Author Archives: liormorag

Press Release: The General Hospitalization System in Israel – The Current Situation

Embargo until 6:00 AM Tuesday, July 18

The full research in Hebrew is available here

Each year, about 1.1 million people are treated in the general hospitalization system in Israel. Despite its influence on the health of the population, the system has no measurable health outcomes.

The metrics commonly used are the basic input measures – like the number of hospital beds nationwide – versus output measures that are general estimates of the contribution of the public healthcare system – like the number of hospitalization days and the number of annual hospitalizations.

Therefore, the public judges the system in terms of waiting times in the emergency rooms and for hospital procedures, the quality of service, and their freedom of choice in selecting a physician. From these perspectives, it appears that the State has failed: the government is forced to institute programs to shorten waiting times for general hospital procedures and admissions.

A new study by Professor Dov Chernichovsky from the Taub Center and Roi Kfir looks at the general hospitalization system in Israel. The research suggests that there are systemic failures in planning, budgeting, and regulation by the government especially in light of the increasing needs of Israel’s aging population.

The result: a low number of beds per population relative to the OECD countries, inefficiencies due to the size of hospitals and their geographic dispersion, substantial gaps in accessibility to hospitals between the Center and the periphery, and bed occupancy rates (the average number of hospitalizations per bed per year) that are especially high which make it difficult for the system to function.

Public general hospitals are those in which the major activity is supplying healthcare services in the framework of the National Health Insurance Law, regardless of the hospital’s legal ownership.

Out of the 44 general hospital facilities, 19 are government-owned (hospitals in which the employees are government workers and their budgets are controlled by the State budget, like Sheba and Rambam hospitals), 12 are owned by health funds (like Soroka Hospital which is owned by Clalit Health Services, although it also supplies services to other health funds).

In addition, there are independent, nonprofit hospitals (like Shaare Zedek), companies for the public benefit (like Hadassah), or those owned by limited companies (Assuta Ashdod).

The government owns about a quarter of the hospital beds in Israel and about 47% of the curative hospital beds (not including psychiatric, long-term care, and rehabilitation beds); Clalit Health Services owns about 30% of the curative hospital beds. Thus, the State and Clalit Health Services are the two main suppliers in the Israeli market.
Fig 1 Hospitalization PR

The state’s multiple roles in the system impairs its ability to regulate

The “public” nature of hospitals with various ownership giving service under the National Health Insurance Law and the state’s obligation to them has never been defined. The situation is particularly serious in light of the fact that the state, as both funder and regulator of the system, is also the largest owner and operator for general hospitalization and essentially competes with other hospitals that are dependent on the state for their budgets and regulation.

What is more, the state is likely to prefer short-term budgetary solutions for those hospitals under its ownership and to avoid adjustments to the budget for the basket of services and in the prices of hospitalization services that serve the entire system.

So, for example, the situation of Jerusalem residents who are dependent on hospital services from Hadassah and Shaare Zedek Hospitals which are not under government ownership is inferior relative to residents of Tel Aviv who receive hospital services from Ichilov and Sheba Hospitals which are owned by the government.

This reality harms managed competition as specified in the law to ensure efficiency and public satisfaction and to also ensure that the state fulfills its basic role as an independent regulator of the system.

For nearly 50 years various government and public committees as well as government ministers have made recommendations but the situation has remained unchanged.

The state has failed in infrastructure planning

By law, the State is responsible for ensuring public healthcare services, and accordingly, for licensing and funding hospitalization beds and other infrastructure as well as determining the size and location of hospitals.

In Israel, the number of hospital beds per 1,000 population is relatively low: 2.2 versus 3.6 in the OECD and 4.1 in European countries with healthcare systems similar to Israel’s. Adjusting for Israel’s relatively young population, the number of beds reaches 2.5, insufficient to make up the gap between Israel and other countries.

What is more, while the number of beds per 1,000 population is trending down in most countries, that trend is especially sharp in Israel – 22% (versus an OECD average of 15% and about 20% in countries with similar systems between 2002 and 2017). This is the result of the continuous growth in the population in Israel, and despite the rapid aging of the Israeli population compared to other countries.

With regard to funding, the share of expenditure on hospitalization out of the national expenditure on healthcare is declining worldwide. Nevertheless, in Israel the decline is especially sharp, and the expenditure is consistently low relative to the average in other countries. What is worse, the disparity between Israel and other countries continues to widen.

The average number of curative hospital beds in Israel is low, particularly in the geographic periphery of the country. The distribution of curative hospital beds in Israel by districts shows inequalities in the number of beds per 1,000 standardized population: in the Northern and Southern periphery, the number of beds per 1,000 population is the lowest, 1.32 and 1.55 respectively, while Jerusalem hospitals have the most, 2.36.

It is important to note that the number of beds per 1,000 population has declined in all districts, although in Jerusalem, Tel Aviv and the North, the decline has all but stopped, while in the Center and South, it has continued.

In addition, average distances to the nearest hospital for relatively simple medical cases are longest in the Northern district (more than 19 km), then Judea/Samaria (more than 18 km), followed by the Southern district (about 16 km).

This is relative to much shorter distances in Tel Aviv and Jerusalem of about 3-4 km. Average distances to regional centers, for more complex medical treatments, are about 45 km in the Northern district, about 41 km in the Southern district, while in Jerusalem and Tel Aviv the distances remain about only 4 km.

Thus, there are differences between the Center and the periphery in terms of accessibility to healthcare services and hospitalization beds. These differences are reflected in longer waiting times for hospitalization in the periphery.

Among other reasons, this situation stems from inefficient planning of additional hospital beds – expanding hospitals beyond the optimal 800-bed range in areas which already have a high proportion of beds per population, instead of adding beds and resources to hospitals in the periphery which are in the optimal size range and building another hospital in addition to Soroka in the South (see figure below).
Fig 8 ENG

Due to these findings, the researchers at the Taub Center stress that it is important to consider issues of accessibility and efficiency when making decisions regarding the opening of new hospitals or the expansion of existing facilities.

Treatment and service quality are in danger

Despite the relatively low number of hospital beds, the number of hospital discharges per 100,000 population in Israel is similar to the OECD average – about 15,000 annually – although lower than the average in countries with similar systems, which is about 16,000 annually.

The average number of curative hospitalizations per bed (bed turnover rate) in Israel in 2016 was particularly high: about 66 versus an OECD average of about 41 and about 44 in countries with similar systems.

Israel’s bed turnover rate reflects relatively short hospitalizations on the one hand (about 5 days per patient in contrast to an average of 6.7 days in the OECD countries and 6.2 in countries with similar systems), and particularly high bed occupancy rates on the other hand. The average bed occupancy rate in Israeli hospitals is also exceptional at about 94%, versus and average of 75% in both the OECD countries and those countries with similar systems
Fig 2 Hospitalization PR

The data indicate a curative care hospitalization system that is characterized by a diminished ability to handle emergencies (not necessarily security related).

This is in addition to a potentially lower level of treatment quality due to relatively short hospitalizations and additional pressures to shorten hospitalizations due to pressures of those waiting for treatment at home and in the emergency rooms, and an inability to compete with other hospitals on issues of quality of care, due to high occupancy rates.

In light of the disparities between needs and hospital infrastructure in Israel, particularly in the periphery, the addition of curative hospital beds – that are efficient and accessible – is inevitable within the next few years, even considering technological advances that allow expansion of services given in the community setting.

Before additional investments in the system are made, though, it is worthwhile to reduce the government’s involvement in the marketplace – an involvement that only exacerbates the situation as is highlighted in a second new study by the Taub Center to be published shortly.

Physicians claim that additional beds will not substantially improve the situation

Conversations with physicians have revealed that they feel additional hospital beds will not significantly change the situation, and that what needs to change are hospitalization procedures in order to reduce pressure on the hospitals and waiting times for patients.

The physicians interviewed recommend among other things: avoiding unnecessary hospitalizations by discharging patients from the emergency rooms (something that requires strengthening specialist staff in emergency rooms and opening holding units); moving physicians to two shifts in hospital departments (in place of a single shift until 16:00 with physicians on call for critical treatment only) and tests in the evening hours and weekends in order to shorten overall hospitalization time; a look at the efficacy of home hospitalization and creating lines of communication between hospital departments and community physicians; physician consultations to old-age facilities and supervision of residents’ medications in order to avoid hospitalization of the elderly in curative care units in place of treatment in their residential facility.

 

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

 

 

 

 


Determinants of financing in the Israeli education system

This is important because the clearer and more well-defined the budgeting formulas, the less likely that preferential treatment will be given to a certain sector. Nonetheless, a recently published Taub Center study shows that for Israel’s official primary schools that include grades 1-6 (not including ultra-Orthodox schools), the per class and per student budgetary formulas partially reflect not only educational considerations, but social and ideological considerations as well.

The first and central portion of the budget is called “the basic standard,” which is mostly based on the number of classes in a given school, and not the number of students. According to this formula, each class entitles the school to a certain number of teacher work hours, which comprise the main part of the school’s budget.

For budgetary purposes, the minimum number of students per class is 20, and each additional student entitles the school to a rather small supplementary budget (in the event that the number of students in a class is less than 20 the class receives only half of the basic standard budget). Thus, a rise in the number of students raises the budget per class, but budgeting per student goes down as the class size increases, as shown for the sample third-grade class depicted in the graph below.
Budget per class and per student

The cutoff for the maximum number of students considered a “class” for budgeting purposes is different than the number of actual students per class, and is based on the school’s Nurture Index (the higher the index, the weaker the socioeconomic profile of the school’s students).

The cutoff is 32 students per class for schools in which students have the weakest socioeconomic background and 40 students per class for schools in which students have the strongest socioeconomic background. This means that, in practice, two schools with the same number of students could be considered as having a different number of budgetary classes, impacting the schools’ overall budgets.

In addition to “the basic standard, “dedicated baskets” are provided to schools in recognition of special needs or special projects, such as a longer school day, which requires extra teaching hours in every class.

Other dedicated baskets include the “nurture basket” for the purpose of providing resources to improve the educational achievements of students from weak socioeconomic backgrounds; the “mainstreaming basket” for integrating students with special needs in mainstream classes; the “absorption basket,” which is meant to help integrate students who are immigrants or returning residents into the school; and the “prayer time basket,” allocated for prayer hours in Hebrew State-religious schools.

Thus, a school’s actual per class and per student allocation is influenced by a number of different variables, including, among others: the school’s Nurture Index, school size, the presence of a long school day program, and the presence of Special Education classes. Additional factors, such as the median seniority of teachers and the share of teachers with advanced degrees, also influence this allocation.

Taub Center researchers found that, indeed, the vast majority of the budget differences are explained by the factors in the fixed budgetary formulas, making it difficult for education leaders to grant budgetary preferences to one type of school or another.

The variables that best explain the differences in budgeting between schools are the Nurture Index, school size and participation in a long school day program. As seen in the graph, “education sector” is actually the variable with the least influence among those measured.

With this, even after controlling for different aforementioned school characteristics, the study reveals what appears to be a hierarchy in primary school budgets across different education streams in Israel; budgets are highest in the Hebrew State-religious education system, followed by the Hebrew State education system, and are lowest in the Arab education system.

The high allocation for Hebrew State-religious education may be explained by the prevalence of several special budgetary baskets in Hebrew State-religious schools including prayer time, separate classes for boys and girls, and rabbi hours. All of these factors are meant to maintain the special character of the Hebrew State-religious education system.
aaa

Press Release: The Picture of the Nation 2019

The Taub Center for Social Policy Studies in Israel publishes A Picture of the Nation 2019 today. The booklet, written by Taub Center President and Bar-Ilan University Professor of Economics Avi Weiss, presents up-to-date data on Israel’s society and economy in the country’s 71st year .

The findings in the booklet, which is generously supported by the Koret Foundation, paint a complex picture of Israeli society, including improving trends alongside challenges that the next government will face.

Israel has a higher birth rate, a high employment rate, and high education levels, as well as an improvement in the standard of living. In contrast, student achievements on international tests remain relatively low (although they have improved over time), the health system is facing difficulties as inequalities in accessibility grow, and it is more difficult for households to lift themselves out of poverty than in other OECD countries.

Macroeconomics and the standard of living

The Israeli economy is stronger than at the beginning of the decade. Household incomes have risen and price levels are declining relative to other developed countries (although prices are still high), but it is questionable whether this positive trend will continue.

  • A sharp rise in the standard of living: in the past few years, there has been a rise in household income and consumption levels. Between 2012 and 2017, the net real income of households in the middle income quintile rose by about 22%, and in the lowest quintile by about 19% (versus an increase of only 14% in the highest quintile). Incomes rose primarily as a result of increased income from labor, whose source was a rapid rise in wages and employment levels.
  • In many OECD countries, it has become more difficult to purchase a home over the past two decades, while in Israel the ability to purchase a home over this entire period has largely remained the same. With this, purchasing a home has become much more difficult in the last decade. That is, at the beginning of the period, Israelis’ disposable income rose faster than housing prices, and since 2007 the situation has reversed and housing prices have risen faster than incomes.
  • Based on early estimations, in 2018 GDP grew faster than the average in OECD countries: 3.3% versus 2.9%. Nevertheless, per capita GDP, the more significant metric for determining standard of living, grew by only 1.3% annually versus an average rate of 2.2% in the OECD.
  • After an extended period of increases in employment rates, it is unlikely that additional improvements in the standard of living will be realized without an increase in labor productivity. Since 2000, the annual growth rate in labor productivity in Israel was low relative to what could have been expected given its level in 2000: it was 1.2% per year instead of an expected level of about 2% per year.
  • One of the greatest challenges facing the new government is dealing with the deficit, which stands at 3.8%. This is the highest level in recent years, with the deficit having ranged between 2% and 3% following the fiscal discipline that characterized the government budget. Foreign debt level in previous years has also been particularly low. Recent government commitments – primarily in the areas of wages and security – will likely lead to a reversal of these trends: the deficit is expected to rise, which is liable to lead to a downgrading of Israel’s international credit rating, raise debt financing costs and impact growth negatively.
    The real cumulative change in household income and consumption, 2012-2017

Israel’s fertility patterns break records and paradigms

Israel’s fertility rates are unusually high relative to other developed countries, even among Israel’s secular and religiously traditional Jewish population. These rates largely do not conform to international paradigms.

  • Israel tops the fertility charts: in 2015, the Total Fertility Rate (TFR) was 3.1 children per woman, which places Israel at the top of OECD countries, by far.
  • The source of the rise in TFR is mostly secular and traditional Jewish women; their TFR has never fallen below 2.2 (which is higher than all the other OECD countries) and has actually risen over the past 20 years.
  • A unique combination of high standard of living and high TFR: in countries where the per capita GDP is similar to Israel’s, the TFR level is much lower (1.24-2.02 children per woman), while in countries with a similar TFR level to Israel’s, the average per capita GDP is one-fifth of Israel’s.
  • A rise in mother’s age at first birth does not translate into a lower fertility rate among Jewish women in Israel: between 1994 and 2016, the average age at first birth rose by about three years among both Christian and Druze women and by about one year among Muslim women, and total fertility rates showed a corresponding decline (by about 6%, 41% and 30%, respectively). In contrast, among Jewish women, the expected relationship between age at first birth and TFR is severed: age at first birth rose by about 2.8 years while the TFR also rose, by about 0.4 children.
  • More educated Jews in Israel do not have fewer children: corresponding to worldwide trends, among Arab Israelis, the highest fertility rates are among those with the lowest education levels, while those with a university degree have fewest children. In contrast, among non-Haredi Jewish women, those who complete high school or college have the same fertility ratesgraph – check if there us one

Education

Israeli student achievements have improved and the gaps between them and OECD students have narrowed; achievements have remained low, though, relative to other developed countries. Expenditure per student has risen but remains low relative to the OECD level.

  • Israel’s student population has increased by 44% since 2000: this is an average annual growth rate of 2%, which is above the norm in developed and developing countries. The most rapid growth has been in the Bedouin and Haredi education sectors.
  • The number of children attending preschool rose by about 81% between 2000 and 2015: in the last decade, the share of these students in the Arab education system has declined, while the share of students in Hebrew State education has risen.
  • Expenditure per student in Israel continues to rise: since 2010, the increase in per student expenditure was faster than in other OECD countries, although the level of expenditure remains lower than average (as of 2015). Nevertheless, developments since 2015 – such as the new teacher wage agreements, school activities during vacations, and others – are expected to increase the average expenditure per student in Israel such that at least in elementary schools it will approach the OECD average in the next few years.
  • Test scores have improved and gaps have narrowed: since 2008, student achievement scores on the Meitzav exams have improved, and test score dispersion has narrowed – that is, gaps have lessened. The greatest advance has been in 8th grade science scores (17.4%).
  • International achievements have also improved, though not sufficiently: in almost all international tests, student scores have improved more in Israel than in other countries. Nevertheless, in almost all cases, Israeli student scores remain below the average of the countries that participated in 2001 and 2015.
    PR EN Ed fig
  • Druze students lead in terms of bagrut qualification rates: bagrut qualification rates have increased overall from about 41% to about 56%. In Druze education, this rate has more than doubled and today is the highest of all education sectors (about 66%). The rate has also doubled in the Bedouin schools, though it remains the lowest of all education sectors (about 32%).
  • In most industry sectors, workers with high skills enjoy greater returns to education relative to workers with low skills. An exception is in the education field where the return to education is much higher for those with low skill levels.

Expanding technological-vocational education in high schools

The goal of the Ministry of Education to expand technological-vocational education in high schools has largely succeeded, although the expansion is not identical across all education sectors.

  • The Druze and the Bedouin girls lead: the share of female students in the high technology track rose most markedly in the Arab education sector, and especially among Druze (from 8% to 31%) and Bedouin (from 6% to 21%) girls.
    PR EN Voc Training fig

    • Student backgrounds matter, especially among those in Hebrew education: students in the high technology track come from the strongest socioeconomic backgrounds, while those in the low track come from the weakest backgrounds. Socioeconomic profiles of Arab and Druze students in the high technology track are much weaker than of their Hebrew education peers, yet, despite these differences, bagrut qualification rates are similar at around 90% (as of 2017).
  • Technology education has expanded: in the last decade there has been a substantial rise in the share of students in technology education – in the Hebrew education sector it has increased to 38%, and in the Arab education sector to 46%. The majority of the increase has been in the high technology track (characterized by high achievements), while the share of students in the low technology track has remained stable (3%).
  • A large portion of Haredi and Arab Israeli women work in education: the share of Haredi women working in the education field stands at 45%. This rate is high relative to non-Haredi women, but lower than past rates, and it has neared that among Arab Israeli women (38%). The decline indicates a gradual process of employment diversification, which can also be seen in the increase in Haredi women studying in the technology track in high school.
  • The best men to high tech; the best women less: in 2017, only a third of those employed in high tech were women (an international phenomenon), the majority non-Haredi Jews. At the same time, there has been an increase in the share of Haredi women in the field – from less than 1% a decade ago to a little over 3% today. It is surprising to note that Arab Israeli women, who study science at high rates in high school, do not yet continue in the field – among other reasons because a large portion of them live in the north of the country and most high tech employment is in the center.
  • Arab Israeli women are working more; Haredi men are not: the share of Arab Israeli women who are working has risen consistently and is close to the government goal set in 2010 for 2020 (41%). Among Haredi men, on the other hand, the increased employment that was so notable at the beginning of the decade has stopped and their rate stands at 49% – very far from the government goal for 2020 (63%). This is one of the greatest challenges facing the Israeli economy.
  • Fewer students in Arab education than in Hebrew education take 5-unit math bagrut exams: in 2017, 19% of students in Hebrew education took 5-units of math versus only 8% in Arab education. The greatest increase in the portion of those taking the math bagrut at the highest level was from the high technology track students (an increase of about 60% in 12 years), and only 6% of those taking high level math bagrut exams studied in academic schools without a science major.

Employment hits new highs

The share of employment and labor force participation rates continue to rise and unemployment is at near-record lows.

  • Arab Israeli women are working more; Haredi men are not: the share of Arab Israeli women who are working has risen consistently and is close to the government goal set in 2010 for 2020 (41%). Among Haredi men, on the other hand, the increased employment that was so notable at the beginning of the decade has stopped and their rate stands at 49% – very far from the government goal for 2020 (63%). This is one of the greatest challenges facing the Israeli economy.
  • The best men to high tech; the best women less: in 2017, only a third of those employed in high tech were women (an international phenomenon), the majority non-Haredi Jews. At the same time, there has been an increase in the share of Haredi women in the field – from less than 1% a decade ago to a little over 3% today. It is surprising to note that Arab Israeli women, who study science at high rates in high school, do not continue in the field – among other reasons because a large portion of them live in the north of the country and most high tech employment is in the center.
  • A large portion of Haredi and Arab Israeli women work in education: the share of Haredi women working in the education field stands at 45%. This rate is high relative to non-Haredi women, but lower than past rates, and it has neared that among Arab Israeli women (38%). The decline indicates a gradual process of employment diversification, which can also be seen in the increase of Haredi women studying in the technology track in high school.
  • Commuters experience traffic jams: road congestion is rising, and in the past 30 years the number of workers who work outside their place of residence has tripled (while the population has only doubled). The increases in commuters have been accompanied by an increase in private car use, and the number of private cars has risen faster than the development of roads. At the same time, the price of public transportation has declined, and, in the past decade, the share of those commuting by train has increased.

High tech – the economy’s engine?

The government wants to expand employment in the high tech sector to improve Israel’s economy. But most of the high skill workers with the requisite skills are either already working in high tech or are working in other lucrative positions, and it appears that in order to expand employment in this sector, it will be necessary to improve the skill level of the Israeli labor force by interventions earlier on in the education process.

  • High tech is dominated by men: the share of high tech employment in Israel is the highest in the OECD (8%). Among workers at the highest skill level (as measured by the PIAAC, Survey of Adult Skills), more than one-quarter of the men and 12% of the women are employed in high tech, which places Israel higher than any other country for both men and women.
  • Gaps between workers are high: workers in the highest skill quintile are similar in skill level to the mean among high skill workers in the OECD, while for workers in the lower skill quintiles the gaps grow and skill levels are considerably lower than the levels of their OECD peers. This is especially true with regard to Arab Israelis. In order to close these gaps, skill levels in the overall population will have to be raised in future generations through the education system, and in particular amongst the weaker segments.
  • A large majority of those at the highest skill level who are not employed in high tech is employed in other lucrative positions, so it is not reasonable to assume that they will move into high tech. Alternate solutions will, therefore, have to be found for the shortage of workers in this sector.
    oecd average skill level

Health indicators are good, but there are concerns about the healthcare system

Israelis’ health is good: life expectancy in Israel is high and infant mortality rates are low. Nevertheless, there is a deep concern that the situation will change with the rapid aging of the population and increasing medical needs alongside the slow growth of resources.

  • Healthcare expenditures have increased relatively little: since 1995, the percentage of GDP spent on healthcare remained about 7% while in the OECD countries it increased from 7% to 9%, and to 11% in those countries with similar healthcare systems to Israel. The rapid aging of the Israeli population alongside rising physician wages will likely require a rise in the share of government expenditure to prevent the current levels of care from deteriorating.
  • Physician wages are rising, and the costs of healthcare are rising accordingly: between 2011 and 2018, the Healthcare Price Index rose by about 9% while the Consumer Price Index rose by only 4%. The increase was primarily due to rising physician wages.
  • In Israel, there is a common practice of referring patients from the public system to the private one, and physicians have an incentive t olimit their work hours in the public system to have more time for their private practices. This creates wage pressure in the public system: between 2011 and 2017, the wages of physicians in the public sector increased by about 42% (in contrast to an increase of about 15% in the average market wage).
  • Financer, operator, supervisor: the state finances hospitals (through budgets to the kupot holim, that then pay for hospitalization), is the owner of the majority of general hospital beds, and is the supervisor of all hospitals. These multiple roles constitute a conflict of interests.
  • In Israel there are fewer hospitalization beds per 1,000 population than in the OECD: Israel has 3 beds per 1,000 population versus an OECD average of 4.8. The number of beds per 1,000 population is declining – in Israel and in the other countries examined – largely as the result of technological changes.
  • Israel leads in terms of bed occupancy rates among the OECD countries (except for Ireland): 94% in 2016 (versus 75% on average in the OECD). In contrast, average length of hospitalization is shorter in Israel: 5.2 days versus an OECD average of 6.7 days. This leads to crowding and long waiting times even in emergency rooms.
  • May you never need it (especially in the periphery): the number of beds per person in the periphery (north and south) is the lowest in the country, and in Jerusalem it is the highest. What is more, the greatest average distance from the towns to the hospitals is in the northern district. Differences between the center and the periphery in the distance from towns to hospitals are also correlated with longer waiting times for medical procedures and treatments in the periphery.
    PR EN Health fig

Social welfare

The levels of poverty and inequality have declined in recent years and social investment has increased, but Israel is still far from the targets set by the Committee for the War Against Poverty.

  • The poverty line is rising, welfare benefits are not: increases in income support benefits have not kept up with the rising poverty line and the average wage, and, in fact, the gap between them has grown for over a decade. In 2000, the amount of income support and the child allowance for a couple with one child was about 70% of the poverty line, while in 2017, it is 40%. In addition, the number of families receiving the benefit has been halved in the past 20 years, while the incidence of poverty has only decreased by about 10%.
  • In Israel, it is exceptionally difficult to escape poverty: to increase their income above the poverty line, a household in the lowest income decile has to work many more hours than households in the OECD, as there is a large gap between household incomes in the poorest income decile and the median income quintile, which determines the poverty line.

PR EN Welfare fig

  • Limited policies of social investment: the government promotes social investment through the development of human capital, but steps have not been taken to improve the safety net for those who are not in the labor market – unemployment benefits and income support.
  • Investments in early childhood: the expenditure for building and refurbishing buildings as day care centers grew between 2011 and 2017 from NIS 2 million to NIS 260 million, with the adoption of the recommendations of the Trajtenberg Committee and in order to encourage employment.
  • Low investment in training: expenditure on active labor market policies (ALMP) is among the lowest of the OECD countries. Although there is a notable rise in spending on vocational training, Israel’s expenditure remains below the OECD average (0.06% of GDP in Israel versus an OECD average of 0.13%).
  • The weakest populations are on the verge of bankruptcy due to high debt: among households in the lowest decile that are in debt, the ratio between the average debt and income is close to 8.0 – that is, their debts are far greater than their annual income, and it is doubtful whether they will be able to repay their debts.

Pension gender gaps

The pension system has universal components that benefit women, but due to employment differences between men and women and their impact on private pensions, and due to differences in retirement ages, gender gaps are created in pension income that work to women’s disadvantage.

  • Women earn less – in their jobs and from their pensions: data from Menorah Mivtachim for 2017 show distinct gender differences in pension savings that tend to increase with age. The gap stems from differences in employment characteristics – fewer women work, women work fewer hours and for lower hourly wages.
    pensions

    • Women lose money during extended career breaks for maternity leave and childcare: the way in which pension rights are accrued during career breaks for maternity leave and childcare has an impact on the pension gender gap. A woman with two children who takes a 5-year career break for childcare (who according to the law cannot make pension contributions during this period), will receive about 90% of the pension of a woman with no career breaks. This is low relative to the OECD average.
    • It pays for women to delay retirement: a woman who delays her retirement to after age 62 (the retirement age set by the government) can receive as much as 40% in additional old-age benefits. In contrast, a man can receive at most an additional 15% for pushing off his retirement after age 67. Hence, a woman who delays her retirement until age 70 will receive a pension benefit that is 22% higher than a man who does the same.
    • The retirement age of 67 for a man is the highest in the OECD, and the retirement age of 62 for women is among the lowest. Israel is one of only three OECD countries that does not intend to eliminate the retirement age gap between men and women.
  • According to a simulation by Menorah Mivtachim, delaying retirement for a married woman to age 67 reduces the employment portion of the pension gender gap from 45% to 20% (and to 13% if one also takes into account the contribution of the old-age allowance). It seems that raising women’s retirement age would improve the retirement situation for most working women, and it is possible to find solutions for women who would be harmed by the policy change (e.g., those who are unable to continue working due to health, education or ageist issues).

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.


 

 

A Picture of the Nation 2019

Happy birthday to Israel! The country’s economy at 71

In the short term, it appears that the past few years have been economically robust for Israel in many respects: the employment rate is the highest it has been in years, unemployment has reached a historic low, wages have risen, and GDP growth is similar to recent years.

Israel experienced higher GDP growth than in other OECD countries – 3.3% in Israel, compared to an average of 2.9% in the OECD in 2018. However, because the Israeli population is also growing faster than in the OECD, Israel’s GDP per capita growth rate (1.4%) remains lower than the OECD average (2.2%).

When looking at productivity (how much the country produces per hour of work), Israel falls well below the OECD average, as well as below the US and the G7 countries, and is not managing to close the gap.
GDP per work hour

In fact, Israel has experienced a slowdown in productivity growth since the early 1970s, and even the rapid growth experienced by Israel’s high tech sector from the 1990s onward has not altered the slowdown.

While this trend is concerning, the lack of productivity growth in the past decade may actually be due, at least in part, to more Israelis entering the labor market. Growth in the economy can be attributed to several factors including human and physical capital, the number of work hours, and productivity.

For over a decade, increasing work hours as more people enter the labor market has been the main source of Israel’s per capita GDP growth. However, the fact that most of the workers joining the labor force during this period were low-skilled workers also had a dampening effect on productivity growth.

Despite this, there was some improvement in the quality of employment during this period due to an increase in workers’ experience and education levels.

Looking ahead, as the already-high employment rate continues to rise (leaving little room for it to keep growing) and the share of Israelis who are of prime working-age falls, the potential for future growth based on increased labor input will decline, and the country will need to look to other potential sources of growth.

The sizable increase in real wages in the past few years is not attributable to improved productivity, as explained above, but rather can be traced to a relative decline in consumer prices. The rise in real wages and the accompanying growth in consumption have occurred not only among high-income Israelis, but among the lowest-income Israelis as well.

Consumer prices have decreased in a number of categories in recent years, yet, despite this, price levels and the cost of living in Israel remain high. The steepest price decrease among consumption categories since 2015 occurred in communications, with substantial price reductions for food, transportation, and recreation/culture as well. At the same time, housing prices rose. It is likely that the decline in prices stems, at least in part, from measures taken by the government to try to lower the cost of living.

In addition to the challenges Israel faces in searching for new sources of long-term economic growth and keeping the cost of living in check, the country will need to address its fiscal system, which is subject to growing pressure.

Israel succeeded in reducing its debt significantly over the last two decades – from 90% of GDP to 60% – by adhering to spending limits and following a plan to lower the deficit to 1.5% of GDP by 2024. However, according to the most recent numbers, the annual deficit reached 3.8% of Israel’s GDP during the past twelve months – much higher than the 2.9% deficit ceiling set for 2018, and already on track to surpass the deficit limit for 2019.

This is exacerbated by the “hidden budget deficit” that has been created through common deviations from the spending and deficit rules by enacting long-term programs with long-term funding implications under “temporary directives” or by transferring governmental activities to off-budgetary frameworks that are not technically bound to the budget spending limits.

Given these trends, the government deficit is set to rise well above its limits in the coming years unless government spending is significantly cut and/or taxes are raised.

In summary, there are several indications that Israel’s economy is doing quite well right now, and that it will continue to be strong in the near future, but several larger challenges must be addressed for these trends to continue in the long-run.

Material Assistance to People Living in Poverty – A Historical Overview and Current Trends

Executive Summary

Almost one-fifth of families in Israel live in poverty, the highest rate among OECD countries. Over the past number of decades, the perception of poverty in Israel and methods for coping with it have changed. Since the early 2000’s, there has been a sharp decrease in the scope and accessibility of Income Support provided by the National Insurance Institute (NII), which acts as a safety net for families living in poverty, while the budget allocated to impoverished families for emergency assistance has remained fairly stable.

Alongside the NII allowances, there have been efforts in the past decade to offer people living in poverty comprehensive programs that include providing material assistance through local social services departments. The Ministry of Social Affairs and Social Services’ flagship program for this is the Breath of Relief program.

Trends in poverty policy and material assistance over time

Today, assistance to impoverished families is granted mainly through Income Support distributed by the NII, while a smaller amount, earmarked for financing emergency assistance, is provided by local social services departments.

Since the turn of the century, Israel has shifted from a “welfare-to-work” model to more of a “social investment” and “poverty-aware” approach to social welfare.

  • Economic instability in the early 2000’s resulted in a sharp reduction in the level of Income Support and more stringent eligibility requirements, such that the share of families receiving Income Support declined from 8% to 3% by 2017.
  • The early 2000’s also witnessed an acceleration of the outsourcing of social services to civil society organizations and private companies.
  • In 2004, a welfare-to-work program was established to encourage Income Support recipients to integrate into the labor market, but was discontinued after a short trial period.
  • The public began paying more attention to social welfare issues following the 2011 social protests. One manifestation of this was the establishment of the Committee for the War Against Poverty (The Elalouf Committee). The Committee’s recommendations touched on areas of education, housing and employment, and were designed to strengthen the human capital of families living in poverty.
  • The “poverty-aware social work” paradigm, which emerged in 2010, directed the discourse on poverty to families’ social rights, and paved the way for the comprehensive Breath of Relief program.

    The Breath of Relief program

    The Breath of Relief program has been in operation since 2015. The program consists of two main components: (1) Rights Centers – community centers focused on the take-up of people’s social rights and the implementation of employment and community programs; (2) An intensive 2-year family support program that includes a flexible family budget and social worker intervention.

    The cost of this program is NIS 100 million a year. Each family participating in the program receives NIS 8,000 a year for various purposes, allocated at the discretion of social workers and in consultation with the families.

    • By the end of 2018, approximately 5,700 families had been reached through the program, of which 41% were from the Arab and Bedouin sectors, and 44% from the north of the country.
    • About 40% of recipient families have four or more children, and about 64% of the Jewish participant families (not including Haredim) are headed by single parents.
    • The parents in most of the families have 12 years of schooling, 17% have studied in higher education, and 27% have less than a high school education.
    • Most participants in the program are employed, but their incomes are low and allowances comprise the major source of their livelihood.
    • About 70% of the families in the program reported being in debt, and it is reasonable to assume that the real percentage is even higher.

The flexible budget seems to serve families for a variety of expenses: household needs, employment, paying off debt, and more. However, not all recipient families use the assistance to the fullest extent and they avail of the funds to cover different types of expenses.

  • The sum used during the first year of the two-year program stands at only NIS 4,200, on average – a little over half of the total allocated sum. Those who joined the program in 2017 used a larger sum in the first year.
  • About 42% of the assistance is used by families for household needs (electrical appliances, furnishings, and household goods), about 28% is spent on employment (training advising, and equipment), and about 10% is spent on paying off debt.
  • Among Arab Israeli families, a large share of the assistance is spent on electrical appliances and home accessories. This is particularly true among the Bedouin, where about 50% of the assistance is spent on household needs.
    Expenditure from financial assistance on goods and servicedThe differences in the ways in which the recipient families use the aid indicate the need to maintain the flexible nature of these budgets so that they can provide a real response to the different needs of the families participating in the program.

 

 

Is there a cure? Addressing challenges in Israel’s healthcare system

Israelis have benefited from the universal health coverage enacted in 1995 following the National Health Insurance Law (NHIL), and they are in comparatively good health: for example, Israel has a relatively high life expectancy at birth (82.5 years) – among the highest in the world – and low infant mortality (3.1 per thousand births) – among the lowest in the world.

However, the current health indicators reflect past investments in the healthcare system. There are signs today that the relative health status of Israel’s population may deteriorate in the future, as a result of rising tension between medical needs and resources that stems from state policy or, rather, a lack thereof.

The medical needs of the population are rising. Israel has a young but rapidly aging population. Simultaneously, Israel has rising fertility rates – already the highest among the developed nations – requiring a growing investment in pregnant women and infants.

Additionally, the country faces growing risks of modern diseases that have an impact on the entire population, such as obesity, which can be linked, in part, to increasing income disparities and rising food prices.

The challenges the system faces in response to these rising needs is reflected in its lagging funding. Worse, changes in the composition of this funding aggravates the situation.

In 2017, the share of healthcare spending in Israel stood at 7.4% of GDP (compared to 6.9% of GDP two decades prior). This figure is lower than both the OECD average of 8.9% and the 11.0% average among countries whose healthcare systems are based on sickness funds (HMO-type organizations) like in Israel. The gap between Israel and these other countries has been increasing over time, though they do not face an increase in medical needs similar to Israel’s.
Healthcare expenditure as percent of GDP

As for the composition of spending, the share of public spending out of total healthcare spending has been falling, and is relatively low compared to other developed nations with universal coverage. Public spending out of total health spending stands at about 63% in Israel, compared to 73.5% in the OECD, and 78% in countries with similar healthcare systems.

Consequently, households are spending more and more out of pocket for their medical needs: healthcare spending out of household disposable income nearly doubled between 1997 and 2016.

These developments mean that access to care in Israel, manifested, among other things, in prolonged waiting lines, has become increasingly dependent on residents’ ability to pay – contrary to the fundamental philosophy of the National Health Insurance Law.

Worse, regulations of private and supplemental insurance (which is quasi-public) mean that physicians are currently allowed to simultaneously be employed in both the public and private spheres. This results in the widespread practice of doctors referring patients from the public system to their own services in the private system, where they can charge higher prices for treatments that could largely be administered through the public system as well. This results in ethical issues, supplier induced demand for private services (including potentially unnecessary procedures), inequalities in access to care, and inefficiencies in the system.

At the same time, health care prices have increased, mainly due to rising physicians’ wages and fees. Physician wages in the public sector increased by 42% between 2011 and 2017 while the average wage rose by only 15%. This is because publicly funded institutions need to increase wages in order to compete for their own personnel moonlighting in the private institutions.

Additionally, the public health infrastructure has been underutilized because of the “migration” of medical personnel with their patients from starved publicly funded institutions to privately funded institutions for services financed by supplemental insurance.
Trends in physicians wages

The public-private mix in the Israeli health care system is an ungainly hybrid with no clear distinction between public and private, on the one hand, and no infrastructure to regulate the two, on the other. The state has been trying to confront the issues with ad hoc solutions such as preventing physicians from self-referral to privately funded care for a period of six months and organizing a special program to cut waiting lines in the public system.

To confront the challenges created by this ungainly system, one of two models (the principles of which are already in effect in various countries) could be implemented in Israel.

In the first model, known as the “separated model,” the public and private systems would exist at separate funding and infrastructure levels, administered in separate institutions. Most importantly, in this model, both citizens and healthcare workers would not move between the public and private spheres.

All patients would have to decide whether to receive their care in the public or private system for the duration of a specific treatment. Likewise, healthcare workers receiving income based on public funding would not offer private treatment.

The second model – the “integrated model” – would merge the private and public systems. In this model, every resident would receive basic public insurance with extra elective services available for pay out-of-pocket or through private insurance.

Another insurance and medical tier would be based entirely on private funding. This model can be compared to an airplane in which one might choose between flying in economy class, business class, or first class – or to fly in a separate, private plane.

In this model, the system is regulated so that people cannot pay for shorter waiting times in the publicly-based system and doctors in the integrated system can provide both basic and elective services, but cannot work at the same time in the separate, completely private system.

Regardless, because Israel’s healthcare issues are so embedded in the way the system itself functions, they need to be addressed in a comprehensive manner by fundamentally re-examining the system’s structure, incentives, and regulation.

Press Release: Material Assistance to People Living in Poverty – A Historical Overview and Current Trends

Embargo until Wednesday, April 17, 6:00a.m.

To read the full study (in Hebrew) – Password: taub042019

Almost one-fifth of families in Israel live in poverty, the highest rate among the OECD countries. Local social services departments deal with 266,000 assistance requests for people living in poverty, and the question of how to help poor families has preoccupied policymakers for many years.

A new Taub Center study conducted by Prof. John Gal, Prof. Michal Krumer-Nevo, Shavit Madhala and Guy Yanay explores changes in the perception of poverty and methods for coping with it over time.

The study shows that there has been a sharp decrease in the generosity and accessibility of Income Support over the years, which acts as a safety net for families living in poverty. At the same time, the government budget allocated for emergency assistance to these families remains limited.

The growing economic distress of families living in poverty and the high volume of requests for assistance have led to a new approach to addressing poverty in social services departments in recent years. One manifestation of this is the development of the flagship program of the Ministry of Social Affairs and Social Services – the Breath of Relief program (“Noshmim Lirvacha”).

The study examines patterns in the use of material assistance among various population groups participating in the program, and finds that individual characteristics, especially sector, are related to the extent to which the assistance provided by the program is utilized and the purposes for which it seems to be used. The researchers point to the need for flexibility and tailored assistance for families living in poverty.

Changes in tackling poverty in the early 2000s: reduced allowances and the privatization of social services

Most of the responsibility for financial assistance to families living in poverty was transferred from social services departments at the local level to the National Insurance Institute about four decades ago. Today, the assistance is granted mainly through Income Support distributed by the National Insurance Institute, while a smaller amount, earmarked for financing emergency assistance, is provided by the local social services departments.

The Taub Center study notes that, in the past, Income Support was linked to the average wage. The economic crisis and rising unemployment in the early 2000s led to changes in poverty policy and was reflected, among other things, in a sharp reduction in the level of Income Support and in tougher eligibility requirements.

As a result of these changes, the share of those receiving Income Support declined from 8% to 5% of Israeli families. The decrease in the level of Income Support and child allowances increased the gap between the level of assistance and the poverty line. At the same time, from 2000 to 2005, the incidence of poverty rose from 17.5% to a peak of 20.6% of Israeli families, and since dropped to 18.4%.

Alongside the decline in the level of Income Support and eligibility, efforts were made to encourage the integration of impoverished populations into the labor market through the “Mirvacha La’avoda” program, which, despite being a leading program in the field (also known as the “Wisconsin Program”), was discontinued after a limited trial period.

Even aid provided by social services departments, intended to provide assistance in situations such as difficulty to pay rent and the financing of basic necessities, underwent changes during this period. The main development was the expanded role of non-governmental actors – such as civil society organizations and private companies – in the areas of welfare and employment, which accelerated the outsourcing of social services.

A prominent example of this is the International Fellowship of Christians and Jews (IFCJ) which doubled the sum transferred by the Ministry of Social Affairs and Social Services for material assistance administered by social services departments. However, due to bureaucratic difficulties and the approach of social workers in these departments, who believed their main purpose was to provide counseling and not material assistance, the budgets were not fully utilized.

The impact of the 2011 protests: expansion of social investment – but without increasing the budget

The social protests of 2011, and the recommendations of the Trajtenberg Committee that followed, led to a fundamental change in the discourse on social issues and poverty in Israel. In 2013, a public committee was established to combat poverty (The Elalouf Committee). The committee set an ambitious goal to almost halve the poverty rate within a decade, and recommended a number of steps to achieve such a goal.

Of the recommendations, the government primarily implemented those designed to strengthen education, housing and employment. These measures epitomize the “social investment” approach to social welfare, which seeks to strengthen the human capital of families living in poverty – mainly by expanding early childhood care – thus enabling parents to integrate into the labor market and improve their children’s ability to escape poverty in the future.

However, alongside these measures, there was no significant change in social welfare expenditure or expenditure for the impoverished population, and the percentage of those entitled to Income Support continued to decline from 5% to 3% of families in 2017.

As the Taub Center study shows, the change in attitude was also felt in local social services departments. Difficulties in providing for the material needs of people living in poverty at the beginning of the century led to the development of new modes of assistance during this period in cooperation with non-governmental organizations:

  • “Guardians of Israel”: The IFCJ transferred NIS 20 million a year to local social services departments, and invested in training social workers to distribute the funds. Due to the accessibility of the funds and the ease with which they can be used, the sum is generally utilized to its full extent. In recent years, the Foundation decided to gradually reduce the level of assistance until the funds are closed and transferred to the supervision of the Ministry of Social Affairs and Social Services.
  • Flexible family budget: The Ministry of Social Affairs and Social Services has developed programs to improve family functioning and reduce poverty. These programs see the family as the preferred point of intervention and integrate elements of counseling, training and advising, budget management, and job-searching skills. In this framework, families are allocated a flexible budget, which can be used in various manners and is meant to improve the family’s employment situation (for example by funding childcare). However, the sum is not directly given to the family, but is rather allocated at the discretion of social workers.

These two types of assistance have expanded both the professional welfare discourse and the understanding of poverty as a systemic phenomenon of socioeconomic inequality, which influences social workers’ approach to care. At the same time, the “poverty-aware social work” paradigm developed around 2010, which bases the discourse on poverty on families’ social rights.

This approach paved the way for the implementation of the comprehensive Breath of Relief program and Rights Centers. Thanks to the additional Guardians of Israel funds and the Breath of Relief budget, the sum allocated for material assistance increased from NIS 60 million to NIS 100 million in 2016-2017.

Breath of Relief program: most families are single-parent, most participants are in debt

The Breath of Relief program has been in operation since 2015 and has become the flagship program of the Ministry of Social Affairs and Social Services. It operates in 108 low socioeconomic status localities and in deprived neighborhoods in large localities and, since its establishment, it has provided care for thousands of families. Gal, Krumer-Nevo, Madhala and Yanay analyzed data from the program, providing, for the first time, an understanding of the material needs of Israel’s impoverished population.

The program consists of two main components: (1) Rights Centers – community centers focused on the take-up of people’s social rights and the implementation of employment and community programs; (2) An intensive 2-year family support program that includes a flexible family budget and social worker intervention. The cost of this program is NIS 100 million a year.

Each family participating in the program receives NIS 8,000 a year (NIS 15,000 total over the two years of participation, reflecting a deduction of NIS 1,000 transferred to the locality for group activities).

By the end of 2018, approximately 5,700 families had been reached through the program, of which 41% were from the Arab and Bedouin sectors, and 44% from the north of the country.

About 40% of recipient families have four or more children, and about 64% of the Jewish families (not including Haredim) are headed by single parents. The parents in most of the families have 12 years of schooling, 17% have studied in higher education, and 27% have less than a high school education.

Distribution of families ENG
Most participants in the program are employed, but their incomes are low and allowances comprise the major source of their livelihood. Beyond the financial difficulties reflected in the families’ income data, most of them are in debt.

About 70% of the families in the program reported being in debt, and it is reasonable to assume that the real percentage is even higher. It therefore seems that the flexible family budget is an important source for acquiring their basic material needs.

Arab Israelis and the Bedouin report using monetary assistance to purchase basic necessities, Haredim – for employment

The flexible budget seems to serve families for a variety of expenses: household needs (electrical appliances, furnishings, and household goods), employment (training and advising), paying off debt, and more. Plans for spending the money are made in cooperation with the family, and provide aid to ease both material and emotional deprivation.

In general, the share of the flexible budget reportedly used for household needs stands out at about 42%. For Arab Israeli families, and even more strongly for Haredi families, the share of the budget reportedly spent on employment is significantly higher than in other population groups.

Among Arab Israeli families, especially Bedouin families, the reported spending on household needs, clothing, and footwear is notable; in other words, a larger portion of their flexible budget is devoted to basic needs, leaving them with less to cover needs such health and paying back debt.

According to the researchers, these differences indicate the need to maintain the flexible nature of these budgets so that they can provide a real response to the different needs of the families participating in the program.

Distribution of use of monetary aid ENG

Although flexible budgets are a central component of the Breath of Relief program, most participating families do not make use of the total sum of available aid. The sum used during the first year of the two-year program stands at only NIS 4,200, on average – a little over half of the total allocated sum.

However, it seems that as the program has progressed there has been an increase in the share of the flexible budget utilized: participants who joined the program in 2017 used a larger sum. The Taub Center researchers note that only 42 families (less than 1% of participants) left the program within 6 months or sooner after utilizing part of the budget; that is, for most participants, the motivation to participate in the program is not only material aid.

“The study shows the limitations of Israel’s social security system in dealing with poverty,” says Prof. John Gal. “Income Support and the social safety net for working-age people living in poverty is far from adequate. At the same time, there has been a notable in change in the perception of poverty over time and a transition to poverty-aware social work.”

The researchers highlight the importance of using data on how assistance seems to be used, particularly among population groups that do not use the aid to its full extent, to examine how the welfare system addresses the needs of families living in poverty.

