic well-being, consumption-based measures may be more representative of long-term economic well-being. Together, the two approaches can provide a richer picture of households’ economic well-being.
Analysis of household consumption and savings patterns can also help identify trends in what may be considered a “typical” middle‑class lifestyle. Indeed, belonging to the middle class is often associated with access to certain types of goods and services, such as homeownership, the ability to purchase consumer durables of a certain quality, and access to quality education and healthcare. Many OECD countries have seen public debates in recent years about whether this middle‑class lifestyle is getting under pressure. Earlier OECD analysis has documented how in many OECD countries economic and societal transformations, growing economic uncertainty, and rising prices have put pressure on middle‑class living standards and threatened the ability of middle‑class households to save, or even make ends meet (OECD, 2019[1]; OECD, 2021[2]). And indeed, Israel experienced several episodes of public protests over the last two decades that were driven in part by people’s discontent about the high prices of essential goods and services, notably housing and food (Frohm, 2025[3]; OECD, 2023[4]; 2025[5]; Weiss, 2014[6]).
This chapter provides empirical evidence on these issues by examining the consumption and savings patterns of households in Israel and discussing how their living standards have evolved over the last two decades (2001-2021). While paying special attention to the middle class, the chapter somewhat widens the analysis to also include other groups, since changes in the consumption patterns of middle‑class household often mirror the trends for the population at large. The empirical analysis mainly draws on tabulations from survey microdata, which break down consumption expenditures by quintiles of the income distribution. Middle‑class households are being proxied in the analysis as those in the three middle income quintiles of the distribution (see Box 4.1). Consumption is measured as household consumption expenditure, with expenditure categories harmonised to give a common classification for all OECD countries covered (see Box 4.2).
The chapter starts by analysing trends in overall consumption, looking at differences across income groups, with a particular focus on the middle class (Section 4.1). It then examines how households allocate their expenditures across consumption categories, and how spending for these different categories has evolved (Section 4.2). It proceeds with an assessment of households’ saving patterns (Section 4.3), and concludes with a summary of key findings (Section 4.4).
The analysis in this chapter largely draws on tabulated data broken down by quintiles of the household disposable income distribution, both for Israel and for European OECD countries. As in previous chapters, the middle class is defined using an income‑based measure; however, the exact approach used differs from the one used in previous chapters, because tabulations rather than microdata are used (see Box 1.1). The analysis considers five income groups, with each group corresponding to one income quintile: low income (Q1); lower middle income (Q2); middle income (Q3); higher middle income (Q4); and high income (Q5). The middle class is defined as consisting of households belonging to the three middle income quintiles (Q2‑Q4).
For Israel, the analysis is mainly based on tabulations from the Household Expenditure Survey that were provided by the Israel Central Bureau of Statistics (CBS). Data are available on both income and consumption spending, which allows for an analysis of consumption and savings patterns of Israeli households. The data cover the period from 2001 to 2021. Two important structural changes to the survey occurred during this period:
1. In 2012: Expansion of the survey sample, and changes in the survey population, questionnaire, and estimates. These changes mostly affected the income data, having a smaller impact on consumption.
2. In 2019: The survey stopped being conducted on paper and became computer-based, which implied significant changes in the survey processes and methods of data imputation. In addition, due to a decline in survey response rates, the method of calculating weights was revised. These changes had a significant impact, introducing a structural break in the series of consumption data.
For other OECD countries, the data used in the analysis come from Eurostat’s Household Budget Survey (HBS), which is conducted every five years (Eurostat, 2025[7]). While the most recent collection wave took place in 2020, this chapter uses data from the 2015 wave to avoid the distortions in the 2020 data brought about by the COVID‑19 crisis. The OECD countries covered in data include Austria, Belgium, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Türkiye, and the United Kingdom.
The method used to construct income quintiles for the tabulated expenditure data differs between the CBS and the Eurostat datasets. In the CBS dataset income quintiles are calculated from the household distribution of net income per standard person. The Eurostat dataset uses the household distribution of disposable income, without accounting for household size. The tabulated results by income quintile provided by CBS and Eurostat are therefore not fully comparable. The analysis addresses this issue by relying in all figures that show cross-country comparisons on Israeli microdata from the Luxembourg Income Study (LIS) database (Luxembourg Income Study, 2025[8]), which are made fully comparable with the Eurostat tabulations. The CBS tabulations are used for all parts of the analysis that focus on Israel only.
