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Israelis may be said to have three identities, based on religion, citizenship and ethnicity. A Jew in Israel is Jewish by religion and ethnicity, and Israeli by citizenship; an Arab in Israel can be either Muslim or Christian by religion and is Arab by ethnicity and Israeli by citizenship.

Whilst 80% of Israeli citizens are Jewish, considerable ethnic and cultural diversity exists within the Jewish community. Over half of Israel's Jewish community was born in Israel, although a significant number of these are the offspring of immigrants from Europe, the Americas, North Africa and neighbouring Arab countries who immigrated to Israel in the years after the establishment of the state. The remaining 50% are first-generation Jewish immigrants from a wide range of countries, in particular North Africa and Eastern Europe. Two massive airlifts of the ancient Jewish community of Ethiopia took place in the mid 1980s and early 1990s; these were followed by an influx of around three quarters of a million people from the former Soviet Union.

Notwithstanding their diversity of origin, Jews tend to be categorised according to three major ethnic groupings - the Ashkenazic Jews of northern Europe; the Sephardic Jews from the Mediterranean; and the Oriental Jews of Yemen, Iraq, Persia, Kurdistan, India and Ethiopia. The Ashkenazim have always dominated religion and politics in Israel, whilst the Sephardim and Orientals have traditionally constituted a poor underclass. Despite intermarriage and the gradual equalising of incomes and political power, historical tensions continue to exist between these groups.

The family is central to Jewish life in Israel and holidays such as Passover are occasions for great family celebration. Jewish children are afforded great care and attention and elderly members of the family are treated with respect. Married offspring frequently live near their parents and take responsibility for caring for them in their old age. The man is traditionally the head of the Jewish family unit but women also have considerable influence in family affairs and decisions; many Jewish women work outside the home, accounting for about 41% of the labour force.

The great majority of the Jewish population lives in urban apartments or houses, but just over 7% live in either a kibbutz or a moshav, symbols of Israel which grew out of the pioneering society of the early 20th century. The kibbutz is a collective unit in which property is communally-owned and all members work for the prosperity of the group; in return, the kibbutz provides everything its members need. Kibbutz life emphasises democracy and equality; children are raised communally and are taught to value the group over the individual. The moshav can take the form of the moshav ovdim, a community in which up to 100 families, each with their own farm, co-operate in providing for the needs of the community and marketing their products, or the moshav shitufi, in which much of the farming is done collectively. In recent years there has been much debate in Israel about the extent to which modern consumer society has departed from such ideals. In fact, many modern kibbutzim are involved in industry, tourism and related services whilst it is increasingly common to find moshav farmers operating independently.

Arab families in Israel are often large. Typically in Arab society, the father is considered head of the family and takes all decisions relating to its welfare while the mother takes care of the housework and children. In former times Arab women rarely went out to work, but the Palestinian problem has taken its toll on the male Arab population, forcing many wives and female siblings into the role of principal income-earner. Palestinian parents take great pride in their children and their accomplishments and do all they can to help them succeed. In turn, the elderly are shown great respect and children are expected to look after their elderly parents.