They also note that, while government allowances are intended to meet regular living needs, additional emergency funds or funds for special needs are necessary as well. Furthermore, the researchers emphasize the importance of easy-to-use flexible budgets and the ability to tailor them to families’ specific needs.

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

 

 

 

Women of the future: Israeli high school girls in technological education

Under its last four ministers, Israel’s Ministry of Education has focused many of its efforts on increasing the number and share of high school students in technological-vocational education (as opposed to academic education).

But how do trends in technological education over the last decade break down by gender? In honor of International Women’s Day, which took place this month, let’s take a closer look at the gender differences in technological education across Israel’s education streams.

In general, technological education in Israel has indeed grown in the past decade; as of 2017, 40% of 12th grade students were enrolled in technological education, compared to just over 33% in 2006. The number of high schools offering technological tracks has increased substantially over this time period, as well.

A new achievement-based classification system proposed by Taub Center researchers sorts technological majors into high, medium, and low technological tracks based on the bagrut qualification rates of the students in these tracks and the level of math and English studied.

This new classification shows that the share of technological students studying in majors with high achievement levels – those in the high technological tracks – has risen by 40% over the past decade.

Overall, the share of boys enrolled in technological education is higher than the share of girls in all of the education streams except for the Haredi stream.

However, when broken down into high technological, medium technological, and low technological tracks, there has been a substantial rise in the number of girls in the Arab education system choosing to study in high technological tracks.

In fact, unlike the Hebrew sector where the share of girls in the high technological track is considerably smaller than the share of boys, girls in Arab education make up a majority of students in the high technological track.
High technological education by gender and sector

The most noteworthy change has taken place in Druze and Bedouin education. In Bedouin education, for example, the gap between the share of girls and boys studying in high technological tracks is largest: 21% compared to 12%, respectively. The great increase in the share of girls in all streams of Arab education in the high track is accompanied by a large increase in the bagrut qualification rate for this group and in the number of Arab Israeli women pursuing academic studies.

In contrast to the changes in the Arab sector, girls in the Hebrew education sector are still a minority in all scientific tracks in general, and, particularly, in high technological education.

The percentage of girls studying in high technological tracks is particularly low in the State-religious education system, even though the boys in the same system study these subjects at a higher rate than boys in any other education stream. While one out of four boys in the State-religious education system is enrolled in high technological education, the same is true for fewer than one out of every ten girls.

It appears that single-sex schools in the State-religious system result in fewer study options for religious girls. Indeed, only 18% of the religious girls’ schools offer high technological tracks, compared to 48% of all other schools (except Haredi schools).

Not offering high technological tracks could prevent interested religious girls from pursuing these majors. One possibility for increasing the options open to these girls is combining technological classes between a number of religious schools.

In Haredi education, the share of girls in the medium technological track rose from 9% to 46% between 2006 and 2017, with many of these students studying bookkeeping and human resources majors.

Whereas in the past the vast majority of Haredi women went into the teaching profession, the large increase in the share of Haredi girls enrolled in these majors seems to indicate that new career opportunities are opening up for Haredi women, in addition to the classic teaching track.

The large differences across education streams require varied, tailored approaches for encouraging girls who are interested to study technological subjects in high school at a high level. In the Arab sector, where the share of girls in the high technological track is already high, it is important to address the transition from high school to academia, where many Arab Israeli women pursue a degree in education despite having studied scientific majors in high school.

In the Haredi stream, the sharp increase in the share of girls enrolled in the medium technological track – which opens up more employment opportunities – is encouraging, but there is still much room to increase the share enrolled in the high technological track, which has hardly changed in the past decade.

In the State-religious stream, it is crucial to ensure that high technological tracks are offered in girls’ high schools, so that religious girls have the opportunity to study them.

It is, of course, important that each student choose a study major in high school that interests him or her. However, it is also worth noting that skills learned in high technological tracks are in-demand in the labor market and are associated with labor market opportunities and higher earning potential.

Encouraging interested girls to study these subjects could help to close gender gaps that emerge later on, in academia and the labor market.

Why are there so many children in Israel?

Fertility in Israel stands at 3.1 children per woman – the highest fertility rate in the OECD, and almost one full child above the next highest fertility countries, Mexico and Turkey. To put Israel’s fertility in historical perspective, among Western countries fertility was last as high as 3.1 in the US toward the end of the baby boom in the mid-1960s, in Italy in 1931, in Germany in 1914, in the UK in 1908, and in France in 1889.
Israel's birth rath relative to the OECD countries

Not only is Israel’s fertility high among developed countries, it is also higher than fertility rates in emerging economies. In fact, despite a magnitude of differences in other areas – including GDP – Israel’s fertility is most similar to that of its direct geographic neighbors: Egypt and Syria.

People often mention two factors that encourage Israel’s high fertility: the cultural aspect, which is anchored in the historical experience of the Jewish people, and particular policies that make it easier for Israeli women to balance work and family (such as leave for sick children, reduced working hours following the return from maternity leave (“nursing hour”), and part-time, flexible positions).

Yet these arguments are less convincing when we compare Jews in Israel to their counterparts elsewhere. Although they share the same history, fertility among Jews in every other developed country is considerably lower – including among Jews living in Europe, where welfare policies are more generous than in Israel.

Another argument is that Israel’s high fertility is driven by certain parts of the population, such as Haredi (ultra-Orthodox) women, having many children (the fertility rate of Haredi women is indeed quite high at around 7 children per woman).

However, the rise in Israel’s fertility over the last two decades has been largely driven by the secular and traditional Jewish populations, whose combined fertility rate is greater than 2.2, which is itself higher than the overall fertility in any other OECD country.

Among the Arab Israeli population, fertility trends have followed patterns similar to those in the rest of the modern world – decreasing significantly since the 1960s in conjunction with increased education levels and employment participation rates among women. As such, Israel’s fertility has risen in recent decades despite Haredi fertility remaining relatively stable and despite a decline in fertility among Arab Israelis.

Furthermore, Israel’s fertility is not only exceptional because it is high. It is also exceptional because strong pronatalist norms cut across all educational classes and levels of religiosity, and because fertility has been increasing alongside a rise in the age at which women first give birth and increasing education levels — at least in the Jewish population. From an international perspective, these are extremely unusual patterns.

For example, Israeli women are having more kids even though they are having them later in life and working more. In fact, non-Haredi Jewish women in Israel have higher employment rates than women in any other OECD country, except for Iceland. Around the world, both increased age at first birth and increased labor force participation are generally correlated with declining fertility, yet the trends in Israel do not follow suit.

Additionally, in almost every other developed country, more educated women have fewer children than less educated women. However, by age 40, Israeli women with a college degree have the same number of children as those whose highest level of education is high school.

To a large degree, the reasons behind Israel’s fertility trends remain a mystery. However, they will continue to impact Israeli society. As direct result of these fertility patterns, a higher percentage of children in Israel are being born to older and more-educated parents than is the case in other developed countries.

This has implications for education, social and health policy. Older parents tend to be wealthier and more financially stable, which influences their own children’s outcomes across a wide range of domains, and parent’s levels of education also have indirect effects on outcomes for other children in their neighborhoods, which allows for positive spillover effects.

As policy makers look into the future, these implications of Israel’s exceptional fertility profile need to be taken into account.

Household Debt in Israel

Executive Summary

The level of household debt in Israel (as a percentage of GDP) is low compared to many developed countries around the world, yet has been on the rise over the past decade as a result, in part, of the low interest environment, the rise in housing prices, and an increase in the supply of credit and private consumption that have occurred with the entry of non-banking entities into the market.

The study examines household’s level of debt by income decile, age group, and sector.

The credit market

In recent years, several regulatory measures have been taken to promote competition in the banking industry in general, and in the consumer credit market in particular.

  • The supply of credit has increased as a result of the entry of non-banking entities into the credit market, the removal of technological barriers, and the integration of new technologies.
  • There are four main sources of credit available to households: banks, institutional bodies, credit card companies, and government credit.
  • Between 2013 and 2017, there was a 148% increase in credit granted by credit card companies, and a 140% increase in total loans granted by institutional bodies. At the same time, the growth rate of total credit granted by banks to households declined: an increase of 3.9% in 2017, compared to an increase of 7.4% in each of the five preceding years.

Household debt in Israel in the past decade

The ratio of household debt to GDP in Israel stands at 42%, while in many other countries the ratio exceeds 100% (as of 2017), yet is on the rise. The expansion of Israeli households’ debt in the past decade stems from a number of factors: the rise housing prices, the low interest environment, and an increase in the supply of credit and private consumption.

  • Israel’s household debt balance at the end of 2017 stood at NIS 530 billion – an increase of 5% since 2016.
  • Between 2008 and 2017, household debt increased by 84%. Total housing debt increased by 70%, while total non-housing debt increased by 114%.

Level of leveraging by income decile

An analysis of household debt level by income decile (according to a long-term household survey from 2016) raises concerns about the financial stability of households in the lowest income decile.

The share of those in debt in the bottom decile is relatively low and stands at only 18%, compared to 56% in the top decile. However, the average ratio between households’ debt and their annual income is approaching 8 in the bottom decile, meaning their total debt is equal, on average, to their total income over 8 years.

By age:

  • Half the total population in the bottom decile is over age 54 and only 9% are under 25, whereas 69% of the top decile are of prime working age (25-54).
  • While, in the top decile, 75% of the indebted population are of prime working age and only 22% are 54 and older, in the bottom decile, only 59% are of prime working age and 35% are 54 and older.

By sector:

  • 23% of Arab Israelis in the bottom decile are in debt, and their median ratio of debt to annual income is close to 2.
  • Only 15% of non-Haredi Jews in the bottom decile are in debt, but their median debt-to-income ratio is higher at about 3.
  • For Haredim, 30% of those in the bottom decile are in debt, and the median ratio is 13.5.

By type of loan and sector:

  • 64% of indebted non-Haredi Jews and 43% of indebted Haredim from the bottom decile took out a consumer loan, compared with 89% of indebted Arab Israelis from this decile.
  • In comparison, 52% of non-Haredi Jews and 72% of Haredim from the bottom decile took out a housing loan, compared to only 15% of indebted Arab Israelis, perhaps because of difficulties Arab Israelis face in putting up collateral for housing loans.

By source of loan:

  • The percentage of those who rely on non-bank sources for non-housing loans in the bottom quintile is 22.5%, compared to 12% in the top quintile.
  • In contrast, the rate of applying to banks for non-housing loans is higher at the higher income levels: 88% in the bottom quintile compared to 92% in the top quintile.

The study’s findings raise concern that the expansion of the credit market and the rise in household debt would particularly affect the financial stability of households belonging to the bottom decile, and that the financial vulnerability of this population is liable to lead to its financial collapse in the case of an economic slowdown.

 

 

 

 

 

Press Release: Household Debt in Israel


The full study in Hebrew is available here.

Executive Summary in English available here.

The rate of household debt in Israel (as a percentage of GDP) is low compared to many developed countries around the world, yet has been on the rise over the past decade. What is the potential danger in this trend and which households are most vulnerable?

A common claim in Israeli socioeconomic discourse is that many households in Israel struggle to cover their daily expenses. A new study by Taub Center Senior Researcher Dr. Labib Shami examines one of the aspects related to households’ economic ability – level of debt – by income decile, age group, and sector. The study’s findings raise concern that the expansion of household debt would particularly affect the financial stability of households belonging to the bottom decile, and that the financial vulnerability of this population is liable to lead to its financial collapse in the case of an economic slowdown.

Competition in the credit industry has increased, and Israelis are taking on more credit

In recent years, several regulatory measures have been taken to promote competition in the banking industry in general, and in the consumer credit market in particular. In 2017, the Knesset passed the Law for Increasing Competition and Reducing Concentration in Israel’s Banking Market, based on the recommendations of the Strum Committee. The changes that took place in the industry – including the entry of non-banking entities into the credit market, the removal of technological barriers, and the integration of new technologies (such as digital banking) – increased the supply of credit and its forms available to households.

Today, there are four main sources of credit available to households: banks, institutional bodies (insurance companies, pension funds and provident funds), credit card companies, and government credit. The breakdown of credit between these sources has changed greatly in recent years: between 2013 and 2017, there was a 148% increase in credit granted to private individuals by credit card companies, and a 140% increase in total loans granted by institutional bodies. At the same time, the growth rate of total credit granted by banks to households declined, especially in 2017 (an increase of 3.9% compared with an increase of 7.4% in each of the five preceding years).

Debt in Israel is low compared to the rest of the world, but is on the rise

According to the Taub Center study, the ratio of household debt to GDP in Israel stands at 42%, while in many other countries the ratio exceeds 100% (as of 2017). However, despite Israel’s relatively good situation, this ratio is on the rise. At the end of 2017, Israel’s household debt balance stood at NIS 530 billion – an increase of 5% since 2016. Between 2008 and 2017, household debt increased by 84%. Total housing debt, usually backed by the value of the asset for which the loan was taken, increased by 70%. In comparison, total non-housing debt increased by 114%.

The expansion of Israeli households’ credit (debt) over the past decade stems from a number of factors: the rise in housing prices, which forces households to take out a higher mortgage; the low interest environment, which encourages taking out loans; and an increase in the supply of credit and private consumption. According to Dr. Shami, “This expansion is fraught with risks that can stem from the over-leveraging of households; that is, sinking deeper into debt relative to their income. This could put their financial stability at risk in the event of an increase in interest rates or a drop in real estate prices.”

About a quarter of households in the bottom decile are in debt

An analysis of household debt level by income decile (according to a long-term household survey from 2016) shows that while the share of those in debt in the bottom decile is relatively low and stands at only 18% (compared to 56% in the top decile), the average ratio between the amount of debt of households in this decile and their annual income is approaching 8. In other words, the total liability of indebted households from the bottom decile is equal, on average, to their total income over 8 years.

According to the Taub Center study, this means that the level of debt of many households in the lowest socioeconomic bracket is unreasonably high given their annual income, and it is doubtful that they will be able to repay this debt. In addition, the highest percentage of households who self-report being in debt (households whose income is insufficient to cover their expenditures and who do not have any savings) is in the bottom decile – about a quarter of the households in this decile, compared with only 3% among households in the top decile.

F1 Eng

Furthermore, segmenting the population in each decile by age, emphasizes the distress of those in debt from the bottom decile. In this decile, 59% of the indebted population are of prime working age (25-54) and 35% are over the age of 54, compared to a very different ratio among the indebted population in the top decile, where 75% are of prime working age and 22% are 54 and older. The data reveal that households in the top decile primarily take out loans at a younger age and reduce their debt over the years, enabling them to maintain a more uniform level of consumption throughout their lives than households from the bottom decile, and to better weather financial difficulties while minimizing their damage.

Gaps in debt are also evident across different sectors of the population. About a quarter of Arab Israelis in the bottom decile owe money, and their median ratio of debt to annual income is close to 2. Among non-Haredi Jews in this decile the share of those in debt is lower (15%), but the median debt-to-income ratio is much higher (close to 3), and among Haredim in the bottom decile, both the share of those in debt and the ratio of debt to annual income are higher (30% are in debt and the median ratio is 13.5).

The Taub Center’s Dr. Shami explains that differences in the indebtedness figures for the Arab Israeli and Jewish populations in general, and for the Haredi population in particular, stem mainly from the type of loan taken out: 64% of indebted non-Haredi Jews and 43% of indebted Haredim from the bottom decile took out a consumer loan, compared with 89% of indebted Arab Israelis from this decile – and, in comparison, 52% of non-Haredi Jews and 72% of Haredim took out a housing loan, compared to only 15% of indebted Arab Israelis in this decile. As pointed out by Dr. Shami, it is possible that the high rate of consumer credit-holders in the Arab Israeli sector stems from difficulties they face in putting up property they own as collateral for a housing loan, such that, in this sector, credit designated as consumer credit is actually being used for housing.

F2 Eng

The differences between various income levels are also evident in the source of the loan. To receive non-housing loans, the two bottom deciles rely on non-bank sources at almost twice the rate of the two highest deciles (about 22% compared to about 12%, respectively). In contrast, the rate of applying to banks for non-housing loans is higher at the higher income levels: 88% in the bottom quintile compared to 92% in the top quintile.

“The data reinforce the argument that the entry of non-banking entities into the consumer credit market increases the exposure of households in the bottom deciles to consumer credit,” explains Dr. Shami. “As a result, the risk in this industry has increased both for households, who are more likely to get caught up in debt, and for lenders, who will receive a smaller portion of debt repayments.”

 

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

 

 

 

 

 

 

Economic growth and workforce diversity go hand in hand

As we say goodbye to 2018 and start the new calendar year, Israel’s labor market continues to be strong and show many encouraging trends: labor force participation rates are rising, employment rates of both men and women are increasing, and unemployment has reached a historic low. The number of job vacancies has also increased, and wages have been continually rising. This increase in employment has also contributed greatly to Israel’s economic growth in the past few years.

In a recent Taub Center study, Researcher Hadas Fuchs and President Prof. Avi Weiss find that over the past decade and a half (since 2003), employment has risen among both men and women and across all population groups: Haredim, non-Haredi Jews, and Arab Israelis. This is a change from the previous decade during which employment rates had declined or remained stagnant among all groups except non-Haredi Jewish women.
Employment rates by population groups and gender

The employment rate for Israeli men has risen by 7 percentage points and the increase was most impacted by a rise in the employment rate of 55-64-year-olds. Among women, on the other hand, employment increased by 13 percentage points and was driven both by increased employment among 35-44 year olds and among 55-64-year-olds, but for different reasons: the former because there has been a major increase in the percentage of mothers of young children who are working, the latter because women close to retirement work more than their predecessors and women’s retirement age was raised from 60 to 62.

All in all, these increased employment rates put Israel in a good position relative to the OECD. In fact, the employment rates of non-Haredi Jewish women and men and Haredi women in Israel are higher than the average employment rates in the OECD, and among non-Haredi Jewish women it is the second highest in the OECD (after Iceland).

But what about Israel’s other population groups?

Despite the gains of the past decade and a half, there are two groups whose employment rates remain particularly low: Arab Israeli women and Haredi men. In 2010, the government set target employment rates for these two population groups to reach by 2020.

After several years of stagnation, the employment rate of Arab Israeli women has increased substantially and stands at about 40%. This is nearly double the rate in 2003 and an increase of more than 6 percentage points since 2016, bringing the rate very close to the government’s 2020 target for Arab Israeli women of 41%. Furthermore, there are indications that this trend will continue. Most of the employment increase for this population group (72%) stems from the improved education of Arab Israeli women, and, because more Arab Israeli women are pursuing higher education, it is likely that their employment rates will continue to rise.

In contrast, the employment rate of Haredi men, after rising by more than 15 percentage points between 2003 and 2015, has declined slightly in recent years. It now stands at about 48% – far from the government’s 2020 goal of 63%. Of those who are working, about 42% of Haredi men ages 30-64 worked part time in 2017 (compared to 15% of non-Haredi Jewish males), mostly due to yeshiva studies.

It is important not only to look at employment trends in Israel in general, but also to break it down by industry. For example, 50% of Arab Israeli men, whose education levels have not risen as much as those of Arab Israeli women, worked in occupations characterized by low wages in 2017: manufacturing, construction, and agriculture. These are physically demanding occupations, and, consequently, Arab Israeli men show a major decline in employment rates from age 50 and on.

In high tech, the sector that attracts the greatest attention in Israel both because of its high wages and its disproportional contribution to Israel’s GDP, tax revenues, and exports, the share of those employed in the industry has increased from 8% to 15% among non-Haredi Jewish men, but among Arab Israeli and Haredi men the percentage has remained negligible. The percentage of women working in the field is also low (as it is in the rest of the world); women made up 32% of those working in high tech in Israel in 2017, and most of them are non-Haredi Jews. Nonetheless, there has been an impressive rise in the share of Haredi women employed in high tech: from less than one percent in the middle of the last decade to about 3%.

If labor market participation is to keep rising in Israel, the participation rates of Haredi men and Arab Israeli women and men must increase. Providing training to population groups that are currently underrepresented in the labor market, or in specific industries, and encouraging employers to aim for diversity in the workplace could help these groups not only join the workforce, but integrate into prestigious, high-paying fields, and thereby strengthen the Israeli economy and society as a whole. Moreover, in addition to training for adults, it is important to improve Israelis’ skill levels earlier on by providing high-quality education from a very young age.

As Director General Suzie Patt Benvenisti put it so poignantly at the Taub Center’s latest international conference (on Israel’s future labor market): “The issues of economic growth and enhancing diversity of the workforce really go hand in hand…Getting more segments of the population – like Arab Israelis and Haredim – more engaged in the workforce is not something that we need to do just because it’s the right thing to do, but because it will have a very positive impact on our economic growth as a country.”

 

Press Release: The State of the Nation Report 2018

Embargo until Monday, December 31st, 6:00am

To download the full chapters, click here 

The Taub Center’s State of the Nation Report 2018 has been released

The Taub Center’s annual report presents a picture of Israel’s society and economy in 2018. The report contains 10 new research studies in the fields of macroeconomics, employment, education, health, and welfare, as well as executive summaries of other studies published by the Taub Center over the past year.

The editor of the report is Prof. Avi Weiss, President of the Taub Center and Professor of Economics at Bar-Ilan University.

Selected findings from The State of the Nation Report 2018

Economic Developments in Israel: An Overview
Prof. Benjamin Bental and Gilad Brand

In 2018, employment is at an all-time high, unemployment is at a historic low, GDP growth is high, and wages have risen. However, growth potential is declining due to demographic changes and trends in labor productivity, which is not growing at all.

  • Assuming that the government will increase its expenditure in accordance with the relevant legal rules and limitations, it seems that as of 2020 the government will breach the deficit limit as it is set by law, and that the problem is likely to become even more severe in the long run. The budgetary problem is expected to increase further if the government follows through with its plan to increase the defense budget to about 6% of GDP, and to peg it to the GDP growth-rate. Such tendencies will impair the government’s ability to improve services and infrastructure and may weaken the standing of the Israeli economy in the global capital market.
  • Since 2012, increased employment has been the main source of Israel’s per capita GDP growth. Despite the fact that most of the workers joining the labor force were low-skilled workers, there was an improvement in the quality of employment due to an increase in experience and education levels. However, the working-age population is shrinking, as is the potential for future economic growth from increased employment rates. Therefore, it will be difficult for the Israeli economy to continue growing without an improvement in other growth-enhancing factors.
  • Expanded employment and the rise in wages were reflected in an impressive increase in households’ income and consumption. This was particularly apparent among households in the middle and lowest income quintiles (an increase of 16% and 13%, respectively, between 2012 and 2016), while among the highest income quintile there was a more moderate increase (9%).
  • In recent years, prices in Israel have increased at a significantly lower rate than in the OECD. As a result, consumer prices relative to the OECD average have declined by 5.2% since 2014. This is surprising given the good state of Israel’s economy and the sharp rise in wages in recent years, and resulted from measures taken to increase domestic competition after the 2011 social protests.
  • Nevertheless, price levels in Israel remain significantly higher than expected given income levels, which negatively affects the standard of living. Against the backdrop of mounting public pressure and reports of expected price hikes, removing barriers and encouraging competition in the local market could help the country cope with this challenge.
    1) Macro intro EN

Rising Housing Prices and Their Impact on Households’ Ability to Purchase a Home
Kyrill Shraberman

Housing prices have risen over the past decade, but the ratio of disposable household income to housing prices is similar to that of the mid-1990s.

  • The rise in housing prices over the past decade has reduced the ability of households to purchase housing. However, assessing the ability to buy a home in terms of total disposable household income (which usually includes the incomes of two earners, as well as income from sources other than work), rather than in terms of average salary (as is common practice), reveals that the decline in Israelis’ ability to purchase housing is more moderate, and the ratio of disposable household income to housing prices is similar to what it was in the mid-1990s. The reason for this is that the total disposable income of households rose to a greater degree than wages over this period, primarily due to an increase in the average number of earners per household.
  • The disposable income of young adult households (25-34) grew at a rate similar to the average disposable household income between 1998 and 2016, so their ability to purchase housing was no more affected than was that of the general population. The age group whose housing-purchasing ability suffered the most is the 35-54-year-olds, because the income of these households increased at a lower rate than the average for the general population.
  • The ability to purchase housing has declined significantly in Tel Aviv, Jerusalem, and Israel’s Southern District.
  • The average level of household leveraging – the size of households’ net financial liabilities to creditors as a percentage of GDP – has increased since 2009, which could potentially make it hard for them to receive additional credit in the future. The current level of leveraging is only slightly lower than it was in 2000, the year that witnessed the highest leverage levels recorded.
    2) Housing prices ENG

Israel’s Labor Market: An Overview
Prof. Avi Weiss and Hadas Fuchs

The employment rate in Israel is high, and has increased greatly among Arab Israeli women, but has declined among Haredi men. For employment to continue rising, there needs to be improvement in the employment of Arab Israelis and Haredi men.

  • Both employment and labor market participation rates continue to be high in 2018. The employment rate of non-Haredi Jews is higher than the average employment rate in the OECD, and among women, it is the second highest in the OECD (after Iceland). In order to further improve these figures, employment rates need to increase in sectors where they are relatively low – among Arab Israelis and Haredi men.
  • Wages have continued to rise in 2018 at a fast pace. This increase is consistent with the rapid rise in real wages since 2014 – an increase of 11% in total.
  • Over the past decade, the share of workers in high tech has increased from 8% to 15% among non-Haredi Jewish men, but among Arab Israelis and Haredim the percentage has remained minimal. The share of women employed in the high tech sector is low (as it is in the rest of the world), and those women employed in high tech are mostly non-Haredi Jews. However, there has been an impressive rise in the share of Haredi women employed in the field: from less than one percent to about 3%.
  • After several years of stagnation, the employment rate of Arab Israeli women increased substantially and stands at about 40% – an increase of more than 6 percentage points between 2016 and 2018 – and is now very close to the government’s 2020 target. Most of the increase (72%) stems from the improved education of Arab Israeli women, and, because more Arab Israeli women are pursuing higher education, it is likely that their employment will continue to rise. Arab Israeli men’s education levels have not risen in a similar manner, and the improvement in their employment rate is relatively low. After years of gradual decline followed by gradual improvement, it is only in the last two years that their employment levels returned to what they were in 1995. Low levels of education also affect the employment opportunities available to Arab Israeli men, 50% of whom work in occupations characterized by low wages: manufacturing, construction, and agriculture (as of 2017).
  • The employment rate of Haredi men has declined slightly in recent years, and stands at about 48%. Therefore, the government’s target rate for this segment of the population (63% by 2020) seems unrealistic. The decline may partially be a result of increased transfer payments in 2015. 42% of employed Haredi men ages 30-64 worked part time in 2017, mostly due to yeshiva studies.
  • Among Haredi women, the employment rate increased by 5.5 percentage points between 2013 and 2018, and stands at 76%. A large percentage of Haredi women are still employed in education, but this figure is declining while the share of women learning technological studies in seminaries is on the rise. Improving the quality of education in seminaries and opening additional engineering tracks could open up more high-paying employment opportunities for Haredi women.
  • Israel’s population is aging at a slow pace relative to the OECD, but when taking into account Israel’s high birth rate, the dependency ratio (the ratio between those not of prime working age and those of prime working age) is the highest in the OECD. One possibility for coping with this situation is to raise the retirement age for women. This would save money for the National Insurance Institute (NII), which is at risk of bankruptcy.
    3) Employment ENG

How Much Can the Israeli Start-Up Nation
Continue to Grow?
Gilad Brand

The share of high tech out of total employment in Israel is only about 8%, and it seems that efforts to expand employment in the field are only relevant for a small percentage of the population. Even if these efforts are indeed effective, expanding high tech employment is not expected to have a significant impact on the economy at large.

  • Comparing the skills of workers in Israel and other developed countries, as measured by the OECD’s Basic Skills Survey (PIAAC), shows that the skills of high tech employees are very different from those of workers in other fields. In Israel, the gap between the skills of workers in high tech and workers in the rest of the economy on the survey is almost a complete standard deviation, an exceptionally large gap among the developed countries. Due to differences in skills, the wages of high tech employees are much higher as well – double those of other workers in the economy, and this gap is also exceptionally large. The share of workers employed in high tech was also found to be higher in Israel than in other developed countries, and skilled workers are already integrated into the industry on a large scale. Given all these trends, it seems that efforts to expand employment in high tech are only relevant for a small percentage of the working-age population (about 1%).
  • Due to the large skills gap between high tech and other sectors, it is unlikely that expanding employment in high tech would lead to the spread of advanced knowledge and innovative work methods to other fields to a significant degree. It is also possible that expanding employment in high tech may slow the development of relative advantages in other areas of the economy, where the employment profile is more varied.
  • A high share of the Haredi and Arab Israeli populations report low levels of English proficiency, as opposed to a high level of proficiency reported among high tech employees. As a result of this, and due to low levels of general proficiency among these population groups (as measured by the survey), it seems that there is limited utility in using professional training as a means of integrating them into the high tech industry (thereby narrowing gaps). Most of the potential to expand high tech employment is found among non-Haredi Jews, who already comprise the majority of high tech workers.
  • Israel is characterized by a large presence of workers with low skills, which result in low earning ability. The percentage of Israeli workers whose skills are ranked in the lowest skills level in the OECD (the bottom decile) is about 16% of the adult population, and only about 7% of Israeli workers rank in the highest skills level (top decile). Among the Arab Israeli population, the picture is particularly worrying: about half of the adult Arab Israeli population ranks at the bottom of the OECD skills distribution (the bottom two deciles).
  • The availability of cheap labor makes it less feasible that employers will streamline processes and adopt advanced technologies, and is likely one of the causes of low levels of investment and low productivity in non-high tech industries. Therefore, focusing on raising skill levels specifically among the workers in these industries, through appropriate professional training and by improving the education system (in order to improve the skills of the next generation), may be preferable to efforts to recruit additional highly-skilled workers to move into the high tech field.
    4) Skill level gap ENG

The Israeli Education System: An Overview
Nachum Blass

The Ministry of Education budget has risen due to an increase in the number of students and the implementation of various programs and labor agreements. While the scores of Israeli students on Meitzav and international exams do not meet expectations, there has been an improvement in Israeli students’ achievements and the gaps are narrowing.

  • The student population has grown at a rate of 2% a year since 2000. While the growth rate is declining in the Haredi, Bedouin, and Druze education systems, it is rising in Hebrew State and State-religious education.
  • The Ministry of Education budget increased by 83% in real terms between 2005 and 2018. The budget increased due to a rise in the number of students, the signing of the Ofek Chadash and Oz LeTmura labor agreements, the implementation of the Compulsory Education Law for ages 3-4, and the introduction of programs such as reducing the number of children per class. The budget for Special Education increased at almost twice the rate of the overall education budget, mainly due to the tremendous rise (127%) in the number of students enrolled in Special Education.
    • Based on the latest data from 2014, the Ministry of Education’s real budget per student increased since 2010 at a faster rate than in the OECD, and it seems that this trend has continued through 2018 as a result of the measures detailed above. Despite the rapid increase, per-student expenditure in Israel remains lower than in other OECD countries: the expenditure per student in primary education in 2014 was $7,981 in Israel compared to $8,631 in the OECD, and the expenditure per student in high school education was $7,987 in Israel compared to $10,010 in the OECD.

    5) Per student expen ENG

  • Since 2000, the number of teachers in Hebrew primary education has increased by 28%, and by 20% in Arab education. In Hebrew education there was a slight decline in the percentage of female teachers, as well as in the average age of all teachers and their seniority, while in Arab education the trends were reversed. The percentage of teachers with an academic degree has risen in both sectors since 2000: from 50% to 89% among Jews and from 37% to 94% among Arab Israelis.
  • The scores of Israeli students on the Meitzav and international exams do not meet expectations, but there have been improvements in students’ performance on both the Meitzav and international exams relative to the past. Furthermore, Israel’s improvement on international exam scores and narrowing gaps (relative to the first exam) was greater than the improvement in most other participating countries.

Expenditure Per Class and Per Student in Israel’s Official Primary Education
Nachum Blass and Haim Bleikh

The Ministry of Education per-class and per-student budget has increased significantly in recent years. Most school budgets are allocated according to fixed formulas, and principals and other officials in the system have limited influence as to their scope. However, despite the universal formulas, after controlling for various school characteristics, budgeting is highest in the State-religious schools and lowest in the Arab Israeli schools.

  • There are several important characteristics that affect the per-student and per-class budget in regular official primary education (institutions that contain grades 1-6 only): the school’s Nurture Index – the higher the index (which indicates a weaker socioeconomic profile), the higher the allocation per student; the size of the school – the larger it is, the lower the allocation per student; and the presence of a “long school day,” which increases expenditure per class by an average of 14%, and per student by 15%.
  • An analysis that isolates each factor affecting the budget shows that the vast majority of explained variance has to do with factors that are difficult to influence, such as: Nurture Index, participation in the “long school day” program, and the size of the school. On the other hand, sector and type of supervision explain a much smaller share of the explained variance (about 13% for per-class budget and 8% for per-student budget).
  • After controlling for various school characteristics, per-class and per-student budgets are highest in the State-religious education system and lowest in the Arab education system; there is a 10% gap between the two. Part of the gap can be explained by unique budgetary baskets, but the remainder of the gap cannot be explained because the considerations behind budgeting are not transparent.
  • The State-religious education’s budgetary advantage stems from the fact that it receives unique budgetary baskets, such as funding supplements for prayer time, separate frameworks for boys and girls, and hours with a Rabbi. These supplements are intended to preserve the character of this education system, yet, on the other hand, it could be argued that similar funding should be granted in order to preserve the unique character of the State education system. It is also worth noting that differences in type of supervision by religiosity level is a phenomenon unique to Jewish education.
    6) Per student budget ENG

Technological Education: Trends and Developments, 2006 to 2017
Hadas Fuchs, Guy Yanay, and Nachum Blass

The share of high school students studying in high technological education has risen, primarily among Druze and Bedouins. The percentage of Arab Israeli girls studying in high technological education has risen, but the percentage remains low among Jewish girls in State-religious education.

  • A new achievement-based classification of technological education tracks reveals that, between 2006 and 2017, the share of technological-vocational students studying in high technological tracks (where achievements are the highest) rose by 40%, alongside a lesser increase in other tracks. This increase has come mainly from outstanding students transferring from academic tracks to high technological tracks (as indicated by a decline in the share of high school students studying in academic tracks from 67% to 60% during the period).
  • The greatest increase in the share of students studying in high technological tracks was in the Arab education system, especially among Druze (20 percentage points) and Bedouins (11 percentage points). This figure indicates a substantial change which could lead to better integration of the Arabic-speaking populations into more prestigious occupations in the Israeli labor market.
  • The percentage of girls studying in the high technological track in Arab education has risen substantially, and is even higher than the percentage of boys (31% compared to 26%). The gap between girls and boys in Bedouin education is even larger (21% compared to 12%, respectively). This increase has been accompanied by a rise in the bagrut qualification rate and in the pursuit of academic studies among Arab Israeli women, the effects of which can already be seen in the rapid growth in their employment (see the chapter on “Israel’s Labor Market: An Overview” in this Report).
  • Only a small percentage of Jewish girls study in the high technological track, particularly in the State-religious education system, whereas the percentage of boys in the high technological track is relatively high in State-religious education. It is possible that single-sex schools result in fewer study options for religious girls, because the number of high technological tracks offered in girls’ schools in the State-religious education stream is particularly low (only 18% of the schools offer these tracks, compared to 48% of all other schools, except Haredi schools).
  • Though the socioeconomic profile of Arab Israeli students in the high technological track is much lower than that of Jews, their bagrut qualification rates are similar to their Jewish counterparts. Even among Bedouin students – whose socioeconomic status is particularly low – the bagrut qualification rate is about 74%.
  • The number of students taking math at the five unit level (the highest level) has risen by 56% since 2012 and the number of those taking the bagrut exam at this level in English increased by 20% between 2013 and 2017 (over and above the increase in the overall number of students). However, the share of those learning English at such a high level is relatively low in the Arab Israeli sector and stood at only 17% in 2017, compared to 51% among Jews. This has a negative impact on the ability of these young adults to integrate into high-paying occupations in the future, such as high tech (see the chapter on “How Much Can the Israeli High Tech Sector Grow?” in this Report).
    7) Tech education ENG

Healthcare in Israel: An Overview
Prof. Dov Chernichovsky

Israel’s current health indicators are quite good, but they reflect past investments in the healthcare system. Today, there are signs of a worsening in the relative health of Israel’s population, and the situation is likely to deteriorate further unless changes are made in the level of health funding and in the system’s public-private mix and its regulation. 

  • The share of national expenditure on health out of Israel’s GDP was about 7.4% in 2017, compared to an average of nearly 9% in the OECD and 11% in European countries with health systems similar to Israel’s. The share of public expenditure out of total expenditure on health stands at about 63% in Israel, compared to 73.5% in the OECD, and 78% among countries with similar systems.
  • Since 1995, per capita health expenditure in OECD countries has increased on average by 2.5 times, and in countries with health systems that are similar to Israel’s, they have increased by about 3 times.  In Israel, however, per capita health expenditure has barely doubled over the same time period.
  • The growth in health expenditure was similar to the growth in GDP per capita – about 1.7% a year, on average, since 1995. However, when taking into account changes in healthcare prices relative to the Consumer Price Index and increased consumption rooted in changes in the age structure of Israel’s population, the growth was only 0.9% per age-adjusted standardized person.
  • The low level of funding, as well as the high share of private funding, inhibits Israel’s ability to maintain its good health status among the developed countries. In addition, the rising share of private health funding widens gaps in the accessibility of medical services for various population groups and increases health costs.
  • The relative increase in health prices is high, and stems, at least in part, from the public-private mix that has developed in the system, and the effect of this public-private mix on physicians’ wages. Physicians’ wages rose by about 42% between 2011 and 2017, compared to an increase of about 15% among other salaried employees in Israel. This increase also stands out in international comparison. One main reason for this is that doctors can refer patients from the public system to their own services in the private system, where they can charge higher prices for treatments that could largely be administered through the public system as well. At the same time, this phenomenon means that doctors are spending less time working in the public system.
  • Israel can improve the state of its healthcare system by regulating the provision of privately funded medical care relative to publicly funded care, based on existing models (already in effect in various countries) of either separating the two systems or unifying regulations across them. The two models do not deny access to private healthcare, however, at the same time, they do not allow the two parts of the system to overlap, as is the case today.
    8) Health fig EN

Israel’s Exceptional Fertility
Prof. Alex Weinreb, Prof. Dov Chernichovsky, and Aviv Brill

Fertility in Israel is not only high relative to the rest of the world, but is exceptional in a number of other characteristics. Other exceptional aspects of Israel’s fertility include an increase in fertility despite a coinciding increase in age of marriage and in women’s education levels, as well as a sharper rise in fertility among the secular and traditional Jewish populations.

  • The overall fertility rate in Israel is higher than in any other OECD country, and stood at 3.1 children per woman in 2015. While fertility rates in most countries have declined over time, the rate in Israel has risen by 0.2 children in the last two decades, and this growth is largely driven by the secular and traditional Jewish populations. At the same time, since 2004 the fertility rate of Muslim women has declined by almost one child, and of Haredi women by about half a child.The overall fertility rate is almost identical among Jewish and Arab Israeli women, but there are significant differences in the fertility patterns of each group. Among Arab Israeli women, age at first birth is four years younger; the percentage of women without children is much higher (13.7% among those born between 1947 and 1967, compared with 6.4% among Jewish women); and the negative correlation between education and fertility is much stronger.
    • In most population groups in Israel, as education increases, fertility declines. However, the situation is different for two population groups. For non-Haredi Jewish men, the number of children among academics and those with lower levels of education is the same. Haredi women with an academic degree give birth to their first child at a relatively late age, but by their late thirties their fertility rates converge with those of Haredi women with lower levels of education.
    • The main difference in fertility between Israel and other developed countries stems from the fact that, in Israel, relatively educated families – who make up a large and increasing share of all Israeli families – are having more children than their counterparts in Europe. As a direct result of these fertility patterns, a higher percentage of children in Israel are born to older parents and to more-educated parents (compared to any other OECD country).Non-marital fertility in Israel is low (less than 10%, compared to about 40% on average in the OECD), but is rising: from 3% in 2000 to 5% in 2016 among women aged 25-39 and from 7% to 17% of births among women aged 40+. In comparison to other developed countries, the increase in both marital and non-marital fertility in Israel is highly unusual.

Israel’s Social Welfare System: An Overview
Prof. John Gal and Shavit Madhala

The social investment policy Israel has adopted in recent years has emphasized improving human capital and making the labor market more accessible to various populations, yet poverty and inequality rates remain among the highest in the OECD.

  • Social spending (government spending on education, healthcare and social welfare) stood at 59% of total government expenditure in 2017 – an increase of 2 percentage points from 2016. Social welfare spending alone increased by about 9%, mainly due to spending for the National Insurance Institute’s “Savings for Every Child” program and growth in the budgets of the Ministry of Labor, Social Affairs and Social Services and the Ministry of Housing. However, these changes did not have an impact on most of the needy population, and both the proportion of families living in poverty and the level of inequality in Israel remain among the highest in the OECD.
  • In recent years, Israel has adopted a policy of “social investment” – measures that seek to improve the human capital of citizens and labor market accessibility – such as expanding the early childhood education system and the Savings for Every Child program. At the same time, there is still no indication that other major elements of the social investment approach have been adopted: expansion of unemployment insurance and income support programs.
  • Following an intensive protest campaign in 2018 by organizations for people with disabilities, the Knesset approved an increase in the basic disability benefit as well as an increase in the “disregard” limit (the maximum income from work that a person with disabilities can earn without their disability benefit being reduced) from NIS 2,800 to NIS 3,700. This has resulted in a change in the ratio between the disability benefit and the average wage. While between 2010 and 2018 the disability benefit eroded in comparison to wages, the benefit-to-wage ratio increased in 2018 as a result of agreements that enabled disabled persons with a spouse and two children, for example, to reach about 64% of the average wage, compared to 54% previously.
    10) Welfare ENG
  • Expenditure on vocational training in Israel stands at about 0.06% of GDP, about half of the OECD average. In recent years expenditure in this area has been rising, but there have been no significant changes in its share of GDP.
  • As part of the adoption of the Trajtenberg Committee recommendations, the Day Care Centers Department budget almost doubled between 2011 and 2017. In particular, the expenditure devoted to construction and the conversion of buildings into day care centers has increased substantially: from about NIS 2 million in 2011 to about NIS 260 million. This increase reflects the centrality that welfare states currently ascribe to early childhood education and the importance of early educational interventions for human capital enhancement, especially for children of families suffering from economic distress.
  • The additional expenditure allocated to fighting poverty in 2017 is 48% of the total expenditure recommended by the Elalouf Committee. Although a large portion of the Committee’s recommendations have been adopted, their chronic under-funding together with the government’s failure to implement other major recommendations, such as more generous income support benefits, have impaired the effectiveness of current poverty-fighting efforts.

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis. 

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

 

 

Executive Summary: Today’s Workers, Tomorrow’s Retirees – Understanding the Pension Gender Gap in Israel

In recent years there has been much public discussion about a variety of issues relating to pensions in Israel, including concern about the performance of pension funds and the implications of an aging population on the pension system. In Israel, pension income comes primarily from two sources: oldage allowances (provided by the National Insurance Institute to retirees and elderly living in poverty) and occupational pensions (mandatory since 2008). The differences between men and women for each of these pillars are expected to dictate the degree of future gaps in pension income…

To continue reading the summary, download the full publication.

Full study available under “Related Materials”

Executive Summary: Welfare Nonprofits in Israel – A Comprehensive Overview

Civil society organizations (or nonprofit organizations) are playing a growing role in the field of welfare in Israel. In 2016, 43,000 nonprofit organizations were registered, a particularly high share of organizations per capita. Of them, 15 percent were active in the field of welfare…

To continue reading the summary, download the full publication.

Full study available under “Related Materials”

Executive Summary: Emerging Early Childhood Inequality: On the Relationship Between Poverty, Stress, Sensory Stimulation, and Child Development and Achievements

How do experiences in early childhood impact development and achievement? The academic literature indicates that there are various ways in which economic inequality experienced in early childhood may lead to inequality in scholastic achievement later in life…

To continue reading the summary, download the full publication.

Full study available under “Related Materials”

Executive Summary: Arab Israeli Women Entering the Labor Market – Higher Education, Employment, and Wages

Usually, socioeconomic discussions about the Arab Israeli sector focus on the gaps that still exist between this sector and Jewish Israelis, and do not emphasize the areas where substantial improvements have been made. However, large strides have been made by Arab Israeli women in educational achievements as well as improvements, though more limited, in employment…

To continue reading the summary, download the full publication.

Full study available under “Related Materials”

Executive Summary: Back and Forth – Commuting for Work in Israel

The subject of commuting has attracted more and more public attention in Israel in recent years as road congestion levels continue to rise with the increasing number of commuters. Over the last 30 years, the number of employed persons working outside their residential area has risen from 42 percent to 54 percent (as of 2016) among Israelis of working age (25-64)…

To continue reading the summary, download the full publication.

Full study available under “Related Materials”

Executive Summary: Trends in Religiosity Among the Jewish Population in Israel

What will the religious makeup of Israel’s Jewish population look like in the coming decades? According to the projections of the Central Bureau of Statistics (CBS), the Haredi (ultra-Orthodox) population will compose about 50 percent of Israel’s Jewish population by 2059.

These projections have raised serious concerns for Israel’s future economic growth given the education and employment patterns of contemporary Haredim. However, there are a number of significant demographic shifts occurring, some of which, it seems, have not been fully accounted for in the CBS forecasts…

To continue reading the summary, download the full publication.

Full study available under “Related Materials”

Executive Summary: The Income-Expenditure Gap and Household Debt in Israel

How do Israeli households sink into debt? Given the difficulty of assessing actual debt due to data limitations, the gap between Israeli household income and expenditure can be analyzed alongside characteristics such as socioeconomic status, age, marital status, and type of housing expenditure…

To continue reading the summary, download the full publication.

Full study available under “Related Materials”

Israel’s Social Welfare System: An Overview

Data on Israeli social welfare spending in recent years, and decisions by the government and its ministries on issues relating to the social welfare and social security of the country’s residents, point to two prominent trends in Israel’s social welfare system.

One trend is that of long-term stability in social spending levels and the limited effectiveness of measures to address poverty and inequality. The other trend indicates a new emphasis on implementing elements of a “social investment” approach to social welfare activities.

Welfare expenditure in Israel

 

The data show that, since the early 2000s, social security and social welfare spending as a percentage of GDP has remained more or less stable, as has the incidence of poverty in Israel. The overall trend during this period continues to be one in which the share of Israeli families living in poverty, and the degree of inequality between Israeli citizens, have remained among the highest in the OECD.

Welfare expen as percent of GDP ENG

  • Social spending, which includes government spending on education, healthcare and social welfare, amounted to about NIS 223 billion in 2017 – an increase of NIS 18 billion compared with 2016.
  • In financial terms, social welfare spending alone increased by about 9% between 2016 and 2017, amounting to about NIS 110 billion in 2017. The main source of this increase is expenditure on the Savings for Every Child program and growth in the budgets of the Ministry of Labor, Social Affairs and Social Services and the Ministry of Housing.
  • In February 2018, following an intensive protest campaign by organizations for people with disabilities, the Knesset approved an increase in the basic disability benefit as well as an increase in the “disregard” limit (the maximum income from work that a person with disabilities can earn without their disability benefit being reduced) from NIS 2,800 to NIS 3,700.

The government’s official adoption of the recommendations of the Committee for the War Against Poverty (established in 2013 and headed by MK Eli Elalouf) has not brought about a dramatic change in poverty policy.

  • The spending increase in 2017 as compared with 2014 for all areas covered by the final Committee recommendations amounts to some NIS 3.6 billion – 48% of the total recommended expenditure (NIS 7.4 billion per year).
  • Although a large portion of the recommendations have been adopted, their chronic under-funding together with the government’s failure to implement other major recommendations, such as more generous income support benefits, have impaired the effectiveness of current poverty-fighting efforts.

Implementing “social investment” policies

 

The three main elements of a “social investment” approach to welfare policy are:

  1. “Flow”: facilitating the entry and exit of groups into the labor market
  2. “Stock”: continuously improving human capital and skills
  3. “Buffers”: ensuring safety nets for segments of society in need

In recent years Israel has implemented measures intended mainly to reinforce the “stock and “flow” elements of a social investment approach, while little effort has been made to upgrade the “buffer” components.