4.1.1. Israel has a more even consumption distribution than many OECD countries
Inequalities in consumption expenditure are relatively modest in Israel compared to most OECD countries, with the middle parts of the income distribution accounting for a relatively large share of overall consumption expenditure. The three middle‑income quintiles (Q2, Q3 and Q4), which in this chapter are used as the proxy for the middle class, accounted for 57% of total consumption expenditure in 2015. This was a little higher than the average across OECD countries with available data of 56% (Figure 4.1). This reflects a relatively low consumption share for the high-income group (Q5) in Israel, of 33%, one of the lowest values among the 25 countries included in the analysis. Meanwhile, the low-income group (Q1) accounts for 10% of total consumption expenditure, a value in line with the OECD average. Consumption expenditure is distributed unequally also within the middle‑income group: the higher middle‑income group (Q4) has a consumption share 8 percentage points (p.p.) higher than that of the lower middle‑income group (Q2) (23% vs. 15%).
Share of consumption expenditure by income group in OECD countries, 2015, percentage
Notes: Income groups correspond to quintiles of the household disposable income distribution without accounting for household size. The figure shows data for 2015 for all countries to avoid potential distortions due to the COVID‑19 crisis in the more recent 2020 wave of the Household Budget Survey (see Box 4.1). The average across OECD countries is unweighted.
Source: OECD calculations based on the Luxembourg Income Study (LIS) database for Israel and tabulations from the Eurostat Household Budget Survey for other countries.
These disparities in consumption shares mirror the differences in income shares shown in Chapter 2, though consumption inequality in Israel is less pronounced than income inequality. The 40% top income‑earners (Q4 and Q5) account for 62% of overall income, 6 p.p. more than their combined consumption share. This implies that high-income households save a greater share of their income than households in the lower parts of the income distribution.
4.1.2. Consumption inequalities in Israel have slightly narrowed, unlike in most OECD countries
Consumption inequalities have shrunk in Israel over the last 20 years, and particularly so over the last decade. Total consumption expenditure grew for all income groups after adjusting for inflation (by 13% in total; Figure 4.2, Panel A). However, expenditure growth was uneven across income groups: by 2021, cumulative spending growth since 2001 had reached nearly 24% for low-income households, compared to only around 7% for high-income households. Middle‑income households were in between, with an increase of 14%, which closely mirrors the growth in overall consumption. The pattern remains intact when focussing only on the period up to 2018, i.e. before larger changes were introduced to the Household Expenditure Survey underlying the analysis (see Box 4.1). The COVID‑19 crisis led to a steep drop in consumption spending in 2020 as the scope for many types of discretionary spending, notably on travel and leisure activities, was much restricted. This decline affected all income groups, but it was somewhat more pronounced for high-income households.
This decrease in consumption inequality in Israeli over the last two decades coincides with a slight decrease in income inequality over the same period, with incomes in the middle of the income distribution having risen faster than those at the top (see Chapter 2, Figure 2.1). However, it may also reflect rising spending on core necessities as a result of rising prices, which particularly affect households in the lower parts of the income distribution, see discussion in Section 4.3.
As a result of these trends, the distribution of consumption spending narrowed. The consumption share of the high-income group (Q5) declined by 1.4 p.p. between 2001 and 2021 (or by 1.6 p.p. when considering just the period up to 2018) (Figure 4.2, Panel B). Meanwhile, the consumption share of low-income households (Q1) increased by 1.2%, both when considering the period up to 2018 and up to 2021. The consumption share of the middle‑income group also rose, reflecting positive growth for the lower-income group (Q2) offset by slight declines for the mid-middle and upper‑middle income groups (Q3 and Q4).
Notes: Income groups are defined as quintiles of the household distribution of net income per standard person. The evolution of consumption spending is affected by a structural break between 2018 and 2019 (see Box 4.1), as indicated by the grey dashed line. Nominal values were deflated using the CPI from the OECD Consumer price indices (CPIs, HICPs), COICOP 1999 database, https://data-explorer.oecd.org/s/4ch.
Source: OECD calculations based on CBS tabulations from the Israeli Household Expenditure Survey.
The pattern of narrowing inequalities in consumption expenditure observed in Israel stands in contrast to the trends observed in most European OECD countries, where consumption inequalities usually widened over the same period. Indeed, in most countries with available time series data on consumption, the share of consumption accounted for by the middle‑income group declined between 2000 and 2015, notably in the Nordic countries (Finland, Sweden, and Denmark) and in France (Figure 4.3). Most of these countries also experienced a decline in consumption expenditures for the low-income group, while the consumption share strongly increased for high-income households.
