While Israel celebrates the 45th anniversary of the unification of Jerusalem today, a new report reveals that 78 percent of Palestinians in the city - and 84 percent of Palestinian children - live under the poverty line.

According to the report by the Association for Civil Rights in Israel, the 360,000 Palestinian residents of the city - 38 percent of Jerusalem's total population - have reached the highest poverty rate ever in 2011. By comparison, in 2006, 64 percent of the Palestinian population and 73 percent of the children lived under the poverty line.

The report, titled "Policies of Neglect in East Jerusalem" points out "limited employment opportunities, a severely depleted educational system, and a systematic lack of physical and economic infrastructure."

The main reason for the poverty, according to the report is the high unemployment rates - 40 percent of the men are unemployed as are 85 percent of the women.

The report also cites neglect by the Israeli authorities, noting that there is only one industrial area in East Jerusalem, in Wadi Joz, and it too may be closed to due to the expected expansion of the road leading to the Western Wall.

A further cause for the poverty, according to the report, is the separation barrier which effectively separates East Jerusalem from the West Bank. "Due to the checkpoints and a requirement that Palestinians from the West Bank attain permits from the army to cross into the city, East Jerusalem has gone from being a central urban hub that provides services and opportunities to wide portions of the West Bank, to a border city with extremely limited access."

Other factors listed by the report are neglect of the educational system which suffers from overcrowding. Forty percent of students do not finish 12 years of schooling and only precious few attempt to pass Israeli matriculation exams.

There is a severe shortage of municipal preschool programs for mothers who wish to go out to work, and a shortage of manpower in welfare offices in East Jerusalem.

Three offices handle roughly one third of Jerusalem's population, while 18 such offices operate in West Jerusalem; even with the addition of 19 welfare officer positions in East Jerusalem, there is still a tremendous work backlog and the need for 15 additional full-time positions.

Another report by the NGO, Ir Amim, points at the legal status of Jerusalem as a reason for Palestinian plight. "Legally, politically and practically, Israel clearly distinguishes between the territory of East Jerusalem, which was annexed de facto - and the Palestinian population, denying them the right to vote [and be elected] for ethnic-nationalist reasons - which undermines Israel's claim for sovereignty in East Jerusalem."

A spokesperson for the Jerusalem municipality said: "The municipality is undertaking a huge effort to improve the quality of life of Jerusalem's Arab residents, and decrease the gaps caused by decades of neglect. In the past year, a Washington Institute survey has reported a sharp increase in the residents' rating of municipal services."

The spokesperson added that 400 new classes have been constructed, NIS 500 million have been invested in cooperation with the Transportation Ministry in improvement of the road system in the Arab neighborhoods, and that two more welfare offices and other community buildings will be constructed in the eastern part of the city.