Social investment areas ENG

  • Savings for Every Child. The implementation of the Savings for Every Child program, which, in 2017, amounted to NIS 4.2 billion, seeks to jumpstart young Israelis’ transition to post-secondary education and the labor market. This program is aimed to increase human capital and facilitate future social mobility.
  • Daycare centers. As part of the adoption of the Trajtenberg Committee recommendations, the budget of the day Care Centers Department almost doubled between 2011 and 2017 and stood at NIS 1.64 billion in 2017. Out of this budget, the share of expenditure devoted to construction and the conversion of buildings into day care centers increased substantially, from about NIS 2 million in 2011 to about NIS 260 million in 2017.

This increase reflects the centrality that welfare states currently ascribe to early childhood education and the importance of early educational interventions for human capital enhancement, especially for children of families suffering economic distress.

  • Expenditure on active labor market policy in Israel, that is, on programs to encourage the optimal integration of different populations into the labor market, is among the lowest in the OECD. Of this expenditure, the share that Israel devotes to vocational training is 0.06% of GDP, about half of the OECD average. In recent years the expenditure in this area has been rising, but there have been no significant changes in its share of GDP.

Between 2013 and the end of 2017, the budget of the agency responsible for government-funded vocational training grew by 26%. There have also been changes in the share of vocational training expenditure spent on adult v. youth training. The share of adult training has increased relative to the spending on youth training, and stood at about 43% of the training expenditure in 2017.

  • Work grants and Intervention programs. While there have been no major changes in the amount of the average work grant since 2012 (NIS 3,700 per year), eligibility for the grant was extended to single parents in 2017, which added another 50,000 people to the population of those entitled to the grant. Additionally, recent years have witnessed the promotion of intervention programs such as Noshmim Lirvacha, operated by the Ministry of Labor, Social Affairs and Social Services to address the social exclusion of families living in poverty.

On the one hand, the early childhood education system has been expanded; investment in vocational training has been increased; vocational programs targeting specific sectors have been created; holistic programs have been operated to help families living in poverty enter the labor market; and the Savings for Every Child program has been implemented.

However, there is still no indication that other major elements of the social investment approach have been adopted – elements that aim to ensure the quality of life of those who are ejected from the labor market (and their optimal re-entry), or that provide a buffer for those who are unable to integrate in the labor market.

 

Israel’s Exceptional Fertility

It is widely known that fertility levels in Israel exceed fertility levels in all other developed countries, and that this is the main factor driving Israel’s unusually high rate of population growth.

However, Israel’s fertility is not only exceptional because it is high. It is exceptional because strong pronatalist norms cut across all educational classes and levels of religiosity, and because fertility has been increasing alongside increasing age at first birth and education—at least in the Jewish population. From an international perspective, these are atypical patterns.

Fertility levels and trends

Israel’s Period Total Fertility Rate (TFR) in 2015 was 3.1, which is unusually high, and well above the population “replacement level” of 2.1. While there have been widespread and recognizable reductions in fertility over the last 150 year – the “Fertility Transition” pulling TFR to around 2-3 children per woman, and the “Second Demographic Transition” pulling it below 2 since about the 1970s – Israel is unique among OECD countries in not having followed the second of these international trends.

Total fertility rates ENG

  • Israel’s TFR is the highest among the OECD countries, and is almost one full child above the next highest fertility countries, Mexico and Turkey. Israel’s TFR is also much higher than that of BRIC countries and other emerging economies.
  • Despite a magnitude of differences on a number of other characteristics, Israel’s fertility is closest to that of its direct geographic neighbors, and falls between that of Egypt and Syria.
  • Israel’s TFR has never dropped below 2.8 children, and actually increased by 0.2 children between 1995 and 2015. With the exception of Israel, every country with a TFR greater than 2.0 in 1995 experienced a reduction in fertility by 2015.

There is considerable heterogeneity in fertility across different subpopulations within Israel, and the rise in Israeli fertility by 0.2 children over the last two decades is largely driven by the secular and traditional populations.

  • Between 1960 and 2016, the TFR of Christians dropped from 4.7 to 2.1; Druze fertility fell from 7.3 to 2.3 between 1970 and 2010; and Muslim fertility also dropped precipitously from an estimated TFR of 9.2 in 1965 to 3.3 fifty years later.
  • Since 2005, national fertility levels have risen—even as Muslim and Druze fertility have fallen and Christian fertility has remained stable—because of increases in the fertility of Israeli Jews (whose fertility declined slightly between 1960 and the 1990s, but has since increased).
  • Among Jews, the TFR among Haredim has fluctuated around 7 children per woman since the 1980s, and around 2.5 children per woman among the secular and the traditional who identify as not religious. However, Haredi fertility in the 2007 to 2013 period was lower than in the 1990s, while fertility in the non-Haredi Jewish population has increased since then.
  • Even among Jewish women who self-identify as secular and traditional but not religious, the combined TFR exceeds 2.2, making it higher than the TFR in all other OECD countries.

Israel’s unique fertility profile

Israel’s fertility is exceptional in a number of characteristics, including those relating to non-marital fertility, age at first birth, childlessness, and education levels.

Non-marital fertility

  • Across the OECD and other developed countries, there is a positive correlation between TFR and the percentage of children born outside marriage. However, this is not true for Israel: Israel has high fertility despite having one of the lowest rates of non-marital fertility (less than 10%, compared to about 40% on average in the OECD).
  • Nonetheless, non-marital fertility in Israel is rising. Across all births to women aged 25-39, the percentage born to never-married women increased from about 3% in 2000 to about 5% in 2016. Among never-married women aged 40+, it rose from 7% to 17% of all births.

Age at first birth 

  • Age at first birth has continued to increase in the OECD—driven largely by improved access to effective contraception and rising levels of women’s education and employment – and is negatively correlated with fertility levels.
  • In Israel, between 1994 and 2016, age at first birth increased by about 3 years for Christians and Druze, and by 1 year for Muslims, accompanied by an overall reduction in TFR in these populations.
  • Among Jews, age at first birth increased by about 2.8 years between 1994 and 2016, even as non-Haredi Jewish women’s TFR rose by about 0.2 children. This means that gains to fertility at older ages have outweighed reductions in fertility at younger ages.

Childlessness

  • Across countries with high contraceptive prevalence, there is no clear relationship between prevalence of childlessness and TFR. Countries in Eastern Europe tend to have both lower levels of childlessness and lower TFR than countries in Western Europe and the US, Canada, and Australia.
  • Within Israel, childlessness is comparatively low, but is more prevalent among Israeli Arabs than among Israeli Jews: 13.7% of Israeli Arab women in the 45-59 age group compared to 6.4%.

Education

  • Women’s education has long been one of the most important determinants of fertility. Because educated women have largely continued to have lower fertility than their less educated peers, rising levels of education—desirable for many reasons at both the individual and societal level—impose a fertility “cost” on societies.
  • In most population groups in Israel, as education increases, fertility declines. However, the situation is different for two population groups. For non-Haredi Jewish men, the number of children among academics and those with lower levels of education is the same. Haredi women with an academic degree give birth to their first child at a relatively late age, but by their late thirties their fertility rates converge with those of Haredi women with lower levels of education.
    Fertility ENG

The main difference in fertility between Israel and other developed countries does not only stem from the fact that, in Israel, relatively educated families – who make up a large and increasing share of all Israeli families – are having more children than their counterparts in Europe.

It’s that the difference in fertility between college-educated Israelis and their European counterparts is much greater than the difference between non-educated Israelis and their Europeans counterparts. As a direct result of these fertility patterns, a higher percentage of children in Israel are born to older parents and to more-educated parents (compared to any other OECD country).

 

Healthcare in Israel: An Overview

Israel’s current health indicators are potentially quite good, but they reflect past investments in the healthcare system. Today, there are signs of a worsening in the relative health of Israel’s population, and the situation is likely to deteriorate further unless there is an increase in the share of state funding, in the overall level of health funding, and in the regulation of the system’s public-private mix.

Israel’s current health indices

 

The health of Israel’s population looks good by common health metrics like infant mortality and life expectancy at birth. Nevertheless, there are concerning indications for the future.

  • Infant mortality is low in Israel at 3.1 per thousand births. This is even low compared with healthcare systems similar to Israel’s in Belgium, German, the Netherlands, France and Switzerland. However, infant mortality has stabilized since 2013, which is worrisome as there is potential for still further improvement among certain population groups.
  • Life expectancy at birth is relatively high at 82.5 years, but there are signs that, in terms of life expectancy and years of healthy life, Israel’s relative status is liable to decline.

The financing of Israel’s healthcare system

 

Israel’s healthcare expenditure as a share of GDP remained relatively stagnant despite the country’s impressive economic growth and, in international comparison, the share of public spending out of total healthcare spending in Israel is relatively low compared with all systems with universal coverage amongst developed nations.

  • The share of national expenditure on health out of Israel’s GDP was about 7.4% in 2017, compared to an average of nearly 9% in the OECD and 11% in European countries with health systems similar to Israel’s.
  • The share of public expenditure out of total expenditure on health stands at about 63% in Israel, compared to 73.5% in the OECD, and 78% among countries with similar systems. Meanwhile, the share of healthcare spending out of household disposable income rose from 3.9% in 1997 to 5.9% in 2016.
  • Between 1995 and 2017, per capita health expenditure in OECD countries has increased on average by 2.6 times, and in countries with health systems that are similar to Israel’s, they have increased by 2.7 times. In Israel, however, per capita health expenditure only doubled over the same period.
  • Growth in health expenditure was similar to the growth in GDP per capita – about 1.7% a year, on average, since 1995. However, when taking into account changes in healthcare prices relative to the Consumer Price Index and increased needs rooted in changes in the age structure of Israel’s population, the growth was only 0.9% per age-adjusted standardized person.
    National expenditure on healthcare per capita

Problems in the healthcare system: The public-private mix and physician wages

 

The relatively low level of public funding and the rising share of private health funding increases health costs and widens gaps in the accessibility of medical services for various population groups in Israel.

The relative increase in health prices is high, and stems, at least in part, from the public-private mix that has developed in the system, and the effect it has on physicians’ wages. Physicians’ wages rose by about 42% between 2011 and 2017, compared to an increase of about 15% among other salaried employees in Israel. One main reason for this is that doctors can refer patients from the public system to their own services in the private system, where they can charge higher prices for treatments that could largely be administered through the public system as well. At the same time, this phenomenon means that doctors are spending less time working in the public system. Therefore, publicly funded institutions compete for their own personnel in the privately paid institutions. This drives pay up in the public system as well.

Israel can improve the state of its healthcare system by employing existing models (already in effect in various countries) of either separating the two systems or unifying regulations across them.

The separated model

In this solution, the two systems would exist at separate funding and infrastructure levels. In the model:

  • Public funding would comprise the regular health tax and payments currently transferred to the health funds plus collections for supplementary insurance. Thus, the public framework would also offer the option of choosing a broader healthcare basket than the basic one.
  • Any institutions that have contracts for supplying entitled care, and thus funding from the state, would be considered “public,” regardless of ownership, and could compete for publicly funded patients. However, they would have to meet specific criteria to receive public funding.
  • In the private system, citizens could pay for treatment through a variety of commercial insurance policies or out of their own pockets.
  • All patients would have to decide to receive their care in the public or private system before seeking treatment, and this choice would obligate them throughout the course of treatment.
  • Healthcare workers whose income is based on public funding would not offer private treatment, but be “full timers” in the publicly funded system.
  • Emergency services currently provided by the public system would not support the private system.
    The separated model

The integrated model

In this solution, the private and public systems would be merged. In the model:

  • Every resident would receive basic public insurance, combining today’s basic and supplementary coverages (as in the separated model).
  • Another insurance tier would be based entirely on private funding.
  • The “integration” comes from the fact that elective services (supplementary and commercial insurance tiers) would be provided as part of the same system that delivers the public services. The extra insurance would be for extra services but not for faster elective service. In essence, the public system would offer a publicly-funded basket and a certain degree of private choice, and public services would be received in both privately and publicly owned institutions, but residents could also pay out of pocket or through insurance for treatments not included in the integrated system.
    The integrated model

 

 

Technological Education: Trends and Developments, 2006 to 2017

Under the last four education ministers, the Ministry of Education has focused much of its efforts on increasing the number and share of high school students in technological-vocational education. A second, related goal has been to increase the number and share of students taking the bagrut exams in math and English at the highest study level (five units). This study examines the profile of students in high school technological-vocational education according to a new achievement-based classification system of educational tracks proposed by the authors.

The growth of technological education in Israel

As of 2017, 40% of 12th grade students were enrolled in technological education (compared to just over 33% in 2006). Within that, 15% of the students study majors in the high technological track, 23% in the medium track, and less than 3% in the low track.

Students by edu tracks ENG

  • Between 2006 and 2017, the share of students studying in the high technological track (where achievements are the highest) rose by 40%. This increase has come mainly from outstanding students transferring from the academic track to the high technological track. This is indicated by a decline in the share of high school students studying in the academic track from 67% to 60% during the same period.
  • While the total number of students in the 12th grade increased between 2006 and 2017 by almost 18%, the number of students in academic track education increased by only about 4,000 students (a 6% increase), and the number of students in technological education increased by about 14,000 students (42% rise). The biggest increase was in the number of students in high technological education — about 7,000 students, or a 65% increase.
  • The number of schools offering only an academic track increased by only 17 during this period, whereas the number of schools offering technological tracks rose by 291.

Technological education by sector and gender

The share of students in technological education increased in all of the education streams (Hebrew and Arab), but there are large differences between sectors and genders.

High technological edu ENG

  • The greatest increase in the share of students studying in high technological tracks was in the Arab education system, especially among Druze (20 percentage points) and Bedouins (11 percentage points).
  • In 2017, the share of students in the high technological track in the entire Arab sector was higher than its share in the Hebrew education sector.
  • The percentage of girls studying in the high technological track in Arab education has risen substantially, and is even higher than the percentage of boys. The gap between girls and boys in Bedouin education is the largest (21% compared to 12%, respectively).
  • Only a small percentage of Jewish girls study in the high technological track, and the percentage is particularly low in the State-religious education system, whereas the percentage of boys in the high track is relatively high in State-religious education. It is possible that single-sex schools result in fewer study options for religious girls, because the number of high technological tracks offered in girls’ schools in the State-religious education stream is particularly low (only 18% of the schools offer these tracks, compared to 48% of all other schools (except Haredi schools)).
  • In Haredi education, the share of girls in the medium technological track rose from 9% to 46% between 2006 and 2017, with many of these students studying bookkeeping and human resources majors. Whereas in the past the vast majority of Haredi women went into the teaching profession, the large increase in the share of Haredi girls enrolled in these majors seems to indicate that they are now pursuing other areas of study.

Technological education: socioeconomic and academic background

As expected, students’ socioeconomic background is highly correlated with the level of academic achievement in each of the technological tracks: the students in the high technological track come from the strongest backgrounds, followed by the students in the medium and low tracks. In Hebrew education, those in the academic and high technological tracks have similar backgrounds, while, in the Arab sector, those in the high track come from slightly stronger backgrounds.

  • In Hebrew education, parents’ average years of schooling for students in the high technological and academic tracks is about 13.7 years, while in the Arab sector, it is 11.8 years in the high track and 10.5 years in the academic track.
  • Though the socioeconomic profile of Arab Israeli students in the high technological track is much lower than that of Jews, their bagrut qualification rates are similar to their Jewish counterparts: around 90%. Even among Bedouin students – whose socioeconomic status is particularly low – the bagrut qualification rate is about 74%.
  • The 8th grade mathematics skills of students in high technological education (according to Meitzav scores) is higher than those of students in academic education and medium and low technological education: the average percentile of students in the high technological track is 16 points higher in the Jewish population and 20 points higher in the Arab population than that of students in academic education.

Bagrut performance

After years of decline in the number of students studying math and English at the five unit level (the highest level), these rates are now increasing.

  • While the number of students in the 12th grade grew by 18% from 2006 to 2017, the bagrut qualification rate rose by 42%.
  • The number of students taking math at the five unit level declined between 2006 and 2012, but has risen by 56% since 2012. In the Arab sector, in 2006, the share of students studying math at the five unit level was lower than in the Hebrew sector — 11% compared to 15.5%. Until 2012, the decrease was larger in the Arab sector, and the recovery since has been slower.
  • The number of those taking the English bagrut exam at the five unit level increased by 20% between 2013 and 2017 (over and above the increase in the overall number of students). However, the share of those learning English at such a high level is relatively low in the Arab Israeli sector and stood at only 17% in 2017, compared to 51% among Jews.
  • In 2017, of all students taking five units in math, 47% were students in technological education, most of them in the high technological track.
  • The share of students taking five units in math who do not study in the high technological track or in a scientific academic track is very low, and declining: only 6% of students who took math at this level in 2017 are enrolled in non-science academic majors.

 

The Determinants of School Budgets: Per Class and Per Student

The per class and per student budget (the study deals only with budgets allocated by the Ministry of Education) in regular official primary education (institutions containing grades 1-6 only) increased significantly in recent years. Most school budgets are allocated according to fixed formulas. However, despite the universal formulas, after controlling for various school characteristics, budgeting is highest in State-religious schools and lowest in Arab Israeli schools.

Primary education budgeting

 

The budgeting of primary schools in Israel today is determined by a combination of three main budgeting sources that reflect educational, social, and ideological considerations.

1. The basic allocation (“the basic standard”): this guarantees a minimum number of teacher work hours necessary to provide the required curriculum and achieve other educational goals.

  • The basic standard part of the budget transferred to educational institutions depends on the number of classes and not on the number of students. Given that 20 students is the minimum number of students per class, each additional student entitles the school to a supplementary budget and when the number of students is less than 20 the class receives only half of the basic standard budget. Thus, a rise in the number of students raises the budget per class, but budgeting per student goes down the larger the class size.
    Budget per class and per student
  • The cutoff for the number of students considered a “class” for budgeting purposes (regardless of how many classes the students are split into in practice) is different based on the school’s Nurture Index (the higher the index, the weaker the socioeconomic profile of the school’s students): 32 for schools with a weakest socioeconomic background and 40 for schools with a highest socioeconomic background. On the ground, this means that two schools with the same number of students could be considered as having a different number of budgetary classes, impacting the schools’ overall budgets.
  • An educational policy decision to gradually reduce the number of students per class to a maximum of 34 applies to all students in grades 1-3 as of the end of 2018.

2. Dedicated “baskets”: these budgets are added to the basic standard, according to fixed formulas, based on the school’s student profile. They are “earmarked” for specific purposes.

  • The Nurture basket – which has the purpose of improving educational achievements of students from weak socioeconomic backgrounds and was increased in 2014.
  • The mainstreaming basket – which aims to integrate students with special needs into regular classrooms – is allocated by a fixed formula: 5.4% of all students in all schools receive an addition of 1.85 weekly teaching hours each.
  • The prayer time basket – for prayer hours at Hebrew State-religious schools – is 1.22 weekly hours per standard class.
  • The absorption basket – for immigrants and returning residents – takes into account country of origin and length of presence in Israel.

3. Other allocations (“baskets”): additional discretionary baskets based on a school’s inclusion in specific projects, or that stem from a recognition of a special need.

Factors that influence the school budget

 

The study takes a closer look and examines the influence of various school variables on budgeting per class and per student: the Nurture Index, school size, whether the school is part of the long school day program or not, the presence or absence of Special Education classes, the education sector and school supervisory authority, the median seniority of teachers, and the share of teachers with advanced degrees.

The results focus on two main aspects: the marginal effect of each variable on budgeting and the degree to which each variable contributes to the explained variance.

The results of a multivariate analysis, after controlling for various school characteristics, shows that most of the per student budget and of the per class budget can be explained by these variables:

  • The vast majority of the explained variance – 87% for per class budgeting and 92% for per student budgeting – has to do with factors that are difficult to influence, such as: Nurture Index, participation in the “long school day” program, and the size of the school.
  • Sector and type of supervision, on the other hand, explain a much smaller share of the explained variance: about 13% for per class budget and 8% for per student budget.
    Contribution of explanatory variables

 


 

 

 

 

The Israeli Education System: An Overview

The main developments in the education system in the last years have taken place over four dimensions of the system: the composition of the student population, the Ministry of Education budget, the profile of the teaching personnel, and students’ educational achievements.

Composition of the student population

The student population in Israel is growing, but the growth has not been consistent over time, across age levels, or across population subgroups.

  • Israel’s student population has increased by about 44% since 2000 (an increase of 2% per year), which is exceptional compared to other developed countries.
  • While the growth rate is declining in the Haredi, Arab, Bedouin, and Druze education systems, it is rising in Hebrew State and State-religious education.

The number of children in preschool increased between 2000 and 2015 by 81% (compared to a 43% growth in the total population). The fastest growth rate was between 2010 and 2015 and coincided with the implementation of the free Compulsory Education Law for ages 3-4.

Budget

An examination of the Ministry of Education’s budget shows an increase in the share of the budget allocated for Special Education and an increase in per-student expenditure.

  • The Ministry of Education budget increased by 83% in real terms between 2005 and 2018. The budget increased due to a rise in the number of students, the signing of the Ofek Chadash and Oz LeTmura labor agreements, the implementation of the Compulsory Education Law for ages 3-4, and the introduction of resource-heavy programs such as reducing the number of children per class.
  • The budget for Special Education increased at almost twice the rate of the overall education budget, mainly due to the tremendous rise (127%) in the number of students in Special Education.
  • The growth in the number of Special Education students was particularly fast among students diagnosed with autism – their number rose from 894 in 2000 to 11,145 in 2018 – and students with serious behavioral disorders – their number rose from 2,347 to 17,483 over the same period.
  • The Ministry of Education’s real budget per student increased between 2000 and 2014 at a higher rate than in the OECD. In 2015, the expenditure per student in primary education in Israel was $7,981 (PPP dollars) compared to $8,631 in the OECD. The corresponding figures in high school education were $7,987 in Israel compared to $10,010 in the OECD. Given recent developments, it is reasonable to believe that differences in the rate of change of expenditure per student between Israel and the OECD will continue to grow.

Teaching personnel

As a whole, the feminization of the teaching profession has come to a halt (except in Arab education) and there has been a real improvement in the academic level of teaching personnel.

  • Feminization: In primary school, the share of women working in Hebrew education dropped from 90% of teaching personnel in 2000 to 86% in 2017, while, in Arab education, the share of women rose from 65% to 78%. Similarly, in high school, the feminization process stalled in Hebrew education (87% of teachers were women in 2010 compared to 86% in 2018), and grew stronger in Arab education (increase from 36% in 2000 to 57% in 2018).
  • Academic level: In primary school, the share of teachers in Hebrew education with an academic degree rose from 50% in 2000 to 89% in 2018, while, in Arab education, their share rose from 37% to 94% (surpassing the share in Hebrew education). In high school in both streams the process of academization of the teaching faculty is nearly complete (having reached 92%).
  • Teacher supply: In Israel, it is expected that when there is a teacher surplus there will be a drop in the teacher hours worked. In primary school, the average teaching job in Hebrew education rose from a 73%-time position in 2000 to 77% in 2018. In Arab education, despite oft-heard claims of a surplus of teachers in the Arab sector, average job positions increased slightly from an 82%-time position to 84%. These trends indicate that there is not a surplus of teachers at the primary school level. On the other hand, in high school there was a drop in the average job position in Hebrew education from 78%-time in 2010 to 70% in 2018 and a drop in Arab education from 95%-time to 85%.

    Educational achievements

There are large gaps between Israeli students on the Meitzav exams and, on international exams, these gaps are among the largest of the participating countries, especially among the developed countries. At the same time, Israel has been improving educational achievements and reducing achievement gaps on national and international exams in recent decades.

  • There has been a significant improvement in Meitzav exam scores in Israel, with an impressive rise of half a standard deviation throughout all the tests (5th grade math and English; 8th grade math, English and Science).
  • Israel’s improvement on international exams has been larger than the average improvement in all countries, and larger than the average improvement of the countries that participated in the first and last tests examined in the study. In fact, Israel was one of the top three countries in terms of improving test scores for the PIRLS and TIMSS tests evaluated in the study and ranked first in reducing gaps on the PIRLS test and the PISA test in math and sciences.
  • In comparison to the average scores of the countries that participated in all of the international tests in the study period, Israel’s average score was nearly always lower than the average, but the gap between the two narrowed substantially.

Progress in Israel’s education system has been significant in recent decades, but, given the important role the education system plays in creating a strong and thriving society, we need to understand and address the gaps that still exist.

Israel’s Labor Market: An Overview

In 2018, Israel’s labor market continues to be strong: participation rates continue to rise, employment rates of both men and women are increasing, and unemployment has reached a historic low. The number of job vacancies has also increased, and wages have been continually rising. The study examines changes that have occurred in the Israeli labor market overall, as well as changes within specific population groups.

The labor market: A general picture

 

Israel’s employment rate has reached slightly more than 78% in 2018 and the unemployment rate is continuing to decline, reaching a low of 3.4%.

  • Overall, the employment rate for men has risen by 7 percentage points since 2003, while women’s employment has increased by 13 percentage points.
  • The employment rates of non-Haredi Jewish women and men and Haredi women in Israel are higher than the average employment rates in the OECD, and among non-Haredi Jewish women, it is the second highest in the OECD (after Iceland). For both men and women, most of Israel’s employment growth between 2003 and 2018 was due to changes in the non-Haredi Jewish population (5 and 10 percentage points for men and women, respectively), mainly because they are the most populace group.
  • When broken down by age group, the greatest impact on the rise in employment among women came from the 35-44 and 55-64 age groups, but for different reasons: the former because there was a major increase in the percentage of mothers of young children in the labor market, the latter due to women close to retirement working more than their predecessors and the increased retirement age. Among men, the most substantial employment rate increase occurred in the 55-64-year-old age group.
  • Wages have continued to rise in 2018 at a fast pace. This increase is consistent with the rapid rise in real wages since 2014 – an increase of 11% in total.Employment rates by pop groups and gender

High tech employment

 

While the high tech sector employs only 8%-9% of Israel’s workers (as of 2017), it contributes 12% of GDP, a quarter of the country’s tax revenues, and 42% of exports. Employment rates in this sector differ by gender and across population groups.

  • Over the past decade, the share of workers in high tech has increased from 8% to 15% among non-Haredi Jewish men, but among Arab Israelis and Haredim the percentage has remained negligible.
  • The share of women employed in high tech is low (as it is in the rest of the world), standing at 32% of those working in the sector in 2017, and those women employed in high tech are mostly non-Haredi Jews.
  • There has been an impressive rise in the share of Haredi women employed in the field: from less than one percent in the middle of the last decade to about 3%.

Labor market trends by population group

 

Arab Israeli employment

  • After several years of stagnation, the employment rate of Arab Israeli women increased substantially and stands at about 40% – nearly double the rate in 2003 and an increase of more than 6 percentage points since 2016 – and is now very close to the government’s 2020 target (41%). Most of the increase (72%) stems from the improved education of Arab Israeli women.
  • Arab Israeli men’s education levels have not risen as much as those of Arab Israeli women, and the increase in their employment rate is relatively low. Low levels of education also affect the employment opportunities available to Arab Israeli men, 50% of whom (as of 2017) work in occupations characterized by low wages: manufacturing, construction, and agriculture. These are also physically demanding occupations, and, consequently, Arab Israeli men show a major decline in employment rates from age 50 and on.
    High tech employment

Haredi employment

  • After rising by more than 15 percentage points between 2003 and 2015, the employment rate of Haredi men has declined slightly in recent years, and stands at about 48% – far from the government’s 2020 goal of 63%. About 42% of employed Haredi men ages 30-64 worked part time in 2017 (compared to 15% of non-Haredi Jewish males), mostly due to yeshiva studies. About 23% of employed Haredi men work in education, most without academic or post-secondary training other than yeshiva study.
  • The employment rate of Haredi women increased by 5.5 percentage points between 2013 and 2018, and stands at 76%. About 51% of Haredi women were employed in part-time positions in 2017, and 55% of those working in part-time positions do so in order to care for their families and households. This is a higher share than for Arab Israeli women (36%) or non-Haredi Jewish women (30%). The share of Haredi women employed in education dropped from 58% in 2004 to 46% in 2017, while the share of women learning technological studies in seminaries is on the rise.

Employment among older adults

  • Israel’s population is aging at a slow pace relative to the OECD, but when taking into account Israel’s high birth rate, the dependency ratio (the ratio between those not of prime working age and those of prime working age) is the highest in the OECD. One possibility for coping with this situation is to raise the retirement age for women.

Rising Housing Prices and Their Impact on Households’ Ability to Purchase a Home

The rising housing prices of the past decade have reduced the ability of the average Israeli household to purchase a home. However, when the ability to buy a home is assessed in terms of total disposable household income, rather than in terms of the number of monthly salaries needed to purchase housing (widely used in the media and public discourse), the findings show a more moderate decline in purchasing ability.

The reason for this is that total disposable household incomes rose more than wages did between 1998 and 2016, due mainly to a rise in the average number of income earners per household.

Measuring the ability to purchase a home

 

From the mid-1990s to 2007, many developed countries experienced housing price increases. Prices dropped somewhat in the wake of the 2008 financial crisis but, by 2017, have risen back to their pre-crisis levels. Since the second half of 2007, real housing prices in Israel have been trending upward (in annual terms). The consistency of this trend over the course of a decade, and the rate of increase, are unprecedented.

A households’ ability to buy housing is usually calculated in terms of the ratio between the average (or median) apartment price and the average (or median) individual wage – called the “average wage index” for the purposes of this study. However, this has many drawbacks as it does not take into account non-salary income or multiple household income earners. Thus, this study uses the “disposable household income index” to evaluate Israeli households’ housing-purchasing ability.

  • Between 1998 and 2016, the average disposable income grew by 2.3% annually, while the average monthly wage increased by just 1%.
  • Between 1998 and 2007/2008, both ratios declined – that is, the ability to buy housing improved. Since then, it has become harder to purchase housing.
  • The ability of households to purchase housing in 2007 declined in most of the OECD countries relative to the end of 1990s. A similar picture emerged in Israel, but a decade later than in the other developed countries.

Ratio of housing prices to disposable income ENG

The ability to purchase housing by household characteristics

 

The figures described above provide a more general picture, but do not necessarily reflect changes in the ability to buy housing that occurred among specific population groups, or in different geographic regions.

  • The disposable income of young adult households (25-34) grew at a rate similar to the average disposable household income between 1998 and 2016, so their ability to purchase housing was no more affected than was that of the general population.
  • The age group whose housing-purchasing ability was most affected (the group whose disposable income rose at a lower rate than the general population) are households headed by individuals in the 35-54 age range, because the income of these households increased at a lower rate than the average for the general population.
  • The ability to purchase housing has declined significantly in Tel Aviv, Jerusalem, and Israel’s Southern District. In the Northern, Sharon, and Gush Dan districts (excluding Tel Aviv), the ability to buy housing declined to a degree similar to the national average.

Housing Prices to Disposable Income Index ratio by locality
Real estate EN

  • Since 1998, the average disposable household income of immigrant families has risen at a faster rate than has the average Israeli disposable income: 2.9% between 1998 and 2016, versus an average annual change of 2.2% for native-born Israelis. This indicates that the ability of immigrants to purchase housing diminished to a more limited degree than the average for the public at large.

Household leveraging

 

A home is one of the largest purchases a household can make, and the vast majority of home buyers are obliged to take out loans in order to fund the purchase. As such, a useful indicator of households’ ability to buy housing is the credit available to them, and their ability to repay loans.

  • The average level of household leveraging – the size of households’ net financial liabilities to creditors as a percentage of GDP – has increased since 2009, which could potentially make it hard for them to receive additional credit in the future.
  • The following trends emerge when examining credit in terms of housing credit, non-housing credit, and net credit: the ratio between housing credit and GDP declined slightly between 2000 and 2007, then started climbing again and slowed around 2013; the ratio between non-housing credit and GDP increased from 10.1% in 2000 to 13.4% in 2009, halted between 2009 and 2013, then climbed until reaching 15.4% in 2017; the net credit to GDP ratio fell steeply from 27.1% of GDP in 2000 to 10.7% in 2009, then the trend reversed and the ratio rose continuously to reach 23.4% of GDP in 2017.
  • The current level of leveraging is only slightly lower than it was in 2000, the year that witnessed the highest leveraging levels recorded.

The data show that rising housing prices have taken their toll on Israeli society. Since the second half of 2007, the ratio between housing prices and disposable income has increased, meaning that it was harder to buy housing in 2016 than it was in 2007.

Nonetheless, using the disposable household income index to measure this shows that the ability to buy housing did not decline as much as one might conclude if using the commonly-accepted average wage index.

The Singer Series: State of the Nation Report 2018

We are pleased to present the Herbert M. Singer Annual Report Series, State of the Nation Report: Society, Economy and Policy in Israel 2018. The chapters that appear in this volume deal with a wide variety of subjects and are based on unique studies that show the many faces of the socioeconomic situation in Israel today. There are many things to learn about social policy from the subjects surveyed in this year’s book; and there are many things to take away about how to improve the welfare of Israel’s citizens.

Economic Developments in Israel: An Overview

In 2018, employment is at an all-time high, unemployment is at a historic low, GDP growth is similar to recent years, and wages have risen. However, growth potential is declining due to demographic changes and trends in labor productivity, which is not growing at all.

Macroeconomic processes

The picture that emerges from an examination of developments in the major GDP components in recent years is one of stability and “balanced growth.”

  • GDP growth for 2018 is expected to amount to 3.2% — slightly lower than in recent years, reflecting per capita growth of 1.2%.
  • Since 2010, there have been no substantive changes in the relative shares of the main GDP components: private consumption, public consumption, fixed asset investment, exports and imports.
    GDP and its components

    • Most of the volatility in fixed asset investment since 2010 is due to investment activity by the economic sectors: Between 2012 and 2015, the share of this kind of investment in GDP fell by 2 percentage points, but has risen by a little over 1 percentage point over the past two years.
    • In terms of government consumption, the expenditure on the individual consumption component has shown stability over the years, while the collective component has fallen slightly (stemming from a decline in the share of security spending).Israel’s fiscal system is subject to growing pressure. In the 2019 budget, the government is deviating by 3 percentage points from the permissible amount, and it also seems to be on the verge of deviating from the legally specified deficit ceiling.
      • Despite the deficit reduction of the last few years, Israel still has a larger deficit than most OECD countries. Israel’s national debt amounted to 75.6% of GDP in 2016 – a figure puts Israel near the middle of the OECD distribution.
      • Assuming that the government will increase its expenditure in accordance with the relevant legal rules and limitations, it seems that as of 2020 the government will breach the deficit limit as it is set by law, and that the problem is likely to become even more severe in the long run.
      • The budgetary problem is expected to increase further if the government follows through with its plan to increase the defense budget to about 6% of GDP, and peg it to the GDP growth-rate.

        Growth and productivity in Israel

         

        Israel is characterized by higher growth rates than those of other OECD countries. However, the same does not hold when examining growth per capita, and Israel’s productivity is not improving.

        • In 2017, the Israeli economy grew by 3.5%, compared with an average OECD growth rate of 3.0%. However, because the Israeli population grew by 2% in 2017, the GDP per capita growth rate was only 1.5%, compared to 2.4%, on average, in the OECD.
        • Israel is not managing to close the gap between itself and the OECD and G7 average (and the US) in terms of GDP per work hour. Israel’s GDP per work hour fell from 58% to 55.5% of the analogous US figure in 2016.
        • Israel has experienced a slowdown in total factor productivity growth since 1973 (the rate of growth had been much faster between 1961 and 1973), and even the rapid growth experienced by Israel’s high tech sector from the 1990s on has not altered the slowdown.
        • Since 2012, increasing employment has been the main source of Israel’s per capita GDP growth. Despite the fact that most of the workers joining the labor force were low-skilled workers, there was an improvement in the quality of employment due to an increase in experience and education levels. However, the working-age population is shrinking, as is the potential for future economic growth from increased employment rates.

          Prices and the cost of living

          The past few years have witnessed a sizable increase in real wages that is not attributable to improved labor productivity, but rather can be traced to a decline in consumer prices relative to the prices of all products and services produced in the economy. Nonetheless, prices in Israel remain high.

          • Since 2015, wages have risen substantially, across all income levels and population groups.
          • Expanded employment and the rise in wages were reflected in an impressive increase in households’ income and consumption. This was particularly apparent among households in the middle and lowest income quintiles (an increase of 16% and 13%, respectively, between 2012 and 2016), while among the highest income quintile there was a more moderate increase (9%).
          • In recent years, prices in Israel have increased at a significantly lower rate than in the OECD. As a result, gaps between Israel and other developed countries have been narrowing and consumer prices relative to the OECD average have declined by 5.2% since 2014.
            GDP per capita growth
          • The steepest price decrease among consumption categories was found for the communications category, with substantial price reductions for food, transportation, and recreation/ culture as well. At the same time, housing prices rose. It likely that the price decline also stems from measures taken by the government to lower the cost of living.

           

           

Going the distance: commuting patterns in Israel

In a recently published Taub Center study, Researcher Haim Bleikh explores various aspects of commuting trends in Israel and finds that most trips to work in Israel are short. Three out of every four workers of prime working age travel 20 kilometers or less to reach their workplace, and most of them travel by private car.

Distribution of workers by daily commute to work

While 62% of commuters get to work by car, only 17% commute by public transportation, 10% by bicycle or by foot, and 8% by work-organized transportation. In terms of how long the commute takes, about 60% of workers travel for no more than half an hour, while 30% travel between half an hour and an hour, and 10% travel for over an hour in each direction.

The length of commuting time can be influenced by different factors in different parts of the country.

For example, in both Jerusalem and Petah Tikva many commuters travel between half an hour and an hour, but in Jerusalem (where 91% of residents work within the city) this seems to be due to the extensive use of public transportation and large city size, while in Petah Tikva (where 44% of residents work within the city) a higher percentage of commuters travel by private car and commute distances of up to 20 kilometers, indicating that the travel time is a result of traffic congestion.

There are also differences in modes of transportation and commuting patterns between Arab and Jewish majority localities. For example, among Arab Israelis living in Arab localities the infrequent use of public transportation is notable, stemming from the lack of adequate public transportation infrastructure.

The topography of some localities creates natural constraints that impede mobility as well. Among those who use public transportation, surveys show that 82% of Jews are satisfied with the location of the nearest bus stop to their home, compared to only 63% of Arab Israelis.

Similarly, residents of Arab Israeli localities report lower levels of satisfaction with the state of the roads in their area than Arab Israelis living in localities with a Jewish majority.

Given the particularly low labor force participation of Arab Israeli women, Bleikh’s study takes a closer look at the commuting patterns within this segment of the population. The vast majority of employed Arab Israeli women (about 70%) live either in the north or in the Triangle (Hadera and the Central region) areas. Two-thirds of these women work within the area in which they live, while one-third work outside their residential area.

Of those who commute from their residential area, the commuting distance among women from the Triangle is greater than among women from the North. This seems to indicate that women in the Triangle have a higher “commuting tolerance” than women in the north.

In general, employment opportunities are more limited and less diversified in the north and big employment hubs like Haifa are a considerable distance from Arab Israeli localities. Thus, traveling just a little bit farther does not necessarily yield a big increase in employment opportunities.

For women in the Triangle, however, their relative proximity to the center of the country, where there are more employment opportunities, means that traveling farther distances is more likely to be rewarded with increased employment opportunities.

It’s important to note that the willingness of Arab Israeli women from the Triangle to commute farther distances may be due to a combination of two factors: increased employment opportunities that make a longer commute reasonable (as mentioned above) or a shortage of employment in the Triangle area, which forces many women to seek work farther from home.

So, are the challenges faced by Arab Israeli women in integrating into the labor market all about geography? The employment rates of Arab Israeli women in mixed localities are higher than in the northern and Triangle regions but lower than those among Jewish women.

This indicates that, beyond the substantial geographic barriers, there are additional obstacles that affect the employment patterns of Arab Israeli women, such as mastery of the Hebrew and English languages, unofficial discrimination by employers, a shortage of appropriate daycare solutions, and social norms.

In Israel, the National Insurance Institute publishes its annual report on poverty in December, resulting in a month in which policymakers and the media put a particular emphasis on discussing issues relating to poverty. It’s no surprise that the presence or lack of employment opportunities has an impact on individuals’ and households’ abilities to escape poverty.

Therefore, it is important to understand that the accessibility of employment opportunities largely depends on the spatial “match” between places of employment and places of residence, as well as on the transportation options and travel times required to get from one to the other.

Better understanding of Israelis’ commuting patterns provides us with a more accurate picture of how this spatial matching affects labor market participation and employment opportunities, particularly for some of Israel’s most vulnerable population groups.

 

How Much Can the Israeli Start-Up Nation Continue to Grow?

Israel is considered the “Start-Up Nation,” but the high tech sector accounts for only about 8% of total employment. Nonetheless, this sector is of great importance to the economy as the source of one-quarter of Israel’s income tax revenues and a major portion of the added value of Israeli exports.

The sector has received support and incentives from Israeli policy makers since its inception, including a recently approved comprehensive government reform to encourage further employment in the high tech sector.

Despite the fact that high tech workers in Israel earn twice as much as workers in other fields, on average, and the large tech companies have been regularly ranked among Israel’s most desirable workplaces, the share of high tech workers has remained more or less unchanged for more than a decade.

The question is, how much room is there for employment in Israel’s high tech industry to grow? Given a number of trends, it seems that efforts to expand employment in high tech are only relevant for a small percentage of the working-age population, at least in the short term.

Basic worker skills: international comparison

According to an analysis of the OECD’s Basic Skills Survey (PIAAC), Israel is characterized by a large prevalence of workers with low skills.

  • The percentage of Israeli workers whose skills are ranked at the lowest skills level in the OECD (the bottom decile) is about 16% of the adult population and only about 7% of Israeli workers rank in the highest skills level (top decile).
  • About half of the adult Arab Israeli population ranks at the bottom of the OECD skills distribution (the bottom two deciles).

These data point to the need for substantial improvements in every stage of Israel’s education system in order to improve the skills of future workers and their employment opportunities.

High tech versus the rest of the labor market

The PIAAC survey results point to stark differences between the skill levels of Israeli high tech workers and those of workers in other fields. The gap between the skills of Israeli high tech workers and the skills of employees in other sectors is almost a full standard deviation – an exceptionally large gap among the developed countries.
Skill level gap between workers in the high tech sector and non-high tech sectors

Another finding that emerges from the survey is that a large portion of the most highly-skilled workers are already working in high tech and it is difficult for others to integrate into the field.

  • Of Israeli workers ranked in the highest skills quintile, 22% are already working in the high tech sector. This is the highest percentage of all the comparison countries. Put differently, 60% of Israelis working in the high tech sector are ranked in the highest skills quintile and the probability of working in high tech declines significantly at lower skill levels.
  • Even science and engineering graduates who do not have high skill levels find it difficult to integrate into occupations relevant to their areas of study (both in Israel and in other developed countries).
  • Individuals who reported low levels of English had almost no likelihood of being employed in the high tech sector, regardless of their skill levels in other areas.
  • A high share of the Haredi and Arab Israeli populations report low levels of English proficiency, as opposed to a high level of proficiency reported among high tech employees. As a result of this, and due to low levels of general proficiency among these population groups (as measured by the survey), it seems that there is limited expected benefit from using professional training as a means of integrating them into the high tech industry (thereby narrowing gaps).
  • Most of the potential to expand high tech employment is found among non-Haredi Jews, who already comprise the majority of high tech workers.

The potential for expanding employment in Israel’s high tech sector

A simulation conducted as part of the study shows that the combination of the high share of highly skilled workers who are already employed in high tech and the low skill level of workers in the other sectors means that the potential for increasing high tech employment is low relative to that in other countries, at least in the short term.

  • The intermediate scenario of the simulation shows the high tech employment growth potential to be about 4% of the working-age population. Among Haredim, this figure is 3% and, among Arab Israelis, only about half a percent.
  • The percentage of workers who may expect to substantially improve their employment status by retraining for high tech (a subset of those with the appropriate skills) is small and stands at only about 1% of the working-age population.
  • There is a notable shortage of women in high tech, and it seems highly likely that a majority of the potential for employment expansion comes from within this group.

Beyond the question of the extent to which it is possible to grow the high tech sector, there is also room to examine whether this is a worthwhile pursuit.

Due to the large skills gap between high tech and other sectors, it is unlikely that expanding employment in high tech would lead to the spread of advanced knowledge and innovative work methods to other fields to a significant degree. It is also possible that expanding employment in high tech may slow development in other areas of the economy, where the employment profile is more varied.

The availability of cheap labor makes it less feasible that employers will streamline processes and adopt advanced technologies, and is likely one of the causes of low levels of investment and low productivity in non-high tech industries.

Therefore, increasing investment and technology adoption in these industries as well as raising the skill levels of the workers employed in them, through appropriate professional training and by improving the education system (in order to improve the skills of the next generation), may be preferable to efforts to recruit additional highly-skilled workers to move into the high tech field.

Can the Israeli Start-Up Nation Continue to Grow?

Embargo until Wednesday, December 12, 6:00am

To download the full publication in Hebrew, click here 

This study will be published in the coming weeks (alongside other new studies) as part of the Taub Center’s State of the Nation Report 2018.

Israel is considered the “Start-Up Nation,” but the high-tech sector accounts for only about 8% of total employment. Nonetheless, this sector is of great importance to the economy as the source of one-quarter of Israel’s income tax payments, and a comprehensive reform was recently approved to encourage further employment in this sector.

A new study conducted by Taub Center Researcher Gilad Brand assesses the potential to expand employment in high-tech through an examination of the OECD Survey of Adult Skills (PIAAC).

The study shows that the potential for increasing high-tech employment within Israel’s adult population is low, at least in the short term. This is because Israel’s share of high-tech workers is already high relative to other countries, and workers outside this industry, especially Arab Israelis and Haredim, are characterized by very low skill levels.

As a result, the gap in Israel between the skills of workers in high-tech and workers in the rest of the economy is the largest gap out of all the countries analyzed in the study. Furthermore, it seems that most Israelis who are capable of working in high-tech are already employed in the industry.

In light of the findings, Brand says: “Policy makers may have to find alternative sources for future economic growth.”

From its inception, Israel’s high-tech sector has gained world renown and has received support and incentives from Israeli policy makers. In fact, in January 2017 a government reform was approved to encourage employment in high-tech, in an attempt to increase the number of Israelis benefiting from the field’s advantageous employment conditions.

Against this backdrop, Taub Center Researcher Gilad Brand analyzes the OECD’s Survey of Adult Skills (PIAAC) and assesses the potential for enlarging the scope of Israel’s high-tech employment. The survey evaluates skill levels in literacy, numeracy, and problem solving in technology-rich environments among those ages 16-65.

The study’s findings show that, despite the success of the high-tech sector, the field does not appear to have much room left to grow due to the mismatch between the skills of most workers in the economy and the skills needed in the high-tech industry. The average skill level among workers in Israel is lower than the OECD average, especially among Haredi and Arab Israeli workers, whose skill levels are particularly low.

In contrast, the skills of Israel’s high-tech workers are quite similar to those of their counterparts in other countries. The gap between the skill level of Israeli high-tech workers and workers in other sectors is among the largest in the OECD.

High-tech employment: those capable of working in the industry are already doing so

High-tech workers in Israel earn twice as much as workers in other fields, on average, and the large tech companies have been regularly ranked among Israel’s most desirable workplaces. If so, why has the share of high-tech workers remained unchanged for more than a decade?

The study finds that workers with high cognitive abilities, as reflected in the PIAAC survey results, are already integrated into the high-tech industry at high rates, and that the gap between the skills of Israeli high-tech workers and the skills of employees in other sectors is almost a full standard deviation – an exceptionally large gap relative to other countries.

skill level gap between workers

The Taub Center study also finds that 22% of the most skilled workers (highest skill quintile on the PIAAC survey) are already employed in high-tech – a much higher share than in all other comparison countries. On the other hand, the probability of working in the high-tech sector among workers who are not in the top quintile of skills is relatively low.