Change in share of consumption expenditure by income group in OECD countries, 1999/2001-2015, p.p.
Notes: Income groups correspond to quintiles of the household disposable income distribution without accounting for household size. The initial observation point is 2001 for Israel and 1999 for all other OECD countries. The figure shows data up to 2015 for all countries to avoid potential distortions due to the COVID‑19 crisis in the more recent 2020 wave of the Household Budget Survey (see Box 4.1). The average across OECD countries is unweighted.
Source: OECD calculations based on the Luxembourg Income Study (LIS) database for Israel and tabulations from the Eurostat Household Budget Survey for other countries.
4.2.1. Spending on core necessities of Israeli households is broadly in line with that of households in other OECD countries
Israeli households – as households in other OECD countries – allocate most of their consumption budget to core necessities, such as housing and food (for information on the construction of consumption categories, see Box 4.2). Housing is the largest expense, making up over one‑third (36%) of total expenditure in Israel in 2015 (Figure 4.4). The value that homeowners derive from living in their own dwelling, i.e. imputed rent, is included in this figure and accounts for more than half of overall housing expenditure. Food accounted for another 14% of total household expenditure.
Share of each consumption category in total expenditure in OECD countries, 2015, all income groups, percentage
Note: Consumption categories were constructed following a harmonisation process (see Box 4.2). Data for Czechia and the United Kingdom do not include imputed rent for the use of owner-occupied dwellings. The figure shows data for 2015 for all countries to avoid potential distortions due to the COVID‑19 crisis in the more recent 2020 wave of the Household Budget Survey (see Box 4.1). The average across OECD countries is unweighted.
Source: OECD calculations based on the Luxembourg Income Study (LIS) database for Israel and tabulations from the Eurostat Household Budget Survey for other countries.
Overall, households’ spending on core necessities in Israel is broadly in line with that of other OECD countries. In 2015, the share of expenditures dedicated to housing and food consumption combined ranged from 45% in Austria and Slovenia to 62% in Lithuania.1 At 49%, the share for Israel is slightly below the OECD average of 51%. Also spending on the two other large consumption expenditure categories, transport and communications2 and leisure, are broadly in line with the shares observed in other OECD countries. Combined household spending on education and healthcare in Israel is among the highest across OECD countries, though relatively in small in magnitude overall (7% in Israel, compared to an OECD average of 5%). This may reflect that Israel has a relatively young population (see Chapter 2, Box 2.1). Moreover, public spending on early childhood education and care is relatively low (OECD, 2020[9]), also public health expenditures are low, and private health insurance is voluntary but widespread (OECD, 2023[4]; 2025[10]).
This chapter focusses on household final consumption expenditure (or spending) as a measure of consumption. This includes: i) monetary expenditure on goods and services consumed; ii) the use value of owner-occupied housing, i.e. imputed rent; and, in a few countries, iii) the value of in-kind consumption of certain limited items. The inclusion of imputed rent is important from a conceptual perspective as it allows allocating the cost of buying a house over the years in which the house is “consumed” instead of registering the expenditure only in the year of purchase.
Consumption expenditure does not include the value of goods and services provided for free by the government and non-profit institutions serving households, such as free healthcare and education. Furthermore, it does generally not include consumption of home‑produced goods and services, where no market transaction takes place. This consumption is reflected in consumption expenditure only through the value of the inputs used in the production process, which generally amounts to less than the market value of the final good or service.
In the analysis of households’ savings pattern in Israel, the savings rate is computed as the difference between household net money income and money expenditure, as a share of net money income. Since no corresponding tabulations were available for European countries from the Eurostat website, no international comparison of savings patterns is provided.
The classification of consumption expenditures differs between the CBS (Israel) and Eurostat (European OECD countries) datasets. While Eurostat’s HBS follows the COICOP classification (United Nations, 2018[11]), Israel’s CBS uses a different classification. For all figures showing cross-country comparisons, the values for Israel therefore rely on microdata from the Luxembourg Income Study (LIS) database (Luxembourg Income Study, 2025[8]) that have been harmonised with the Eurostat categories. The CBS tabulations are used for all parts of the analysis that focus on Israel only. For an overview of the construction of the harmonised consumption categories for Israel, see Annex Table 4.A.1.
