The OECD report, released Wednesday, said Israel's poverty rate stands at nearly 21 percent compared with 13.8 percent in 1995. Israel was fifth after Chile, Mexico, Turkey and the United States among countries included in the report.
The report also named Israel as one of the countries with the widest gaps between rich and poor.
The report -- "Growing risk of inequality and poverty as crisis hits the poor hardest" -- noted "after taxes and transfers, the richest 10 percent of the population in OECD countries earned 9.5 times the income of the poorest 10 percent in 2010, up from nine times in 2007. The gap is largest in Chile, Mexico, Turkey, the United States and Israel and lowest in Iceland, Slovenia, Norway and Denmark."
"These worrying findings underline the need to protect the most vulnerable in society, especially as governments pursue the necessary task of bringing public spending under control," OECD Secretary-General Angel Gurria said in the report.
"Policies to boost jobs and growth must be designed to ensure fairness, efficiency and inclusiveness. Among these policies, reforming tax systems is essential to ensure that everyone pays their fair share and also benefits and receives the support they need."
Thirty-four countries are members of the OECD. Israel became a member in 2010.
Details of the report came just days after the Israeli Cabinet approved the national budget, which has yet to be taken before the Knesset. The new budget drawn up by Finance Minister Yair Lapid drew widespread public criticism because of an array of austerity measures.
Commenting on the report and the proposed budget cuts, Shlomo Mor-Yosef, director of the National Insurance Institute, told Ynetnews.com the cut in benefits and the raising of taxes will lead to an additional 40,000 families in Israel dropping below the poverty line.
"These families will not survive," he said.
Minister of Welfare Meir Cohen said the OECD report proves that fundamental changes are needed.
"Poverty represents a threat of the first order," he told Ynetnews.com Thursday.