Brand finds that even science and engineering graduates who do not have high skill levels find it difficult to integrate into occupations relevant to their areas of study (both in Israel and other developed countries). From this we may conclude that offering high-tech retraining to workers whose skill levels are not high is of little value.

top quintile in the PIAAC survey

Mastery of the English language is another important skill needed to work in high-tech, and there is little chance of someone not proficient in English being employed in this industry.

The Taub Center study finds that the language barrier is especially significant for the Arab Israeli and Haredi populations, who are under-represented in high-tech (less than 5% of workers): about 44% of Haredim and 40% of Arab Israelis ages 25-44 reported that they were not proficient in English, compared to 20% and 40% (respectively) who reported that their English was good.

According to Brand: “the data show that improving English instruction in these population groups’ educational institutions is a necessary step toward making the high-tech sector accessible to them.”

Is it possible to expand employment in the high-tech sector in Israel?

As stated, the skills of most workers in the Israeli economy are lower than what is required to work in high-tech. Brand therefore conducts a simulation to examine the employment potential among highly skilled workers who are not currently employed in the industry.

The simulation includes a comparison between the skill levels required for employment in high-tech in OECD countries and the skills of Israeli workers ages 25-44 (among whom career retraining is more feasible). The comparison reveals that the percentage of workers who could potentially integrate into the high-tech sector stands at only about 4% of the working-age population not currently employed in the industry.

Among Haredim, this figure is 3% and, among Arab Israelis, only about half a percent. However, most of the workers in this “potential” group (68%) are already employed in high-paying jobs, and only a small portion (32%) may be expected to substantially improve their employment status by retraining and moving into high-tech – that is, when the motivation to retrain is taken into account, the potential for expanding employment in the high-tech sector is only about 1%.

In addition to the very limited ability to expand employment in high-tech, the study finds that there is a need to reexamine the value of investing in this industry in particular. At first glance, the expansion of high-tech should have a positive effect on the rest of the economy (through, for example, the spread of innovative work methods to other fields).

However, due to differences in required skills, only limited worker migration between high-tech and other industries can be expected, calling into question the extent to which high-tech can have a positive impact on the rest of the economy.

Israeli workers are less skilled than workers in other countries, but the situation is improving

 

Data from the Taub Center’s research show that Israel is characterized by a large presence of low-skilled workers, which results in low earning ability. The share of Israeli workers whose skills are ranked at the lowest level in the OECD (bottom decile) stands at about 16% of the adult population, and only about 7% of Israeli workers are ranked in the highest skill level (top decile).

Within the Arab Israeli population, the picture is particularly worrying: about half of the adult Arab Israeli population can be found at the bottom of the OECD’s skills ranking (the two lowest deciles).

On a positive note, the data indicate an upward trend in the non-Haredi Jewish population’s skill level, and an even more substantial improvement in the skills of the Arab Israeli population; within these populations, the younger age groups outperform the older ones on the PIAAC survey (compared with parallel age groups in OECD countries). Therefore, the potential for increasing the share of those employed in high-wage employment sectors, such as high-tech, will grow over time.

“A large portion of the workers in Israel have low skill levels and therefore have low earning ability. The availability of cheap labor detracts from employers’ willingness to adopt advanced technologies and holds back the economy’s growth potential,” says Brand.

“Focusing on improving the skills of low-skilled workers may yield a higher return than the investment needed to move higher-skilled workers, of which there are not many, into the high-tech industry.”

Prof. Avi Weiss, President of the Taub Center, adds that “the data consistently show high levels of inequality in Israel, which stem from large differences between the abilities of graduates from various streams of Israel’s education system. Therefore, providing incentives to retrain and move workers into the high-tech industry is not in and of itself an adequate response.”

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.  

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749. 

Edward Glaeser

Edward Glaeser is the Fred and Eleanor Glimp Professor of Economics in the Faculty of Arts and Sciences at Harvard University, where he has taught since 1992. He regularly teaches microeconomics theory, and occasionally urban and public economics. He has served as Director of the Taubman Center for State and Local Government, and Director of the Rappaport Institute for Greater Boston.

 

He has published dozens of papers on cities’ economic growth, law, and economics. In particular, his work has focused on the determinants of city growth and the role of cities as centers of idea transmission. He received his PhD from the University of Chicago in 1992.

 

Prof. Glaeser’s books include Cities, Agglomeration, and Spatial Equilibrium (Oxford University Press, 2008), Rethinking Federal Housing Policy (American Enterprise Institute Press, 2008), and Triumph of the City (Penguin Press, 2011).

Mynd the Gaps

Despite being called the “Start-Up Nation”, only about 8% of working Israelis are employed in high tech. While this is the highest percentage in any country, it still means that more than 9 out of 10 working Israelis aren’t part of this world at all.
heb1Furthermore, some groups have an easier time integrating into the field than others: according to the Chief Economist in Israel’s Ministry of Finance, Israeli Jews with degrees in high-tech-related subjects are 1.3 times more likely to end up working in high tech than Arab Israelis with similar degrees.

In the first episode of the Taub Center’s new podcast, DataPoint, we focus on a unique story in the world of high tech: the story of a young Arab Israeli entrepreneur who co-founded a start-up in Tel Aviv. The episode, which is called “Aziz Goes to Tel Aviv,” tells the story of Aziz Kaddan and his company Myndlift.

The Center’s podcast zooms in from Israel’s bigger socioeconomic trends, like developments in high tech, and focuses on individual stories. In doing so we ask the question: who are the people – the millions of data points – who stand behind the numbers?

Aziz, who grew up in the town of Baqa al-Gharbiyye, attended an accelerated program, called Etgar, that allowed him to start working towards a computer science degree while still in high school. Inspired and encouraged by his family from a young age, Aziz co-founded Myndlift at age 21. The company produces technology that helps treat ADHD without medication.

In the episode, Aziz discusses some of the difficulties of being an Arab Israeli entrepreneur, both personally and on a larger scale. He found that he initially had difficulty raising money from Israeli investors, but that this changed over time.

As he says in his own words “I was 21 back in the day, obviously no elite intelligence unit…and hardly anything in common with that investor. So they would look at it as if I’m a guy with a broken leg trying to run a marathon.”

However, once he passed the milestone of showing that his product was making money, Israeli investors “know that you had to pass so many hurdles to get there and definitely it’s a more difficult path for you as an Arab…so they appreciate it more and they jump even more at the opportunity.”

More broadly, Aziz talks about the challenges that arise for the Arab Israeli population because of the geographic concentration of this population group and that of the high tech industry.

While most of the Arab Israeli population is concentrated in the northern part of the country, most of the tech scene is happening in the center. Aziz notes that many Arab Israelis marry and have children early, making the travel from the periphery to the center of the country an even greater logistical burden.

Furthermore, many Arab Israeli entrepreneurs face challenges in networking and connecting with investors. Aziz argues that, in order to encourage Arab Israeli entrepreneurship and improve communication skills for pitching to investors, there is a need to improve English language studies in Arab schools.

During the Taub Center’s recent Herbert M. Singer Annual International Policy Conference on “Envisioning the Future of Israel’s Labor Market,” there was much discussion about issues relating to Israel as the start-up nation, the geographic concentration of job opportunities and workers, and workforce diversity – issues that are all reflected in Aziz’s story.

The Taub Center’s Herbert M. Singer Annual International Policy Conference

The Taub Center’s Herbert M. Singer Annual International Policy Conference

Panelists participating in the conference discussed how much room there is for the high tech sector in Israel to grow in terms of available human capital, labor market differences between the country’s geographic center and periphery, and the challenges faced by particular population groups in Israel in integrating into the workforce.

With the conference’s specific focus on the future, much of the discussion was around what actions can be taken now and in the coming years to prepare for Israel’s future labor market.

For his part, Aziz says he tries to give 15%-20% of his time to mentoring other Arab Israeli entrepreneurs, and hopes, in the future, to encourage Arab Israeli entrepreneurship by investing in companies himself.

Even though he and his co-founder made a very intentional decision to place the current Myndlift office in Tel Aviv, Aziz has a dream to open a satellite office of Myndlift in Baqa al-Gharbiyye, the town where he grew up. He wants to do this for a number of reasons, including that “it will make it much easier for engineers from the Arab community to come and work at a workplace that is close to home.”

Aziz Kaddan in the Myndlift office

Aziz Kaddan in the Myndlift office

In the meantime, however, Aziz says that despite the support he and his company receive from the Arab Israeli community, he doesn’t yet see himself as a role model. He appreciates this support, but also says that it creates even more pressure on him to succeed: “The hopes I raise in the community are the ones I don’t want to shatter,” he says. “I want these hopes to keep getting higher.”

 

Thank you to the Herbert M. and Nell Singer Foundation for making this episode possible! For more information about sponsoring future episodes, contact michalp@taubcenter.org.il.

Martha Freedman

Martha Freedman is involved in a variety of philanthropic endeavors with a primary focus on humanitarian, educational, and youth empowerment goals. She currently serves on the Board of Directors of the JDC, the American Friends of Hand-in-Hand: Center for Jewish – Arab Education in Israel, Holocaust Museum Houston, and the American Jewish Committee.

In addition, she served for many years on the Boards of the Emery/Weiner School and Amigos de las Americas.

She is a retired attorney, having specialized in Immigration and Nationality Law in Houston, Texas.  She began her career at the New York Legal Aid Society in the Juvenile Rights Division.

Martha has a B.A. from New York University and a J. D. from the University of Houston Law Center. She and her husband, Donald, have four adult children.

What’s behind Israel’s pension gender gap?

In recent years there has been much public discussion about a variety of issues relating to pensions in Israel, including concern about the performance of pension funds and the implications of an aging population on the pension system.

In particular, women’s retirement age is one of the most contentious topics on Israel’s socioeconomic agenda. Israel is one of only nine OECD countries that has a gap between the retirement age of men (67) and women (62) and recent attempts to increase the retirement age for women have thus far been unsuccessful.

Those in favor of raising women’s retirement age cite it as a central factor contributing to the gender gap in pension income during retirement. On the other hand, some argue that raising the retirement age will harm women of low socioeconomic status who would find it difficult to continue working until a later age.

In a new Taub Center study, Researchers Liora Bowers and Hadas Fuchs analyze pensions from a gender perspective. In Israel, pension income comes primarily from two sources: old-age allowances (provided by the National Insurance Institute) and private occupational pensions (mandatory since 2008).

To get a sense of the full picture, the study analyzes both the gaps arising from differences between men and women in the labor market and the gaps arising from the pension system itself. The study aims to assess what factors impact the pension gender gap and what pension income gaps between men and women will look like in the future.

While limitations in data availability make it difficult to measure the pension gender gap among today’s retirees in Israel, data for 640,000 people who held a pension fund with Menorah Mivtachim (the largest new pension fund in Israel) in 2017 indicate that there is indeed a gender gap in private pension savings and this gap increases with age. The most significant gap was found among those aged 45-54: men in this age group have 28% higher occupational pension savings than women.

When looking across population groups, the study finds generational differences in the gender gap among Arab Israelis (likely due to an increase in employment and higher education rates among young Arab Israeli women) and higher pension balances among Haredi women than Haredi men (due to the fact that Haredi women are employed at higher rates than Haredi men).

What factors affect the pension gender gap?

eng1 for newsletter

In addition, while women accrue pension entitlements during paid maternity leave (15 weeks), they do not accrue entitlements if they choose to extend into unpaid leave, as many do, or during other career breaks for childcare.

These factors affect differences in the extent of savings men and women have in their occupational pension funds. In addition, there are gender differences in how the sum of the allowance is calculated. Israel is among only four OECD countries that take gender into account when calculating the monthly sum to be paid to each insured individual in the fund, a practice that is not legal in many other countries.

Since the life expectancy of women is higher, pension companies divide the total savings into a higher number of payments – thus, unmarried women receive a lower sum each month during retirement than unmarried men. (It is important to note that, among married couples, the coefficient is also influenced by the calculation of survivor’s pension benefits should one’s spouse pass away. Due to the fact that a woman is more likely in practice to benefit from a survivor’s pension than is her husband, the coefficients used for married men and women are fairly similar.)

Women’s lower retirement age – the factor that has received the most public attention in Israel – actually affects the pension gender gap in both directions. On the one hand, the difference in working years due to the gap in retirement age reduces women’s occupational pension savings.

On the other hand, because of the differences in retirement age, women may take advantage of the ability to defer the old-age allowance provided by the National Insurance Institute (NII) until the age of 70 (the absolute retirement age), thereby increasing the value of the benefit. The NII provides an additional 5% for every year of delay so that women who choose to retire at age 70 receive a 25% higher social security benefit from the NII than men who retire at the same age.

Looking forward, the researchers use a simulation to estimate future pension gender gaps in Israel. They find that, among married individuals who retire at the age of 67, a man will receive about NIS 2,000 more a month from a pension (occupational and old-age allowance) than a woman: NIS 15,300 compared to NIS 13,300, on average. Among single individuals, the gender gap is expected to be even larger in favor of men: about NIS 3,000.

The researchers conclude that gender shapes retirement policies in a uniquely profound way in Israel that has a large effect on pension gaps between men and women. In looking to the future they draw attention both to structural issues within the pension system and to the connection between current labor market trends and future post-retirement income.

The Hadassah Foundation has provided generous support for the creation and implementation of this project.

Back and Forth: Commuting for Work in Israel

Executive Summary

The subject of commuting has attracted more and more public attention in Israel in recent years as road congestion levels continue to rise with the increasing number of commuters. Over the last 30 years, the number of employed persons working outside their residential area has risen from 42% to 54% (as of 2016) among Israelis of working age (25-64). The main mode of commuting is by private car and the number of rides has grown faster than road expansion – creating the traffic jams that have become all too familiar.

Commuting distance, time, and mode of transportation

Most trips to work are short. Three out of every four workers aged 25-64 travel 20 kilometers or less to reach their workplace, mostly in private vehicles (for 2014-2016). About 60% of workers travel for no more than half an hour, 30% between half an hour and an hour, and about 10% travel for over an hour in each direction. Regarding the choice in mode of transportation – 62% commute to work by car (including shared rides) and only 17% commute by public transportation. 10% commute by bicycle or by foot and 8% commute by work-organized transportation.

There are large differences in commuting patterns in different parts of the country. For example, in both Jerusalem and Petah Tikva many commuters travel between half an hour and an hour, but in Jerusalem (where 91% of residents work within the city) this seems to be due to the extensive use of public transportation and large city size while, in Petah Tikva, a higher percentage use a private vehicle and commute distances of up to 20 kilometers, indicating that the travel time is a result of traffic congestion. In contrast, Tel Aviv has a high rate (68%) of workers with short commute times, and the city is also characterized by a high percentage of commuting by foot or bicycle.

Distribution of workers by length of commute ENG

The choice among modes of transportation for commuting is influenced by various economic, social, and geographic factors. Among Arab Israelis living in Arab localities, the infrequent use of public transportation is notable, stemming from a low supply due to the lack of adequate public transportation infrastructure. The topography of some localities creates natural constraints that impede mobility as well. This is evident from responses on satisfaction surveys. A high percentage of residents of Arab Israeli localities reported low levels of satisfaction with the state of the roads in their area while Arab Israelis living in localities with a Jewish majority and Jewish residents outside of Jerusalem reported higher levels of satisfaction. Among those who use public transportation, 82% of Jews are satisfied with the location of the nearest bus stop to their home, compared to only 63% of Arab Israelis.

Resident satisfaction with roads ENG

Among both Jews and Arab Israelis, a large proportion of workers in the manufacturing industry commute by work-organized transportation, a mode of transportation also commonly used by Arab Israeli men in the construction industry.

Within the Jewish population, there is widespread use of public transportation among Haredim (ultra-Orthodox) and new immigrants – especially women – in both large and small localities.

Commuting, migration and housing

Commuting should allow workers to live in the right place for them at the right price and to work in a place that suits them. The academic literature on commuting suggests the existence of a trade-off between the journey to work and housing prices; that is, the inconvenience for households living farther from employment hubs should be “compensated” by lower housing prices.

In an analysis of the commuting distances and housing prices among the Jewish localities in the “Gedera-Hadera” area (the Central region of Israel), the data show that those living in localities closer to central employment areas do indeed pay on average a higher price for housing, while workers who are forced to travel longer distances receive “compensation” in the form of cheaper housing prices.

Distance to workplace and housing prices ENG

The relatively short distances between localities in the Gedera-Hadera area may encourage choosing longer commutes over moving between residential areas.

More generally, residents tend to prefer to remain in the living environment familiar to them. The internal migration rate between localities and within them in Israel stands at about 7% of the total population in recent years, and about 60% of changes in address were recorded within the same locality.

In terms of moving across regions, the data seem to reflect the limited ability of low housing prices in the periphery to attract residents away from the Central region, where there are a number of socioeconomic advantages (e.g., proximity to employment, cultural centers, and leisure areas).

Arab Israeli women: geography, commuting and employment

While the employment rate of Arab Israeli women has risen in recent years, further increasing their labor force participation rate is an important challenge facing policymakers.

Over 70% of employed Arab Israeli women live either in the North or the Triangle (Hadera and the Central region) areas. About a third of the employed women from these regions work outside their residential area.

Of those who commute from their residential area, women in the Triangle area are more likely to commute to Jewish localities for work than women in the North. Also, the commuting distance among women from the Triangle is greater than among women from the North. In general, the North is characterized by more limited and less diversified employment opportunities and big employment hubs like Haifa are a considerable distance from Arab Israeli localities. However, for women from the Triangle, their relative geographic proximity to the Center of the country, characterized by more employment opportunities, increases their “commuting tolerance.” Their willingness to travel farther distances may be due to a combination of two push and pull factors: a long commute that is still considered reasonable due to increased employment opportunities, or a shortage of employment in the Triangle area, which forces many women to seek work farther from home.

Employment rates of Arab Israeli women in mixed localities (66%) are higher than in the Northern and Triangle regions (about 33%) but lower than those among Jewish women, indicating that, beyond the substantial geographic barriers, there are additional obstacles that affect the employment patterns of Arab Israeli women, such as mastery of Hebrew and English and social norms.

 

Back and Forth: Commuting for Work in Israel

For the full research click here

The phenomenon of ­­commuting – workers traveling daily from their residential area to another locality for work – is a topic of much discussion in Israel, mostly because of increasing road congestion and issues surrounding investments in infrastructure development and public transportation.

A new study by Taub Center researcher Haim Bleikh examines the characteristics of commuting in Israel, the various factors that influence choices about mode of transportation, and the impact that residential area and transportation infrastructure have on different population groups.

The study shows that most workers engage in short distance commuting and prefer to travel by private car rather than public transportation, but spend a relatively long time in transit. Regarding the commuting patterns of Arab Israeli women, the data show additional evidence of geographic barriers that may inhibit their entrance into the labor market.

Over the last 30 years, the number of employed persons working outside their residential area has risen from 42% to 54% among Israelis of working age (as of 2016). The expansion of commuting is characterized by an increase in the use of private cars, which is the main mode of transportation among commuters.

This expansion is the central cause of the strain on Israel’s road infrastructure; the number of rides has grown faster than road expansion – creating the traffic jams that have become all too familiar.

Alongside a large increase in the number of workers commuting by private car, there has been a notable change in the modes of public transportation use: specifically, alongside a sharp decrease in the number of commuters riding the bus, there has been an increase in the number of train passengers in response to investments in this area.
Modes of transportation to the workplace

How far do Israelis travel and how long does it take?

 

The study shows that most trips to work are short. Three out of every four workers aged 25-64 travel 20 kilometers or less to reach their workplace, mostly in private vehicles (for 2014-2016). About 60% of workers travel for no more than half an hour, 30% between half an hour and an hour, and about 10% travel for over an hour in each direction.

Regarding the choice in mode of transportation – 62% commute to work by car (including shared rides) and only 17% commute by public transportation. 10% commute by bicycle or by foot and 8% commute by work-organized transportation.

There are large differences in commuting patterns in different parts of the country. These reflect differences between the spatial distribution of suitable places of employment and residential patterns, the personal preferences of residents, and the availability of transportation options (resulting from national and regional decisions related to infrastructure development and public transportation).

Thus, even though 91% of Jerusalem residents work in the city, 33% commute between half an hour and an hour in each direction, apparently due to the large size of the city and the extensive use of public transportation (which stems from the socioeconomic characteristics of the population as well). Similarly, many commuters in Petah Tikva travel between half an hour and an hour, but a much higher percentage of them use a private vehicle and commute a distance of 20 kilometers or less, meaning that the duration of the journey is the result of traffic congestion.

In stark contrast, Tel Aviv has a high rate (68%) of commuters with short commute times, who mostly travel by foot or bicycle. Among other things, this is a result of municipal encouragement of the use of bicycles.

Distribution of workers by lenght of daily commute to work

Factors influencing decisions about mode of transportation for commuting: residential area, gender and sector

 

The choice among modes of transportation for commuting is influenced by various economic, social, and geographic factors. From Bleikh’s analysis it emerges that there are differences in commuting patterns between Jews and Arab Israelis that are affected by their places of residence.

Among Arab Israelis living in Arab localities, the infrequent use of public transportation is notable, stemming from a low supply due to the lack of adequate public transportation infrastructure. On the other hand, among Arab Israeli workers there is much more extensive use of work-organized transportation.

In general, transportation infrastructure in Arab Israeli localities is inferior to that in Jewish localities, a fact that is evident from responses on satisfaction surveys. Arab Israelis living in localities with a Jewish majority are more satisfied with the state of the roads than residents of Arab Israeli localities, and, among those who use public transportation, 82% of Jews are satisfied with the location of the nearest bus stop to their home, compared to only 63% of Arab Israelis.

In addition, gender differences were found in the mode of transportation chosen by commuters. Men are more likely than women to use a private vehicle, since, on average, they work farther from home and are more likely to have a driver’s license. Women use public transportation more – especially in large cities, where employment opportunities are varied.

Among both Jews and Arab Israelis, a large proportion of workers in the manufacturing industry – mainly men – commute by work-organized transportation. Among the reasons for this are the prevalence of shift work in the manufacturing industry and the isolated location of workplaces. Work-organized transportation is also commonly used by Arab Israeli men in the construction industry.

Sector affiliation is also related to commuting patterns. Within the Jewish population, there is widespread use of public transportation among Haredim (ultra-Orthodox) and new immigrants – especially women – in both large and small localities. This seems to be related to the socioeconomic characteristics of these population groups. For the Haredi population, the data also reflects policy that takes into account the particular needs of this group – such as the high frequency of certain bus lines.

Want to travel less? You’ll pay more

 

Israelis’ decisions about where to live and work stem from a variety of factors, including regional differences in housing prices and the location of employment hubs. In this new Taub Center study, Bleikh examines the relationship between commuting and housing prices in the Central region of the country (Gedera to Hadera).

The analysis shows that workers who live closer to employment hubs pay more on average for housing, and those who commute from farther away enjoy cheaper housing prices.

It is quite possible that many workers prefer commuting to relocating their place of residence. In general, the internal migration rate between localities and within them stands at about 7% of the total population in recent years, and it seems that among those who move there is a preference to remain close to their previous place of residence: about 60% of changes in address were recorded within the same locality.

In the Gedera-Hadera area, the relatively short distances between localities, as well as the proximity to the Tel Aviv area and to major cities such as Rehovot and Herzliya, may encourage choosing longer commutes over moving between residential areas.

In general, the population density in the Gedera-Hadera area has socioeconomic advantages and, accordingly, net migration to this region was positive. The data may reflect the limited ability of low housing prices in the periphery to attract residents.

Geography: how do commuting options affect the employment of Arab Israeli women?

 

The employment rate of Arab Israeli women has risen in recent years, but the question of how to further encourage this trend presents an important challenge for policymakers. The Taub Center study examines the effect of commuting patterns and places of residence on this issue. The analysis focuses on the North and Triangle (Hadera and the Central region) areas, where 70% of employed Arab Israeli women live.

The data show that about a third of employed women work outside their residential area. Of those who work outside their residential area, women in the Triangle area are more likely to commute to Jewish localities for work. In the North, about half of employed women who commute work in Arab Israeli localities and about half in Jewish localities.

Bleikh also finds that the commuting distance among Arab Israeli women from the Triangle is greater than among Arab Israeli women from the North. The reason for this is that in the North employment opportunities open to Arab Israeli women at a reasonable distance (such as in Afula and Carmiel) are limited, and it isn’t always possible for them to travel a farther distance (to Haifa, for example).

Therefore, despite the distance between the Triangle and localities in the Center of the country, women from the Triangle area are willing to travel farther and to spend more time commuting either to expand their employment opportunities or because of the employment shortage in their residential areas.

The employment rates of Arab Israeli women aged 25-64 from the Northern and Triangle regions are similar to each other (about 33%). The low employment rate in these regions, as well as the fact that a high percentage of Arab Israeli women in the Northern district do not seek employment because they claim there are no employment opportunities in their region, indicate that the geographical aspect might be particularly important in determining employment rates for this population.

Therefore, to raise the employment rates of Arab Israeli women in general, and of those in the North in particular, incentives for the manufacturing industry to develop new employment hubs close to Arab Israeli communities should be considered, as well as improving transportation in these areas.

Employment rates in mixed localities (66%) are higher than in the Northern and Triangle regions but lower than those among the Jewish population, indicating that there are additional non-geographical barriers and factors that affect the employment patters of Arab Israeli women, such as mastery of Hebrew and English and social norms.

“Commuting should benefit workers because it allows them to live in the right place for them at the right price and to work in a place that suits them,” says Bleikh, “but most commutes to work are over short distances and in private cars. This has created an infrastructure overload, and the overload will only become greater as the population grows, especially if the population continues to converge in the already-crowded Central region of the country.”

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

 

 

 

 

Gil Epstein

Gil S. Epstein is a Professor of Economics at the Department of Economics at Bar-Ilan University, Israel.

 

After completing his doctorate in Economics and Statistics from the Hebrew University of Jerusalem Gil did his post doctorate  at the University of Pennsylvania.

 

Gil is currently an Associate Editor of the Journal of Population Economics and is an Associate Editor for Economics. In addition, he is a Research Fellow at IZA (Institute for the Study of Labor, Bonn), CReAM (Centre for Research and Analysis of Migration, London), GLO (Global Labor Organization, Germany) and Ld’A (Centro Studi Luca d’Agliano, Milano).

 

Gil’s research interest are in Labor Economics, Migration, Public Economics, Public Choice and Public Policy.

Today’s Workers, Tomorrow’s Retirees Understanding the Pension Gender Gap in Israel

Executive Summary

In recent years there has been much public discussion about a variety of issues relating to pensions in Israel, including concern about the performance of pension funds and the implications of an aging population on the pension system.  

In Israel, pension income comes primarily from two sources: old-age allowances (provided by the National Insurance Institute to retirees and elderly living in poverty) and occupational pensions (mandatory since 2008). The differences between men and women for each of these pillars are expected to dictate the degree of future gaps in pension income. 

Pension savings by gender 

Data for 640,000 people who held a pension fund with Menorah Mivtachim (the largest new pension fund in Israel) in 2017 indicate that there is indeed a gender gap in private pension savings and this gap increases with age. The most significant gap was found among those aged 45-54: men in this age group have 28% higher occupational pension savings than women.

Pension gap by age group ENG

Among older age groups (44 and older) the average pension gender gaps are higher among Arab Israelis than the rest of the population, but for those aged 44 and under, the expected gaps are similar. This seems to reflect an intergenerational shift – younger Arab Israeli women are employed at higher rates and therefore their pension contributions are expected to be higher than those of the previous generation.  

The private pension savings of Haredi women in the 25-34 age group is 26% higher than that of Haredi men, reflecting the higher employment rates of women in this population group. 

What affects the gender pension gap? 

A comprehensive index that measures the expected future pension gender gaps in European countries provides a framework for comparing the situation in Israel to that in Europe. 

Employment data: The employment rate of women in Israel is relatively high: about 66% among women of working age and policies encourage women’s employment; for example, women receive higher tax credits than men. Since private pension funds play a very important role in post-retirement income, the higher magnitude of employed women reduces gender disparities relative to the world. 

However, other data widen the gap; the hourly wage gap between men and women in Israel falls in the middle of the OECD ranking (standing at about 19% as of 2016), and there is a relatively high gap (16%) between the number of weekly working hours for women (about 37 hours) and for men (about 44 hours). 

Continuity of employment: Paid maternity leave in Israel (15 weeks) is considered an insured period for the purposes of calculating the accrual of pension entitlements, but if a woman chooses to extend into unpaid leave, as many do, this period is not insured. In Israel, the protection of pensions during periods of childcare is relatively limited compared to countries in the OECD, most of which have policies for reducing these gaps. 

Retirement age: Israel is among the nine OECD countries that have retirement age gaps between men and women, and one of only three that are expected to maintain this gap through 2060. The conditional retirement age for men in Israel (67) is the highest in the OECD, while for women it is 62, though many women continue to work after this age. The difference in working years due to the gap in retirement age contributes greatly to reducing women’s pension income relative to men’s.  

Government allowances: Allowances actually provide an advantage for women. While a man and a woman who paid NII contributions for at least 35 years and retire at the official retirement age will receive an identical monthly allowance from the NII, employees can opt to defer the allowance until the age of 70 (the absolute retirement age) and receive an additional 5% for every year of delay. Because of the gap in the conditional retirement age, a woman who chooses to retire at age 70 will receive 22% more than a man who does the same.  

Pension payment coefficient: Israel is among only four OECD countries that take into account gender when calculating the monthly sum to be paid to each insured individual in the fund, a practice that is not legal in many other countries. Since the life expectancy of women is higher, pension companies divide the total savings into a higher number of payments – thus, unmarried women receive a lower sum each month than unmarried men. (It is important to note that, among married couples, the coefficient is also influenced by the calculation of survivor’s pension benefits should one’s spouse pass away. Due to the fact that a woman is more likely in practice to benefit from a survivor’s pension than is her husband, the coefficients used for married men and women are fairly similar.) 

The future pension gender gap 

A simulation to estimate future pension gender gaps finds that, among married individuals who retire at the age of 67, a man will receive about NIS 2,000 more a month from a pension (occupational and old-age allowance) than a woman: NIS 15,300 compared to NIS 13,300, on average. Among single individuals, the gender gap is even larger in favor of men: about NIS 3,000. 

Monthly pension income gaps ENG

The simulation also shows that retirement age has a significant impact on pensions: a woman who retires at age 62 will receive about NIS 3,800 less per month than one who retires at age 67, both because of lower total accrual in her pension fund and because she will not receive additional funds for postponing the old-age allowance. 

In general, it seems that gender plays a more prominent role in retirement policies in Israel than in other OECD countries. A 5-year retirement age gap, the pension payment coefficient, and the lack of pension accrual during breaks in employment for childcare are just a few examples of how gender shapes retirement policies in a uniquely profound way in Israel that has a large effect on pension gaps between men and women. 

The Hadassah Foundation has provided generous support for the creation and implementation of this project.  

 

From employment to retirement: the pension gender gap in Israel

The Hadassah Foundation has provided generous support for the creation and implementation of this study.

For the full publication in Hebrew click here

In recent years there has been much public discussion about a variety of issues relating to pensions in Israel, including concern about the performance of pension funds and the implications of an aging population on the pension system.

A new Taub Center study by Liora Bowers and Hadas Fuchs analyzes pensions from a gender perspective and examines both the labor market and the pension system to assess what pension income gaps between men and women will look like in the future.

Main findings:

  • Women’s monthly income from occupational pensions is lower than that of men, on average, due to the fact that women earn lower salaries on average, go on maternity leave, and tend to retire earlier from the labor market.
  • Retirement age has a notable impact on pension income – postponing the retirement age from 62 to 67 increases income from occupational pensions by 45% and from old-age allowances by 25%.
  • Simulation estimates show that even if women delay retirement until age 67, the gender gap in income from private pensions would still be at least 20% among married individuals and 27% among single individuals. Old-age allowances, however, narrow these gaps: when they are taken into account in the simulation, the gaps are reduced to 13% and 20%, respectively.
  • The estimated future gap in pension income between men and women places Israel roughly in the middle of the ranking of European countries.

Pension savings by gender: Men save more – with the exception of Haredim

 

To estimate the expected pension income for men and women, Bowers and Fuchs examine the various pillars of the pension system in Israel. The system is comprised of three pillars:

  1. Allowances: The National Insurance Institute (NII) grants an old-age allowance to every individual over the age of 70 (the absolute retirement age), and at an earlier age for employees who retire at the conditional retirement age (62 for women and 67 for men) or for low-income earners. The elderly living in poverty also receive some income support – one in five senior citizens is eligible for this benefit.
  2. Private occupational pensions: In 2008, Israel implemented mandatory pension coverage and from that time every employee has been obligated to deposit part of their income in a pension fund (as are their employers). The monthly pension payment received during retirement is determined by the sum of money accumulated in the fund.
  3. Voluntary contributions.

The differences between men and women for each of these pillars are expected to dictate the degree of future gaps in pension income.

Current data from government institutions do not allow us to estimate gender gaps in pension savings today because these data are provided at the household level and do not include distinctions by gender for married couples.

Therefore, the Taub Center study is based on alternative methods of estimation. One of them uses data for 640,000 people who held a pension fund with Menorah Mivtachim (the largest new pension fund in Israel) in 2017. These data do not provide a complete picture of pension gender gaps because they only include individuals insured by the new pension funds, but they provide a rough estimation.

The data indicate that there is indeed a gender gap in private pension savings and this gap increases with age. The most significant gap was found among those aged 45-54: men in this age group have 28% higher occupational pension savings than women.

The study also compares three population groups – Arab Israelis, Haredim, and the remainder of the population – in light of the differences in employment rates and incomes between these groups.

The study finds that in the older age groups (44 and older) the average pension gender gaps are higher among Arab Israelis, but for those aged 44 and under, the expected gaps for this sector are similar to those in the rest of the population.

The smaller gap at younger ages seems to reflect an intergenerational change – for the younger generation, the employment of Arab Israeli women has increased considerably, and, therefore, their pension contributions are expected to be much higher than those of the previous generation.

The private pension savings of Haredi women in the 25-34 age group is 26% higher than that of Haredi men, reflecting the higher employment rates of women in this population group.

Fig 1 EN

What affects women’s pensions? Work hours, childcare, and the Consumer Price Index

 

The Taub Center study by Bowers and Fuchs also uses a comprehensive index that measures the expected future pension gender gaps in European countries to compare the situation in Israel to that in Europe. The index includes selected employment and pension system data, and, by analyzing these data, the researchers find a number of factors that have a particularly notable impact on the pension gender gap in Israel.

Employment data: Policies in Israel encourage the employment of women; for example, women receive higher tax credits than men. Indeed, the employment rate of women in Israel is relatively high: about 66% among women of working age (a difference of 7 percentage points from men, compared to an average gap of 15 percentage points in the OECD).

Since private pension funds play a very important role in post-retirement income, the higher magnitude of employed women reduces gender disparities relative to the world.

However, other data widen the gap; the hourly wage gap between men and women in Israel falls in the middle of the OECD ranking (standing at about 19% as of 2016), and there is a relatively high gap (16%) between the number of weekly working hours for women (about 37 hours) and for men (about 44 hours).

Continuity of employment: The fact that those who take parental leave in Israel are nearly all women, and that women are usually the primary caregivers for children, is also reflected in the accrual of pension entitlements. Paid maternity leave (15 weeks) is considered an insured period for the purposes of calculating seniority and the accrual of pension entitlements, but if a woman chooses to extend into unpaid leave (as many do), this period is not insured.

In Israel, the protection of pensions during periods of childcare is relatively limited compared to countries in the OECD, most of which have policies for reducing these gaps – for example, through pension entitlements or private contributions for the parent.

A simulation of OECD countries shows that a woman in Israel who leaves her career for five years to provide childcare will receive about 90% of the pension income of a woman who did not take a break, a finding that places Israel in fourth-to-last place in the ranking of OECD countries.

Government allowances: Redistribution policies in the pension system by means of allowances affect the pension gender gap, and provide an advantage for women. A man and a woman who paid NII contributions for at least 35 years and retire at the official retirement age will receive an identical monthly allowance from the NII.

However, every employee has the option of deferring the onset of the allowance until the age of 70 and receiving an additional 5% for every year of delay – and, because of the gap in the conditional retirement age, a woman who chooses to retire at age 70 will receive 22% more than a man who does the same (NIS 3,224 compared to NIS 2,648).

As of 2003, the monthly old-age allowance is linked to the Consumer Price Index (CPI). The CPI rises at a slower rate than wages, and, therefore, pensions are eroded relative to the average income in the economy. Given that women have a longer life expectancy, linking allowances to the CPI affects them more and erodes their pension more over time relative to wages in the economy.

Retirement age: Israel is among the nine OECD countries that have retirement age gaps between men and women, and one of only three that are expected to maintain this gap through 2060. This contributes greatly to reducing women’s pension income relative to men’s; therefore a woman who chooses to delay retirement can increase her occupational pension income by a substantial amount.

The retirement age for men in Israel (67) is the highest in the OECD, and many women continue to work after their conditional retirement age (62). In 2016, 53% of women and 70% of men in Israel aged 65-69 worked, 10 percentage points higher than in the OECD.

Pension payment coefficient: Israel is among only four OECD countries that take into account gender when calculating the monthly sum to be paid to each insured individual in the fund, a practice that is illegal in many other countries. Since the life expectancy of women is higher, pension companies divide the total savings balance in the contributions fund into a higher number of payments – thus, women receive a lower sum each month.

Among married couples the calculation includes survivor’s insurance, making the coefficient almost the same for men and women, but a single woman has a coefficient that is 7.5% higher (and a correspondingly lower monthly pension payment) than a single man who retires at the same age. At the same time, the gender gap in pension provisions directed to life and disability insurance actually slightly increases pension incomes for women, and reduces the gap to 6%.

What will the pension gender gap be in the future?

 

In an attempt to estimate the extent of the future pension gender gap, the Taub Center researchers conduct a simulation that estimates future pensions based on current average salaries and salary growth for each gender.

Among married couples who retire at the age of 67, a woman will receive about NIS 13,300 a month from a pension (occupational and old-age allowance), while a man will receive about NIS 15,300; that is, NIS 2,000 more than the woman. Among single individuals, the gender gap is even larger, and a woman who retires at the age of 67 will receive about NIS 3,000 less than a man.

Retirement age has a significant impact on pensions: a woman who retires at age 62 will receive about NIS 3,800 less per month than one who retires at age 67, both because of lower total accrual in her pension fund and because she will not receive additional funds for postponing the old-age allowance.
Fig 2 EN

Bowers and Fuchs say that awareness should be raised about the impact careers have on post-retirement income. Fuchs says: “The more people contribute to their pensions during employment, the larger the sum they receives in retirement.

Women in Israel do work at high rates, but men work more years, work more hours, and have higher wages, so their average income is higher than that of women. The key to narrowing the pension gap is narrowing the gaps that exist in the labor market.”

Bowers adds: “In terms of government policy measures, there are ways to reduce pension gaps – first and foremost, to raise the retirement age for women (taking into account the complexity of this issue); to find solutions for maintaining continuity of pension and social security benefits during maternity leave and childcare; and to reevaluate the gender aspects of private pensions, like calculating the coefficient.”

President of the Taub Center, Prof. Avi Weiss, comments: “Policymakers should think about how the distribution of resources will encourage people to participate in the labor market on the one hand and reduce inequality on the other.”

 

Envisioning the Future of Israel’s Labor Market

The 2018 Herbert M. Singer Annual International Policy Conference brought together policy makers, academics and business professionals to address the most pressing challenges and promising opportunities facing the Israeli labor market in the coming decades.

Taub Center Director General Suzie Patt Benvenisti welcomed conference attendees and extended special thanks to Jay Sandak, President of the Herbert and Nell Singer Foundation, for his family’s ongoing support of the Center’s annual conference.

Mr. Sandak shared his wishes for a productive day and underlined the importance of the Taub Center’s work in advancing the wellbeing of Israelis from all walks of life. The Taub Center was excited to welcome Tom Sandak who accompanied his father, Jay, to this year’s conference.

The conference kicked off with opening remarks by Mordechai Elisha, General Director of the Labor Division in the Ministry of Labor, Social Affairs and Social Services. Mr. Elisha highlighted the professions that are expected to continue to be relevant in the wake of future automation.

He emphasized the role of technology in preparing for the future, summarizing: “Israel will
know how to confront the challenges that are before us, and we will be able to use technology in a way that improves quality of life of all the sectors, areas, and populations in the economy.”

Next, Taub Center President Professor Avi Weiss framed the topics of the day by presenting an overview of Taub Center research on Israel’s labor market. He outlined topics such as labor market differences by gender, sector, and geographic area, employment challenges of Haredi men and Arab Israeli women, income inequality, and the high-tech economy.

Focusing on high tech, Professor Weiss raised concerns about sustainability and potential for growth in this booming sector given Israel’s deficit in the highly skilled workers that the tech industry requires.

Professor Weiss then introduced the Keynote Lecture by Professor Eugene Kandel of Hebrew University, CEO of Start-Up Nation Central and former Head of the National Economic Council in the Prime Minister’s Office.

Professor Kandel discussed Israel’s two “very different and essentially disconnected economies,” emphasizing the need to regulate and invest in the two economies differently: “Nothing that the government does for one economy fits the other,” he said.

Professor Kandel’s remarks were followed by a panel discussion, moderated by Professor Weiss: Productivity, High-Tech, and the Start-Up Nation. The first speaker was Michal Tzuk, former Deputy of Employment at the Ministry of Labor, Social Affairs and Social Services. She discussed the technological and employment challenges that lie ahead for the labor market.

She warned that “the rhythm of technology change is just increasing,” but by ‘reskilling’ and ‘upskilling’— that is, teaching new, relevant skills later in one’s career — workers will be able keep up.

Dalia Narkis, former Chair of Manpower Israel, followed Ms. Tzuk. She noted that the skills needed for labor market success have evolved in recent years. “The skills that are required are critical thinking, the ability to solve problems, the ability to work in a non-traditional work environment, and adaptivity… we need the ability to reinvent ourselves.”She also emphasized the importance of English language skills in succeeding in the modern and future labor market.

Dr. Oren Shoval, Co-Founder and Chief Technology Officer of smart shared ride start-up Via brought the panel to a close by sharing his perspective from the vantage point of an Israeli high tech start-up. Dr. Shoval highlighted how, in many ways, Via reflects the needs of the current and future labor market, offering high-tech, on-demand, rapid services to its customers around the world.

The next panel discussion, The Geographic Matching and Concentration of Firms, Workers, and Places of Residence, was chaired by Professor Eric Gould, outgoing Chair of the Taub Center Labor Policy Program and Professor of Economics at Hebrew University. He presented data on the geographic concentration of several socioeconomic indicators — including population share, income, employment, college graduation rate, and life satisfaction rate.

Professor Gould then introduced the Keynote Speaker, Professor Edward Glaeser of Harvard University, a world-renowned leader in the field of Urban Economics. He presented his research on the variables that lead to economic urban success, emphasizing the importance of proximity and human capital. “Physical proximity makes it possible to transfer ever denser, ever more complicated ideas… Proximity and the exchange of ideas are the lifeblood of creativity.”

Professor Glaeser compared the economic health of the United States and Israel, and explored place-based policy options to promote successful cities. However, he cautioned, “Just because the free market gets it wrong, doesn’t mean the government gets it right.”

The keynote was followed by an address from MK Itzik Shmuli (Zionist Union) on big-picture economics in Israel from his legislative and social activist perspective. He addressed solutions to known challenges and expressed his mission to “try to lead change… not just by legislation in Knesset but by real action in the field.” Following MK Shmuli, Efrat Dagan, the Global Staffing Lead for Google, spoke about the importance of building an infrastructure and ecosystem for innovation and development.

“I believe there is talent everywhere,” said Dagan, as she outlined the key ways to grow an innovation ecosystem, including, for example, bridging cultural divides, investing in talented individuals at a young age and from diverse backgrounds, and creating professional support systems with experienced mentors and stakeholders.

Next, Maya Dolgin, Taub Center Director of Community Relations, introduced the pilot episode of DataPoint, the Center’s new podcast, which zooms in on the people and stories behind the numbers in the Taub Center’s research. The episode tells the story of Aziz Kaddan, Founder of Myndlift, and his experience navigating the “Start-Up Nation” as an Arab Israeli entrepreneur.

The final panel discussion of the day, Workforce Diversity, was chaired by Yulia Eitan, Head of the Employment Administration for Special Populations at the Ministry of Labor, Social Affairs and Social Services. Ms. Eitan presented both current and projected labor market trends among women and minorities in Israel, highlighting wage, employment, and academic gaps between and within the different population sectors.

Next, the audience heard from Rivi Beller, CEO of VeHadarta, an organization that works to advance the participation of older Israelis in the labor market. Ms. Beller argued that due to declining birth rates and the growing elderly population, Israeli employers should take advantage of the abundant human capital that can be found among older Israelis who are equipped to work well beyond the official retirement age

. Ayman Saif, former Head of the Authority for the Economic Development of the Arab, Druze and Circassian Sectors in the Prime Minister’s Office was the next panelist. Mr. Saif presented a look at challenges concerning Israel’s Arab sector, emphasizing his view that a lack of available jobs in close proximity to Arab Israeli communities is among the largest barriers to their labor market participation. Accordingly, he encouraged investment in employment opportunities near Arab population centers.

The final presenter was Moishi Friedman, Co-Founder and CEO of Kamatech, an organization that works to advance the employment of Haredim in high tech. According to Mr. Friedman, today’s Haredi community has strengthened to the point where they can participate in the economy more fully without feeling that their lifestyle is vulnerable to the influences of the modern world.

The Herbert M. Singer Annual International Policy Conference 2018: Envisioning the Future of Israel’s Labor Market was a great success that brought together great economic minds, from Taub Center researchers to Israeli and international experts, with participants from diverse backgrounds to envision a future for Israel’s labor market that serves and benefits all citizens.

Thanks to generous support from the Herbert and Nell Singer Foundation, the Taub Center implemented an expanded dissemination plan to increase the impact of the conference, reaching broad audiences beyond the 200 individuals in attendance.

This included the first-ever livestreaming of the full event, filmed simultaneously by two cameras, and funding for the first episode of the Taub Center podcast, DataPoint, which has been downloaded over 430 times to date. The Taub Center wishes to extend its appreciation to all those who participated in the conference in person or Online and looks forward to further researching this crucial policy area and promoting public discourse around these important subjects.

Benjamin Bental

Prof. Benjamin Bental, who holds a Ph.D. in economics from the University of Minnesota, is a professor emeritus of economics at the University of Haifa. He has been a visiting professor at several universities around the world, including: the University of California San Diego, Humboldt University in Berlin, the New Economic School in Moscow, the Tongji University in Shanghai, and Pontifica Universidad Católica del Perú.

His research interests include macroeconomics and economic growth. In recent years his research has focused on the impact of contractual frictions stemming from asymmetric information, especially in the labor market, on macroeconomic policies.

Mapped out: welfare nonprofits in Israel

Civil society organizations (nonprofits) play a major and growing role in the provision of welfare services in Israel. Organizations active in the welfare field constituted 15% of all the civil society organizations registered in Israel, and the sum spent on their annual activity is approximately NIS 14 billion. These organizations provide a broad range of social services to a variety of target populations, yet, to date, there has been a lack of data on the scope of their activities and funding.

In response to the need for comprehensive data, Taub Center researchers Prof. John Gal and Shavit Madhala, along with Dr. Michal Almog-Bar from the Center for the Study of Civil Society and Philanthropy at the Hebrew University, conducted an analysis of active organizations working in the field of welfare between the years of 2013 and 2016 whose annual revenues exceeded NIS 500,000 – a total of 748 organizations.

The study maps out various characteristics of civil society organizations working in the field of welfare in Israel as well as their level and sources of revenue.

What do we know about these organizations and who they serve?

A little under a quarter of the civil society organizations examined in the study serve the general population, while the majority of the remaining organizations serve youth, the elderly, and people with disabilities.

Some organizations provide services intended for particular sectors within Israeli society. 23% of the organizations in the study are intended for the Haredi sector (Haredim make up about 12% of Israel’s population), while 7% have services designated for the Arab Israeli population (which constitutes about 21% of the total population).

 

Welfare EN

The study also finds that about one-fifth of the nonprofits examined are national organizations, operating in five or more locations throughout Israel, and a similar percentage of the total organizations are new – that is, they have been operating for under 15 years. Among organizations serving the Arab Israeli and Haredi populations, specifically, the share of new organizations is even higher.