4.2.2. Total household expenditure in Israel has shifted towards core necessities, while spending on leisure has plummeted
Overall consumption expenditures by Israeli households increased by 13% (in real terms) over the past two decades, as previously shown in Figure 4.2. This growth reflects very different evolutions for different consumption categories (Figure 4.5, Panel A):
Expenditures on healthcare and education have strongly increased, particularly over the past decade, rising by 69% and 54%, respectively, between 2001 and 2018.
Expenditures on core necessities have also increased, albeit to a smaller extent, close to 30% for both housing and food by 2018.
Spending on leisure has plummeted, declining by nearly 30% between 2001 and 2018.
The COVID‑19 crisis led to a drop in expenditures across all categories, and by 2021 spending levels had not yet recovered to their pre‑crisis levels. This effect was particularly pronounced for transport and communications and education, likely reflecting the impact of lockdown measures, which restricted travel and imposed school closures (in line with the findings in Roll et al. (2022[12])).
As a result, spending on core necessities, healthcare and education make up a growing share of overall consumption expenditures. Over the period from 2001 to 2018, the consumption share dedicated to housing increased by 3 p.p., while the shares allocated to healthcare and education each increased by 1 p.p. Meanwhile, the share of total consumption expenditure going to leisure declined by 3 p.p. The COVID‑19 crisis led to significant shifts in more years, notably a strong relative shift away from transport and communications – reflecting travel restrictions during the pandemic – towards housing – reflecting the high proportion of fixed costs in this category as well as possibly the increase in housing-related costs during lockdown, such as for electricity and gas.
Note: Consumption categories were constructed following a harmonisation process (see Box 4.2). The evolution of consumption spending is affected by a structural break between 2018 and 2019 (see Box 4.1), as indicated by the grey dashed line. Nominal values were deflated using the CPI from the OECD Consumer price indices (CPIs, HICPs), COICOP 1999 database, https://data-explorer.oecd.org/s/4ch.
Source: OECD calculations based on CBS tabulations from the Israeli Household Expenditure Survey.
4.2.3. The overall price level is very high in Israel, and prices have risen particularly for core necessities, such as housing and food
The shift in household consumption expenditures towards core necessities, and away from leisure, likely reflects increases in the relative cost of core necessities in Israel. While the cost of the average consumption basket for Israeli households has risen by around 34% in the past 20 years, or about 1.5% per year, core necessities have seen the most significant surge in prices (Figure 4.6). By 2021, housing prices were 65% higher than they had been in 2001, while food prices had climbed by 50%, well above the overall inflation rate. Those price increases may be particularly relevant given Israel’s demographic composition, notably the large share of households with many children (see Chapter 2, Box 2.1). The prices of healthcare and education also increased only slightly above the overall inflation rate even as household spending on these items grew substantially (as shown in Figure 4.5). This suggests that the sharp rise in expenditures was driven partly by higher demand for these services. Meanwhile, the prices of recreation and culture remained broadly stable over the time period, suggesting that the decline in spending on leisure previously identified reflects to some extent price effects. The price for communication products strongly declined, by around 35%.
Change in overall prices and prices for selected categories in Israel, 2001-2021, index (base year 2001)
Note: Consumption categories in this figure do not correspond to those in previous figures, as they are defined according to the CPI classification.
Source: OECD Consumer Price Indices database OECD Data Explorer • Consumer price indices (CPIs, HICPs), COICOP 1999, https://data-explorer.oecd.org/s/4ci.
Notwithstanding the burden that rising prices in housing, food, and other consumption categories have placed on the living standards of Israeli households, these increases remain relatively moderate in international comparison.3 Indeed, the overall price level increase in Israel is below that across OECD countries on average (55%) and those experienced in peer countries, such as the United States (53%) and the United Kingdom (50%; Figure 4.7, Panel A).
However, the price level in Israel is very high in international comparison. After adjusting for purchasing power, the overall price level in Israel is 40% higher than in the OECD on average, with prices in Israel being second only to those in Switzerland in 2021 (Figure 4.7, Panel B). As discussed in the recent OECD Economic Survey of Israel (OECD, 2025[5]), several structural factors contribute to these high prices, including geopolitical and economic uncertainties, limited trade and supply chain integration with neighbouring countries, and the low housing supply because of administrative red tape and planning obstacles.
