Prime Minister Benjamin Netanyahu's declaration that Israel is in fine shape if you ignore the ultra-Orthodox and Arab communities drew fire from critics, who noted that this is precisely where the country's problems lie.

The State of Israel is doing "not badly" compared to other countries, and "if you deduct the Arabs and ultra-Orthodox from inequality indexes, we're in great shape," Netanyahu told TheMarker in a pre-holiday interview published Thursday.

Open gallery view Prime Minister Benjamin Netanyahu. Credit: Emil Salman

He was responding to the latest annual International Monetary Fund report on Israel, which showed that inequality has worsened significantly over the past two decades and that Israel is now one of the three IMF members with the worst inequality. The IMF had called on Israel to integrate ultra-Orthodox and Arabs into the workforce in order to alleviate the problem.

These two communities tend to have more poverty and fewer breadwinners.

Open gallery view Ben-David: High inequality even without these groups. Credit: Eyal Toueg

"There are definitely lots of Arabs and ultra-Orthodox living below the poverty line, but it's no great feat to drop them from the equation," said Prof. Dan Ben-David of the Taub Center for Social Policy Studies in Israel.

If Netanyahu really wants to see how society is doing without these two groups he needs to drop them from calculations of the poverty line, which is generally considered to be 50% of the median available income per family. In 2011, 20% of households were found to be living below the poverty line.

Open gallery view Nathanson: If poverty level stabilized, it did so at high rate. Credit: Ofer Vaknin

But even after doing so, poverty figures decrease only slightly - meaning that inequality is not only due to these two groups, said Ben-David.

And then there's the issue of education, he added. If you look only at the secular and the religious-Zionist school systems - meaning, again, drop the Arabs and the ultra-Orthodox - students have still been lagging behind the OECD average. Meanwhile, Arab students underperform third-world averages, while their ultra-Orthodox peers don't even touch relevant material, he said.

Even if the country were in good shape not counting the ultra-Orthodox and Arabs, these communities currently make up 20% and 9% of the total population, respectively, and their high birthrates make improving their education systems a necessity, Ben-David said.

"Over the past decade, the number of students within the secular school system didn't change, but within the religious-Zionist system it increased 11%, in the Arab system it increased 37% and in the ultra-Orthodox system it increased 57%," said Ben-David. "This is the face of the next generation. Given the poor education that the Arabs and ultra-Orthodox receive, we're going to be in very bad shape.

"If Netanyahu understands that the problem lies with the ultra-Orthodox and the Arabs, he needs to immediately improve their schools, have them take on part of the burden, give them incentives to work and find coalition partners who understand the urgency of all this," he added. "If we don't get to these children by tomorrow morning, we'll wake up to find that the Arabs and ultra-Orthodox are the majority, but lack sufficient education."

Dr. Roby Nathanson, head of the Macro Center for Political Economics, also slammed Netanyahu's statements.

"Why not take single mothers and the elderly out of the equation too?" he said. "If we did so, our situation would be much better."

Netanyahu's statement that poverty has stabilized surprised him, he said. The prime minister claimed that another NIS 1 billion had been set aside for old-age stipends, but this will merely lift more elderly citizens slightly above the poverty line, not make them better off compared to other population groups, he said.

"Netanyahu's argument that the weaker classes' well-being has stabilized is surprising. Where has it stabilized? At a very low level. Some 40% of the country's working public is poor," he said.

He also took issue with Netanyahu's statements at a Wednesday press conference that his government had pushed down housing prices 13% by flooding the market with new homes.

"There's no greater distortion," he said. "Supply hasn't increased, certainly not due to public construction by the government. People stopped buying homes because prices were very high and they couldn't afford it."

Netanyahu has been finance minister in some form or another for the past decade, Nathanson noted. "He has impressive macro-economic achievements, but they had a price. He's ignoring the price."

The prime minister also drew criticism from within the political arena. Opposition chairman Shaul Mofaz of Kadima accused Netanyahu of dividing the nation, while Labor Party chair Shelly Yacimovich accused him of incitement against the Arabs and ultra-Orthodox.

"Based on Netanyahu's logic, without the poor and the middle class, we're all rich," Yacimovich said.