In addition, among the Arab Israeli organizations, there is a relatively low share of organizations classified as large – with annual revenues exceeding NIS 10 million.

Where is the money coming from and where is it going to?

The total revenue of the welfare nonprofit organizations examined in the study amounts to NIS 13.8 billion a year. The main source of this revenue is through the sale of services (39%), followed by government funding (34%) and donations and bequests (25%).

Out of the total revenue, 23% goes to organizations working with children and youth, and a similar percentage goes to those focused on the elderly, and to those addressing the general population. When examining revenue by sector served, the study finds that only 2% of the total revenue goes to Arab Israeli organizations, while 20% goes to the Haredi organizations.

A notably high percentage of revenue going to Arab Israeli organizations comes from government funding, while, among Haredi organizations, revenue from donations is prominent.

The researchers found that funding disproportionately goes to the organizations with more resources. The vast majority of the government funding that goes to welfare nonprofits (85%) goes to organizations with an annual revenue of over NIS 10 million (including government allocations). Similarly, about half of the philanthropic donations go to the organizations with the highest revenues (in the top 10%), and only 2% of donations go to Arab Israeli organizations.

 

Organization size EN2

What do these data tell us?

Mapping out Israel’s welfare nonprofits sheds light on the disparities that exist among them. The study finds substantial gaps between older and newer organizations, between large and small organizations, and between organizations active in Jewish society and those active in Arab Israeli society. For example, the largest and most veteran organizations receive most of the governmental and philanthropic funding that is available.

Moreover, the shortage of organizations serving the Arab Israeli society and the sector’s limited share of resources, limit Arab Israeli citizens’ access to the social services provided by nonprofits, despite the sector’s many welfare needs. These findings indicate a need to strengthen the civil society organizations in the Arab Israeli sector so as not to further increase the existing social gaps between Jewish and Arab Israelis.

Taub Center senior staff met with the President of The State of Israel

תמונה בבית הנשיא

Prof. Weiss presented the key findings of the State of the Nation Report 2017 and a Picture of the Nation 2018 and discussed the unique changes in demographic trends among Israel’s various population groups. The President expressed great interest in Taub Center research.

The President said: “Your work at the Taub Center examines all topics that affect the lives of Israeli citizens other than security. I carefully read the Taub Center’s annual reports; you do avodat kodesh (holy work) that benefits all of those who need information on these issues. Kol Hakavod to you.”

Prof. Johnny Gal, the Chair of the Taub Center’s Welfare Policy Program presented data on poverty in Israel and on the partial implementation of the recommendations of the Elalouf Committee’s War on Poverty.

Prof. Weiss said “We are pleased to share Taub Center research in a variety of fields and to serve as a source of knowledge for the President’s Residence.”

In this photo (from left): Harel Tovi, CEO of the Presidential Residence, Avi Weiss, President of the Taub Center, The President of the State of Israel Reuven (Ruvi) Rivlin, Suzanne Patt Benvenisti, Director General of the Taub Center, John Gal, Principal Researcher and Welfare Policy Program Chair at the Taub Center

The building blocks of equal opportunity: early childhood education

It is widely agreed that education is the key to future opportunities, success, and intergenerational economic mobility, and thus, that educational inequality should be reduced among children in Israel.

The prevailing assumption is that inequalities in education can be reduced through changes to the traditional K-12 education system, but studies from around the world show that scholastic-achievement disparities between children from different socioeconomic backgrounds appear already at younger ages.

Recently, the Taub Center published a comprehensive literature review on early childhood. The literature review, conducted by Prof. Yossi Shavit, Prof. Isaac Friedman, Prof. John Gal, and Dana Vaknin, discusses the various ways in which economic inequality experienced in early childhood may lead to inequality in scholastic achievements later in life.

It also maps out the existing evidence about the impact of early childhood education on child development and future achievements.

According to the literature, the environment a child is exposed to in his or her early years is of critical importance to the development of the brain and the central nervous system. This is the time of life when the brain is most malleable.

Negative influences during pregnancy and early childhood, such as stress, can disrupt normal cognitive and emotional development. Not only does childhood poverty have an impact on chronic stress, but there is also evidence that children of high socioeconomic status have an easier time recovering from damage caused by stress during the mother’s pregnancy than those of lower socioeconomic status.

At the same time, children from low socioeconomic backgrounds may suffer from a lack of sensory stimuli and enriching experiences, which can negatively affect the development of cognitive abilities and social and emotional skills, as well as future scholastic achievement.

eng1

The findings of the study are particularly relevant for Israel for two main reasons: Firstly, inequality in scholastic achievements in Israel is among the highest in the developed world.

In fact, the gap between Israel’s top- and bottom-performing students on the 2015 PISA exams was among the widest of all participating countries for each of the test’s sections: scientific literacy, reading literacy, and math. Secondly, a high percentage of children in Israel live in poverty, particularly among the Arab Israeli and Haredi populations (though also in other segments of Israeli society) – and, as mentioned earlier, poverty and scholastic inequality may well be related to one another.

A number of policy options should be explored in Israel in order to address poverty in early childhood and its impact on future scholastic achievements, including:

  • Substantially increasing access to daycare and improving the quality of care: Research has shown that the educational programs with the highest rates of return (where we get the biggest bang for our buck) are those that target the youngest children, from birth to age 5. Yet in Israel, only 20% of children ages 0-3 attend recognized and supervised daycare centers or family daycare (only 10.6% in the Arab Israeli sector). Increasing the supply of high quality early childhood education programs may help to address this issue.
    eng2
  • Comprehensive interventions at the community level, focusing on families with young children living in poverty: Poverty and distress can make it hard for parents to provide their children with the best possible developmental environment. Directly and holistically addressing the diverse needs of families and communities in poverty can make a big difference.
  • Directly addressing poverty more comprehensively and effectively: Direct intervention could help to curb the prevalence of child poverty to begin with through measures like increasing social assistance benefits, child allowances (particularly, increasing the allowance paid to families with young children), and work grants for parents.

The existing literature builds a strong case for the importance of early childhood care and education, its impact on future scholastic achievements, and the power of interventions during this critical period to narrow social gaps. It also raises the need for more research in this area and, in particular, for studies examining the situation in Israel that could help inform future policy.

The Taub Center gratefully acknowledges The Bernard Van Leer Foundation for its generous support of the literature review.

Labib Shami

Labib Shami is a senior researcher at the Taub Center, a staff member in the Department of Economics at Western Galilee College and a lecturer in the Department of Economics at the University of Haifa. He holds a doctoral degree in Economics from the University of Haifa. His research interests lie in the area of macroeconomics, monetary policy and non-observed economies. Labib has published two Guide-Books: “Fundamentals of Economics” for finance students, 2018 (in Hebrew) and “Introduction to Statistics” for finance students, Michlala Leminhal Press, 2015 (in Hebrew).

Labib lives with his wife, also an economist, and their two children – Emily and Leon Camal.

Michal Pozmanter

Michal Pozmanter is Senior Director of Strategic Partnerships at the Taub Center, and is responsible for cultivating new partnerships and expanding the Center’s base of support through strategic engagement of the lay leadership, membership and staff. Michal is empowered by the Center’s high-quality research which offers a comprehensive analysis of the most severe domestic challenges facing Israel today. Previously, Michal worked at the American Israel Public Affairs Committee’s (AIPAC) Northeast Regional Office as Area Director for Brooklyn and Queens, New York, and Area Director for Westchester, New York. Most recently, she was Director of Development for Berman Hebrew Academy in Maryland, responsible for fulfilling the school’s annual development campaign. Michal holds a B.A. from Brandeis University in Economics with a Minor in International Business. She lives in Ra’anana with her husband and children.

Are Israeli Jews Becoming More Secular?

What will the religious makeup of the Jewish population in Israel look like in the coming decades? According to the projections of Israel’s Central Bureau of Statistics (CBS), the Haredi (ultra-Orthodox) population will grow very quickly and compose about 50% of the Jewish population in Israel by 2059.

These projections have raised serious concerns regarding the sustainability of the economy given the education and employment patterns of contemporary Haredim. However, there are a number of significant demographic shifts occurring, some of which, it seems, have not been fully accounted for in the CBS forecasts.

In their recent study, Taub Center researchers Prof. Alex Weinreb and Nachum Blass examine trends in religious mobility among Israeli Jews, as reflected in data on student enrollment in different streams of the public education system: State-secular, State-religious, and Haredi. Their analyses point to two main findings:

Finding 1: First grade enrollment doesn’t match fertility rates

The CBS projections are based on fertility rates – which are much higher among Haredi Jews in Israel than among national religious Jews, and higher among national religious Jews than among traditional and secular Jews.

As expected, the number of students enrolled in first grade in the Haredi education stream increased at the fastest rate between 2001 and 2015, in keeping with the high fertility rates in this sector. However, relative to prior fertility, that rate of growth in enrollment was less than expected – 7.5% lower in the 2013-2015 period.

Meanwhile, the State-secular education system increased at an annual growth rate of over 2% between 2001 and 2015 – much faster than expected given prior fertility rates in the secular and traditional populations.
eng1

Finding 2: Net movement from more to less religious education streams

Between 1st and 8th grade, many more students move toward less religious education streams than in the opposite direction. Specifically, between 2001 and 2015, there was a net flow (subtracting transfers in the opposite direction) of 9.0% of boys and 6.4% of girls from Haredi to one of the less religious streams by 8th grade (about 60% to State-religious schools, the rest to State-secular schools).

Likewise, there was a net flow of 16.4% of boys and 11.7% of girls away from State-religious schools toward the State-secular education stream.

What does all of this tell us about religious mobility?

These two findings – the mismatch between prior fertility and 1st grade enrollment, and the net flow of students from more to less religious education frameworks – suggest that, while the Haredi and religious communities in Israel will continue to grow, the pace of growth of these populations is slower than expected.

In fact, Weinreb and Blass show that if these trends continue, they will have a significant impact on the future composition of Israeli society. Whereas the CBS projections (the solid lines in the below graph) predict that for every 100 non-Haredi Jews in 2059 there will be about 50 Haredim, taking trends in religious mobility into account (the dotted lines in the graph), suggests there will be closer to 35 Haredim for every 100 non-Haredi Jews.

In the meantime, many other changes are taking place in Haredi society, including a rise in the number studying in higher education and a rise in the employment rates. Alongside the trends in religious mobility, these suggest that the effect of demographic changes on Israel’s future economy may not be as extreme as many think.

Welfare Nonprofits in Israel: A Comprehensive Overview

Executive Summary

Civil society organizations (or nonprofit organizations) are playing a growing role in the field of welfare in Israel. In 2016, 43,000 nonprofit organizations were registered, a particularly high share of organizations per capita. Of them, 15% were active in the field of welfare.

However, to date, there has been a lack of data on the scope of these organizations’ activities and funding. A new Taub Center study, conducted in cooperation with the Center for the Study of Civil Society and Philanthropy at the Hebrew University, maps out the welfare nonprofits in Israel.

The study includes an analysis of active organizations working in the field of welfare between the years of 2013 and 2016 whose annual revenues exceeded NIS 500,000 – a total of 748 organizations. The research examines characteristics such as sources of revenue, the number of paid staff and volunteers, and the target populations they aim to reach.

The organizations are classified according to how long they have been operating, the scope of their economic activity, their geographic distribution, and other characteristics.

Many organizations are intended for the Haredi society, but few for the Arab Israeli society

Of the welfare organizations analyzed in the study:

  • 7% have services designated for the Arab Israeli population, while 23% are intended for the Haredi sector.
  • About one-fifth of the organizations serve the general population, about one-fifth are intended for children and youth, and the remainder focus on target populations such as people with disabilities and the elderly.
  • About one-fifth of all organizations are new (have been operating for under 15 years) and, among the organizations focusing on the Arab Israeli and Haredi populations, the share of new organizations is relatively large.
  • About 20% of the nonprofits are national organizations operating in five or more locations throughout Israel. About 20% of Arab Israeli organizations operate nationally, compared with 13% of Haredi organizations.

Organizations’ financing comes primarily from the provision of services and from public sources

The total revenue of the welfare nonprofit organizations examined in the study amounts to NIS 13.8 billion a year. 23% of that sum goes to organizations working with children and youth, 22% to those focused on the elderly, and 21% to those addressing the general population. The main sources of revenue are the provision of services (39%) and public funding sources (34%). Additional funds come from donations and bequests (25%).

eng2

  • Among Arab Israeli organizations, the majority of funding is public (57%) whereas, among the Haredi organizations, funding from donations is prominent (38%).
  • Most of the revenue of more longstanding organizations (operating for more than 15 years) comes from the provision of services and public funding while, among newer organizations, most revenue comes from donations.
  • The vast majority of government funding (85%) goes to large organizations with an annual revenue of over NIS 10 million. Similarly, about half of philanthropic donations go to organizations whose revenues are in the top decile of the income distribution (the top 10%).

  • Only about 2% of donations go to Arab Israeli organizations, while the share of donations received by Haredi organizations is relatively high – 30%.

Personnel in organizations is largely reliant on volunteers

Personnel in the examined organizations stand at 370,000, of which 66% (243,000) are volunteers.

  • Most of the volunteers can be found in nonprofits that focus on families (31%) and working-age adults (17%). A particularly high percentage of paid staff can be found in organizations that care for the elderly (33%).
  • About 87% of the organizations’ personnel are concentrated in the large organizations, and it seems that among small organizations, the proportion of volunteers is higher.
  • Only 1% of total personnel are either employed or volunteer in Arab Israeli organizations, compared to 11% in Haredi organizations.

Welfare Nonprofits in Israel: A Comprehensive Overview

Civil society organizations (nonprofits) are playing a growing role in the field of welfare in Israel, and provide services to a variety of population groups, government ministries, and local authorities. In 2016, 43,000 organizations were registered – a particularly high share of organizations per capita.

However, to date, there has been a lack of data on organizations working in the field of welfare, the scope of their activities, their sources of funding, their defining characteristics, and the target populations they aim to reach. A new Taub Center study, conducted in cooperation with the Center for the Study of Civil Society and Philanthropy at the Hebrew University of Jerusalem, sheds light on this issue and maps out the welfare nonprofits in Israel alongside the scope of their revenue and their sources of funding.

The research study – conducted by Shavit Madhala, Dr. Michal Almog-Bar, and Prof. John Gal – reveals that, among the Haredi and Arab Israeli sectors, the share of new organizations is relatively high. Among organizations serving the Arab Israeli population revenues are significantly lower than in organizations serving other sectors, and they only receive a small portion of philanthropic donations.

The study also finds that government support is mostly given to large and longstanding organizations.

Israel’s civil society sector is one of the largest in the world in terms of the number of registered organizations per resident, and in terms of the relative scope of their economic activity. Over the last decade, 1,600 new organizations registered per year, on average, and in 2016 there were 43,000 registered organizations total (although only about 20,000 appear to be active). Organizations dealing with welfare constitute 15% of all civil society organizations in Israel.

The study of Madhala, Almog-Bar, and Gal includes an analysis of active organizations working in the field of welfare between the years of 2013 and 2016 whose annual revenues exceeded NIS 500,000 – a total of 748 organizations.

The research examines characteristics such as sources of revenue, the number of paid staff and volunteers, and target populations. The organizations are classified according to how long they have been operating, the scope of their economic activity, their geographic distribution, and other characteristics. The findings of the study are based on an analysis of the reports organizations submit to the Israeli Corporations Authority, which are available on the “GuideStar Israel” website.

Many organizations are intended for the Haredi society, and few work in the Arab Israeli society

About one-fifth of the welfare organizations included in the study work with the general population, about one-fifth are intended for children and youth, and the remainder focus on target populations such as people with disabilities and the elderly.

7% of the organizations have services designated for the Arab Israeli population, yet their revenues account for only 2% of the total revenue of all the organizations. On the other hand, 23% of the organizations – whose revenues account for 20% of the total revenue of all the organizations – are intended for the Haredi sector.
Distribution of nonprofit organisations by population group

About one-fifth of all organizations are new (have been operating for under 15 years), and among the organizations focusing on the Arab Israeli and Haredi populations, the share of new organizations is relatively large.

In terms of geographical distribution, about 20% of the nonprofits are national organizations operating in five or more locations throughout Israel. About 20% of Arab Israeli organizations operate nationally, compared with 13% of Haredi organizations. Most of the local Arab Israeli organizations operate in the North and in Haifa.

Organizations’ financing comes primarily from the provision of services and from public sources; donations to Arab Israeli organizations are limited

The total revenue of the welfare nonprofit organizations examined in the study amounts to NIS 13.8 billion a year. 23% of that sum goes to organizations working with children and youth, 22% to those focused on the elderly, and 21% to those addressing the general population. The main sources of revenue are the provision of services (39%) and public funding sources (34%). Additional funds come from donations (25%).

The significance of these data is that funds collected by nonprofit organizations from donations (philanthropy) come to 28% of the total public expenditure on welfare services in Israel. The estimated sum of donated funds is NIS 3.45 billion, and this sum increases Israel’s annual expenditure on welfare from NIS 12 billion to NIS 15.45 billion.

Among Arab Israeli organizations, the majority of funding is public (57%) whereas, among the Haredi organizations, funding from donations is prominent (38%). Most of the revenue of more longstanding organizations (operating for more than 15 years) comes from the provision of services and public funding while, among newer organizations, most revenue comes from donations.
Distribution of total revenues of organisations by source

An examination of government funding shows that 85% of funds go to large organizations (with an annual revenue of over NIS 10 million), which make up about one-third of all the organizations. This means that, among large organizations, public funding is the primary source of revenue, while the main source of revenue for small organizations (with an annual revenue of up to NIS 3 million) is donations.

The Taub Center and the Center for the Study of Civil Society and Philanthropy at the Hebrew University of Jerusalem also found that most of the organizations that provide services to working-age adults do not receive any government funding, but most of the organizations dealing with people with disabilities or yeshiva students (84% for each category) receive government support.

Support from the government is also relatively high among organizations that work with the elderly (78%) and with children and youth (79%).

An analysis of philanthropic donations shows that only about 2% of donations go to Arab Israeli organizations, while the share of donations received by Haredi organizations is relatively high – 30%. Donations are also not equally distributed across organizations of different sizes: about half of donations go to the top decile of organizations (the 10% that have the highest revenues from all the organizations examined).

Personnel in organizations is largely reliant on volunteers, but there are also many paid positions

Personnel in the examined organizations stand at 370,000, of which 66% (243,000) are volunteers. Most of the volunteers can be found in nonprofits that focus on families (31%) and adults of working age (17%). Two organizations that have a particularly notable number of volunteers are Chasdei Naomi (200 paid staff and 58,000 volunteers) and WIZO (5,000 paid staff and 40,000 volunteers).

When these two organizations are taken out of the equation, the share of volunteers in nonprofits focusing on families is 12%, and in those focusing on working-age adults, only 1%. A particularly high percentage of paid staff can be found in organizations that care for the elderly (33%).

About 87% of the organizations’ personnel are concentrated in the large organizations, and it seems that among small organizations, the proportion of volunteers is higher. Only 1% of total personnel are either employed or volunteer in Arab Israeli organizations, and 11% in Haredi organizations.

Madhala, Almog-Bar, and Gal explain the study’s findings: “It seems that in the Arab Israeli and Haredi sectors many organizations have been established in the past 20 years to supplement services provided by the State.

The small number of Arab Israeli nonprofits attests to the sector’s great reliance on religious organizations, family support, and informal communal organizing. There is also a significant gap between the revenues of Arab Israeli organizations – which account for only 2% of the revenue of the studied organizations – and the share of revenue going to Haredi organizations (20%) or other Jewish organizations.”

The researchers add that “the findings indicate the importance of philanthropy as a significant source of funding for welfare services in Israel, and philanthropy must also be developed within Arab Israeli society.” Regarding government funding, they say: “Most of the funding goes to large organizations, whose share out of all welfare organizations stands at only 33%, and it is clear that the distribution of government funds is not equal.”

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

The Center for the Study of Civil Society and Philanthropy in Israel aims to enhance existing knowledge in the fields of civil society, social engagement, volunteering, philanthropy, and cross-sector partnerships in Israel. The Center engages in efforts to develop and promote basic and applied research on the activities of civil society, social engagement, and philanthropy, their roles, and their contribution to Israeli society. The research findings serve as a basis for expanding the Center’s activities in developing study and enrichment programs on civil society, social engagement, and philanthropy.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

 

Socioeconomics in Israel at a glance: what is the picture of the nation?

engupperThe Taub Center’s A Picture of the Nation 2018, generously supported by the Koret Foundation, presents a complex picture of Israeli society by exploring trends in demographics, macroeconomics, welfare, health, education, and employment. We are pleased to share a number of the findings from this year’s booklet, edited by Prof. Avi Weiss, President of the Taub Center.

 

Demographics: Projections about the makeup of Israeli society do not take into account current demographic trends

Israel’s current population is comprised of approximately 74% Jews, 21% Arab Israelis, and 5% defined as “Other.” Haredim are estimated to be about 12% of the total population, and the share of secular and traditional Jews (both those identifying as religious and less religious) – about 56%.

While the total fertility rate in Israel is high and stands at 3.11, almost double the rate in OECD countries, there have been substantial changes across Israel’s population groups in recent decades. Fertility rates have fallen greatly among Arab Israelis, while among Jews there has been an increase in fertility since 1990.

An examination of first grade enrollment in Haredi, State-religious, and State (secular) schools in comparison to fertility rates, and of transfers between education streams from first to eighth grades, reveals that student movement is in the direction from more to less religious streams (see figure).

If the trend of secularization indicated by this student movement continues, the Haredi population is expected to make up about 21% of the population in 2059 (compared with 27% in Central Bureau of Statistics projections).

eng2

Macroeconomics: The standard of living has risen, but price levels remain high

The standard of living in Israel has increased over the past decade. For many years real wages did not rise despite a rise in productivity, but changes in the past few years have reversed this trend and real wages have risen. However, the Israeli economy is characterized by stark polarization. For example, high-tech salaries are 2.5 times higher than wages in the rest of the business sector.

In terms of prices, price levels in Israel are still 14% higher than the OECD average, despite a decline in recent years. In particular, prices declined in industries exposed to competition from imported goods such as clothing and furniture.

Rental prices in Israel have risen on average 2% faster than inflation per year since 2008, meaning that throughout the period demand increased more than supply. Housing prices have risen at an even faster pace since 2008, though in recent months they stopped rising.

 

Welfare: The unemployment rate is lower, but the poverty rate remains the highest among OECD countries

There has been an increase in employment rates in Israel, and the unemployment rate has continued to decrease. At the same time, the poverty rate when measured using disposable income is the highest among OECD countries (see figure).

eng3

The percentage of government expenditure devoted to social spending is increasing, but at a very slow pace, and most of the increase has been in the health and education budgets.

With regard to addressing poverty, specifically, the sum allocated to the implementation of the Elalouf Committee for the War Against Poverty in 2017 was only 31% of the Committee’s budgeted recommendations. However, a considerable sum was allocated to the “Savings for Every Child” program, which appeared among the recommendations but was not budgeted.

Whether more or less well-off, about 37% of Jewish Israeli households spend more than their income. Among households seeking assistance in financial management, those with higher incomes owe more to banks, and those with relatively lower incomes borrow more from family members and friends.

 

Health: Israelis spend a larger percentage out-of-pocket on health services than the OECD average, and the health system is not adequately prepared to cope with the aging population

Health spending out of GDP has remained stable, despite an increase in medical needs due to rising life expectancy and the aging population. This has resulted in a decrease in health spending per person, and an increase in the cost of medical care.

Though there has been relative stability in total health spending, the gap between the share of public expenditure as a percent of total health expenditure in Israel and its share in the OECD has increased almost threefold over the past two decades. As a result, households are spending more out-of-pocket on health services, particularly by purchasing private insurance plans.

An examination of health in the Arab Israeli population shows that life expectancy at birth is four years lower than for the Jewish population, and lower than the average in OECD countries. One of the reasons for this is that the infant mortality rate in the Arab Israeli sector is three times higher than in the Jewish sector. More generally, the lower socioeconomic status of the Arab Israeli population has an impact on health levels.

 

Education and employment: There have been significant changes in the fields of study of students in higher education, and an increase in employment rates in all sectors

One of the goals of the past two Ministers of Education was to increase the share of students studying advanced math. The share of those qualifying for a bagrut certificate with five unit-level math did indeed rise from 10.6% to 13.8% between 2013 and 2016. Another goal of the Ministry – to increase the share of students in vocational tracks – is also proving successful: the portion of students in vocational tracks increased from 33% in 2010 to 36% in 2015 in the Hebrew education system, and from 40% to 43% in the Arab education system.

In higher education, the past two decades witnessed a decline in the percentage of students studying humanities and the social sciences, while the share of students studying business administration, medical professions, and architecture and engineering has risen (see figure).

Among Arab Israelis, the percentage of female students studying science and technology subjects in high school is high and continues to rise steadily, but they tend to pursue degrees and careers in education at very high rates.

eng4

In general, employment has increased among men and women in all sectors – including for Arab Israeli women and Haredi men (for whom employment rates are particularly low). Within the Haredi population, employment rates rose over time in all Haredi streams, both for men and for women. Among Haredi men ages 23-30, Chabad men work at the highest rates, with almost 50% employment in 2013.

Together, these and other important trends presented in A Picture of the Nation 2018 highlight some of the most crucial social and economic issues facing Israeli society. We hope this publication can serve as a resource to the Israeli public and assist Israeli decision makers in basing their choices and actions on unbiased data and professional analyses.

Noam Zontag

Noam Zontag is a researcher at the Taub Center. He holds a B.A. in Economics and International Relations and a M.Sc. in Environmental Economics and Management, both from the Hebrew University of Jerusalem. His thesis utilizes game theory to examine the way individuals choose for others between probabilistic alternatives that involve risk.

Prior to joining the Taub Center, Noam was a researcher at the Geocartography Knowledge Group (economic department) and at the Shoresh Institution for Socioeconomic Research. He also served as an economist for the Budget Department of the Council for Higher Education.

 

Emerging Early Childhood Inequality: On the Relationship between Poverty, Stress, Sensory Stimulation, and Child Development and Achievements

The Taub Center gratefully acknowledges The Bernard Van Leer Foundation for its generous support of this project.

This literature review, conducted by Prof. Yossi Shavit, Prof. Isaac Friedman, Prof. John Gal, and Dana Vaknin, discusses the various ways in which economic inequality experienced in early childhood may lead to inequality in scholastic achievement later in life.

It is widely agreed that education is the key to future opportunities, success, and intergenerational economic mobility, and that equal educational opportunity should be assured for all of Israel’s children.

The prevailing assumption is to address inequalities in education through changes to the education system, but studies show that scholastic-achievement disparities between children belonging to different socioeconomic strata appear already at very young ages.

Socioeconomic and Scholastic-Achievement Inequalities

Inequality in scholastic achievements in Israel is among the highest in the developed world, and the main cause is economic inequality.

  • Despite a slight decline in recent years, Israel leads the OECD in disposable income inequality. In 2015, the share of children ages 0-17 living in poor families was 25%. The incidence of poverty among children in Israel is very high compared to the norm for welfare states, and child poverty is especially prevalent among the Arab Israeli and Haredi populations.The incidence of poverty among individuals
    • Inequality in scholastic performance is also particularly high in Israel. The PISA 2015 results indicate that the gap between the score representing Israel’s 5th percentile and the score representing Israel’s 95th percentile ranks in the top three of all participating countries for scientific literacy, reading literacy, and math.

    Stress and Sensory Stimulation

    The research literature suggests that prolonged exposure to environmental experiences in early ages is of critical importance to the development of the brain and the central nervous system, and that early childhood is a time when the brain has the most “plasticity” and is particularly open to change.

    This review argues that the lack of exposure to cognitive stimuli in early childhood, as well as exposure to chronic stress situations, may inhibit the normal development of cognitive and non-cognitive skills.

    • Studies show that stress during the young brain’s developmental stages can disrupt normal cognitive and emotional development. Similarly, stress experienced by a mother during pregnancy may affect the development of the fetus and the infant in the future.
    • Not only does childhood poverty have an impact on chronic stress, but there is also evidence that the degree of recovering from damage caused by gestational stress is closely related to family socioeconomic status – with children of high socioeconomic status recovering more readily than those of lower socioeconomic status.
    • The family’s socioeconomic status may affect the supply of sensory stimuli available to young children, which in turn influence brain development. Therefore, children who grow up in an environment of chronic poverty may suffer from persistent deprivation of exposure to enriching experiences, which may affect the optimal development of cognitive abilities and social and emotional skills, as well as future scholastic achievement.
    • Experiential deprivation during “critical periods” of brain development and lack of exposure to certain vital stimuli while the brain has optimal plasticity, can be very difficult to compensate for later in life.

    Policy Options: Addressing Poverty in Early Childhood and its Impact on Scholastic Achievements

    Interventions aimed at coping with the consequences of early childhood poverty and inequality on the educational achievements of children can focus on a wide range of areas – labor market, healthcare system, education system, etc. The review focuses on three approaches:

1. Substantially increasing access to daycare and improving the quality of care

Educational frameworks for young children could mitigate the disadvantages of growing up in a family of low socioeconomic background and can lead to better cognitive performance and non-cognitive development later on. In fact, research has shown that the educational programs with the highest rates of return are those that target the youngest age group, from birth to age 5.

In Israel, only 20% of children ages 0-3 attend recognized and supervised daycare centers or family daycare (only 10.6% in the Arab Israeli sector). Consideration should be given to policies that would substantially increase the supply of high quality ECEC (early childhood education and care) programs and allow easier access to daycare centers for children whose parents do not regularly and continuously participate in the labor market. There should also be special emphasis on developing a system of daycare centers to serve the Arab Israeli population.

2. Comprehensive interventions at the community level, focusing on families with young children living in poverty

Poverty and distress can make it hard for parents to provide their children with the best possible developmental environment. Directly and holistically addressing the diverse needs of families through “poverty-aware social work” can make a big difference, but cannot be done on a large scale without a major expansion of community-level programs.

3. Addressing poverty more comprehensively and effectively

Another approach is direct intervention to curb the prevalence of child poverty. This could be accomplished through increasing social assistance benefits, increasing universal child allowances (or, particularly, the allowances of families with young children), and improving working families’ access to work grants.

A Picture of the Nation 2018

A Picture of the Nation 2018

Embargo until Tuesday, May 29th, 6:00a.m.

To download the full publication, click here

The Taub Center’s “A Picture of the Nation 2018,” which presents updated data on Israel’s society and economy in its 70th year, was published today. The findings in the booklet, generously supported by the Koret Foundation, present a complex picture of Israeli society: the standard of living in Israel has increased, as have employment rates, and there is evidence of changes in the demographic composition of the population.

At the same time, food and housing prices remain high, and disposable income poverty rates are still higher than in any other OECD country.

An international comparison shows that Israelis are relatively healthy and have high life expectancy, but it seems that the health system is not prepared to cope with Israel’s aging population, along with all the costs that entails. There have been trends showing improvement in the education system, such as an increase in the share of students studying advanced mathematics (5-units) and a substantial improvement in the academic achievements of Arab Israelis, particularly among women.

Arab Israeli women also participate in the labor force at a higher rate than in the past. The rate of employment for both men and women has risen among Haredim (ultra-Orthodox) as well, but there are gaps between the various Haredi streams.

The booklet was edited by Prof. Avi Weiss, Director of the Taub Center and Professor of Economics at Bar Ilan University.

Demographics: Projections about the makeup of Israeli society do not take into account current demographic trends

  • Israel’s current population is comprised of approximately 74% Jews, 21% Arab Israelis (17.6% Muslims, 2.7% Bedouin, 1.9% Christians, 1.6% Druze), and 5% defined as “Other.” Haredim are estimated to be about 12% of the total population, and the share of secular and traditional Jews – about 56% (pages 14-15).
  • The total fertility rate in Israel is high and stands at 3.11, almost double the rate in OECD countries. In recent decades, there have been significant changes in the fertility rates of all population groups, especially among Arab Israelis: since 1960, the fertility rate among Muslims has dropped by about 64%, and among Druze by 70%. On the other hand, among Jews there has been an increase in fertility since 1990 due to an increase in the share of Haredim and an increase in fertility rates among secular and traditional Jews (page 17).
    Fertility Rates EN
  • The number of children who began studying in first grade in the Arab education system has declined – a trend that is consistent with the decline in fertility rates for Arab Israeli women. Among Jews there is no such correlation: the number of first graders in the Haredi education system has increased significantly, but is lower than expected when taking into account fertility rates – and the greatest surprise is that the number of students in the State education system has increased at a higher rate than expected (page 18).
  • An examination of student movement between religious education streams reveals that between first and eighth grades most of the student movement is in the direction from more to less religious streams (page 20).
  • Long-term population projections do not take into account movement between the streams, although the Jewish population is experiencing a notable secularization trend. If the trend continues, the Haredi population is expected to make up about 21% of the population in 2059 (compared with 27% in the Central Bureau of Statistics forecast). This slower growth rate of the Haredi population will leave more time for other trends to develop, such as an increase in their integration into the labor market (page 21).
    Pop projections EN

Macroeconomics: The standard of living has risen, but price levels remain high and a slowdown in growth is evident

  • The standard of living in Israel has increased over the past decade, partly due to an increase in nominal wages and a decline in the rate of price increases. For many years real wages did not rise despite a rise in productivity. Changes in the past few years have reversed this trend, and the rise in real wages is catching up to the rise in productivity (page 25).
  • Despite a decline that began during the current decade, price levels in Israel are still 14% higher than the OECD average. There has been a decline in prices in most expenditure categories since 2005, mainly in industries exposed to competition from imported goods such as clothing and furniture. However, in the areas of housing and food, prices have risen since the beginning of the 21st century (page 28-29).
    CPI EN
  • Rental prices have risen by an average of 2% a year above and beyond the CPI since 2008, meaning that throughout the period demand increased more than supply. Housing prices have risen at an even faster pace. Possible explanations for this are a decrease (or expectation of a decrease) in interest rates, or an expectation that housing prices will continue to increase. Since the Bank of Israel’s interest rate has remained close to zero since 2015 it seems clear that there is no expectation of falling interest rates, and, therefore, the rapid rise in housing prices can only be explained by expectations of future housing price increases. In recent months housing prices have stopped rising, and the trend seems to be changing (page 30).
  • The economy is in a relatively good state and the rate of labor market participation is the highest it has ever been, yet there has been a slowdown in productivity growth. One reason for this is that most of those joining the labor market are from populations with relatively low levels of education and earning capabilities. Improving the educational achievements of these groups could be a source of future economic growth (page 31).
  • The Israeli economy is characterized by stark polarization. For example, high-tech salaries are 2.5 times higher than wages in the rest of the business sector. These gaps are significantly greater than in other countries. One reason for this is that in large parts of the business sector productivity has remained unchanged for many years (page 34).

Welfare: The unemployment rate is low and continues to drop, but the poverty rate remains the highest among OECD countries

  • The poverty rate in Israel, when measured using disposable income, is the highest among OECD countries. However, in the last year examined (2016), the poverty rate had fallen by about 1%. At the same time, there was an increase in employment rates and the unemployment rate is low and continues to drop. In light of the planned increase in disability benefits and old-age pensions, there may be an additional reduction in the poverty rate in the near future (page 36).
  • The sum allocated to the implementation of the Elalouf Committee for the War Against Poverty in 2017 was only 31% of the Committee’s recommendations. In contrast, a considerable sum was allocated to the “Savings for Every Child” program, which appeared among the recommendations but was not budgeted. The amount of money that will accrue in these personal savings funds is expected to be more or less sufficient to finance tuition for higher education (for families who choose to add NIS 50 from child allowances to the savings accounts). The program is not unique to Israel, but only in Israel is the allowance universal (pages 40-41).
  • The percentage of government expenditure devoted to social spending is increasing, but at a very slow pace. Most of the increase has been in the health and education budgets. However, in the area of health, the increase has not kept pace with rising medical needs or with the increasing costs of medical care (page 37).
    Welfare budget EN
  • The sum allocated for old-age pensions has increased due to the aging population, and the burden is expected to increase as the share of those of working age in the population declines. The decision to raise disability benefits over the next three years, from NIS 2,800 to NIS 4,000 a month is also expected to place a burden on the budget (page 38).
  • The portion of those actually receiving the negative income tax is only 70% of the number who are eligible. In 2018, several changes are expected in the plan: extension of eligibility for single parents – adding in an additional 50,000 potential recipients; an increase in the benefit for men to make it equal to that for women; and an increase in the maximum permissible salary (page 39).
  • About 37% of Jewish Israeli households spend more than their income. Among households seeking assistance in financial management, those with higher incomes owe more to banks, and those with relatively lower incomes borrow more from family members and friends (page 45).

Health: Israelis are relatively healthy and have high life expectancy, but they spend a larger percentage out-of-pocket on health services than the average in the OECD, and the health system is not adequately prepared to cope with the aging population

  • The share of health expenditure out of GDP has remained stable in Israel, despite an increase in medical needs due to rising life expectancy and the aging of the population, which has resulted in an erosion of about 10% in the real expenditure on health per standardized person, and an increase of 10% in the cost of medical care (page 50).
  • The gap between the share of public expenditure out of total health expenditure in Israel and its share in the OECD has increased almost threefold over the past two decades, and households are spending more on health services. A major reason for this is an increase in the purchase of private insurance plans, mainly because they allow for choosing one’s own surgeon and shorter waiting times (pages 53-54).
    Private health EN
  • Life expectancy at birth for the Arab Israeli population is four years lower than for the Jewish population, and lower than the average in OECD countries. One of the reasons for this is that the infant mortality rate in the Arab Israeli sector is three times higher than in the Jewish sector. The main cause of the gap in child mortality is congenital disorders (pages 56-57).
    Infant mortality
  • The lower socioeconomic status of the Arab Israeli population has an impact on the level of health; the higher the socioeconomic profile of a locality, the higher its life expectancy.

Education and employment: There have been significant changes in the fields of study of students in higher education, and an increase in employment rates in all sectors – including for Haredi men and Arab Israeli women

  • The share of those qualifying for a bagrut certificate with five unit-level math rose from 10.6% to 13.8% between 2013 and 2016 in light of measures taken by the last two Ministers of Education to encourage this (such as the “safety net” for those who take the exam and the addition of math teachers and teaching hours) (page 67).
  • Computerization and technology trends in the labor market have led the Ministry of Education to encourage vocational education tracks, so that even those who do not acquire an academic education can pursue relevant professions. As a result, the number of students in vocational tracks increased from 33% in 2010 to 36% in 2015 in the Hebrew education system, and from 40% to 43% in the Arab education system (page 68).
  • In more than 60% of classes there was at least one student in 2015 who suffered from ostracism. Students in the Arab education system suffer from ostracism at a rate 3.5 times as high as do students in the Hebrew education system. With this, there has been an encouraging 38% decrease in the portion reporting being ostracized in the Arab education system, and a 30% decrease in the Hebrew system (page 75).
  • Returns to education are higher among women than among men, and a first degree is expected to yield an increase of 22.5% in the wages of Jewish women and of more than 26% for Arab Israeli women. Among men, however, the yield is expected to stand at about 18%. Among immigrants, returns to education are seemingly low – 8.8% for women and 9.3% for men – but this reflects the difficulty that immigrants from the Former Soviet Union in the 1990s faced in finding jobs that matched their levels of education, and returns to education for immigrants who came to Israel as children are similar to those of native born Israelis (page 69).
    Return on education
  • In the past two decades there have been significant changes in higher education: the percentage of students studying humanities has fallen by about 50%, and the percentage in the social sciences has fallen to less than 20%. On the other hand, the share of students studying business administration rose by over 50%, and the share pursuing medical professions by more than 60%. The largest absolute increase was in the share of students studying architecture and engineering (page 70).
    Study majors
  • The Arab Israeli population has improved their achievements and narrowed gaps in education: the share of students enrolled in high school rose from 63% in 1990 to 93% in 2015, compared to 97% among the Jewish population. The percentage of female Arab Israeli students studying science and technology subjects in high school is high and continues to rise steadily, but does not translate into Arab Israeli women pursuing these subjects in higher education or employment (page 81,85).
  • There has been a large increase in the share of Arab Israeli women studying in higher education, and the rate is currently double that of Arab Israeli men. However, they tend to study education at very high rates, as is reflected in the labor market – 3 out of 5 Druze and Muslim women with a degree, and 4 out of 5 Bedouin women work in education.It seems that the reason for these choices may be that the field of education allows Arab Israelis to work within their communities and in Arabic, and is considered beneficial for family life. Many Arab Israeli men work in the healthcare fields. Developing new employment opportunities in Arab Israeli communities, improving public transportation, and incentivizing hiring Arab Israelis may help to provide this population with a more balanced distribution of occupations (pages 90-91).
  • Haredi men study law at a very high rate and Haredi women tend to study education and health; however, they also study more mathematics and computers than do secular women. In the labor market there are notable differences between the Haredi streams: among Haredi men ages 23-30, Chabad men work the most, with almost 50% employment in 2013. Among Haredi women, the highest employment rates are among Lithuanian women, about 80% of whom are employed. There has been an increase in employment rates over time among all Haredi streams, both for men and for women (pages 97-98).

 

To read the full “Picture of the Nation 2018” booklet on the Taub Center website, click here.

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

 

The places that need welfare funding the most are getting the least

How much of lical authorities budget is spent on welfare services

In Israel, local authorities are primarily responsible for providing the welfare services needed by individuals, families, and communities.

Social workers and other professionals employed in the local authority social service departments deal with the problems of around 464,000 households in distress who receive a range of services including care for the elderly, individuals with disabilities, and children at risk.

Currently, these services are funded by what is called the “matching” method: for every shekel invested by the local authority, Israel’s Ministry of Labor and Social Welfare allocates three shekels. In practice, this means that 75% of the local authority’s welfare budget is financed by the Ministry of Labor and Social Welfare and 25% by the local authority itself, though municipalities can, and do, add additional resources.

This funding method is the topic of much public debate. While many argue that, under the current method, the funding for social services is inequitable across local authorities, there is not much data available on the topic. Many of Israel’s decision makers agree that the “matching” method should be abolished or modified, though there is little consensus about what type of funding method should be adopted in its place.

A recent Taub Center study, conducted by Prof. John Gal, Shavit Madhala, and Haim Bleikh, sheds light on the extent of funding gaps between different local authorities and explores possible explanations for these gaps.

When looking at the percentage of a local authority’s budget that goes towards welfare services for its residents, localities of low socioeconomic ranking spend about 11% of their budgets on welfare services, as compared to about 6% among localities of high socioeconomic ranking.

There are also large differences among localities in Israel when looking at average welfare spending per client. While Israel’s strongest localities (a group of localities called the “Forum-15” that do not require central government development grants or balanced-budget grants) spend an average of NIS 9,095 per client annually, Arab Israeli localities spend an average of only NIS 3,387 per client.

In the Haredi localities, the average expenditure is NIS 8,749, compared to NIS 7,318 in the remaining Jewish localities.

Total annual expenditure per client by localityThe study explores a number of possible explanations for these funding disparities. One possibility that the researchers raise but do not find to be compelling is that weaker authorities are unable to meet their share of the funding costs in order to receive the full budget from the Ministry of Labor and Social Welfare.

Given that over 90% of local authorities do indeed spend the entire budget earmarked for them at the beginning of the year (or more) and that the few who don’t include authorities in both low and high socioeconomic clusters, this does not seem to be a major reason for funding disparities.

However, it is quite possible that authorities with fewer resources request a relatively small sum from the national government in order to avoid a situation where they cannot meet their share of the funding later in the year.

The researchers find that another possible explanation – differences in the types of care frameworks localities use to provide social services – does indeed explain over half of the difference in initial funding that localities receive from the Ministry of Labor and Social Welfare.

Different types of frameworks can have substantially different costs from one another. Localities of lower socioeconomic standing tend to use fewer out-of-home residential services, which are the most expensive type.

This, in turn, has an impact on the initial sum allotted to them by the Ministry (and, presumably, on the quality of care provided to clients): in the initial allocation, NIS 3,170 per client is allocated to localities of low socioeconomic standing, on average, as opposed to NIS 5,400 per client to the other authorities.

Haredi localities are an interesting exception. Though Haredi localities belong to lower socioeconomic clusters, they tend to use out-of-home care frameworks more and, as mentioned above, end up spending more per client than other Jewish (non-Forum-15) localities.

In addition to differences in the original allocation by the Ministry of Labor and Social Welfare, a third explanation for funding gaps is that more affluent localities tend to allocate more additional resources to welfare issues, beyond those required to receive funding from the Ministry of Labor and Social Welfare through the matching method.

Here again the Haredi localities stand out. They supplement the budget beyond what is required by the matching method, despite belonging to lower socioeconomic clusters.

Since the study’s publication, the researchers have continued to meet with national and local leaders, sharing their findings and adding much-needed data to the policy discussion on this topic.

 

 

Trends in Religiosity Among the Jewish Population in Israel

Executive Summary

What will the religious makeup of the Israeli population look like in the coming decades? According to the projections of the Central Bureau of Statistics (CBS), the Haredi population will compose about 50% of the Jewish population in Israel by 2059. However, this assessment does not take into account religious mobility between the different sectors.

In this study, researchers Prof. Alex Weinreb and Nachum Blass examine trends in religious mobility among Israeli Jews, as reflected by the movement of students between sectors in the education system, and find that the bulk of the movement is towards less religious streams. The study finds that the State education system is larger than would be expected on the basis of fertility rates in each sector, while the State-religious and Haredi education systems are smaller than would be expected.

First grade enrollment doesn’t match fertility rates

The study determines the number of students in first grade according to type of school supervision, and compares this to their expected number given fertility rates in the various religious population groups

  • As expected, the number of students enrolled in the Haredi education stream increased at the fastest rate between 2001 and 2015: from about 16,700 1st graders to about 28,000. In the State-religious stream the increase was from about 15,000 to about 21,500 students, and in the State education stream from about 45,000 to about 62,500.
  • From 2013-2015, the number of students in the Haredi education stream was about 7.5% lower than expected given fertility rates in the Haredi sector.
  • From 2001 to 2015, the State education system increased at an annual growth rate of over 2% –higher than expected given fertility rates among the secular and traditional populations.
  • During the same period, the increase in the number of students in the State-religious education system was consistent with fertility trends.

Transfers from first to eighth grade show a net flow towards less religious education streams

The study records which religious education stream students belonged to at the beginning of the research period (1st grade) and at the end (8th grade).

  • Almost 98% of the students who attended State schools in 1st grade remained in this stream in 8th grade.
  • The share of those leaving the State-religious education stream was about 20% of girls and 25% of boys. Most of these students transferred to the State education system, and only a few completed the research period in Haredi schools.
  • About 11% of girls and 13% of boys left the Haredi education system. 6.5% transferred to the State-religious system and about 4.5% transferred to the State system.
  • Across the 2001-2015 period, there was a net flow of 9.0% of boys and 6.4% of girls from Haredi to one of the less religious streams by 8th grade (about 60% to religious schools, the rest to State schools). Likewise, there was a net flow of 16.4% of boys and 11.7% of girls away from State-religious schools toward the State education stream.

Religious mobility in Israel: towards secularization

The net flow of students from more to less religious education frameworks seems to indicate the direction of religious mobility in Israeli society: a slowdown in the growth of the Haredi and religious populations and a slight increase in the growth rate of the secular population. The Haredi population will certainly continue to grow, but at a slower pace than expected.

If these trends continue, they will have a significant impact on the future composition of Israeli society. Though the CBS projections predict that for every 100 non-Haredi Jews in 2059 there will be about 50 Haredim, if trends in religious mobility are taken into account, there will be closer to 35 Haredim for every 100 non-Haredi Jews.

EN Projections 2

Are Israeli Jews Becoming More Secular?

To download the full publication (in Hebrew), click here 

What will the religious makeup of the Israeli population look like in the coming decades? This question is at the center of public discourse in Israel and is important in determining the economic, ideological and security-oriented future of the country.

According to the projections of the Central Bureau of Statistics, the Haredi population will compose about 50% of the Jewish population in Israel by 2059. However, this assessment does not take into account the movement between different sectors over time.