Notes: Comparative price levels are computed as the ratios of PPPs for private final consumption expenditure to USD exchange rates. They provide measures of differences in price levels among countries.
Source: OECD Consumer Price Indices database OECD Data Explorer • Consumer price indices (CPIs, HICPs), COICOP 1999, https://data-explorer.oecd.org/s/4ci for Panel A; replication from (OECD, 2025[5]) for 2021 using data from OECD Annual Purchasing Power Parities and exchange rates database OECD Data Explorer • Annual Purchasing Power Parities and exchange rates, https://data-explorer.oecd.org/s/4cj for Panel B.
4.2.4. The allocation of consumption expenditures varies across ethno-religious groups
While the available CBS tabulations are not detailed enough to allow for comprehensive analysis of spending patterns across different socio‑economic groups, household consumption expenditures can be disaggregated across Israel’s ethno-religious groups. Expenditures on core necessities are relatively similar across groups, with spending on housing and food ranging from 53% of the total budget for Arab‑Israelis to 57% for Haredi (ultra‑orthodox) Jews (Figure 4.8). However, Arab-Israeli households devote a much smaller share to housing and a significantly higher share to food than other groups. This may partly reflect the method used for calculating imputed rent; while homeownership is relatively widespread among Arab Israelis, house and rent prices in majority-Arab-Israeli communities are much lower than in majority-Jewish communities. Meanwhile, Haredi households spend twice as much on education as other groups (10% vs. 5%), likely a reflection of the large share of Haredi households with many children (Chapter 2, Box 2.1) and overall high levels of educational attainment (Chapter 3, Box 3.3).
Share of each consumption category in total expenditure by ethnic group in Israel, 2021, percentage
Note: Consumption categories were constructed following a harmonisation process, as described in Box 4.2.
Source: OECD calculations based on CBS tabulations from the Israeli Household Expenditure Survey.
4.3.1. The savings rate increased for most Israeli households, except for those with lowest incomes
Despite rising expenditures, Israeli households have gradually increased their savings rate over the last two decades, reflecting a higher cumulative growth in incomes (+88% up to 2018) than in spending (+72%) (Figure 4.9, Panel A). Using a simple definition of the savings rate as the difference between household net money income and money expenditure as a share of net money income, the total annual savings rate increased from 16% to 23% between 2001 and 2018 (Figure 4.9, Panel B).4 In 2020, the savings rate temporarily surged as consumption plummeted during the COVID‑19 pandemic, but it still remained somewhat elevated also in 2021.
The rise in the savings rate was particularly pronounced among middle‑class households. Households in the middle three quintiles of the income distribution experienced an increase in the savings rate by 8 p.p. between 2001 and 2018, slightly more than the increase for the overall population (+7 p.p.). As a result, lower-middle income households saw their savings rate turn positive after 2017.
The rise in the savings rate was weakest for households in the bottom of the income distribution (at only 2 p.p. between 2001 and 2018), who moreover strongly dissaved over the entire period. One explanation is that these households experienced much slower real income growth over the last two decades than households further up in the income distribution (see Chapter 2, Figure 2.1). At the same time, low-income households are disproportionately affected by rising prices for core necessities, which make up a large share of their budget (Causa et al., 2022[13]; Caisl et al., 2023[14]). For low-income households, the modest rise in incomes was therefore largely eaten up by rising expenditures. Indeed, households in the bottom quintile of the income distribution spend around 40% more than their monetary income.5 Part of this gap may be filled through income from informal economic activity or through in-kind social transfers; the remainder needs to be covered by running down savings or taking credit.
Note: Income groups are defined as quintiles of the household distribution of net income per standard person. The savings rate is computed as the difference between net money income per household and money expenditure per household, as a share of net money income per household.
Source: OECD calculations based on CBS tabulations from the Israeli Household Expenditure Survey.
4.3.2. Savings rate differentials in Israel have a strong ethno-religious dimension
The savings rate differentials across the income distribution have a strong ethno-religious dimension in Israel, which largely reflect the large disparities in employment outcomes and income levels between different population groups (see also discussion in Chapter 2). Both the Arab-Israeli and the Haredi Jewish minorities are heavily overrepresented in the lower parts of the income distribution, with 48% and 42% of them falling into the lowest income quintile, compared to 12% of Non-Haredi Jews (Figure 4.10, Panel A). Consequently, their savings rates are lower than for the Non-Haredi Jewish majority (Figure 4.10, Panel B). Once income differences are accounted for, disparities in savings rates between Arab-Israelis and the Non-Haredi Jewish population substantially narrow, though Arab-Israelis tend to save a bit less, particularly in the lower parts of the income distribution.6 Meanwhile, the Haredi-Jews have systematically higher savings rates in all income groups – likely a reflection of their frugal lifestyle. Overall, the strongly negative savings rate of Arab-Israelis on average suggests that many Arab-Israelis struggle to make ends meet, let alone to build up wealth.
