Jerusalem is the largest and most populated city in Israel. Political and economic developments since the start of the Israeli-Palestinian peace process in the early 1990s, however, have also rendered it Israel's poorest city. 80 percent of Palestinians and 25 percent of Israelis in Jerusalem live under the poverty line.
Jerusalem spans across 125.2 square kilometres, 71 square kilometres of which were annexed to the city after the 1967 war and the commencement of Israel’s occupation of the West Bank. More than 10% of the Israeli population lives in Jerusalem (Palestinian residents of East Jerusalem are included in the national Israeli census) with a total population of 830,000 residents. Of these residents 39% are Palestinian Christians and Muslims. Additionally, according to data provided by the Jerusalem Institute for Israel Studies, the population of Israeli settlements in East Jerusalem reached 190,423 at the end of 2011.
The Bank of Israel's research division revealed in 2010 that 41% of East and West Jerusalem’s residents were living below the poverty line, and a report published by the United Nations Conference on Trade and Development (UNCTAD) stated that the poverty rate is 25% among Israeli citizens and close to 80% among the Palestinian population in East Jerusalem. It also reported that 85% of Palestinian children in East Jerusalem and 45% of Israeli children throughout Jerusalem live under the poverty line.
In a study released on May 8, 2013, UNCTAD claimed that the high poverty rate in East Jerusalem is a result of the isolation imposed on the Palestinian residents by Israel since the Oslo agreements.
The study also stated that, prior to the 1993 Oslo Accords, East Jerusalem’s economy constituted 15% of the Palestinian economy, and has since shrunk to only 7% in recent years. Consequently, while the GDP of East Jerusalem (around US$600 million in 2010) has increased, albeit marginally, since 2001, its relative contribution to the economy has decreased because East Jerusalem’s growth has lagged behind that of the remaining occupied Palestinian territory (oPt).
The study estimates that the Israeli Separation Wall that isolates East Jerusalem from the West Bank is responsible for over $1 billion in direct losses to the Palestinian economy in Jerusalem since its construction began in 2003. Its adverse impact in terms of lost trade and employment opportunities is ongoing and costs the economy a further $200 million per year.
UNCTAD notes that poverty amongst Palestinians in Jerusalem has risen steadily over the last decade, worsening following the Second Intifada and the city’s subsequent isolation from the West Bank resulting from Israel’s construction of the Separation Wall. In the space of one year alone, the poverty rate of Palestinian households rose from 68% in 2009, to 77% in 2010. By comparison, only 25% of Israeli households in both East and West Jerusalem were classified as living in poverty in 2010.
According to the Bank of Israel’s figures, the percentage of employed working-age Jerusalemites was only 43% in 2008, compared to the national average of 54%. The bank however neglects to analyse the impact of the political, demographic and economic impositions placed on the Palestinian population on low workforce participation and poverty; according to census data, 35% of all Jerusalemites are Arabs and 21% are ultra-Orthodox, two communities that tend to have the lowest employment rates (sic.).