A new Taub Center study conducted by Prof. Alex Weinreb and Nachum Blass examines trends in religious mobility among Israeli Jews, as reflected by the movement of students between sectors in the education system, and finds that the bulk of the movement is towards less religious streams. The study shows that, if religious mobility is taken into account, the share of the Haredi population in 2059 is expected to be much lower – around 35%.

The study calls attention to the fact that the number of students in the State education system is 5.9% larger than would be expected on the basis of fertility rates in each sector, while the State-religious education system is 8.2% smaller than expected, and the Haredi system is 7.7% smaller.

In recent years, there has been much public debate about the level of religiosity of the Jewish population in Israel. There are those who claim that secular Jews are on the verge of extinction, and others who claim that religious populations – including Haredim – are undergoing accelerated secularization.

A new Taub Center research study by Prof. Alex Weinreb and Nachum Blass seeks to examine the issue by tracking mobility trends in Israel’s education system between 2001 and 2015, rather than the common approach of turning to the social survey. The researchers postulate that trends in the Jewish education system, which is divided into religious streams, are a fairly reliable representation of trends that are taking place in the society at large.

The study determines the number of students in first grade according to religious stream (type of supervision, according to Ministry of Education terminology), and compares this to their expected number given fertility rates in the various religious population groups, and to the number transferring between schools of different types of supervision between 1st and 8th grades.

The findings show that the State education system is expanding beyond what would be expected, in contrast to a reduction in the State-religious and Haredi streams. The main reason for this is greater movement from more religious streams to the State education system than movement in the opposite direction.

The Haredi population grew at the fastest rate, but growth was lower than expected

Weinreb and Blass examine the increase in the number of 1st graders enrolled in each education stream, and compare it to the expected increase in the number enrolled on the basis of fertility rates in each sector.

As expected, the number of students in the Haredi education stream increased at the fastest rate between 2001 and 2015: from about 16,700 1st graders to about 28,000. The number of students in the State-religious stream increased from about 15,000 to about 21,500 during the same period, and in the State education stream there was an increase from about 45,000 to about 62,500 students.

While the increase in the number of students in the State-religious education stream is consistent with fertility trends during the period, in the Haredi sector they were only consistent until 2012; from 2013-2015, the number of students in this stream was about 7.5% lower than expected given fertility rates. On the other hand, in the State education system, the number of 1st graders was higher than expected, with the annual increase in the number of students reaching more than 2%.

It is important to note that, due to reasons such as higher accessibility (particularly in the periphery) and an affinity for religious tradition, an unknown share of students in the Haredi education system come from homes with a weaker religious affiliation than their school – and excluding such students would make the gap between the expected number of students in the Haredi system and their actual number even greater.

Weinreb and Blass write that the discrepancy between projections and reality can be explained by several developments, including the bolstering of the State education system through both the substantial increase in women of childbearing age from the Former Soviet Union and the integration of immigrant and Arab Israeli children into the system.

Nonetheless, a large part of the phenomenon stems from changes in the religious orientation of students and their families, which is reflected in student transfers between education streams.

Projected versus actual 1st grade enrollment in the non-Arab education sector

Movement between education streams from 1st to 8th grades: the Haredi education system loses more students than the State system

The study follows students who were born between 1992 and 2003 and records which religious education stream they belonged to at the beginning of the research period (1st grade) and at the end (8th grade). The data show that almost 98% of the students who attended State schools in 1st grade remained in this stream in 8th grade. The vast majority of those who left the stream transferred to a State-religious school, and only 0.4% transferred to a Haredi school.

In the State-religious and Haredi schools, the magnitude of the change is greater. The share of those leaving the State-religious education stream was about 20% of girls and 25% of boys.

Most of these students transferred to the State education system, and only a few completed the research period in Haredi schools. About 11% of girls and 13% of boys left the Haredi education system. 6.5% transferred to the State-religious system and about 4.5% transferred to the State system – a share 11 times higher than those who transferred from the State to the Haredi system.

Transfers between the streams indicate a slowdown in the growth rate of the Haredi and religious populations

“The movement between the streams indicates a significant slowdown in the growth rate of the religious population, a slight slowdown in the growth of the Haredi population, and an end to the decline – and even a slight increase – in the growth rate of the secular population in Israel,” Taub Center researchers Blass and Weinreb explain. “It seems that large segments of the religious and Haredi populations are experiencing a decline, to various degrees, in the level of religious commitment.”

Nevertheless, the researchers note that “fertility rates among Haredim are still much higher than in the other population groups, so the share of the Haredi population is expected to continue to rise. This increase, combined with the stability or growth of the secular population – at the expense of the religious and traditional populations – creates a more religiously polarized society.”

Previous studies have shown that trends in decreased religiosity continue until 12th grade, and a total of about 15% of Haredim in each generation are expected to leave the sector. Moreover, since 1996 there has been a gap between the actual number of voters for the United Torah Judaism party and the expected number based on the natural growth rates of the Haredi population.

If these trends continue, they will have a significant impact on the future composition of Israeli society. According to the assessment of the Central Bureau of Statistics (in the medium growth scenario), which is based solely on fertility rates, for every 100 non-Haredi Jews in 2059 there will be about 50 Haredim. However, if trends in religious mobility are taken into account, for every 100 non-Haredi Jews there will be about 35 Haredim.

EN Projections 2

As stated by Taub Center Executive Director Prof. Avi Weiss: “Forecasts based on natural growth rates, which do not take other factors into account, should be treated cautiously. In addition to movement between the sectors, we must take into account that level of religiosity doesn’t necessarily reflect a particular stance on participation in the labor market, for example, and the data show that more and more Haredim are joining the labor force without rejecting their way of life.”

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

What’s the cost of health – and who’s paying?

Overall, healthcare spending as a share of GDP has remained fairly stable in Israel over the past two decades, weighing in at about 7% of the GDP, which is low when compared with other OECD countries (10% on average). Most of this expenditure is paid by the government, as witnessed by the recently passed 2019 state budget, which included NIS 38 billion allocated to the Ministry of Health.

Alongside this public spending, a significant portion is paid directly by Israelis out-of-pocket. A recent Taub Center study sheds some light on the private-public divide in the provision of healthcare in Israel.

According to the study, the share of public funding out of the total national spending on health has dropped over the past decade: from about 70% to 61%. As a result, the Israeli government’s share in financing health services is currently 15 percentage points lower than the OECD average.

At the same time, there is a growing gap between supply and demand in Israel’s public health system. On the one hand, demand for medical care has increased over the past decade due to the rapidly aging Israeli population. On the other hand, there has been a drop in the supply of medical personnel in the system, at least in the public sector: the number of both physicians and nurses per capita have dropped since the early 2000’s.

As a result of the increasing excess demand in the public sector, more Israelis are turning to the private sector for their medical needs. Consequently, private spending on health has increased in Israel: from 4.5% of total household spending in 2000 to 5.7% in 2015. A large portion of the increase has been directed towards the purchase of private insurance plans, which rose from 18% of total household spending on healthcare to 37% over the same period.

 

Health EN

Of the citizens who report use of private medical services, 42% said they did so primarily in order to select the physician/surgeon of their choice. Another 22% turned to private healthcare in order to get a quicker appointment.

One of the great ironies of this is that Israelis are spending more out-of-pocket in order to receive proper care in private clinics, even though the care is often administered by the same doctors who work in the publicly-funded system. What’s more, doctors are known to refer their patients from the public system to their private practices.

This can be appealing for patients who are willing to spend more for better service (not to mention more lucrative for the doctors). However, the more time these doctors spend working in the private sphere, the more public facilities such as operating rooms are left underutilized. Additionally, more hours worked in the private system further exacerbates the problem of a limited supply of medical personnel in the public system.

Furthermore, as wealthier Israelis turn to the private system, gaps in access to health services are widening between households of different income levels and between the different geographic regions in Israel. While this, in and of itself, may not be problematic, it undermines the egalitarian spirit of the Israeli health system.

In recent years there have been a number of government efforts to address the challenges facing the public health system including efforts to shorten waiting times, prohibit doctors from referring their public system patients to their private practice, and allocating money to improving the infrastructure of hospitals.

However, there is still room for reforms in other areas including expanding physician choice in the public system and enacting policies that will result in an increase in the supply of medical practitioners. Improving Israel’s public health system could help to curb Israelis’ out-of-pocket spending on medical services and reduce socioeconomic disparities in access to quality medical care.

The Income-Expenditure Gap and Household Debt in Israel

Executive Summary

This study analyzes the gap between Israeli household income and expenditure, and examines this gap alongside characteristics such as socioeconomic status, age, marital status, and expenditure on housing. The data show that expenditure on housing is the most significant factor in determining the gap between income and expenditure among those who are unmarried, and socioeconomic status is the most significant factor among married couples. The study also finds that there has been a rapid increase in the total liabilities of households in recent years, though an international comparison shows that the situation in Israel is relatively good.

A negative gap

A negative current gap – when expenditure is greater than income – is liable to increase a household’s risk of economic difficulties. In Israel, the share of households with a negative gap in the Jewish population stands at about one third of all those aged 25-60: 35% of households among married couples and 39% among unmarried persons (as of 2015).

Housing expenditures

One of the most significant household expenditures is the expenditure on housing (rent or mortgage). The study finds that when households are classified according to the type of their expenditure on housing: rent, mortgage payments, rent and mortgage payments, or no housing expense, households that pay both rent and mortgage payments, have a higher negative gap than those who pay only rent, only mortgages, or neither.

What influences the size of the negative gap? Married and unmarried households

Among unmarried persons, the combined expenditure on mortgages and rent is the most influential factor in determining the size of the negative gap: this expenditure increased the per capita negative gap by 156% relative to households without housing expenditures (when other characteristics are held constant).

In contrast, among households of married couples, socioeconomic class is the most influential factor in determining the size of the negative gap. Having a lower socioeconomic standing (belonging to the bottom income quintile) increases the negative gap by 23% relative to households with a high socioeconomic status (belonging to the top quintile).

In terms of the effect that consumption categories have on the size of the negative gap, the study finds that expenditures on “personal expenses” – including clothing and footwear, laundry services, haircuts, and cosmetics – increases the negative current gap at the highest rate both among those who are married (7.2%) and those who are unmarried (4.6%).

Household indebtedness

In addition to the above analyses on household income and expenditure, the study includes an analysis that classifies liable households by the entity to which they owe money: (1) banks (2) commercial bodies, and (3) family and friends. Most households in debt (93%) owe money to banks, 46%-51% owe money to friends and family, and between 21% and 37% owe money to commercial entities.

An analysis by age group found that total average debt (to all three types of entities) increased with age: the average debt in the 25-29 age group was NIS 150,000, compared to NIS 315,000 in the 50-60 age group.

Comparing total debt by socioeconomic status (income quintiles) shows that there is no significant gap between the quintiles in the amount of debt owed, but there are gaps in the distribution of the entities to which households are indebted.

While the top income quintile owed the highest amount to banks (approximately NIS 174,000), the bottom quintile owed the highest amount to family and friends (approximately NIS 110,000). These data show that, due to the low income of households in the lowest quintile, banks do not grant them high credit ratings, but they manage to raise funds from friends and family.

debt1111

An international comparison

An analysis of total liabilities taken by households in Israel shows that since 2007 there has been an increase in the growth rate of liabilities. An international comparison shows that the leverage (the ratio of total liability to GDP) of households in Israel is very low compared to other developed countries: the share of liability stands at 41% of GDP in Israel, compared with an average of 66% of GDP in the OECD.

 

Press Release: Household Debt and the Gap Between Income and Expenditure in Israel

The full research will be available shortly. For the full version in Hebrew click here

A new Taub Center study conducted by Researcher Kyrill Shraberman, in collaboration with Paamonim (a non-profit organization promoting financial responsibility across Israel), examines the gap between the income and expenditure of Israeli households (hereinafter, the current gap). A negative current gap (when expenditure is greater than income) is liable to increase the household’s risk of economic difficulties.

The study examines the relationship between various household characteristics, such as socioeconomic status and age of the head of household, and the probability of having a negative gap.

The share of households with a negative gap in the Jewish population stands at about one-third of all those aged 25-60: 35% of households among married couples and 39% among unmarried persons (as of 2015).

The most influential factors on the negative gap between income and expenditure: housing and socioeconomic status

One of the most significant household expenditures is the expenditure on housing (rent or mortgage). Due to the centrality of this expenditure, and due to the fact that housing prices have risen significantly in the past decade, the Taub Center study classifies households according to the type of their expenditure on housing: rent, mortgage payments, rent and mortgage payments, or no expense.

The study found that households that pay both rent and mortgage payments (for example, households that purchased an apartment that is in the process of being built and are currently renting) have the highest negative gap among all the expenditure groups, and the gap is particularly large among unmarried households where the head of household is aged 50-60, and among 40-50-year-olds for married households. However, this is a very small share (amounting to only a few percentage points) of all households in Israel.

The study also found that most of the households that pay only mortgage payments do not have a negative gap. Households of married couples who pay only rent had a balanced average, with no significant positive or negative gaps. However, for unmarried households, there was a negative gap among much younger apartment renters (aged 25-29) and much older renters (aged 50-60). As expected, households without housing costs have almost no negative gap and, among most of them, income exceeds expenditure.

Type of housing expenditure was also found to be significant in determining the size of the negative gap in an analysis including a combination of several characteristics, such as the age of the head of household, place of residence, and socioeconomic background. Among unmarried persons, the combined expenditure on mortgages and rent is the most influential factor: this expenditure increased the per capita negative gap by 156% relative to households without housing expenditures (when other characteristics are held constant).

Expenditure on rent only increased the gap by 52%, and on mortgage payments – only by 39%. These three types of housing expenditure were the factors that most affected the size of the negative gap among unmarried persons.

Among married couples, the effect of the type of housing expenditure on the gap between expenditure and income was much lower. Expenditure on mortgages and rents increased the negative gap by 14% (the characteristic with the second-largest impact on the size of the gap), expenditures on rent only by 7% (the characteristic with the fourth-largest effect), and spending on mortgages increased the negative gap by only 1% relative to households with the same characteristics that have no housing expenditures.

In contrast, among households of married couples, socioeconomic class is the most influential factor in determining the size of the negative gap. Having a lower socioeconomic standing (belonging to the bottom income quintile) increases the negative gap by 23% relative to households with a high socioeconomic status (belonging to the top quintile). Among unmarried persons, having a lower socioeconomic standing increases the negative gap by 37% but, as stated above, the type of household expenditure is a more influential factor for this group.

Expenditures on clothing and cosmetics and housing costs increase the negative gap

The Taub Center study also analyzes the effect that consumption categories have on the size of the negative gap. The findings indicate that expenditures on “personal expenses” – including clothing and footwear, laundry services, haircuts, and cosmetics – increase the negative current gap at the highest rate both among those who are married (7.2%) and those who are unmarried (4.6%). It is reasonable to assume that the reason this category has such a large influence is that these expenditures, though not frequent, are relatively large and often unplanned, making it difficult to effectively manage the budget, as opposed to regular and planned expenses such as rent, education, and home maintenance.

The expenditure with the second-largest effect on the negative gap among unmarried persons is expenditure on a mortgage: 3.8% (compared with 1.9% among married couples). Among married couples, the expenditure with the second-largest effect is home maintenance (water, electricity, municipal taxes, and gas), which increases the negative gap by 6.8% (among unmarried persons, the effect of this expenditure is not significant).

The leading entity to which households are indebted – the banks

Shraberman’s research is based, among other things, on data from Paamonim, which enabled him to analyze household debt in Israel (data that are not fully available from other sources). The study includes an analysis that classifies liable households by the entity to which they owe money: (1) banks – debt resulting from loans, credit charges, debit balances, and mortgage payment delays; (2) commercial bodies – debt to suppliers and service providers (including municipal property taxes and electricity payments), non-bank loans (insurance and credit companies), payments to educational institutions, and more; (3) family and friends.

Most households in debt (93%) owe money to banks, 46%-51% owe money to friends and family, and between 21% and 37% owe money to commercial entities.

An analysis by age group found that total average debt (to all three types of entities) increased with age: the average debt in the 25-29 age group was NIS 150,000, compared to NIS 315,000 in the 50-60 age group. The highest debt to banks was recorded for households in the 45-49 age group, and the highest debt to family and friends, as well as to commercial entities, was recorded among those aged 50-60.

Comparing total debt by socioeconomic status (income quintiles) shows that there is no significant gap between the quintiles in the amount of debt owed, but there are gaps in the distribution of the entities to which households are indebted.

While the top income quintile owed the highest amount to banks (approximately NIS 174,000) the lowest quintile owed the lowest amount to the banks (approximately NIS 88,000). On the other hand, the bottom quintile owed the highest amount to family and friends (approximately NIS 110,000). These data show that, due to the low income of households in the lowest quintile, banks do not grant them high credit ratings, but they manage to raise funds from friends and family.

An in-depth analysis of debt to commercial entities shows that the most common type of debt in this category is financial debt – mainly credit from non-banking entities (insurance companies or credit card companies, for example). The second-largest type of debt is property taxes and fines, the third-largest is education spending, and the fourth-largest is debt to infrastructure suppliers (electricity, water, and gas).

According to Shraberman, “this means that home maintenance and education costs contribute more to households’ financial difficulties than discussed in the study, due to a tendency to delay these payments in order to cope with immediate economic difficulties.”

Total liability in the economy rose rapidly, but an international comparison shows that the situation in Israel is relatively good

An analysis of total liabilities taken by households in Israel shows that since 2007 there has been an increase in the growth rate of liabilities. An international comparison shows that the leverage (the ratio of total liability to GDP) of households in Israel is very low compared to other developed countries: the share of liability stands at 41% of GDP in Israel, compared with an average of 66% of GDP in the OECD.

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

 

 

Closing the gaps? The achievements of Arab Israeli women

Usually, socioeconomic discussions about the Arab Israeli sector focus on the gaps that still exist between this sector and Jewish Israelis, and don’t emphasize the areas where substantial improvements have been made. In the case of Arab Israeli women – the data point often cited is their low employment rate, which stood at 34% for those aged 25-64 in 2017.

However, recent findings by Researcher Hadas Fuchs show the bigger picture including the large strides that have been made by Arab Israeli women in education and their improvements, though more limited, in employment. Academic achievements are important to the discussion of employment as well given that Arab Israeli women with an academic degree are employed at much higher rates than those without one. At the same time, there are still opportunities for further improvement among this segment of the population.

Already in high school, the percentage of Arab Israeli women qualifying for a bagrut (matriculation exam) surpasses that of Arab Israeli men and is approaching the qualification rate of non-Haredi Jewish women.

Furthermore, the lower socioeconomic status of the Arab Israeli population, on average, seems to contribute to the gaps that remain. When controlling for socioeconomic background, the matriculation rates among all sub-groups of Arab Israeli women are higher than those among Jewish women.

There has been a notable rise in the share of Arab Israeli women enrolling in higher education – particularly notable is an increase of nearly 50% among Bedouin and Druze women between 2008 and 2013 – while there has been almost no change in the enrollment rates of Arab Israeli men. Nonetheless, a smaller share hold a degree than Jewish women; in 2014, about half of Jewish and Arab Christian women aged 30-33 held an academic degree, whereas the percentage of academics was only 23% among Muslim women, 19% among Druze, and 16% among the Bedouin.

Despite the fact that over 70% of Arab Israeli women who qualify for a matriculation certificate study science/engineering majors in high school (compared with only 39% of Jewish women) – subjects associated with a potential for high future wages – by college, they are studying science and engineering at relatively low rates.

Rather, a large percentage of Arab Israeli women pursue degrees in education: 42% among Muslim women and 46% among Bedouin women, compared to only 16% among Jews.

This trend continues on into employment. Among Muslims, Druze, and Bedouin, over 50% of employed female degree-holders work in education, including many women who did not major in education in college. This share is nearly three times higher than the share among Jewish women.
employment branches for thos with a higher degree ages 25-35

The story of Arab Israeli women in the field of education is a complex one. On the one hand, the average number of working hours of Arab Israeli teachers (men and women) has risen in recent years and the share of women employed part-time decreased, meaning that many women are able to find work and with a large number of hours.

On the other hand, the data show that in the past few years, Arab Israelis who studied education are having trouble finding jobs in the field. While the percentage of Jews who received training in education and have since entered the field of teaching has remained relatively stable over the past decade or so, among Arab Israelis there has been a notable decline.

In addition, demand for Arab Israeli teachers is not expected to grow because Arab Israeli fertility rates are declining, the Arab education system has reached near full enrollment, and the trend of reducing class size has stabilized. Thus, there are indications of an excess of women in the field, which is likely to increase further in the future.

In general, employment rates among Arab Israeli women have increased since the early 2000s, but the increase was similar to the increase among Jewish women, such that the gap between them hardly narrowed.

While the employment rate of those with a degree has remained stable at around 75%, a particularly notable increase occurred among non-academic Arab Israeli women aged 45-54. Nonetheless, the 34% employment rate among those aged 25-64 in 2017 is still far from the target rate set by the government for 2020 – 41%.

Wage gaps between Jews and Arab Israelis are low among graduates with degrees in the fields of health and education (occupations in which most jobs are part of the public sector), but are large among those who studied engineering, computer science, business administration and management.

These data reveal that gaps between Arab Israeli and Jewish women still remain. However, given that Arab Israeli women with an academic degree are employed at much higher rates than those without, there is reason to hope that the strides made in education will be accompanied by improvements in employment in the coming years. This could advance Arab Israeli women and could also be a source of growth for the larger Israeli economy.

In order to confront the challenges that remain and promote this population group, it is possible to consider a number of options, including: improving the Arab education system, advising students to increase awareness of ‘in demand’ professions and providing guidance as they navigate academic studies and enter the labor market, and increasing employment opportunities for workers in Arab Israeli localities and the surrounding areas.

 

 

Education, Infrastructure, and Economy of Israel

The Launch Event for the 2018 OECD Economic Survey of Israel, jointly hosted by the Taub Center and the OECD, was held on Sunday evening, March 11, at the Menachem Begin Heritage Center in Jerusalem. The event, moderated by Taub Center Director of Policy Analysis Liora Bowers, attracted an audience of over 50 participants, ranging from civil servants, academics and journalists to curious citizens. This is the third such joint event of the Taub Center and the OECD, reflecting a growing relationship between the two over the past five years.

The evening opened with remarks by Peter Jarrett, Head of Country Studies Division 1 at the OECD, as he presented the latest bi-annual country survey on Israel. Mr. Jarrett began by praising Israel’s macroeconomic and fiscal performance over the last decade, saying it is one of the best outcomes in the OECD, but quickly added that the high GDP growth may be partially explained by the population growth.

He further noted that unemployment is falling sharply and steadily, and that only six countries in the OECD are currently performing better in this regard. Mr. Jarrett concluded the generally positive introduction by highlighting Israel’s falling debt levels and low macro financial vulnerability, noting that the Bank of Israel is rightly maintaining low interest rates, but should be prepared to gradually increase when inflation becomes entrenched in its target range.

Peter Jarrett, Head of Country Studies Division 1 at the OECD

Peter Jarrett, Head of Country Studies Division 1 at the OECD

Yet, not everything was rosy in the OECD survey findings. Mr. Jarrett pointed to Israel’s sky-rocketing house-prices over the last decade, as well as large disparities between Israel’s different population groups, noting the OECD’s perspective that low spending reduces the government’s capacity to address social inequality.

“Above all, reforms and more public investment in education would improve the skills of Haredim and Arab Israelis, allowing them to find well-paid jobs,” he said, referring to the substantial gaps in labor-market outcomes and wages between disadvantaged population groups and the rest of society, predominantly due to differences in skill levels. According to Mr. Jarrett, education spending  per student is low in Israel compared to the OECD, even while the need is likely higher. He further stressed the need for strengthening work-based vocational training and increasing efforts to provide training for the unemployed.

The audience

The audience

Other major challenges facing Israel, according to the OECD findings, include the large infrastructure deficit, especially in public transportation, and the difficulties in doing business. Regarding infrastructure, the OECD recommendations range from ensuring that municipalities have adequate resources to finance local infrastructure services, to promoting automated road tolls. In order to improve the business environment in Israel, Mr. Jarrett stressed the need for streamlining bureaucracy.

The survey found that Israeli businesses have to make the highest number of tax payments in the OECD, and that time required to comply with tax regulation is also very high, and that this especially affects small and medium sized companies.

The evening then continued with remarks by Taub Center’s Executive Director, Prof. Avi Weiss. Drawing upon findings published in the State of the Nation Report, 2017, Prof. Weiss spoke about the two-sector economy of Israel. He noted that in Israel’s high-tech sector wages are 2.46 times higher than in the non high-tech business sector – a difference that is much higher than the OECD average.

Normally, “labor mobility shouldn’t allow this to happen, but in Israel labor mobility is quite low,” he explained. The strong shekel has hurt exports, which causes businesses to turn inwards. This in turn leads to less competition and low investments in advanced equipment.

 Taub Center's Executive Director, Prof. Avi Weiss

Taub Center’s Executive Director, Prof. Avi Weiss

Prof. Weiss went on to comment on the OECD report, in particular the recommendation to increase spending while not adding to the debt, asking, “the OECD report talks about increasing public investment in education and infrastructure. How can we raise public funding in these areas in a fiscally responsible way?” He noted that there is little room for spending increases at the current tax rate, especially when such a large share of the budget goes to security.

Prof. Weiss further stated that the OECD report doesn’t necessarily reflect the many positive developments we’ve seen in education, among Arab Israeli women in particular. Also among the ultra-Orthodox there have been improvements in recent years, such as the increased enrollment at academic institutions.

After Prof. Weiss’ remarks, a panel of experts on education and infrastructure was convened to comment on the OECD findings.

Prof. Reuben Gronau of Hebrew University, weighed in on infrastructure. He expressed his appreciation for the OECD Survey – calling it the most comprehensive report on Israel’s infrastructure he has ever seen – given how little published material there is to draw upon in this field.

Prof. Reuben Gronau of Hebrew University

Prof. Reuben Gronau of Hebrew University

Prof. Gronau then mentioned his own paper from 1998, on the public utilities sector in Israel, which he called “the reform that never was,” and noted that in some industries, such as the electricity industry, very few or no reforms have taken place in the past 20 years.     The “elephant in the room,” according to Prof. Gronau, is the political economy, noting the large role of Workers’ Unions in setting wages.

Nachum Blass, Principal Researcher at the Taub Center, expressed his admiration for the comprehensive work done by the OECD in this survey, and added a number of reservations.

He shared his perspective that there is too much reliance on international education comparisons, such as PISA and PIIAC. In Mr. Blass’ words, “the long-standing economic, cultural and social achievements of the Israeli society reflect a remarkable contrast to its equally longstanding low ranking in the international exams.”

Nachum Blass, Principal Researcher at the Taub Center

Nachum Blass, Principal Researcher at the Taub Center

He also commented on one of the OECD recommendation to make funding of Haredi schools conditional on teaching core studies, such as mathematics and English, noting the cultural and political challenges of imposing such incentives. He further stressed the need to provide assistance to those who decide to leave the Haredi lifestyle, pointing out a lack of such programs.

Taub Center Researcher, Hadas Fuchs, who authored recent reports on education and labor market trends among Arab Israelis, spoke of the need to look at gender when discussing both Arab Israelis and the Ultra-Orthodox.

“Haredi women acquire education with similar scores as non-Haredi women,” she noted, while adding that she found it difficult to be optimistic with regards to Haredi men since they don’t study the core subjects, and there are high dropout rates among those who do pursue academic degrees. Among Arab Israelis, there are also large differences between the achievements of men and women.

Taub Center Researcher Hadas Fuchs

Taub Center Researcher Hadas Fuchs

She noted that “women achieve much more academically, but study education at higher rates than men” where salaries are generally low. She suggested that we should look at ways to encourage women to study fields that lead to higher-paying jobs. However, the real focus should be on Arab Israeli men to understand what barriers they are facing.

The Taub Center is grateful for its ongoing relationship with the OECD and looks forward to continue working towards the shared goal of promoting research and meaningful dialogue on crucial policy areas with potential to improve the wellbeing of Israeli society.

 

 

Arab Israeli Women Entering the Labor Market: Higher Education, Employment, and Wages

*This brief is also available in Arabic. To read the full brief in Arabic, click here

The study shows that Arab Israeli women have improved their academic achievements in high school, are more successful than Arab Israeli men, and are approaching the achievements of Jewish women. In addition, there has been an increase in the share of Arab Israeli women pursuing higher education.

However, alongside these positive trends, there are areas that require further improvement: Arab Israeli women pursue careers in the field of education, which is already saturated with workers, at high rates, and study or pursue work in more lucrative fields such as computers and engineering at much lower rates. A more balanced distribution of fields of study and employment among Arab Israeli women would likely lead to better integration into the labor market and is a potential source of growth for the Israeli economy in the coming years.

The Taub Center gratefully acknowledges The Diane P. and Guilford Glazer Fund of the Jewish Community Foundation of Los Angeles for its generous support of the research study upon which this policy brief is based.

Press Release: Arab Israeli Women in the Labor Market

To read the full publication, click here
*This brief is also available in Arabic. To read the full brief in Arabic,
click here

The study shows that Arab Israeli women have improved their academic achievements in high school, are more successful than Arab Israeli men, and are approaching the achievements of Jewish women. In addition, there has been an increase in the share of Arab Israeli women pursuing higher education.

However, alongside these positive trends, there are areas that require further improvement: Arab Israeli women pursue careers in the field of education, which is already saturated with workers, at high rates, and study or pursue work in more lucrative fields such as computers and engineering at much lower rates.

A more balanced distribution of fields of study and employment among Arab Israeli women would likely lead to better integration into the labor market and is a potential source of growth for the Israeli economy in the coming years.

Arab Israeli women are characterized by relatively low educational and employment achievements, but this appears to be changing greatly in recent years. A new study by Taub Center Researcher Hadas Fuchs, with the assistance of Content Manager Tamar Friedman-Wilson, shows that the percentage of Arab Israeli women succeeding on the bagrut (matriculation) exam surpasses that of Arab Israeli men, and is approaching that of non-Haredi Jewish women (as seen in the figure).
Share of those with a bagrut qualification

It seems that the gap that still exists between the women of the two sectors is attributable to the Arab Israeli population’s lower socioeconomic status: when controlling for socioeconomic background, the rate of matriculation eligibility among Arab Israeli women is higher than that of Jewish women.

Another encouraging fact that emerges from the study is that many Arab Israeli women choose science and engineering majors in high school, subjects that are associated with a potential for high future wages. Over 70% of Arab Israeli women who qualify for a matriculation certificate study these majors, compared with only 39% of Jewish women.

The enrollment of Arab Israeli women in higher education institutions rose significantly between 2008 and 2013, while among Arab Israeli men there was almost no change at all. The largest increase, almost 50%, took place among Bedouin and Druze women.

However, despite this increase, gaps still remain between the groups: in 2014, about half of Jewish and Arab Christian women aged 30-33 held an academic degree, whereas the percentage of academics was only 23% among Muslim women, 19% among Druze, and 16% among the Bedouin. However, given the increase in enrollment rates in recent years, the gap is expected to narrow.

The Taub Center study also shows that a large percentage of Arab Israeli women are pursuing degrees in education: 42% among Muslim women and 46% among Bedouin women, compared to about 20% among Arab Christians and Druze and 16% among Jews.

Despite the large portion of Arab Israeli women majoring in science in high school (aside from chemistry and biology), the share of those who continue to study those fields in higher education is 31% among Jewish women, 21% among Arab Christians, 22% among Druze, and only 9% among Muslim women.

The improvement in educational achievements, which has narrowed the gaps between Arab Israeli and Jewish women, is not evident to the same degree when looking at employment. The rise in the employment rate of Arab Israeli women aged 25-54 is not as high as expected: from 21% in 2000 to 35% in 2016, compared with a similar increase among Jewish women that brought their employment rates to 80%.

A particularly significant increase occurred among Arab Israeli women aged 45-54 with no academic education – with employment increasing from 10% to 20%. Among Arab Israeli women with an academic degree, the employment rate stands at about 75% and has not changed much over the past decade.

According to Fuchs and Friedman-Wilson, “The low employment rate among all Arab Israeli women is surprising given their improvements in the realm of education. The employment rate in the 25-64 age group was 34% in 2017, which is still far from the target rate set by the government for 2020 – 41%.

However, the increase in the share of Arab Israeli women pursuing higher education likely indicates an improvement in their integration into the labor market in the coming years, since the employment rate of Arab Israeli female academics is much higher than that of women without an academic education.”

The Taub Center study also found that a particularly high percentage of Arab Israeli women work in the field of education: over 50% of Muslim, Bedouin, and Druze women who have an academic degree – more than three times the share of Jewish women degree-holders employed in this field. This figure also includes many Arab Israeli women who earned a degree in a subject other than education, but work in the field nonetheless.

The average number of teacher work hours in the Arab education system has risen, accompanied by a decline in the share of part-time workers, indicating that many Arab Israeli women seem to find work in the field and with a large number of hours.

However, in recent years, Arab Israelis who studied education have found it difficult to find employment in the field: as shown in the figure, the percentage of Arab Israelis who received training in education and have since entered the field of teaching declined from 90% in 2005 to 59% in 2015, compared to Jews where those entering the field has remained stable at around 74%.
 Teacher-training graduates working as teachersIn addition to the large number of graduates with a degree in education, the supply of teachers in the Arab Israeli sector does not meet regional needs: while more teachers are needed for the Bedouin population in the south, in the north there is an excess of teachers.

The differences between Jews and Arab Israelis are also evident in average wages, both among men and women. Wage gaps are low among those with degrees in the fields of health and education, and large among graduates of engineering, computers, business administration and management.

Among women, the wage gap between Jewish and Arab Israelis with a degree in computers is very high, standing at about 60% (apparently due to differences in mathematical skills, as exhibited in the quantitative section of the psychometric exam).

In summary, the Taub Center’s study shows that the employment rates of Arab Israeli women are growing but still remain low, and there is great potential for further growth due to the rise in the share of Arab Israeli women studying in higher education.

There are also several challenges facing Arab Israeli women with regard to employment: low psychometric exam scores, low proficiency in the Hebrew language, and a high percentage of Arab Israeli women working in education rather than in science, high tech and engineering.

It is possible to confront these challenges and promote this population group in several ways, including: improving the Arab education system, advising students to increase awareness of ‘in demand’ professions and providing guidance as they navigate academic studies and enter the labor market, and increasing employment opportunities for workers in Arab Israeli localities and the surrounding areas.

As Taub Center Executive Director Prof. Avi Weiss explains, “We decided to publish a brief that deals with the education and employment of Arab Israeli women in preparation for International Women’s Day and in light of the government goals to promote the Arab Israeli population in the coming years.

Alongside improving trends, there are problematic areas and barriers facing Arab Israeli women, who could be a significant source of growth in the Israeli economy in the coming years. Therefore it is very important to pay attention to this topic.”

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

Who are Israeli donors?

Philanthropy in Israel
Modern Israeli philanthropists

In the last few decades, philanthropy in Israeli society has changed and, along with the traditional charitable giving, a new kind of modern philanthropy has emerged. A recent Taub Center study, conducted by Prof. Claude Berrebi and Hanan Yonah, aims to profile modern Israeli philanthropists. The study examines the amount of money donated and the generosity of donors (measured in terms of donation as a percent of income), and explores the links between personal characteristics and the likelihood to donate.

The analysis is based on data collected from the Israeli Tax Authority between 1999 and 2011, and therefore reflects only those individuals who filed tax returns (which is not mandatory for most Israelis).

Total philanthropic donations nearly quadrupled in real terms between 1999 and 2011: from NIS 153 million to NIS 606 million a year. The average annual contribution among philanthropists was NIS 2,776 (about $790). However, because many individuals do not donate consistently – that is, they donate in some years but not in others – in any given year philanthropists who did not donate during that year will be included as having donated zero. When excluding donors who did not contribute in a particular year, the average annual donation was NIS 7,958 ($2,260).

The researchers found that almost 99% percent of all donors claiming a tax benefit in Israel are Jewish. The average donor’s age is 48 and 19% of the donor households are headed by females. About 82% of donors are married and they have 2.89 children on average. About 34% were born outside of Israel, a third originating from Africa and Asia, a third from the Americas, Oceania and Western Europe, and a third from Eastern Europe.

Some 93% of donors report their main income source to be from earned income (i.e., active income) and the most frequently recorded industry category in which donors work was organizations (e.g., NGOs, NPOs, and public organizations).

What do we know about the relationship between donor traits and donor characteristics?

The study examines such things as the scope of donations, generosity, and likelihood to donate across a number of personal characteristics.

Income and industry:

While donors with higher incomes were found to contribute higher amounts on average, those with lower incomes were found to be more generous on average (donate a larger portion of their salaries). It is interesting to see that as income rises above NIS 500,000 there is a moderate reversal in this relationship, and an increase in generosity.

Philanthropists whose main income source was active income (such as salary or business income) contribute on average NIS 1,285 ($370) more than those with mostly passive income (such as rent income or capital gains), but are found to be less generous. This may be because, while donors with active income have a higher level of income on average, their earnings tend to be more sensitive to potential fluctuations and risks.

Philanthropists employed in high-tech, manufacturing, banking and finance are the largest donors and are the most generous relative to philanthropists from other industries. On the other hand, only a small minority of employees in the high-tech sector are donors, and it is possible that philanthropic norms have not yet been established in this young industry, as they have been in more traditional sectors.

Gender, age, marital status and children:

Households headed by women tend to be more generous in their contributions in terms of donating a higher percentage of household income. However, households headed by men tend to contribute higher amounts on average.

The study also finds a trend in age that is quite unique in the academic literature – that philanthropists up to 43-years-old decrease their formal giving both in absolute terms and as a percentage of income, and from 43-years-old and on, they increase their charitable giving with each additional year.

With regard to marriage and children, the study shows that marriage is correlated with lower donation levels, and widowed philanthropists are found to be the most generous. In addition, having more children is positively associated with philanthropic behavior. In fact, there is a marginal increase of NIS 542 (about $155) in charitable giving for each additional child in the household, all else held constant.

Immigrant and minority status:

Philanthropists who immigrated to Israel donate more money than Israeli-born philanthropists, and are also more generous. New immigrants are more generous than veteran immigrants and donate larger sums on average, whereas immigrant philanthropists who have lived in Israel for 21 years or more tend to have similar contribution patterns to Israeli-born donors. A possible explanation for this is that immigrants bring with them a different giving culture, but this gradually converges over time to the level that is customary in the local culture.

In terms of minority status, there is a significant underrepresentation of Arab Israelis in officially reported philanthropy in Israel – despite the fact that they make up about 20% of the total population in Israel, only 1% of reported philanthropists are Arab Israelis.

Philanthropy in Israel

Likelihood to be a philanthropist

Philanthropist households are different from the general population in virtually every category examined, including annual income, family composition, and occupational classification. Israelis with higher incomes, individuals with earned (active) income, and those employed in real estate or organizations (e.g., NGOs, NPOs, and public organizations) are more likely than others to be philanthropists.

Immigrants from America and Europe are more likely to be donors than those born in Israel, Africa, and Asia. In addition, philanthropists in Israel have more children, on average, than the general population.

Overall, the study findings point to a significant increase in philanthropic giving in Israel, but also to differences in philanthropic behavior between donors across a multitude of socio-demographic and economic variables. As such, the study sheds light on some interesting differences between philanthropists and the general population. Through these distinctions emerges a picture of the “new” modern Israeli philanthropists.

The Health of the Arab Israeli Population

The full chapter can be accessed using the link on the right.

The chapter deals with the health status of the Arab Israeli population compared to the Jewish population in a number of areas, including the risk factors characteristic of the Arab Israeli population and access to medical services.

Longevity and quality of life among Arab Israelis

Over the past 40 years, the gap between Jewish and Arab Israelis in life expectancy has increased for those who are currently 30 years old, and in the past two decades the widening of the gap has accelerated. In other words, the relative deterioration in the health of the Arab Israeli population stems primarily from the health status of adults, especially men.

Data from the Central Bureau of Statistics’ (CBS) Social Survey indicate that about half of the sample population self-report “very good” health, both among Jews and Arab Israelis. Of the remaining half of the population, a higher percentage of Arab Israelis than Jews reported that their health was “not so good” or “not at all good.” However, the existence of health problems was reported equally by the groups. This was not the case, though, regarding the severity of the health problems – the share of those reporting a health problem that interfered with daily functioning was over 10 percentage points higher in the Arab Israeli sector than in the Jewish sector.

  • The life expectancy of the Arab population in Israel (79 years) is the highest in the Arab-Muslim world, but it is low compared to the Jewish population (82.7 years) and the OECD average (81.6 years).
  • There are substantial gaps between Jewish and Arab Israelis in infant mortality: Among Jews, the mortality rate was 2.7 per 1,000 births, compared to 3.4 among Druze, 3.0 among Christians, and 7.5 among Muslims. Infant mortality specifically, and longevity in general, are related to the socioeconomic situation of the population. In these measures too, Arabs in Israel are better off than are those in other Arab-Muslim countries.
  • The leading causes of death for Arab Israelis differ from those of Jews. Particularly prominent among Arab Israelis are birth defects, road and work accidents, and relatively high rates of chronic disease. Some of the differences can be explained by social characteristics of the Arab Israeli population such as the marrying among relatives, which increases the chances of birth defects, and high rates of smoking (44% of Arab Israeli men smoke, compared with 22% of Jewish men).

Availability and financing of medical services

Given its economic situation, the Arab Israeli population depends on public funding for healthcare than the Jewish population. This dependence is also reflected in a higher share of Arab Israelis who forgo medical treatments due to financial difficulties than the share among Jews. The CBS Social Survey shows that about one-third of Arab Israeli patients have gone without prescription medication because of financial reasons.

  • In districts with a high concentration of Arab Israelis – in Haifa, Jerusalem, and especially in the North of the country – there is a shortage of doctors and medical equipment. In addition, the average distance between Arab Israeli localities and a hospital is approximately 22 kilometers, compared to 14 kilometers for Jewish localities.
  • The share of those who report using private health services in the Jewish population is almost double that of the Arab Israeli population: about 22% compared to 11% respectively. The main reason cited for using private health services within the Jewish population is the ability to choose one’s doctor, and within the Arab Israeli population is the inability to receive public services.
  • Arab Israelis engage less in preventative measures and visit medical specialists less often, but tend to visit family doctors and hospitals more often. In other words, medical services tend to be used by this population only when health has deteriorated. This pattern is common among most low-income groups, and may also be influenced by cultural characteristics.

Arab Health EN (2)

Social Ostracism Among Pupils

The full chapter can be accessed using the link on the right.

 

Social ostracism is a common phenomenon in schools in Israel, and causes great suffering to the children who are its victims. Ostracism is a form of relational bullying, i.e., bullying that occurs mainly through non-physical violence, characterized by repetition and asymmetrical power relations between the attacker and the victim. Both ostracism and other forms of bullying can have long-term emotional and educational effects on students who experience these forms of school violence, and even on students who are witnesses to them.

This study examines the phenomenon of ostracism and bullying in schools in Israel, and focuses on the relationship between the likelihood of experiencing ostracism and sector, class, gender and grade level. It also reviews changes in patterns of ostracism over time.

The extent of the phenomenon of ostracism

How likely are pupils in Israel to be ostracized by their peers in school?

  • In 2015, 5.6% of the pupils reported that in the previous month they had been ostracized, and nearly 4% reported that there had been a call to ostracize them online.
  • Although a minority of the pupils experienced ostracism (5.6%), in over 60% of classes there is at least one child who suffers from ostracism.
  • The phenomenon of ostracism is more common in the primary school years, in grades 5 and 6, and the share of children experiencing ostracism drops as the pupils’ age rises.

Characteristics of pupils who experience ostracism

The researchers examined trends among pupils experiencing ostracism by sector, gender, and socioeconomic status.

Herem EN (1)

  • There are large gaps between the educational streams in the share of pupils who report ostracism: about 11% in Arab education as compared with 3.4% in Hebrew education. In 79% of the classes in Arab education there is at least one pupil who suffers from ostracism, compared to 50% of classes in Hebrew education.
  • There are also gaps within the Arab education system: 15% of pupils in the Bedouin education system reported ostracism, 10% in the Arab system, and 7% in the Druze system.
  • Jewish girls reported that they were victims of ostracism at slightly higher rates than Jewish boys: 5.2% compared to 4.7%. In the Arab Israeli sector, the opposite is true: about 17% of boys reported being victims of ostracism, compared to 13.5% of girls. The finding in the Arab Israeli sector challenges a widespread claim worldwide that ostracism is more prevalent among girls.
  • Pupils with lower socioeconomic backgrounds suffer from ostracism at higher rates than pupils from higher socioeconomic backgrounds (as reflected in parents’ levels of education): among pupils whose parents have 11 or fewer years of schooling, 16% of Arab Israeli pupils and 6% of Jewish pupils reported ostracism, compared to 11% among Arab Israelis and 4% among Jews whose parents have 16 or more years of schooling.
  • In classrooms where average parental education is low, pupils are more likely to suffer from ostracism, even when controlling for their individual parents’ education.

ostracism 2

Ostracism and school performance

A significant negative correlation was found between reporting ostracism and grades, both in math and in English.

  • In both Hebrew and Arab education, pupils who report being ostracized score an average of 4 points lower in math.
  • In English, there is a significant difference by sector: pupils suffering from ostracism score 8 points lower on average in Arab education and 4 points lower on average in Hebrew education.

Trends in ostracism over time

  • Between 2007 and 2015 there was a significant decline in the share of pupils experiencing ostracism: from 18% to 11% in Arab education and from 5% to 3.4% in Jewish education. The decline is most significant among those suffering from the highest levels of ostracism – primary school pupils and pupils in the Arab education system. The causes of the decline should be examined in order to apply them to additional classrooms in Israel’s education system.

Developments in Israeli Social Welfare Policy

The full chapter can be accessed using the link on the right.

 

Israeli social welfare policy, as reflected in social spending and service provision, has been very stable over the past decade. Besides continued stability, two developments of the past year illustrate the manner in which policy change happens. One is the new Savings Plan for Every Child program – an outcome of the Committee for the War Against Poverty in Israel (the Elalouf Committee), and of coalition-agreement commitments. The other is an agreement to increase general disability benefits, reached in the wake of a lengthy public and political struggle. Despite these measures, current policy and the present level of social spending, which is considerably lower than that of other welfare states, are not expected to reduce inequality or poverty in Israel substantially over the coming years.

Overall expenditure stability, but increases in real-term spending

  • In 2016, social welfare expenditure came to NIS 101 billion, accounting for half of all Israeli social spending (which includes spending on health and education) and about one-third of total government expenditure.
  • Despite the apparent stability in expenditure relative to total government spending and GDP in 2016, there was actually a NIS 7.7 billion increase, in real terms, compared with the previous year – an 8% increase in a single year, compared with an average annual increase of 4% since the beginning of the decade.
  • Social security spending accounts for about 85% of total social welfare spending, and spending in this area rose from NIS 82 billion in 2015 to over NIS 86 billion in 2016 in real terms (in large part due to a rise in expenditure on old age pensions and child allowances by the National Insurance Institute (NII)).

The Savings Plan for Every Child program

  • According to estimates, the annual cost of this program is expected to be approximately NIS 2 billion per year. However, National Insurance Institute data as of September 2017 indicate that the total expenditure on payments and grants in the framework of this program came to NIS 3.66 billion for the current year, apparently due to retroactive payments from the prior year and a half.
  • Centralization in the framework of bank savings accounts used for the program is apparent: of the 21 financial institutions that manage the plans, the most preferred is the Altschuler Shaham provident fund (24% of all of savings plans), followed by Bank Hapoalim (12%).

Increase in general disability benefits

  • The second-largest component of NII expenditure is spent on general disability benefits (20%).
  • A September 2017 agreement contains a number of different provisions translating into a disability benefit increase to NIS 4,000 monthly for people whose degree of incapacity is 100%, a substantial increase in labor market earning capabilities before benefits are reduced (“disregard”), and linkage of benefits to the minimum wage. The agreement is supposed to go into effect in January 2018, and the sum allocated to its implementation through early 2021 is NIS 4.2 billion.