Note: Income groups are defined as quintiles of the household distribution of net income per standard person. The savings rate is computed as the difference between money expenditure per household and net money income per household, as a share of net money income per household.
Source: OECD calculations based on tabulations from the Israeli Household Expenditure Survey.
This chapter discussed key trends in consumption expenditures and saving patterns in Israel over the past two decades, with a particular focus on middle‑class households. The following key findings emerge from the analysis:
Consumption inequalities in Israel are comparatively narrow in international comparison. The share of consumption expenditures that is accounted for by households the three middle quintiles of the income distribution in Israel is well in line with that observed in most European OECD countries. One‑third of total consumption goes to households in the top quintile, slightly less than on average across other OECD countries.
Israel has experienced a decline in consumption inequalities over the past two decades, unlike most European OECD countries. Total household consumption increased more quickly in real terms for low‑ and middle‑income households (24% and 14%, respectively) than for those at the top (7%). This evolution mirrors a slight decline in income inequalities over the same period. It stands in contrast with the trends observed in most European OECD countries, where the consumption shares of low- and middle‑income households declined.
Consumption expenditures of Israeli households have shifted toward core necessities, while spending on leisure has plummeted. Growing shares of overall consumption expenditures of Israeli households go to housing (+3 p.p. from 2001 to 2018), healthcare and education (both +1 p.p.), while the share going to leisure has plummeted (‑3 p.p.). However, in international comparison, household spending on core necessities remains broadly in line with that of households in European OECD countries.
The overall price level is very high in Israel, and prices have risen particularly for housing and food. Over the period from 2001 to 2021, the prices of housing and food in Israel climbed by 65% and 50%, well above the overall inflation rate of 34% over the same period. Also the prices of healthcare and education increased above overall inflation. While these increases remain quite moderate by international standards, the overall price level in Israel was the second highest among OECD countries in 2021, putting pressure on the living standards of Israeli households and challenging their capacity to afford a “middle-class lifestyle”.
Despite rising expenditures, the savings rate of Israeli households gradually increased over the last two decades, reflecting positive income growth. This rise in savings rates was slightly more pronounced among middle‑class households than in the general population; it was weakest for households in the bottom of the income distribution, who moreover strongly dissaved over the entire period. These savings rate differentials have an ethno-religious dimension in Israel: both the Arab-Israeli and the Haredi Jewish minorities are heavily overrepresented in the lower parts of the income distribution, such that their savings rates are much lower than for the Non-Haredi Jewish population. Even once income differences are accounted for, Arab-Israelis tend to save less than Non-Haredi Jews, while the Haredim have systematically higher savings rates.
References
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[13] Causa, O. et al. (2022), “A cost-of-living squeeze? Distributional implications of rising inflation”, OECD Economics Department Working Papers, No. 1744, OECD Publishing, Paris, https://doi.org/10.1787/4b7539a3-en.
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← 1. In the United Kingdom, combined consumption expenditure for housing and food was lower than that but this figure does not include imputed rent.
← 2. Transport and communications includes transport-related expenditures, such as for public transport, travel abroad and vehicles, as well as communications-related expenditures, such as on postal services, mobile phone use and the internet.
← 3. This finding is in line with the discussion in Flug, Hirsch and Portal (2022[15]).
← 4. These figures broadly align with the savings rate reported by the Bank of Israel in its table on “Private Disposable Income, Consumption, And Saving”, from the National Accounts statistics in https://www.boi.org.il/en/economic-roles/statistics/real-economic-activity/national-accounts/.
← 5. These numbers do not imply that the same households systematically spend more than the income they earn. The composition of the low-income group changes from one year to the next, as some households drop into the low-income group, e.g. as a result of job loss or changes in household composition, while others rise out of the low-income group into the middle, e.g. because they take up work or change jobs.
← 6. This may be a consequence of remaining ethno-religious disparities within income groups, with Arab‑Israelis having lower incomes and hence lower savings rates than Non-Haredi Jews within each income quintile.