Ministry of Labor and Social Welfare and Ministry of Construction and Housing budgets

  • Recent years have witnessed a continual increase in the Ministry of Labor and Social Welfare’s budget, which in 2016 amounted to NIS 6.43 billion (10% more than the 2015 budget). Most of the Ministry of Labor and Social Welfare’s budget (77%) is transferred to local authorities (see: “Social Service Budgeting in Israeli Local Authorities”).
  • The Ministry of Construction and Housing’s 2016 budget doubled relative to 2015 – from NIS 1.8 billion to NIS 3.9 billion. In 2016, there was a substantial increase in the sales and purchases of apartments for those entitled to public housing, and an additional NIS 150 million beyond the fund’s income was allocated for the purchase of public housing apartments.

Implementing the Recommendations of the Committee for the War Against Poverty

  • In 2016, there was an increase in expenditure on income supplements for the elderly, on the Ministry of Economy’s expenditure related to employment and on public housing. The expenditure allocated for the implementation of the committee’s recommendations was about 30% of the total recommended expenditure (NIS 7.4 billion per year), compared to 6% in 2015. It is estimated that in 2017, the actual expenditure will also be about 31% of the recommended annual expenditure.
  • Though implementing a Savings Plan for Every Child did indeed appear in the committee’s recommendations, it was not priced out and was not included in the total recommended expenditure. Including the cost of this program significantly increases the total expenditure for the implementation of the recommendations to about 90% of the recommended expenditure.
  • In other areas – particularly in healthcare and in efforts to increase the income of the working poor – the government’s progress in implementing the committee’s recommendations has been slow. Among the most prominent of the committee’s main recommendations that have not been implemented is the recommendation to increase the benefit level provided by the Income Support Program, which serves as a safety net for Israelis living in poverty.

Welfare Intro EN (4)

Philanthropy in Israel: An Updated Picture

The full chapter can be accessed using the link on the right.

 

Total philanthropic donations reported to the Israeli Tax Authority between 1999 and 2011 increased by almost four times in real terms: from NIS 153 million to NIS 606 million a year.

This study examines the characteristics of modern Israeli philanthropists based on data from all donors who requested tax credits for charitable donations to recognized non-profit organizations in Israel. The chapter examines the amount of money donated and the generosity of donors (measured in terms of donation as a percent of income), and explores the relationship between personal characteristics and the likelihood to donate.

Philanthropist households differ from the general population in virtually every category examined, including annual income, family composition, and occupational classification. Israelis with higher incomes, individuals with earned (active) income, and those employed in real estate or organizations (e.g., NGOs, NPOs, and public organizations) are more likely than others to be philanthropists. Immigrants from America and Europe are more likely to be donors than those born in Israel, Africa, and Asia. In addition, philanthropists in Israel have more children, on average, than the general population.

Households headed by women and immigrants tend to donate more

  • Households headed by women tend to be more generous in their contributions, in terms of donating a higher percentage of household income.
  • Philanthropists who immigrated to Israel donate more money than Israel-born philanthropists, and are also more generous. New immigrants are more generous than veteran immigrants and donate larger sums on average, whereas immigrant philanthropists who have lived in Israel for 21 years or more tend to have similar contribution patterns to Israel-born donors. A possible explanation for this is that immigrants bring with them a different giving culture, but this gradually converges over time to the level that is customary in the local culture.

Only a small share of Arab Israelis and high-tech employees donate

  • Philanthropists employed in high-tech, manufacturing, banking and finance are the largest donors and are the most generous relative to philanthropists from other industries. On the other hand, only a small minority of employees in the high-tech sector are donors, and it is possible that philanthropic norms have not yet been established in this young industry, as they have in the traditional industry sectors.
  • There is a significant underrepresentation of Arab Israelis in officially reported philanthropy in Israel – despite the fact that they make up about 20% of the total population in Israel, only 1% of reported philanthropists are Arab Israeli.
  • Jerusalem and Tel Aviv are not among the top ten localities with the most generous residents. The study finds that the most generous localities in Israel include some of the more wealthy localities such as Kfar Shmaryahu and Savyon, as well as localities of low socioeconomic ranking such as Modi’in Illit, Hatzor HaGlilit and Tiberias.

Philanthropy EN (3)

Patterns of Haredi Integration into the Labor Market

The full chapter can be accessed using the link on the right.

This chapter looks at the integration of young Haredim into the labor market relative to other sectors in Israel, and examines how their employment options and earning abilities differ based on factors such as education level, field of study, employment branch, and place of residence.

The first section of the chapter focuses on current trends in employment of young Haredim and finds an impressive rise in the employment rates of young male and female Haredim, within all major streams. Haredi men show higher employment rates in the periphery than in the center of the country, and in mixed cities rather than in homogeneous Haredi cities. In addition this section presents, for the first time, a high resolution map of the geographical distribution of the major Haredi streams by neighborhoods. It also reports the relative share of each stream within the Haredi sector.

The second part of the chapter compares four population groups (Haredim, National Religious, secular Jews, and Arab Israelis), and examines the relationship between education and additional background variables to employment possibilities and earning ability for each group. One interesting finding is that the employment rate of Haredi academic degree students is very similar to that of Haredi degree holders which could indicate that, for Haredi men, the decision to go to work, as evidenced by enrollment in an academic program, is no less important than the degree itself in terms of labor market integration.

Haredi integration in the labor market

  • In recent years there has been an impressive rise in the employment rates of young Haredi women and men across all Haredi streams: between 2008 and 2013, the employment rates of Haredi women and men ages 23-30 rose by 9 percentage points, reaching 73% among women and 36% among men, the largest increase across all sectors. The most significant increase was found among men and women in the Hasidic stream.
  • Employment rates of Haredi men in the periphery are higher than in the center of the country. This may be due in part to new economic realities and rising housing costs in the old Haredi centers that are incentivizing young Haredim to migrate to the periphery.
  • Haredi men living in homogeneous Haredi cities have significantly lower employment rates than those living in mixed cities. Assuming that place of residence has an impact on employment possibilities and desire to work, it is preferable, from an employment standpoint, to build Haredi neighborhoods in mixed cities rather than in homogeneous Haredi cities.

Impact of education and personal characteristics on employment prospects and wages

  • The employment rate among Haredi students is not much lower than the rate among Haredim who already hold an academic degree. In 2013, approximately 76% of Haredi men with academic degrees (ages 25-35) and 67% of male Haredi students worked, compared with only 37% of Haredi men in the same age group who never pursued higher education. This indicates that the employment level of Haredi men is more influenced by the decision to start working (and studying in higher education) than by actually earning a degree.

Haredi Employment EN (1)

  • Among Arab Israeli women, however, there is a large gap between the employment rates of those who already have an academic degree and those who are still students, indicating that, for this group, the probability of employment improves significantly with a degree.
  • The impact of parental income on the chances of obtaining a bagrut (matriculation) certificate – which greatly increases the chances of acquiring an academic education – is four times higher among the Arab Israeli population than among Jews.
  • When controlling for background characteristics (via regression analysis), the probability of young Haredi male degree holders being employed is 26.5% higher than that of those who have never pursued academic studies; for National Religious men – 17.6% higher; for secular Jewish men — 19.7% higher, and for Arab Israeli men — 13.7% higher. Compared with young women who have never studied for a degree, the probability of Haredi female degree holders being employed is 18.1% higher; for National Religious women – 18.8% higher; for secular Jewish women – 14.4% higher; and for Arab Israeli women – 44.2% higher.
  • Nearly 50% of degrees earned by Haredi men are in business administration, law and the humanities, versus 30% among secular Jewish men. In science-related subjects (engineering and architecture, mathematics and computer science), 34% of secular male academics hold degrees in those fields, versus only 25% for Haredi degree holders. That is, a larger percentage of male Haredi academic degree holders are earning degrees in areas where the market is saturated, while a lower percentage are earning higher-paying science-related degrees.
  • However, among female Haredi degree holders, 11.5% earned degrees in computer science and math, compared to only 3.6% of secular female academics.

Impact of parents’ continent of origin on young adults’ income

  • Parents’ continent of origin has a substantial impact on their children’s projected income in all sectors. When controlling for the income and education level of parents (and the mother’s education level in particular) the study finds that, contrary to popular belief, non-Haredi Jewish women whose fathers were born in northern Africa are expected to earn slightly more than women whose fathers were born in Israel. This finding may indicate that, given equal educational opportunities, ethnic wage gaps could be reduced. By contrast, males whose mothers were born in Asia (Mizrachim) may be expected to earn slightly less than those whose mothers were Israeli-born.

Education and Employment Among Young Arab Israelis

The Taub Center gratefully acknowledges The Diane P. and Guilford Glazer Fund of the Jewish Community Foundation of Los Angeles for its generous support of this project.

In recent years there have been major changes in education and employment trends in the Arab Israeli society. The chapter examines these trends by sub-group within the sector and by gender, and finds that there have been substantial improvements in post-secondary and higher education – though there are large gaps between the various sub-groups.

The rate of qualifying for a bagrut (matriculation) certificate rose significantly

The rate of those entitled to a bagrut certificate increased substantially between 1999 and 2013 but, while bagrut achievements by Arab Israeli women are approaching those of Jewish women, the increase among Arab Israeli men was more moderate.

  • It seems that a major factor contributing to educational gaps between Jews and Arab Israelis is the lower socioeconomic status of the Arab Israeli population. When controlling for socioeconomic backgrounds, the matriculation (bagrut) rates among all sub-groups of Arab Israeli women are higher than (or equal to) those among Jewish women. Among men there are still gaps favoring Jewish men – and these gaps have increased over the past decade.
  • A high percentage of Arab Israelis qualifying for a matriculation certificate studied in a scientific-engineering track. The differences between Jewish and Arab Israelis are particularly prominent among women: 39% of Jewish women who qualified for a matriculation certificate in 2013 studied in scientific-engineering tracks, as compared with 71% of Bedouin women and 84% of Christian women, and in the Arab Israeli sector there is a female majority in most scientific-engineering tracks.

Higher education – a large share of women pursue occupations in the fields of health and education

  • The share of those pursuing higher education has increased greatly among Arab Israeli women, particularly among Bedouin and Druze women – an increase of nearly 50% between 2008 and 2013. Among men the improvement was much smaller, although the data do not include Arab Israeli men pursuing an academic degree abroad.
  • Arab Israeli women (especially Muslims and Bedouins) still pursue occupations in the education field at very high rates – a field that facilitates working within their localities. This trend may lead to employment difficulties: 59% of those who applied to teach in the Arab school system did not receive placements in the 2013-2014 school year. If there is not a significant drop in the share of female students studying for a teaching certificate, this percentage is likely to increase as the percentage of female Arab Israeli graduates increases.
  • As in the past, many Arab Israeli men pursue academic studies in health-related fields (both in Israel and abroad), but there has also been an increase in the share pursuing engineering and computer science degrees – which may open the door to new fields of employment.
  • The average psychometric exam score of Arab Israelis is lower than the average score among Jews. It seems that a larger portion of Arab Israelis who take the exam do not reach the threshold required to be admitted into various study programs in academic institutions, as about half of Arab Israeli men who took the psychometric exam did not go on to study in higher education in Israel (although some studied abroad).

Higher Ed EN (3)

How much do Arab Israelis earn in comparison to Jews?

  • Wage gaps between Jews and Arab Israelis are low among graduates with degrees in the fields of health and education, but are large among those who studied engineering, computer science, business administration and management. In the fields of engineering and computer science, high wage gaps stem largely from differences in the sectors in which the graduates of these fields are employed: Jewish academics tend to be employed in more profitable industries (for example, 28% of Jewish graduates are employed in programming, compared with 16% of Arab Israeli graduates).

What are the differences between the different sub-groups?

The Christian population has the highest achievements on all indices: bagrut exams, the share of the population with an academic degree and fields of employment, and the gaps between the Christian and Jewish populations have been decreasing over time. Among the Muslim population, which is the largest sub-group, there were general improvements on educational indices, gaps favoring women over men, and a marked tendency to pursue degrees in the fields of health and education. The achievements of the Druze population are mixed: they have particularly high matriculation rates and their employment rates are high as well. On the other hand, the fields in which they are employed are limited and a high percentage of those with a degree are employed in the defense system. The Bedouin population has the lowest achievements on all indices, despite a significant improvement among women. The vast majority of Bedouins with an academic degree work in education.

The Singer Series: State of the Nation Report 2017

We are pleased to present the Herbert M. Singer Annual Report Series, State of the Nation Report: Society, Economy and Policy in Israel 2017. The chapters that appear in this volume deal with a wide variety of subjects and are based on unique studies that show the many faces of the socioeconomic situation in Israel today. There are many things to learn about social policy from the subjects surveyed in this year’s book; and there are many things to take away about how to improve the welfare of Israel’s citizens.

State of the Nation Report 2017

To read the full chapters click here

The Taub Center’s State of the Nation Report 2017 has been published

The Taub Center’s annual report, published today, presents a picture of the socioeconomic situation in Israel as of 2017. The book compiles 10 new research studies on employment, macroeconomics, education, health and welfare. The report’s editor is Professor Avi Weiss, Executive Director of the Taub Center and professor of economics at Bar-Ilan University.

Selected findings from the State of the Nation Report 2017:

A Macroeconomic Picture of the Economy in 2017
Gilad Brand, Prof. Avi Weiss and Dr. Assaf Zimring

The past year was characterized by an increase in employment and real wages, and a decline in the unemployment rate, which is at a historic low. However, per capita growth in Israel is low relative to other countries, and labor productivity is not growing at all.

  • The increase in employment rates alongside the rise in average real wages led to an impressive increase in consumption in recent years, as well as an increase in the standard of living. However, large parts of the labor market are still characterized by low productivity and low wages. In addition, price levels in Israel remain among the highest in the OECD.
  • In the long term, the country is expected to face demographic challenges that will likely slow the rate of economic growth, including a decline in the share of the working-age population, alongside an increase in the share of population groups whose employment rates are relatively low and whose skills are not compatible with the modern labor market.
  • Housing prices continue to rise at a faster rate than rental prices, and there continues to be a decline in the return on owning an apartment. Since interest rates stopped declining more than two years ago, it appears that the recent rise in housing prices mainly reflects expectations of households and investors that both apartment prices and average rents will continue to rise in the future.

Macro EN (1)

Patterns of Haredi Integration into the Labor Market: An Inter- and Multi-Sector Analysis and Comparison
Dr. Eitan Regev

The chapter focuses on the unique patterns of Haredi integration into the labor market while examining differences across Haredi streams and places of residence. The study also explores the influence of demographic, socioeconomic, and educational factors on the state of employment and wages among young Israelis from all sectors.

  • In recent years there has been an impressive rise in the employment rates of young Haredi women and men across all Haredi streams: between 2008 and 2013, the employment rates of Haredi women and men ages 23-30 rose by 9 percentage points, reaching 73% among women and 36% among men, the largest increase across all sectors. The most significant increase was found among men and women in the Hasidic stream.
  • Haredim living in homogeneous Haredi cities (such as Betar Illit and Modi’in Illit), both in the periphery and in the center of the country, have significantly lower employment rates than Haredim living in mixed cities. Assuming that place of residence has an impact on employment possibilities and the desire to work, it is preferable, from an employment standpoint, to build Haredi neighborhoods in mixed cities rather than in homogeneous cities.
  • The employment rate among Haredi students is similar to the rate among Haredim who already hold an academic degree. In 2013, approximately 76% of Haredi men with academic degrees (ages 25-35) and 67% of male Haredi students worked, compared with only 37% of Haredi men in the same age group who never pursued higher education. This indicates that the employment level of Haredi men is more influenced by the decision to start working (and learning) than by actually earning a degree. On the other hand, among Arab Israeli women, there is a large gap between the employment rates of those who already have an academic degree and those who are still students, indicating that, for this group, the probability of employment improves significantly with a degree.
  • The impact of parental income on the chances of obtaining a bagrut (matriculation) certificate – which greatly increases the chances of acquiring an academic education – is four times higher among the Arab Israeli population than among Jews.
  • Parents’ continent of origin has a substantial impact on their children’s projected income in all sectors. Examining the income and education level of parents (and the mother’s education level in particular) shows that, contrary to popular belief, non-Haredi Jewish women whose fathers were born in northern Africa are expected to earn more than women whose fathers were born in Israel. This finding may indicate that, if given equal educational opportunities, ethnic wage gaps could be reduced. By contrast, males whose mothers were born in Asia (Mizrachim) may be expected to earn less than those whose mothers were Israeli-born.

Haredi Employment EN

Philanthropy in Israel: An Updated Picture
Prof. Claude Berrebi and Hanan Yonah

This study examines the characteristics of modern Israeli philanthropists. It is the first study of Israeli philanthropy that is based on data from all donors who requested tax credits for charitable donations to recognized non-profit organizations in Israel. The chapter looks at the amount of money donated and the generosity of donors (measured in terms of donation as a percent of income), and explores the influence of donor characteristics on the likelihood to donate.

  • Total donations reported to the Israel Tax Authority between 1999 and 2011 nearly quadrupled in real terms: from NIS 153 million to NIS 606 million a year.
  • Households headed by women tend to be more generous in their contributions, in terms of donating a higher percentage of household income.
  • Philanthropists who immigrated to Israel donate more money than Israeli-born philanthropists, and are also more generous. New immigrants are more generous than veteran immigrants and donate larger sums on average, whereas immigrant philanthropists who have lived in Israel for 21 years or more tend to have similar contribution patterns to Israel-born donors. A possible explanation for this is that immigrants bring with them a different giving culture, but this gradually converges over time to the level that is customary in the local culture.
  • There is a significant underrepresentation of Arab Israelis in officially reported philanthropy in Israel – despite the fact that they make up about 20% of the total population in Israel, only 1% of reported philanthropists are Arab Israelis.
  • Philanthropists employed in manufacturing, high-tech, banking, and finance are the largest donors and are the most generous relative to philanthropists from other industries. On the other hand, only a small minority of employees in the high-tech sector are donors, and it is possible that norms of donating have not yet been established in this young industry, as they have in the traditional industry sectors.
  • The study finds that the most generous localities in Israel include some of the more wealthy localities such as Kfar Shmaryahu and Savyon, as well as localities of low socioeconomic ranking such as Modi’in Illit, Hatzor HaGlilit and Tiberias. Jerusalem and Tel Aviv are not among the top ten localities with the most generous residents.

Philanthropy EN

Developments in Israeli Social Welfare Policy
Prof. John Gal and Shavit Madhala

Welfare policy in Israel has remained fairly stable over the last decade. Despite measures taken by the government to address social distress, the level of expenditure allocated for this purpose remains low relative to other welfare states. Therefore, it is unlikely that there will be a significant decrease in the extent of inequality and poverty.

  • Social expenditure on welfare, health and education amounted to NIS 205 billion in 2016 – 57% of total government expenditure (excluding debt and interest payments). Expenditure on welfare, specifically, makes up about half of total social expenditure, and about one-third of total government expenditure. Despite stability in the share of welfare expenditure out of total government expenditure, the welfare budget rose by more than NIS 7 billion in real terms (an annual increase of 8%).
  • The Ministry of Construction and Housing budget doubled in 2016 (relative to 2015), reaching close to NIS 4 billion. The increased budget was reflected in a considerable expansion of the public housing system: about 780 new apartments were purchased and an additional NIS 150 million was allocated for purchasing or building new public housing units.
  • In 2017, expenditure on implementing the recommendations of the Elalouf Committee for the War Against Poverty is expected to amount to 30% of the recommended expenditure, similar to 2016, and compared to 6% in 2015. Implementation of the Savings Plan for Every Child program appeared in the Committee’s recommendations but was not priced out and included in the total recommended expenditure. When factoring in the cost of this program, total spending on implementation in 2017 increases to approximately 90% of the total recommended expenditure. At the same time, the government is gradually advancing the implementation of other Committee recommendations, mainly in the area of healthcare and in addressing the needs of poor workers.
  • A public and political struggle for disability benefits led to the government decision to change policy in this area. The amount distributed through benefits will be raised beginning in 2018 and the sum allocated to the policy’s implementation through 2021 is NIS 4.2 billion.

Welfare Intro EN (2)

Social Service Budgeting in Israeli Local Authorities
Prof. John Gal, Shavit Madhala, and Haim Bleikh

Welfare services in the local authorities are budgeted according to the “matching” method: for every shekel invested by the local authority, the Ministry of Labor and Social Welfare allocates three shekels. Thus, in practice, 75% of the welfare budget is financed by the Ministry of Labor and Social Welfare and 25% by the local authority. Israel’s Supreme Court is currently examining a petition against this funding method that claims it is unequitable. The chapter examines budgetary patterns and indicates that there is indeed considerable inequality in budgeting between strong and weak local authorities, but most of this gap is explained by differences in expenditure on out-of-home care frameworks, which are particularly expensive. The gaps seem to be related to the resource constraints of the weaker communities, the absence of out-of-home care frameworks tailored to the Arab Israeli population, and localities’ preferences for addressing their residents’ needs.

  • The average expenditure on welfare (including the allocation from the Ministry of Labor and Social Welfare at the end of the year and self-generated supplements allocated by the localities) in strong localities without balanced-budget and government development grants (Forum-15 localities) is NIS 9,095 per client, while in Arab Israeli localities the expenditure is only NIS 3,387 per client.
  • A gap that disadvantages the weaker authorities emerges already with the initial allocation by the Ministry of Labor and Social Welfare: NIS 3,170 is allocated to the localities of low socioeconomic standing, as opposed to NIS 5,400 to the other authorities.
  • Most of the gap between localities in per-client budget allocations can be explained by types of care frameworks: the weaker authorities use fewer out-of-home frameworks, which are the most expensive. Another factor that increases the gap is the ability of the strong authorities to allocate many more resources to welfare issues, beyond those required to receive funding from the Ministry of Labor and Social Welfare through the matching method.

Matching EN (1)

Israel’s Education System in Recent Years: An Overview
Nachum Blass and Prof. Yossi Shavit

The greatest challenge facing Israel’s education system is reducing the severe inequality among students from different backgrounds. While some progress has been made in recent years, the road to equality is still long.

  • Expenditure per pupil increased throughout the education system, but mainly for the stronger socioeconomic classes (the upper quintiles). Less than 30% of the additional resources in the system were allocated to students in the two lowest quintiles.
  • In terms of teaching hours per pupil, schools in Jewish primary education in the lowest quintile experienced only minor changes in budget (an increase of about 2%), while in the lower quintiles of Arab Israeli primary schools there was an increase of 3-5% on average. However, the number of hours per pupil in Arab Israeli education in all quintiles is still much lower than the number of hours per pupil in the Jewish sector.
  • Results of efforts to reduce the number of students per class were primarily evident in the Arab education stream, where classes had previously been very large. A very small change in class size occurred in the Jewish sector, mostly concentrated in the well-off quintiles.

Education Intro EN

Social Ostracism Among Pupils
Prof. Yossi Shavit and Eran Hakim

The chapter examines the phenomenon of ostracism and bullying in schools and focuses on the relationship between the likelihood of experiencing ostracism and sector, class, gender and grade level. It also reviews changes in patterns of ostracism over time.

  • About 6% of all students in Israeli schools reported being ostracized in 2015. In over 60% of classes there is at least one child who suffers from ostracism.
  • There are large gaps between the educational streams in the share of pupils who report ostracism: about 11% in Arab education as compared with 3.4% in Hebrew education. There are also gaps within the Arab education system: 15% of pupils in the Bedouin education system reported ostracism, 10% in the Arab system, and 7% in the Druze system.
  • Jewish girls reported that they were victims of ostracism at slightly higher rates than Jewish boys: about 5.2% compared to 4.7%. In the Arab Israeli sector the opposite is true: about 17% of boys reported being victims of ostracism, compared to 13% of girls.
  • Pupils with lower socioeconomic backgrounds suffer from ostracism at higher rates than pupils from higher socioeconomic backgrounds (as reflected in parents’ levels of education): among pupils whose parents have 11 or fewer years of schooling, 16% of Arab Israeli pupils and 6% of Jewish pupils reported ostracism, compared to 11% among Arab Israelis and 4% among Jews whose parents have 16 or more years of schooling.
  • Between 2007 and 2015 there was a significant decline in the share of pupils experiencing ostracism: from 18% to 11% in Arab education and from 5% to 3.4% in Jewish education. The decline is most significant among those suffering from the highest levels of ostracism – primary school pupils and pupils in the Arab education system. Therefore, the causes of the decline should be examined in order to apply them to additional classrooms in Israel’s education system.

Herem EN

Education and Employment Among Young Arab Israelis
Hadas Fuchs

In recent years there have been major changes in education and employment trends in the Arab Israeli society. The chapter examines these trends by sub-group within the sector and by gender, and finds that there have been substantial improvements in post-secondary and higher education – though there are large gaps between the various sub-groups.

  • It seems that a major factor contributing to educational gaps between Jews and Arab Israelis is the lower socioeconomic status of the Arab Israeli population. When controlling for socioeconomic backgrounds, the matriculation (bagrut) rates among all sub-groups of Arab Israeli women are higher than(or equal to) those among Jewish women, while among men there are still gaps favoring Jewish men – and these gaps have increased over the past decade.
  • A high percentage of Arab Israelis qualifying for a matriculation certificate studied in a scientific-engineering track. The differences between Jewish and Arab Israelis are particularly prominent among women: 39% of Jewish women who qualified for a matriculation certificate in 2013 studied in scientific-engineering tracks, as compared with 71% of Bedouin women and 84% of Christian women.
  • The share of those pursuing higher education has increased greatly among Arab Israeli women, particularly among Bedouin and Druze women – an increase of nearly 50% between 2008 and 2013. Among men the improvement was much smaller, although the data do not include Arab Israeli men pursuing an academic degree abroad.
  • Arab Israeli women (especially Muslims and Bedouins) still pursue occupations in the education field at very high rates – a field that facilitates working within their localities. This trend may lead to employment difficulties: 59% of those who applied to teach in the Arab school system did not receive placements in the 2013-2014 school year. If there is not a significant drop in the share of female students studying for a teaching certificate, this percentage is likely to increase as the percentage of female Arab Israeli graduates increases.
  • As in the past, many Arab Israeli men pursue academic studies in health-related fields (both in Israel and abroad), but there has also been an increase in the share pursuing engineering and computer science degrees – which may open the door to new fields of employment.
  • Wage gaps between Jews and Arab Israelis are low among graduates with degrees in the fields of health and education, but are large among those who studied engineering, computer science, business administration and management. In the fields of engineering and computer science, high wage gaps stem largely from differences in the sectors in which the graduates of these fields are employed: Jewish academics tend to be employed in more profitable industries (for example, 28% of Jewish graduates are employed in programming, compared with 16% of Arab Israeli graduates).

Higher Ed EN

Current Developments in the Healthcare System
Prof. Dov Chernichovsky

The chapter deals with the most pressing issues in Israel’s healthcare system, including the balance between public and private funding, management of the health funds and commercial insurance companies, and preparations for Israel’s aging population.

  • The government’s share in financing health services is 15 percentage points lower than the OECD average. Consequently, private expenditure on health has increased in Israel: from 4.5% of total household expenditures in 2000 to 5.7% in 2015. The primary reason for the rise in private expenditure is the purchase of private insurance plans.
  • Demand for medical treatments has increased, mainly due to the aging of Israel’s population. At the same time, the supply of medical personnel has declined, mostly within the publicly-funded system. As a result, prices for medical care have risen. These trends, along with growing dependence on privately-funded care, lead to growing gaps in access to health services between households of different income levels and between the different geographic regions in Israel.
  • In light of the aging population and public interest in issues related to long-term care, the government has taken several steps to improve medical services for the elderly, including raising the maximum allowance for elderly long-term care to NIS 5,000, discontinuing financial means tests for children of long-term care recipients (used to determine the subsidy level for such care), and arranging the immediate transfer of those insured through group insurance via their workplace to health fund insurance. However, despite these efforts, the long-term care system in Israel is inferior to that in other developed countries, and Israel needs a strategy to regulate the issue – both in terms of broader insurance coverage and in terms of care for the elderly.
  • The increasingly common trend of health funds (which are non-profit institutions) and commercial insurance companies acquiring private medical facilities raises questions about induced demand for privately-financed medical procedures and unnecessary spending, freedom of choice in the system, and the public-private mix in Israel’s health system.

Health Intro EN

The Health of the Arab Israeli Population
Prof. Dov Chernichovsky, Dr. Bishara Bisharat, Liora Bowers, Aviv Brill and Chen Sharony

The chapter deals with the state of health of the Arab Israeli population compared to the Jewish population in a number of areas, including the risk factors characteristic of the Arab Israeli population and access to medical services.

  • The life expectancy of the Arab population in Israel (79 years) is the highest in the Arab-Muslim world, but it is low compared to the Jewish population (82.7 years) and the OECD average (81.6 years).
  • There are substantial gaps between Jewish and Arab Israelis in infant mortality: Among Jews, the mortality rate was 2.7 per 1,000 births, compared to 3.4 among Druze, 3.0 among Christians, and 7.5 among Muslims. Infant mortality specifically, and longevity in general, are related to the socioeconomic situation of the population. In these measures too, Arabs in Israel are better off than are those in other Arab-Muslim countries.
  • The leading causes of death for Arab Israelis differ from those of Jews. Particularly prominent among Arab Israelis are birth defects, road and work accidents, and relatively high rates of chronic disease. Some of the differences can be explained by social characteristics of the Arab Israeli population such as marrying relatives, which increases the chances of birth defects, and high rates of smoking (44% of Arab Israeli men smoke, compared with 22% of Jewish men).
  • In districts with a high concentration of Arab Israelis – in Haifa, Jerusalem, and especially in the North of the country – there is a shortage of doctors and medical equipment. In addition, the average distance between Arab Israeli localities and a hospital is approximately 22 kilometers, compared to 14 kilometers for Jewish localities.

Arab Health EN

 

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

Current Developments in the Healthcare System

The full chapter can be accessed using the link on the right.

The chapter deals with the most pressing issues in Israel’s healthcare system, including the balance between public and private funding, management of the health funds and commercial insurance companies, and preparations for Israel’s aging population.

Financing the system

Stability in overall health spending and a decrease in the share of public spending on health mean that, in order to receive adequate medical care, Israelis need to spend more of their private budgets on healthcare. These trends lead to growing gaps in access to health services between households of different incomes levels and between the different geographic regions in Israel.

  • Healthcare spending as a share of GDP has remained fairly stable over the past two decades, at about 7% of the GDP, compared to 10% on average in other OECD countries. However, the share of public funding out of the total national expenditure on health dropped: from about 70% to 61% (compared to about 77% in the OECD). These trends, in addition to the growing demand for medical services due to Israel’s aging population alongside a reduction in the supply of medical personnel, contribute to a rise in medical prices (relative to the general price index). Thus, disparities in access to health services are increasing among households with different income levels.

The government’s share in financing health services is 15 percentage points lower than the OECD average. Consequently, private expenditure on health out of total household expenditure has increased in Israel: from 4.5% in 2000 to 5.7% in 2015. The primary reason for the increase in private expenditure is the purchase of private insurance plans, which rose from 18% in 2000 to 37% in 2015. This means that Israelis need to spend more out-of-pocket in order to receive proper care in private clinics, even though the care is administered by doctors from the publicly-funded system whose work in the private sphere leaves facilities in the public system underutilized. The current situation is causing inefficiencies in the system, and gaps in access to health services are widening between households of different income levels and between the different geographic regions in Israel.

Health Intro EN (2)

Access to services and freedom of choice in the public system

  • Of the citizens who report use of private medical services, 42% said they did so in order to select the physician of their choice. Another 22% turned to private healthcare in order to get an earlier appointment.
  • The increasingly common trend of health funds (which are non-profit institutions) and commercial insurance companies acquiring private medical facilities raises questions about induced demand for privately-financed medical procedures and unnecessary spending, freedom of choice in the system, and the public-private mix in Israel’s health system.

Preparing for an aging population

  • The government has taken several steps to improve medical services for the elderly, including raising the maximum allowance for elderly long-term care to NIS 5,000, discontinuing financial means tests for children of long-term care recipients (used to determine the subsidy level for such care), and arranging the immediate transfer of those insured through group insurance via their workplace to health fund insurance.
  • Nonetheless, Israel’s long-term care system is inferior to that in other developed countries, is largely funded by private expenditure, and is fragmented across a number of government agencies.

Israel’s Education System in Recent Years: An Overview

The full chapter can be accessed using the link on the right.

 

This introduction discusses recent developments in the Israeli education system. In the Explanatory Notes to the Budget, the last two Ministers of Education identified and emphasized the same goals: (1) reduce gaps in budget allocations between different socioeconomic strata and population sectors; (2) reduce the average number of pupils per class; (3) increase the percentage of pupils studying high-level mathematics (five units); (4) increase the number of pupils in technical-vocational education and their share out of all pupils in secondary education.

Background

  • While the combined Haredi and Arab Israeli share of the education system rose from 15% to almost 50% between 1960 and 2000, and continued to rise between 2000 and 2010, the situation changed between 2010 and 2016: growth in the number of Arab Israeli first graders ceased and even became negative, while in the Haredi sector, growth declined, and is now no greater than that of the other Jewish population groups.

From 2000-2016 the Ministry of Education budget increased by 86% in real terms. The number of employed teaching personnel grew by 55% and the number of classes by 34%, while the number of pupils in the schools increased by only 30%.

Edu intro infographic

Goal 1: Reduce budget allocation gaps

Expenditure per pupil increased throughout the education system, but mainly for the stronger socioeconomic classes (the upper quintiles).

  • Between 2013/14 and 2015/16, NIS 878 million were added to the total budget for official primary education, of which only NIS 215 million (24%) were added for pupils in the two lowest Nurture Index quintiles. The total addition for middle schools was NIS 600 million, of which NIS 172 million (29%) were for the two lowest quintiles.
  • In terms of teaching hours per pupil, schools in Jewish primary education in the lowest quintile experienced only minor changes in budget (an increase of about 2%), while in the lower quintiles of Arab Israeli primary schools, there was an increase of 3-5% on average. However, the number of hours per pupil in Arab Israeli education in all quintiles is still much lower than the number of hours per pupil in the Jewish sector.

Education Intro EN (2)

Goal 2: Reduce number of pupils per class

  • Results of efforts to reduce the number of students per class were primarily evident in the Arab education stream, where classes had previously been very large. A very small change in class size occurred in the Jewish sector, mostly concentrated in the well-off quintiles.

Goal 3: Increase share of pupils studying five units of math

  • Between 2014 and 2016, the share of pupils eligible for bagrut with five units of math rose from 9.5% to 11.4% of all bagrut exam takers. However, this may be due in part to changes in the demographic composition of Israel’s twelfth grade population.

Goal 4: Increase share of pupils in technical-vocational education

  • Since 2010, the share of post-secondary pupils in technical-vocational education has risen to 35% in the Jewish sector (from to 32% in 2010) and to 43% in the Arab Israeli sector (from 40% in 2010), for a total of 37.4% in 2016.

A Macroeconomic Picture of the Economy in 2017

The past year was characterized by an increase in employment and real wages, and a decline in the unemployment rate, which is at a historic low. However, per capita growth in Israel is low relative to other countries, and labor productivity growth has stagnated.

GDP is expected to grow by 3.1% in 2017, a rate that translates into a growth of about 1.1% in GDP per capita. These figures are lower than last year’s growth (which stood at 4.0% GDP growth and 1.9% GDP per capita growth), but is similar to the growth rate in recent years. All of the signs indicate that Israel’s economy is in a state of near full employment, and therefore that the current growth rate probably reflects its long-term growth trend, rather than changes in the business cycle.

  • The increase in employment rates alongside the rise in average real wages led to an impressive increase in consumption in recent years, and consequently an increase in the standard of living.
  • Consumption prices in Israel are significantly higher than in other developed countries, but there appears to be a change for the better, and there are signs that prices are to some extent in a process of adjusting to the level of other developed countries.
  • Despite the encouraging data, it seems that in the long term, employment growth is reaching its upper limit and that wage growth is due to a temporary improvement in the trade conditions in the economy, and not from an increase in productivity. This raises concerns that the rapid increase in private consumption will not last for long, and that the country will need to find other sources of growth to narrow the gap between the standard of living in Israel and other developed countries.
  • Housing prices continue to rise at a faster rate than rental prices, thus the return on owning an apartment is further declining. Since interest rates have remained at their current level for the past two years, it appears that the recent rise in housing prices mainly reflects expectations of households and investors that both apartment prices and average rents will continue to rise in the future.

Macro EN (1)

Social Service Budgeting in Israeli Local Authorities

The full chapter can be accessed using the link on the right.

 

Welfare services in the local authorities are budgeted according to the “matching” method: for every shekel invested by the local authority, the Ministry of Labor and Welfare allocates three shekels. Thus, in practice, 75% of the welfare budget is financed by the Ministry of Labor and Welfare and 25% by the local authority. Israel’s Supreme Court is currently examining a petition against this funding method that claims it is unequitable. The chapter examines budgetary patterns and indicates that there is indeed considerable inequality in budgeting between strong and weak local authorities, but most of this gap is explained by differences in expenditure on out-of-home care frameworks, which are particularly expensive. The gaps seem to be related to the resource constraints of the weaker communities, the absence of out-of-home care frameworks tailored to the Arab Israeli population, and localities’ preferences for addressing their residents’ needs.

There is considerable inequality in the financing of welfare services between strong and weak local authorities

The primary responsibility for the welfare of individuals, families and communities rests with local authorities, yet the allocation of resources is not uniform across all localities.

  • The average welfare expenditure stands at 11% of the total budget in localities of low socioeconomic ranking, and at 6% among those with a high socioeconomic ranking.
  • The average expenditure on welfare (including the allocation from the Ministry of Labor and Welfare at the end of the year and self-generated supplements allocated by the localities) in strong localities without balanced-budget grants and government development grants (Forum-15 localities) is NIS 9,095 per client, while in Arab Israeli localities the expenditure is only NIS 3,387 per client. In the Haredi localities, which are categorized as part of the low socioeconomic cluster, the average expenditure is NIS 8,749, compared to NIS 7,318 in the remaining Jewish localities.

Matching EN (3)

Thus, there is considerable inequality between various local authorities, and those who require assistance the most and live in localities of low socioeconomic status are the ones to which the fewest resources are allocated.

Explanation 1 for the inequality: weaker authorities are unable to fulfill the funding costs required on their part in order to receive the full budget from the Ministry of Labor and Welfare

The researchers find that it is difficult to attribute inequalities to this factor, given the following:

  • The vast majority of authorities (92%) utilize the entire budget earmarked for them at the beginning of the year, and even spent more than the required sum.
  • Of the 20 localities that do not utilize the budget allocated to them, only eight are ranked in a low socioeconomic cluster (all are Arab Israeli localities), while the other 12 authorities are ranked among the high socioeconomic cluster.

Though most authorities did manage to meet the funding level, it is quite possible that authorities with fewer resources request a relatively small sum from the national government in order to avoid a situation where they cannot meet their share of the funding later in the year.

Explanation 2 for the inequality: weaker authorities receive less funding because of the initial allocation from the Ministry of Labor and Welfare

The researchers find that about 64% of the explained variance in the initial funding that localities receive from the Ministry of Labor and Welfare can be explained by differences in the types of care frameworks localities use to provide social services.

  • A gap that disadvantages the weaker authorities emerges already with the initial allocation by the Ministry of Labor and Welfare: NIS 3,170 is allocated to the localities of low socioeconomic standing, on average, as opposed to NIS 5,400 to the other authorities.
  • Gaps in the average allocation earmarked by the Ministry are also prominent when examining localities by their demographic composition: NIS 2,682 in Arab Israeli localities, NIS 5,483 in Jewish localities, and even higher sums in Haredi and Forum-15 localities.
  • Most of the gap between localities in per-client budget allocation can be explained by types of care frameworks: the weaker authorities use fewer out-of-home frameworks, which are the most expensive.

Explanation 3 for the inequality: stronger local authorities are able to supplement the budget beyond what is required to receive Ministry funding

  • Wealthy localities tend to allocate many more resources to welfare issues, beyond those required to receive funding from the Ministry of Labor and Welfare through the matching method: the rate of self-generated income out of total welfare expenditure is 30% on average in Arab Israeli localities, 36% on average among the Forum-15, and 37% on average among Haredi localities (though they belong to lower socioeconomic clusters).

These supplements mean that in overall per-client expenditure for welfare services, there are even greater gaps than were seen in the original budgetary allocation by the Ministry of Labor and Welfare.

Does more competition make social services better? Outsourcing by the Ministry of Labor and Welfare

The privatization of social welfare services in Israel has been an on-going process since the 1980s, and has not been curbed in recent years. A study conducted by Researcher Shavit Madhala and Principal Researcher John Gal sheds light on this phenomenon and concentrates on the Ministry of Labor and Welfare’s outsourcing of welfare services to non-governmental agencies, whether for-profit businesses or non-profit organizations. The outsourcing process is carried out by government tenders inviting agencies to compete for a contract.

The assumptions underlying the outsourcing of social services are that this system allows for greater flexibility and more effective operation, and that competition between different specialized service providers will improve the service to Israeli citizens.

Understanding the outsourcing of public welfare services

There has been a considerable increase in public welfare services outsourced by the Ministry of Labor and Social Welfare since the turn of the century. In 2000, the Ministry spent about NIS 2.3 billion, or about 70% of its total budget, on outsourcing services (in 2015 prices). Yet by 2015, when the Ministry’s budget amounted to about NIS 6 billion, outsourcing spending rose to 80% of the Ministry budget, reaching NIS 4.8 billion. This money was dedicated to outsourcing in the areas of rehabilitation, intellectual developmental disabilities, correction services, and personal and social services.

To what types of institutions are these services outsourced? Service providers to the Ministry of Labor and Social Welfare include nonprofits alongside for-profit businesses. In 2015, the number of social service providers to the Welfare Ministry was 2,697, two-thirds of which were private businesses and one-third of which were nonprofit agencies.

Nonetheless, the payments to these different types of providers were similar: about half the payments went to nonprofits and half to private, for-profit providers. In the years that were examined in this study, there was a rise in the number of nonprofits providing services to the Ministry as well as a rise in the spending allocated to these organizations while, simultaneously, there was a drop in the number of for-profit providers.

Most of the service providers for the Ministry of Labor and Welfare are long-time providers, meaning they have worked with the Ministry for at least one year prior to 2015. While only 56% of the providers are considered long-time, these providers receive 94% of total outsourcing payments. This reflects the fact that the Ministry puts an emphasis on the experience of service providers and that, in various areas, it is important to the Ministry to keep the same providers they have used in the past so as to maintain consistency and not harm those receiving the services.

out1eng

Concentration and competition in the welfare services market

Despite the fact that the 50 largest suppliers (receiving more than NIS 20 million each year) constituted only 2% of all the outsourced service providers used by the Ministry of Labor and Welfare in 2015, they received about 46% of the total resources allocated to outsource payments (compared to 49% in 2000). 48 of the 50 largest suppliers are also long-time providers. Overall, 58% of the largest providers in 2015 were long-time for-profit businesses, 38% were long-time nonprofits and 4% consisted of new organizations.

out2eng

The study’s findings relating to concentration levels indicate that there is limited competition among service providers in the field. However, the data show that there has been a decrease in the number of welfare fields that are highly concentrated and an increase in the number with low concentration, meaning that, though competition remains low overall, outsourcing is becoming more competitive over time. This trend can be expected to have a positive effect on pricing and, possibly, on the quality of social services.

It is important to note that the competition between the providers takes place at the stage of being contracted by the government, and in most cases there is no competition between the providers over the service-receiving clients. Clients are generally referred to service providers by the Ministry or the local authority and often have little choice over which provider to use.

This study raises a question about the importance of competition in social welfare. On the one hand, the existence of competition between service providers is one of the justifications for privatization. On the other hand, in the series of interviews conducted for the study, it emerged that the Ministry selects providers mainly on the basis of their experience and expertise in providing the services.

Therefore, where the provider is satisfactory, competition is of little importance. Furthermore, it is widely argued that continuity of care in social services is more important than promoting competition through turnover. Continuity of care is meant to prevent upheavals due to staff changes, for instance, that could harm Israeli citizens receiving the services.

Press Release: Social Service Budgeting in Israeli Local Authorities

Employees of social service departments in local authorities deal with some 465,000 households in distress. The services they provide are financed through matched funding: for every shekel invested by the local authority, the Ministry of Labor and Social Welfare supplements NIS 3, such that in practice 75% of the welfare budget is financed by the Ministry of Labor and Welfare and 25% by the local authority.

The study (which will be published in the State of the Nation Report 2017 this month) examines the budgeting patterns of welfare services in local authorities in Israel and the gaps between the different localities.

The findings show that it is difficult to attribute this disparity to local authorities’ inability to meet their share of the funding, although it is quite possible that authorities with fewer resources request a relatively small sum from the Ministry out of fear that they will not be able to finance their shares. On the other hand, the data clearly show that the average initial sum allocated by the Ministry of Social Welfare to the weaker authorities – particularly to the Arab Israeli localities – is lower, primarily due to differences in the types of care given in the different localities.

Another reason for the discrepancy is the willingness and ability of stronger localities to allocate more resources to social welfare issues beyond what is required to receive funding.

Study findings:

  • The average welfare expenditure stands at 11% of the total budget in localities of low socioeconomic standing, and at 6% among those with a high socioeconomic ranking.
  • The average per-client expenditure in strong localities without balanced-budget grants and government development grants (Forum-15 localities) is NIS 9,095, while in Arab Israeli localities the expenditure is only NIS 3,387. In the Haredi localities, which are categorized as part of the low socioeconomic cluster, the average expenditure is NIS 8,749, compared to NIS 7,318 in the remaining Jewish localities.
  • A gap that disadvantages the weaker authorities emerges already with the initial allocation by the Ministry of Labor and Social Welfare: NIS 3,170 allocated to the localities of low socioeconomic standing, compared to NIS 5,400 to the other authorities.

Most of the gap between localities in per-client budget allocation can be explained by types of care frameworks: the weaker authorities use fewer out-of-home frameworks, which are the most expensive.

 

Israel’s Supreme Court is currently reviewing a petition on the subject of inequality in the welfare services provided by local authorities. A report submitted in the framework of a petition notes the problems associated with the matching method, which requires local authorities to contribute 25% of the cost of funding social services, and with the absence of clear criteria for the allocation of resources by the Ministry of Social Welfare. This research study conducted by Taub Center researchers Prof. John Gal, Shavit Madhala and Haim Bleikh, which will be published in the Taub Center’s State of the Nation Report 2017, addresses the source of gaps in social service provision that residents receive in strong and weak localities, and explores a number of possible explanations. The comprehensive study includes an analysis of 253 local authorities in Israel – Jewish, Haredi, and Arab Israeli – across the spectrum of socioeconomic statuses.

There is considerable inequality in the financing of welfare services between strong and weak local authorities

Under the Welfare Law of 1958, the primary responsibility for the welfare of individuals, families and communities rests with local authorities, whether these services are provided to the community by local social services departments or by welfare institutions from outside the locality. The Ministry of Labor and Social Welfare is the main source of funding for the welfare activities of the local authorities, and is responsible for determining relevant policies and regulation.

The data show that, not surprisingly, the lower a locality falls in socioeconomic ranking, the greater the welfare needs of its residents and the more the locality is required to allocate a large portion of its budget to addressing welfare issues. Accordingly, in localities that belong to the three lowest socioeconomic clusters, welfare expenditure accounts for 11% of the total budget, on average, and in the localities belonging to the three highest socioeconomic clusters, it constitutes an average of 6% of the budget.

While the share of welfare expenditure out of the locality’s budget tends to increase when the locality is weaker socioeconomically, the data show that the total per-client expenditure is actually smaller when the locality is weaker.

While the average per-client expenditure in the Forum-15 localities (autonomous authorities that do not receive balanced-budget and development grants from the government, and are considered the strongest socioeconomically) is NIS 9,095, among Arab Israeli authorities it is only NIS 3,387. In contrast, the Haredi local authorities are exceptions to this rule: even though they have a low socioeconomic ranking, the average per-client expenditure (NIS 8,749) is high in comparison to the per-client expenditure in other Jewish municipalities (NIS 7,318).

Thus, according to data collected by the Taub Center researches, there is considerable inequality between various local authorities, and those who require assistance the most and live in localities of low socioeconomic status are the ones to which the fewest resources are allocated. This trend is likely to increase the social inequality that already exists between different population groups in Israeli society.

The main explanations for inequality are gaps in the sums allocated by the Ministry of Labor and Social Welfare and additional self-generating income in wealthy localities

Over NIS 4 billion out of the Ministry of Labor and Social Welfare’s budget (NIS 5.5 billion as of 2014) was allocated to fund the welfare activities of local authorities. The distribution of the budget for localities is based on formulas determined by the Ministry, and are calculated each year based on several criteria, including the number of client files handled by local social service departments, the type and size of the locality, its socioeconomic status and other indicators that are not made public.

Over the course of the budget year the Ministry reexamines the budgeting, and increases or cuts funding in accordance with new needs that may have arisen, or the local authority’s willingness to provide its share of the funding. The authorities may also expand their provision of services through funding from an independent source, such as philanthropic foundations or tax funds.

It is possible that the budgeting for social services and the matching method create inequality between local authorities

It is widely argued that the matching method of funding creates inequality between local authorities and harms residents in need of assistance. According to this argument, authorities with very few financial resources, whose residents are most in need of welfare, are unable to fulfill the funding costs required on their part in order to receive the full budget from the Ministry of Social Welfare, and therefore end up providing more limited social services.

The research of Gal, Madhala, and Bleikh examines this issue, but it is difficult to determine the degree to which the ability to supplement funds with self-generated income affects the size of the budget. The vast majority of authorities (92%) utilize the entire budget earmarked for them at the beginning of the year, and receive additional funds over and above the initial allocations.

Of the 20 localities that do not utilize the budget allotted to them, only eight are ranked in a low socioeconomic cluster (all are Arab Israeli localities), assumedly due to their inability to produce the share of funding required of them. The other 12 authorities are ranked among the high socioeconomic cluster, and in these cases it seems likely that they do not need the full sum in order to adequately provide welfare services.

The data signify that most of the authorities actually did manage to meet the funding level required of them in order to receive the full government budget, and even spent more than the required sum. However, it is quite possible that authorities with few resources request a relatively small sum from the national government in order to avoid a situation where they cannot meet their share of the funding later in the year.

Employees in the Ministry of Labor and Social Welfare have indicated that requesting a smaller allocation than is needed may result from a locality’s inability to send clients to out-of-home care frameworks as a result of difficulties in obtaining funding.

Institutions that provide clients with out-of-home residential services are considered to be a particularly expensive component of welfare costs, and the general assumption is that weak authorities might prefer to request funding for some of their clients to participate in community-based frameworks rather than in out-of-home frameworks because of the cost, even if the latter is considered to provide better treatment for them.

Weaker authorities receive less funding, mainly because they refer clients to lower-cost care frameworks

A second explanation examined by the Taub Center researchers for gaps in welfare expenditure between local authorities focuses on the initial allotment from the Ministry of Labor and Social Welfare. According to Ministry policy, when resources are allocated, preference is given to weaker localities with a high concentration of needy people.

However, despite this decision, a gap that disadvantages the weaker authorities exists even from the Ministry’s initial allocation: the average per-client expenditure is NIS 3,170 for the localities of low socioeconomic status, compared to NIS 5,400 for the rest of the authorities.

The end-of-year per-client budget data, after adjusting for utilization of the budget and the needs of the authorities, show that the gap is even greater: NIS 3,630 in the lower socioeconomic clusters and NIS 6,078 in the other localities.

Gaps in the average allocation earmarked by the Ministry are also prominent when examining localities by their demographic composition: NIS 2,682 in Arab Israeli localities, NIS 5,483 in Jewish localities, and even higher sums in Haredi and Forum-15 localities.

To explain gaps in the Ministry of Labor and Social Welfare allocation to the various localities, the researchers examined the characteristics of the care frameworks used by each authority. The care frameworks can be divided into direct services provided by social workers in local social service departments, community-based frameworks, and out-of-home frameworks.

The analysis points to large differences between the authorities in the share of clients cared for in community-based and out-of-home frameworks. In Arab Israeli localities, these frameworks are less frequently used than in the Jewish sector, and in the Haredi localities they are used considerably more frequently than in the other localities. The study also finds that, as the share of Haredi residents in a locality increases, there are increased rates of participation in out-of-home and community-based frameworks.

To explain the differences in per-client expenditure between sectors, the researchers conducted a multivariate analysis. They found that gaps in allocation between the sectors may be explained by differences in the characteristics of care in different authorities as well as by different demographic and socioeconomic characteristics.

In particular, they found that the different care frameworks contribute a great deal in explaining the phenomenon – this is the source of 64% of the variance that can be explained.

eng2

eng1

 

The third explanation for gaps in welfare expenditure among the local authorities is their ability to supplement the budget beyond what is required to receive Ministry funding. As stated above, the matching method means that local authorities are supposed to finance 25% of the welfare expenditure for the locality

The Taub Center study finds that almost all of the localities add funds beyond the required amount, but wealthy localities tend to add more additional resources than poor localities: the rate of self-generated income out of total welfare expenditure is 30% on average in Arab Israeli localities, 36% on average among the Forum-15, and 37% on average among Haredi localities (though, as previously stated, they belong to lower socioeconomic clusters).

These supplements mean that in overall per-client expenditure for welfare services there are even greater gaps than were seen in the original budgetary allocation by the Ministry of Labor and Social Welfare.

The researchers write: “The study’s findings on social service budgeting among Israeli local authorities and its examination of the factors underlying the budgeting system, underscore the need for a reexamination of the existing budgeting system and the adoption of policies that will ensure equal access to care for the needy, regardless of where they live.”

 

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.

 

 

Degree is complete, now what?

Taub Center and the National Students’ Union launch a new, one-of-a-kind project:

Degree is complete, now what?

 In the past few years, Taub Center researchers have been looking at different aspects of the Israeli labor market to identify the problems and failures that hinder labor productivity and growth. One of the main findings of their research is the significant lack of congruence between the characteristics of human capital and the labor market needs: the distribution of fields of study selected by students in higher education does not align with the distribution of professions that the market requires. The result is damaging to productivity and growth, and leads to a widening of income inequality between the different sectors.

In order to address this issue, the Taub Center and the National Students’ Union are launching a project that is the first of its kind: a survey on wages and employment as they relate to academic degrees. The survey is expected to shed light on the relationship between higher education and the labor market in Israel.

“Study hard and you will succeed.” We have said it for years, and yet this statement does not necessarily ring true in many cases. Despite the high rate of degree holders in Israel, the workforce is characterized by a significant lack of congruence between the composition of human capital and the needs of the labor market.

In their research on productivity gaps, Taub Center researchers Dr. Eitan Regev and Gilad Brand (2015) looked at the “Other business services” sector in Israel, which is made up of, among others, professions such as lawyers, accountants, managers and clerks. In Israel, this sector is double the size of the parallel sector in other OECD countries. About one-quarter of the workers in the business sector are employed in this sector, compared to only one-eighth in the OECD, and this has had a major effect on the productivity gap between them.

Put simply, Israel has far too many lawyers, accountants, managers and clerks, and this excess comes at the expense of other, more productive industries.

The composition of academic professions also has a major  impact on the gender wage gap.  In her study of the wage gaps between women and men (2016), Taub Center researcher Hadas Fuchs found that the share of women among all students in technological fields was and remains low at only 20-30%.

This fact, and the choice of fields of study that later provide lower paying occupational options, are the core reasons for the hourly wage gap between women and men. In an additional study from 2015, Brand and Regev show that the Israeli labor market is becoming a dual labor market, with little or no movement of skilled workers between different sectors.

In light of the growing polarization between academia and the labor market, it is increasingly important to match the composition of human capital to the needs of the economy. When the fields of study in higher education and the needs of the labor market do not align, the economy has a hard time adjusting, and the result is damaging to productivity and growth, which contributes to a widening of wage gaps between sectors.

In order to address this problem and to give future students better guidance based on the experience of today’s graduates, the Taub Center and the National Students’ Union are launching this groundbreaking project to map employment patterns among the various fields of academic study.

A questionnaire has been distributed to recent graduates to assess their integration into the labor market and the match between their studies and their employment. The questionnaire examines the relevance of their academic education to their professional skill-set, ability to find employment, earning ability, and professional prospects.

The purpose of the survey is to draw data from graduates’ practical experience that will make professional study choices more relevant to the labor market, and to pass these findings on to future students as they decide on their academic paths. The goal is to give them essential information about the labor market early on in their academic decision making process, and, hopefully, to bring about a better match between academic studies and labor market needs.

This pilot project has the potential to have a significant positive impact on labor productivity in and growth of the Israeli economy, to the benefit of all.

Please take a few minutes to answer this anonymous, short questionnaire (in Hebrew) to impact and bring about real change.

For details, or to arrange an interview, please contact Anat Sela-Koren, Director of Marketing, Communications and Government Relations, 050 690 9749, or Reut Matzo, publicist for the National Students’ Union, 054 442 8978.

The Taub Center for Social Policy Studies in Israel, headed by Prof. Avi Weiss, is an independent, non-partisan institution for socioeconomic research based in Jerusalem. The Center provides decision makers, as well as the public in general, with a big picture perspective on economic and social areas. The Center’s interdisciplinary Policy Programs – comprising leading academic and policy making experts – as well as the Center’s professional staff conduct research and provide policy recommendations in the key socioeconomic issues confronting the State.

 

The Arab education system in Israel: Are the gaps closing?

For many years, the Arab Israeli (Arab) education system suffered neglect and discrimination reflected in large disparities relative to the Jewish (Hebrew) sector system — both in terms of resources allocated and in terms of academic achievements. Although these disparities continue to exist, Principal Researcher Nachum Blass finds evidence that there has been significant improvement in the achievements of Arab Israeli students in recent years and that the gaps are narrowing.

In particular, when comparing students of similar socioeconomic backgrounds, the achievements of students in the Arab education system have not only improved considerably over the years, but are approaching those of students in the Hebrew education system – and even surpassing them in some areas. 

Resource allocation: budgets, teachers’ qualifications, and smaller classes

Despite disparities in budget per student and per class, the gaps in teacher quality and number of students per class have nearly closed between the two education streams.

The budget per student in the Arab education system remains much lower than in the Hebrew education system. While NIS 20,000 was allocated per primary school student in the Hebrew stream in 2015, only about NIS 16,000 was allocated in the Arab education stream. Nonetheless, the per-student budget has increased more rapidly over time in the Arab stream than in the Hebrew stream.

On the other hand, there has been improvement in the Arab stream in teacher qualifications, which in educational research are often indicated by teachers’ levels of education. The share of teachers with an academic degree in the Arab education system actually exceeds the share in the Hebrew education system at every level of schooling.

In addition, the share of teachers with a Master’s degree in the Arab system is growing and approaching that of teachers in Hebrew education, though notable gaps remain among teachers in post-primary education.

In a similar vein, though the Ministry of Education’s efforts to reduce the size of classes did not bring about considerable change in the Hebrew education system, the results were more impressive in Arab education. By 2015, the number of students per class in Arab primary and middle schools was lower than in the Hebrew education system, and only in high school was it higher.

Educational outcomes: enrollment, scholastic achievements, and international exams

More Arab Israeli students are enrolled in school and in higher education than in the past, and their scholastic achievements have risen in a number of subjects. However, large scholastic achievement gaps remain between the streams, both on national and international exam scores.

Enrollment rates in Arab primary and middle schools rose considerably between 1990 and 2015. Particularly striking is the rise in enrollment among girls in the Arab education system: from 59% to 94% during this period. In addition, there was an increase in the percentage of Arab Israelis admitted to higher education institutions within Israel and in the share of all degree holders in Israel who are Arab Israeli.

Despite this progress, it is important to note that in 2015 a much smaller percentage of young Arab Israelis (25-34) had more than 13 years of schooling than of Jews: only 36% as compared with 72%.

In terms of achievements on the fifth grade Meitzav exams, there was a substantial increase in math scores and a moderate increase in English scores among Arabic speakers between 2007 and 2016, which narrowed the gaps between the two education streams in these subjects.

On the eighth grade Meitzav exams during the same period, the gap in scores narrowed in science and technology, but the gap in math scores increased, and the gap in English remained unchanged. Classifying students into three socioeconomic groups, and comparing between students of similar socioeconomic backgrounds, cuts the gap in English scores between Hebrew- and Arabic-speaking students in about half. These gaps might be even smaller if students’ achievements were analyzed after dividing the socioeconomic groups more finely.

The share of those taking the matriculation exams in the Arab education stream is similar to that in the Hebrew stream, and the gap between the percentage of Jewish and Arab Israeli students who qualify for a matriculation certificate has narrowed from 17% in 2000 to 12% in 2015.

While there have been some improvements on the math, chemistry, and biology matriculation exams for Arab Israeli students, the success gaps are still large on the 5-unit level of the English matriculation exams: in the Hebrew education stream 58% pass the exams, and in the Arab education stream – 14%.

eng
In contrast to the achievements mentioned above, the gaps between students in the two education streams have narrowed to a lesser degree on international exams, and in some cases have remained unchanged – even among students from similar socioeconomic backgrounds.

Gaps remained on the 2011 PIRLS exam (primary school) and on the 2015 PISA exam (high school), and did not narrow even when students were classified by socioeconomic background. However, the gap in math scores on the 2015 TIMSS exam (middle school) did become much smaller when taking socioeconomic background into account, which may show that at least some of the gap is rooted in the students’ socioeconomic profiles.

What can be done?

The fact that, for the most part, the gaps between the Arab and Hebrew education system appear to be smaller when comparing students of similar socioeconomic standing, shows that disparities in achievement between Jewish students and Arab Israeli students can be explained to a great extent by their socioeconomic backgrounds. To reduce this gap, it is important to focus more generally on addressing socioeconomic issues between the two sectors.

 

Why Does the Start-Up Nation Still Have Low Productivity?

Executive Summary

The Israeli economy is characterized by low productivity, and thus a low standard of living, despite its being a world-class leader in the high-tech field. Why the paradox?

A new study by Taub Center Researcher Gilad Brand shows that the problem lies in the exceptionally large gap in the Israeli labor market between the size of the high-tech and other export-intensive sectors, which are characterized by high wages and rapid growth, and the rest of the market with its low salaries and slow growth. According to the research, the success of the thriving sectors in Israel, unlike in other developed countries, has had little impact on the rest of the economy. Among other things, this is because of low labor mobility which has resulted in the development of two separate economies. In light of these findings, it appears that government support of the high-tech industry has limited impact on the rest of the market and, therefore, other forms of intervention should also be considered.

One market – two economies

According to Brand, the central reason for differential growth between the sectors is that Israel has especially large disparities between the exporting sector (which is primarily made up of high-tech and advanced technologies) and the local sector.

  • Israel’s export sector is highly concentrated and largely rests on high-tech and advanced technologies: 56% of those employed in the export sector work in high-tech and advanced technologies – almost double the OECD average, and the highest share of all the countries examined.
  • Achievements of high-tech workers on the survey of adult skills (PIAAC) are higher than the OECD average, though the achievements of the rest of the workforce are lower than in 20 of 25 other OECD countries.

English graph

Does investment in high-tech have an impact on the rest of the labor market?

Economic literature shows that the benefit the export industry gets from international exposure and competition should trickle down to the rest of the market through labor mobility: higher wages and demand for workers in exporting industries should lead workers to move from local to export industries. As a result, this should incentivize local industries to improve efficiency in order to remain profitable, which in turn would improve productivity and wages. While success in the export sector has indeed trickled down to the rest of the economy in other developed countries, this has not taken place in Israel.

  • There is indeed high demand for more workers in high-tech and advanced technologies. For example, among clerks and office workers there are about 3 job searchers for each available position, as opposed to 1.5 workers for every available job for practical engineers and technicians in science and engineering.
  • There is low worker mobility from local to export industries because the jobs available in export industries require highly trained and skilled labor.

As a result of low mobility, the efficiency, productivity, and wages in the local sector are not increasing, despite the success of high-tech in Israel.

Improving Israel’s labor productivity

The concentration of high-tech products in the export sector is the result not just of Israel’s relative advantages in the field, but also of government incentives given to this sector over the years. Brand finds that, in light of the conditions described above, additional investment in high-tech on its own is unlikely to improve productivity in other sectors. On the other hand, direct investment in local, non-trade sectors could be risky because they have much more limited GDP growth potential than the tradable industries. In addition, improving productivity in the local sector could improve efficiency at the expense of low-skilled workers, who might be pushed out of a job by advanced technologies.

  • Despite the sharp growth in workers in the service and trade sector, its share in the GDP has remained almost identical over the past four decades (45-50%). A growing percentage of workers divide a share of the GDP that is not growing.
  • Israel has import restrictions that diminish the volume of trade – Israel imports only 28% of its GDP – less than the majority of OECD countries.
  • The volume of imports to Israel has decreased by 1.3% over the past decade, and it is the only country in the OECD whose imports declined during this period. It should be noted that the volume of a country’s imports largely determines the volume of exports in a country, through the exchange-rate mechanism.
  • There has been a decline in employed persons in most sectors in the Israel’s export industries.

Overall productivity in Israel would be improved if workers move from the local sector into the export sector where, as stated above, demand for workers is high. Yet Brand notes that “in order to bridge the skills gap between workers in the two sectors, we should think about vocational training that will enable employment mobility and broaden accessibility to employment in the export sector.” Removing trade restrictions and changing government investment policy to allow greater competition in imports and exports could also help to improve productivity by allowing more Israeli companies to benefit from the advantages of exposure to international markets.

Why is productivity so low in the Start-Up Nation?

To read the full publication click here

To download the press release go to this page

Why is productivity so low in the Start-Up Nation?

The Israeli economy is characterized by low productivity, and thus a low standard of living, despite its being a world-class leader in the high-tech field. Why the paradox?

A new study by Taub Center Researcher Gilad Brand shows that the problem lies in the exceptionally large gap in the Israeli labor market between the size of the high-tech and exporting sectors, which are characterized by high wages and rapid growth, and the rest of the market with its low salaries and slow growth. According to the research, the success of the thriving sectors in Israel, unlike in other developed countries, has had little impact on the rest of the economy.

Believe it or not casino players have been from generations and generations of people who love the game and play them at very early ages. It is common to see people being a great fan of these games and spending their free time browsing on the Internet to find various choices.
We can’t really blame them for this, it is actually a very clever and interesting game to play,
sitting at home.One of the most common casino games people enjoy to play for fun is the free online slots.
It is very common to see people from different backgrounds in the world to enjoy this game. It
is probably because this game is one of the many casino games online, where the rules are
easy to follow and no matter what your language is, you always know what you’re supposed to
do. Moreover, as the game is free it gives a chance to all the players who wish to try their luck
from the comfort of the properties.

Among other things, this is because of low labor mobility which has resulted in the development of two separate economies. In light of these findings, it appears that government support of the high-tech industry has limited impact on the rest of the market and, therefore, other forms of intervention should also be considered.

Study findings:

  • High-tech employees in Israel earn more than double what employees in the rest of the business sector earn; this ratio is much higher than in other OECD countries.
  • Achievements of high-tech workers on the survey of adult skills (PIAAC) are higher than the OECD average, though the achievements of the rest of the workforce are lower than in 20 of 25 other OECD countries.
  • Israel has import restrictions that diminish the volume of trade – the share of imports out of the GDP stands at about 28% and is ranked low relative to other OECD countries. This policy primarily harms the non-high-tech exporters that are characterized by lower profit margins by supporting the strong shekel.

Israel is often referred to as the “Start-Up Nation,” but the country’s success in the high-tech industries is not necessarily shared by all, and the overall productivity rate, which is tightly linked to the standard of living, remains low relative to other developed countries. A new study by Gilad Brand, a researcher at the Taub Center for Social Policy Studies in Israel, looks at the relationship between the different sectors in the country and shows why the growth that has characterized the advanced technology sector has not trickled down to the rest of the market.

One market – two economies: Investment in exporting sectors does not impact the rest of the market, and polarization has increased between workers in the different sectors

 According to Brand, the central reason for differential growth between the sectors is that Israel has especially large disparities between the exporting sector (which is primarily made up of high-tech and advanced technologies) and the local sector.

Economic literature shows that productivity and growth in exporting sectors are higher than in local market-centered industries because companies that export are exposed to a greater extent to world technologies, face fierce competition in the world marketplace and gain experience from exposure to new markets.

This growth would be expected to trickle down to the rest of the market through labor mobility: the high productivity in exporting sectors raises wages and demand for workers in those industries, and because of the decrease in the supply of labor in sectors supplying the more local market, wages rise in those sectors as well.

Higher wages in the exporting sector should incentivize local industries to make investments in capital and in technology, and to improve efficiency in order to remain profitable. Through this mechanism, productivity and wages in all sectors would rise.

Indeed, in those countries where productivity in the export sector has improved over time, workers’ wages in the other sectors have also increased. As seen in this graph, the Israeli economy remains exceptional in the weak relationship between the two variables, and the purchasing power of workers in Israel has grown at a slower pace than expected.

According to Brand, the process that is observed in most countries doesn’t hold in Israel because the differences between workers in the two sectors are very pronounced. For example, the average score of workers in Israel’s local sector industries in an international survey of adult skills (PIAAC) is lower than in 20 of the 25 OECD countries in the sample, despite the fact that their formal education is relatively high.

Workers in the export sector, on the other hand, had scores that were a bit higher than the OECD average. The difference between workers in the two groups is the highest among the 25 OECD countries in the sample. This leads to a lack of mobility between the two sectors, and thus the mechanism of labor mobility, as described above, does not occur. That is, the growth of productivity in the export sector does not result in wage pressure in the local market.

Wage differentials in Israel are therefore particularly high. Workers in high-tech earn over double the wage earned by workers in the business sector, and this gap in wages is excessively high compared to other OECD countries.

eng1

Does investment in high-tech have an impact on the rest of the labor market?

The data in the Taub Center study show that, due to the particular composition of the labor force in exporting industries, the success of this sector does not drag other sectors in the economy along, as we witness in other OECD countries. In light of this, Brand raises the question whether current government policy, which supports heavy investment in high-tech, can be expected to bring about a rise in productivity in other sectors.

In his words, “the advanced industries already face limitations in the supply of workers – that is, workers who have the required skills are already working in the sector. It stands to reason then that additional government incentives for these  will result more in an additional rise in wages for those workers already employed than in an increase in the number of workers in the sector.”

Brand’s research also shows that the composition of exports in Israel is highly concentrated and largely rests on high-tech and advanced technologies: 56% of those employed in the export sector work in high-tech – almost double the OECD average and the highest share out of all the countries examined. Over-reliance on a small number of industry areas that require highly trained and skilled labor means that other workers are unable to enter the sector (because of the level of training required) and benefit from high productivity and wages.

The concentration of high-tech products in the export sector is the result not just of Israel’s relative advantages in the field, but also of incentives given to this sector over the years in an effort to encourage capital investment and of age-old government policies regarding international trade.

These directly contributed to the concentration of Israeli exports since they encouraged the expansion of several large exporters, which came at the expense of others through resulting changes in the exchange rate. These changes are particularly damaging to non-high-tech exporters characterized by lower profit margins. For these types of companies, small changes in the exchange rate can make the difference between successful exporting and remaining limited to the local market.

eng2

Potential paths towards improving labor productivity: Vocational training and removal of import restrictions

In light of the conditions described above, additional investment in high-tech is unlikely to improve productivity in other sectors, yet direct investment in non-trade sectors also contains risks. The potential for growth in sectors producing mainly for the local market is low – the industries in these sectors are less impacted by new technologies and are more reliant on local demand alone, something that is, by its very nature, limited and dependent on the level of income in the local market.

The data in Brand’s study show that despite the sharp growth in the service and trade sector, its share in the GDP has remained almost identical over the past four decades (45-50%). A growing percentage of workers divide the share of the GDP that is not growing.

In addition, the local sector is characterized by a relative abundance of low-wage workers, so companies have no strong economic incentive to adopt new technologies that would save manpower.

What is more, incentives to encourage investment in local industry may improve productivity, but there is also a risk that this would be at the expense of workers who might be replaced by technology. Adopting advanced technologies is likely to push low skilled workers out of the low productivity sector and possibly into unemployment.

It seems that improving productivity – which is so necessary for raising the standard of living – will be achieved if workers move from the local sector to the export sector. The data point to a relative abundance of workers in occupations that serve the local market and a lack of workers in the export sector.

For example, among office and clerical workers there are 3 job searchers for each available position, while there are only 1.5 available positions for each engineer and technician. Brand says, “in order to bridge the skills gap between workers in the two sectors, we should think about vocational training that will enable employment mobility and broaden accessibility to employment in the export sector.”

The Taub Center study indicates that having better market conditions could also encourage exports and allow more companies to benefit from the advantages of exposure to international markets. The Israeli market is characterized by a plethora of trade restrictions, among them a great deal of regulation, special standards for Israel, and burdensome arrangements for competing importers.

These restrictions make it difficult for new competitors to enter the market. As a result of this, Israel imports only 28% of its GDP – less than the majority of OECD countries – and this percentage has been declining over the past decade.

The level of imports determines, to a great extent, the level of exports (through the mechanism of the floating exchange rate), so Israel’s exports are also relatively low and declining, as is the share of employees in the export sector in all segments except software programming and IT activities.

Thus, the dependence of the export sector on high-tech continues to grow. The decline in the volume of trade prevents the market from fully utilizing its relative advantage and does not enable the economy to reach its full potential in the long run.

In summary, Brand says “it seems that the way to improve productivity is not only through additional investments in high-tech industries. Other measures are needed as well, such as encouraging mobility between the sectors, removing trade restrictions and changing investment policy to allow greater competition in imports and exports.”

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

Israel as a Welfare State: A Visual Essay

For the full publication (in Hebrew) press here

In recent decades, the “welfare state” concept has become popular among academics, journalists, policymakers, and the general public. It is used to explain efforts to address poverty, exclusion, and economic gaps, and is a term that has entered the public debate on many social issues in Israel.

Researcher Noam Tarshish examines Israel as a welfare state over time. Israel’s welfare state today is more similar to the liberal model – which can be found in countries like the U.S., Canada, and Australia – but includes a few conservative and social democratic elements that are rooted in the country’s past. The contradictory paths that Israel’s welfare system has undergone during its short history can be explained, in part, by Israel’s similar characteristics to the “extended family” of the Mediterranean welfare regimes. These characteristics include an emphasis on family and religion, as well as the differential allocation of welfare resources among ethnic, national, or other population groups.

Educational Inequality in Israel: from Cradle to University

taub191-1

Watch the conference, including all sessions and keynote lectures, on our Youtube channel

The Center’s Herbert M. Singer Annual Policy Conference of 2017 brought together great minds from Israel and the United States to address core, at times provocative, questions related to educational inequality throughout the life of a student, and to examine cutting-edge developments in the field that may help reduce the gaps.

The conference opened with a warm welcome and remarks from Taub Center Executive Director Prof. Avi Weiss, Taub Center Council Member Anat Gafni, and Jay H. Sandak, President of the Herbert and Nell Singer Foundation and a close friend of the Taub Center – who was joined at the conference this year by his son, Stephen Sandak.

The first session, Education and Inequality, was chaired by Prof. Yuli Tamir, President of Shenkar College and Former Minister of Education, and featured Prof. Noah Lewin-Epstein of Tel Aviv University ( Her presentation in Hebrew can be found here) and Taub Center Principal Researcher Nachum Blass (For his presentation click here). The speakers each offered their perspectives on how to address inequality in the education system and presented important trends that helped frame the topics of the day. Parental background was noted as an important predictor of educational success, and policy options, such as differential budgets that prioritize students from weak socioeconomic backgrounds, were put on the table.

The conference transitioned to its first keynote lecture, delivered by Prof. Dalton Conley of Princeton University. Conley presented his research on of the relationship between genetics, educational success, and social mobility, but noted that genetics is not everything. He concluded his presentation by noting that as technology makes individuals’ genetic information more readily available (particularly to wealthier strata in society), it is incumbent upon policy makers to take an active role in the debates already at hand and consider the policy implications on the role that  that genomics can play in society.

The second session focused on vocational education and was chaired by Member of Knesset Yossi Yona (Zionist Union). MK Yona was joined on stage by Prof. Yossi Shavit, Chair of the Center’s Education Policy Program (His presentation, in Hebrew, can be found here), Elad de-Malach from Bank of Israel (His presentation, in Hebrew, can be found here) and Shirin Natour Hafi, Principal of the Arab School ORT Vocational High School in Lod. Ms. Natour Hafi discussed her priorities as principal, noting that the common remedy of longer school hours is not enough to motivate students to succeed; pupils need their physical space to reflect the seriousness and professionalism of their expected educational performance.

As the conference moved into the third session, President of Hadassah Academic College Prof. Bertold Fridlender chaired a panel on higher education. The panellists, Prof. Sigal Alon from Tel Aviv University and Dr. Yariv Feniger of Ben Gurion University, looked at social stratification in university and the efficacy of affirmative action in reducing performance gaps.

The second keynote lecture of the day by Nobel Laureate Prof. James Heckman (and member of the Taub Center International Advisory Council) opened with an introduction by Prof. Avi Weiss and former Member of Knesset Prof. Manuel Trajtenberg. In his talk entitled The Connection Between Poverty, Stress and Development in Early Childhood, Prof. Heckman showed that the achievement gaps that we see at age 18 already exist in preschool, and a key question is when and how to intervene. “If we start at age 20, the most efficient method [of ensuring success] is probably to invest in the most motivated and competent individuals, but if we invest today in the base capabilities of disadvantaged young children, the return on investment will be huge,” he argued. For his full presentation click here

The final session, chaired by Prof. Yossi Shavit, featured an analysis of policy implications by Carmel Blank of Tel Aviv University, Taub Center Principal Researcher Nachum Blass, Daniella Ben-Attar of the Bernard Van Leer Foundation (Here presentation can be found here) , and Meir Kraus, Former Director of the Jerusalem Education Administration. The policy interventions discussed by the panellists and audience members ranged from parental training at the municipal level to a national overhaul of current budgeting standards.

The Center’s 2017 international conference was a huge success, bringing together the leaders of their fields to address this core social policy issue before a record-breaking audience of over 200 engaged participants. We thank all of the speakers and attendees of the conference and look forward to continued dialogue surrounding this important policy area.

 

Paying out of pocket: parental spending on preschool education

household spending on preschool

In July, the Ministry of Education announced that a new subsidized after-school program will begin in the 2017-2018 school year to provide an extended educational framework for students in public preschools in the afternoons, while easing the financial burden on parents.

This development is the most recent in a process of reforms that has occurred in the wake of the 2011 social protests in Israel and the subsequent Trajtenberg Committee (the Committee for Socioeconomic Change headed by Professor Manuel Trajtenberg). A central issue in 2011 — termed the “stroller protest” — called attention to high parental spending on preschool, which burdened young families and had an impact on their financial and employment decisions.

The cost of preschool rose by 43% in real terms from 2003 to 2012, a rise unparalleled in the rest of the education system and far exceeding the increase in household income or spending. Public preschools – while cheaper than private ones – were still paid for by parents, subsidized for those from the lowest socioeconomic backgrounds.

For most of the state’s existence, the Compulsory Education Law provided public funding for children aged 5 and over, except for special cases. However, following the Trajtenberg Committee recommendations, the Knesset decided to extend this law to cover all 3-4-year-olds starting in the 2012-2013 school year. Practically, this means government coverage of public preschool program costs along with subsidies for many private preschool programs.

A recent study conducted by Taub Center researchers Kyrill Shraberman and Nachum Blass finds that, due to the increase in government spending on preschool education, the law resulted in a decline of 11.5% in the average parental payment for 3-4-year-olds specifically. However, at the same time, there was a slight increase in parental spending on daycare for 2-year-olds. This may be due, at least partially, to the fact that parents who previously had to pay for 3-4-year-olds’ education found themselves with more disposable income than in previous years, which could be used toward daycare for their 2-year-old brothers and sisters.

As a result, average household spending per child for all preschool-aged children (ages 2-5) fell by only 3% following implementation of the law. The researchers also found that the law resulted in increased preschool enrollment for 3-4-year-olds: from 80% to 89% among the Jewish population and from 68% to 79% in the Arab Israeli population within the first two years.

As can be seen in the graph below, the main beneficiaries from the universal implementation of the Compulsory Education Law for 3-4-year-olds were middle and upper class households, and not those in the two bottom consumption quintiles. This is because preschool subsidies were already in place for most lower-income families prior to the 2011 social protests as a part of the “long school day” program, which funded public preschool tuition for children in localities with low socioeconomic status.

eng2

To really evaluate the effectiveness of the law for those of different socioeconomic statuses, it is important to take into account the full-day cost of sending a child to a public or private preschool. On the one hand, public preschool costs are covered by the Compulsory Education Law, but, until now, the costs have only fully covered childcare until 2:00pm at the latest.

To enable children to remain in care after official hours, there are supervised public afternoon programs and after school clubs that are eligible for monthly subsidies up to 400 shekels, depending on the socioeconomic status of the parents. However, these subsidies cover only part of the total costs, and parents are expected to make additional payments for afternoon services if they plan to work full time or longer hours.

On the other hand, the vast majority of private institutions, though only partially subsidized by the Compulsory Education Law, provide service throughout the day, including the later afternoon.

This is another illustration of the way the universal implementation of the law primarily benefited middle and upper class households. For families sending their children to private preschool, the law led to a decline in full-day spending due to government subsidies for the earlier part of the day. In contrast, parents sending their children to public preschool still needed to arrange coverage for the afternoon hours if they planned to work after 2pm.

The average afternoon program spending increased by 45% between 2003 and 2014 among households with children aged 3-4 only, rising most notably between 2012 and 2014. The explanation seems to be that, due to subsidized preschool tuition in the morning, many more parents could afford to send children to afternoon programs.

This 45% increase also reflects increased full-time employment among young women, which creates a greater need for extended childcare coverage. Thus, the law enabled more parents of children to use money that would have gone towards preschool costs towards afternoon programs, but it did not necessarily reduce their overall full-day preschool spending burden.

eng3

The new subsidized after-school program, announced this past July, will cover public preschool and elementary school students from the end of the regular school day until 4:00pm and will include a hot meal, teacher supervision, and extracurricular activities. The goal of this measure is to extend childcare coverage for working parents and to ease the financial burden on full-day preschool costs.

It’s important to note that overall spending per student in preschool education relative to Israel’s GDP per capita has not changed significantly since the expansion of the Compulsory Education Law to cover 3-4 year olds. What has changed is the share of this total spending that is provided through private parental payments versus public government spending.

The public share of funding for preschool education grew from about 79% on average before 2011 to 92% in 2012-2013. Accordingly, the private share of funding, which stood at about 21% on average before 2011, dropped to 8% in 2012-2013.

Therefore, the overall cost burden has been falling less on parents and more on the State. The new subsidized after-school program was passed in recognition that, nonetheless, lower and middle income families in public preschools still need more assistance in paying for afternoon care programs.

Pupil trajectories from first to eighth grade: Differences between sectors

To open the full research in Hebrew, click here

A new study by the Taub Center for Social Policy Studies in Israel examines how pupils advance through the various streams of Israel’s education system from first to eighth grade, in order to check the share of pupils with irregular patterns of progression: skipping grades, repeating grades, being dropped down to an earlier grade, or some combination of these patterns. Taub Center Principal Researchers Prof. Alex Weinreb and Nachum Blass, found that irregular patterns of progression are more common in the Haredi sector, and, in particular, in the Ma’ayan Hahinuch Hatorani education system.

Likewise, the share of irregular patterns of progression has increased over time in the Haredi education system, while in other systems it has remained relatively stable or declined. The researchers argue that unusually high rates of irregular progression are likely a sign that official records of grade progression reflect the school’s organizational and management needs rather than students’ individual educational needs.

 

Among the main findings of this research:

  • Boys have higher rates of irregular advancement patterns than girls: In the Hebrew state school system, about 5% of boys repeated a grade versus about 3% of girls; in the state-religious and Arab system, about 9% of boys repeated a grade versus 6% of girls.
  • The highest rate of irregular advancement patterns was in the Haredi education sector: about 20% of boys who began their education in the Exempt system (which has little if any oversight by the Ministry of Education) repeated a grade; in the Haredi Recognized system (schools that are partially financed by the state with partial oversight although they are not officially part of the state system) about 23% of pupils repeated a grade; in the Independent education system, about 26% repeated a grade; and in the Ma’ayan Hahinuch Hatorani system, some 38% of boys repeated a grade.
  • In an examination of how many years it actually takes to complete a single grade in school in each education system, it was found that there were statistically significant differences among the various educational streams. The average pupil in a Hebrew state school takes 1.015 years to complete a grade and advance to the next grade. In state-religious schools, this was 1.025 years while in Arab schools, it was 1.029. In the Haredi education system, it took 1.05 years in the Independent and Exempt schools, about 1.06 years in the Recognized but not official schools, and about 1.09 in the Ma’ayan Hahinuch Hatorani schools.

    It is quite common to hear about irregularities in pupil registration in the education system, although frequently these claims are based on single incidents. Prof. Alex Weinreb and Nachum Blass, principal researchers at the Taub Center, decided to examine the question in a more comprehensive and methodical way by looking at pupil advancement in grades 1 to 8.

    The research is based on Ministry of Education data for all pupils born between 1994 and 2000 and enrolled in grades 1 through 8 between 2001 and 2015. For the first time in Israel, it looks at the differences in the expected advancement patterns of pupils (one school year per grade) and the actual patterns.

    Irregular patterns in the education system include skipping a grade, repeating a grade, being dropped down to a previous grade, and in exceptional cases, some combination (like repeating a grade and then skipping a grade). In theory, these patterns are meant to answer individual educational needs for those who for various reasons did not complete a grade successfully or performed at a particularly high level and needed the challenge of a higher grade.

    However, in the researchers’ view, the inflated share of pupils in irregular advancement patterns – and in particular of pupils who repeated a grade and then skipped a grade at a later time – suggests that these exceptions from the normal pattern do not serve the individual needs of pupils but rather the organizational needs of the institutions.

    Boys advance in irregular patterns at a higher rate than girls; the highest rate of irregular patterns is in the Haredi educational sector.

    The data in the Taub Center study show that, in general, boys go through the system in a less standard fashion than girls. The likelihood of a boy repeating a grade, being put back in a previously completed grade or skipping to a higher grade is almost twice that of a girl: about 5% of boys repeated a grade versus about 3% of girls in the Hebrew state education system, and in the state-religious system these figures were about 9% of boys versus 6% of girls.

    This figure is in line with previous research that showed that in general, the share of boys among the population of those with special educational needs – both those with disciplinary and educational needs – is higher than the share of girls with special needs.

    The data also show that the lowest likelihood of irregular advancement patterns is in the Hebrew state educational system. In this stream, less than 1% of boys in grades 1 through 8 went back a grade, about 5% repeated a grade and about 4% skipped a grade. Among girls, the likelihoods were about half that of boys.

    In contrast, the most irregular advancement patterns were found in the Haredi educational system. About 20% of boys who began school in Exempt educational institutions repeated a grade, and about 10% repeated and then skipped a grade. In the Haredi Recognized system about 23% of pupils repeated a grade and about 14% repeated and then skipped a grade.

    In the Independent system, about 26% of boys repeated a grade and about 18% repeated and then skipped a grade. In the Ma’ayan Hahinuch Hatorani schools, the highest rates of irregular advancement were found: about 38% of boys repeated a grade and about 25% repeated and then skipped a grade.

    In the Arab education system (including Bedouin and Druze) and in the Hebrew state-religious system, the share of boys with irregular advancement patterns is higher than in the state system and low relative to the Haredi system. About 10% repeated a grade and about 6% repeated and then skipped a grade.

    Among girls, the rate of irregular advancement patterns is lower, although the highest share remains among girls learning in the Haredi educational system. In the Haredi Recognized schools, about 13% of girls repeated a grade and about 9% repeated and then skipped a grade. In the Ma’ayan Hahinuch Hatorani schools, about 21% repeated a grade and about 15% repeated and then skipped a grade.

    In contrast, in the Independent schools – where most Haredi girls study – advancement patterns are most similar to those of girls in the Hebrew state-religious system and the Arab, Druze and Bedouin system: about 7% of girls repeated a grade and about 5% repeated and then skipped a grade. In the Hebrew state system there were the lowest rates of irregular patterns: only 3% repeated a grade and about 2% repeated and then skipped a grade. Sector differences remained unchanged even after controlling for the location of the school.

    pupils1

    The incidence of irregular advancement patterns has increased in the Haredi education system while remaining stable in the other sectors

    In their research, the Taub Center’s Weinreb and Blass examined whether these patterns of student progression have change over time. The findings show that in Hebrew state schools, the patterns are similar for the seven birth cohorts that were studied (less than 0.5% of the overall cohort), with similar patterns in the state-religious and Arab systems.

    In contrast, in the Haredi sector, there have been substantial changes over the years and the irregular advancement patterns have become more common with time. For pupils born in 2000, there was a 50% higher chance of being put back in a previously completed grade or repeating a grade than for those born in 1995.

    To gain additional perspective, the Taub Center research looked at the number of years it actually takes to complete a grade, taking into consideration the particular patterns in each education system. It showed that the average pupil in the Hebrew state system takes 1.015 years to complete a grade and to advance to the next grade. In state-religious schools, pupils take 1.025 years.

    In Arab schools, the figure is 1.029. In the Haredi education system, the figure is the highest: 1.05 years are required per grade in the Independent and Exempt schools, 1.06 years in the Recognized but not official schools, and about 1.09 years in the Ma’ayan Hahinuch Hatorani schools. Among girls, the ranking across systems was similar, though the absolute differences were smaller.

    The central finding of the Taub Center research is that there are substantial differences in the share of pupils with irregular patterns of progression depending on the school sector and supervisory authority. The most irregular patterns are found within the various Haredi schools; the most standard patterns are in the state school systems. The highest share of irregularities was found in the Ma’ayan Hahinuch Hatorani education system, particularly among boys.

    In the researchers’ words, “the increase in the number of pupils with irregular patterns of progression, and in particular, the number with some combination of these irregularities which should be uncommon (like repeating and then skipping a grade) indicates that some schools freely intervene in the reporting of pupil advancement or do so in practice as well. Moreover, the similarity in these patterns across different locales underscores that irregularities in reporting are anchored in different school systems’ administrative practices. In some school systems, they are a go-to administrative tool.”

    Weinreb and Blass agree that closer supervision of schools would prevent reporting of over-enrolled classes that require full funding when, in fact, the classes are smaller, and could even reduce the minimum number of years that pupils are in the education system. Public spending on education could be reduced in this way.

    pupils2

    The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets, and economic policy in order to impact the decision making process in Israel and to advance the well-being of all Israelis.

    For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.


 

 

More and More, the Universal Healthcare System in Israel is not Enough

“Healthcare” has been a major buzzword this summer. In the U.S. certainly, the debate over healthcare – what care should and should not be covered by public funding – has dominated the news cycle. Paying for healthcare is also a large topic of discussion in Israel. Despite the establishment of universal healthcare in Israel in 1995, private spending on medical services has been increasing faster than public spending in recent years, thus increasing the private share of total healthcare finance. This has contributed to disparities in access to care that can increase inequalities in health between the rich and the poor and between the “center” and “periphery” of the country.

In their study published in the State of the Nation 2016, Taub Center Researchers Prof. Dov Chernichovsky, Haim Bleikh, and Eitan Regev found that private spending on healthcare has increased since the late 1990s. In 2014, private household spending on healthcare was about NIS 906 per month, on average, or about 5.9% of the average household expenditure, as compared with 3.9% in 1997.

health_en_1

Public spending per person rose from NIS 4,819 in 1995 (in 2014 prices) to NIS 6,377 in 2014, with an average annual growth rate of about 1.5%. In contrast, private expenditures rose during the same period from a total of NIS 2,247 (in 2014 prices) to NIS 3,634 – an average annual growth rate of 2.6%. In other words, the growth in private spending was far greater than the growth in public spending.

Private spending on medical services varies with income. When we look at spending at the household level, rather than per individual, the highest-income households (top quintile) spend nearly three times more than the lowest-income households (bottom quintile) on health – NIS 17,352 per year as compared with NIS 5,772 per year, on average. And, those with the lowest incomes spend a larger portion of their income on health services than those with the highest incomes. In 2015, the lowest-income households spent an average of 9.5% of their disposable income on medical care, compared to 4.8% in the highest-income households. Thus, not only do low income households have less access to medical care, they also shoulder a higher burden for this care, at the expense of buying other goods or services.

Expenditure by quintile

This private spending can be broken down into two major categories: insurance premiums and out-of-pocket payments. Over a fairly short period of time, the percentage of Israelis who purchase their health fund’s supplemental (private) insurance grew from 50% to 80%, with only the poorest not allowing themselves this expenditure. Supplemental insurance is provided by the four health funds for care not included in the universal basket and is considered semi-public because they must accept all applicants, cannot rate them based on their health, and premiums vary only by age. Commercial insurance is less common than the health fund supplementary insurance, although more than 40% of the population purchases it. Some of these private expenditures are superfluous; Israelis often pay privately for services already included in public entitlements.

Unsurprisingly, private spending on supplementary care, parallel services (private services for care that is also available through the publicly funded health basket), and commercial health insurance increases as income increases. However, the fact that such a large – and growing – portion of the population with higher incomes purchases supplementary care supports the hypothesis that the public system is insufficient from their perspective, either in the type or quality of care provided.

Private insurance does indeed provide some meaningful benefits to those who purchase it, including significantly shorter waiting times for medical treatments (which are often long in the national health fund system), meaning that wealthier citizens are able not only to choose their doctor, but also to have medical procedures carried out in a far more timely fashion.

However, on a societal level, its prevalence also increases gaps in the area of waiting times. The combination of increasing private expenditure and the fact that private and public healthcare in Israel are supplied by the same providers, incentivizes the providers to prolong waiting times in publicly funded care in order to push patients into private care, which provides extra benefits to the providers.

Another important finding of the study is that private spending on supplementary care that is not included in the universal health basket (mainly dental care) and for parallel services is higher in places where public services are less available – namely, among Arab Israelis and also to some extent among Haredim (ultra-Orthodox).

In general, the National Health Insurance law is structured to give everyone equal access to a basket of basic healthcare services independent of how much each individual spends privately on health. However, the increased role of private spending in Israel’s health system confounds the notion of equal access to some extent, and the weaker population groups end up spending a greater portion of their income on private health expenditures than do those who are better off. This outcome does not seem to fully align with what the law was intended to accomplish.

 

 

“The War Against Poverty” – Where do things stand?

In 2014, the Committee to Fight Poverty in Israel (the Elalouf Committee) presented a detailed list of recommendations to cut poverty in Israel in half within a decade through policy in the areas of welfare, social security, employment, housing, health, and education.

In a study published in the State of the Nation 2016, Taub Center researchers Prof. John Gal and Shavit Madhala-Brik examined the implementation of this plan and found that while about half of the recommendations of the committee have been implemented, the major aims are still far from being fully realized.

Israel has the highest poverty rate in the OECD when looking at disposable income (i.e., income that is available for spending after taxes and transfer payments) and social gaps have grown substantially over the past few decades.

The Committee, headed by MK Eli Elalouf, was an initiative of the Minister of Social Affairs and Social Services, MK Meir Cohen, in 2013, to recommend ways of dealing with poverty and to strengthen equal opportunity in Israel. The goals of the committee were ambitious: to reduce poverty in Israel by about half, bringing the Israeli rate in line with the OECD average poverty rate of about 11%.

So far, the recommendations of the Committee have been implemented to varying degrees as detailed below, with a number of recommendations not implemented at all. Spending on implementation is slated to increase in 2017, primarily in the area of welfare and social security.

Welfare and Social Security: A number of recommendations have been implemented in this area, including adding 150 family social work positions and increasing the budget for distressed families. The government also increased income support for the elderly by amounts ranging from NIS 130 for individuals to NIS 540 for couples in 2016 (the budget has grown in 2017 and should continue to grow in 2018).

In January of 2017, the government began the roll-out of another committee recommendation: opening a long-term savings account (Child Development Account) for every Israeli child under the age of 18. The government puts a monthly sum of NIS 50 into each account, which can be matched by the child’s family.

An important recommendation that has not yet been implemented is increasing income support for those below the poverty line to the level suggested by the committee.

Employment: Since the committee issued its recommendations, legislation has expanded eligibility for work grants (negative income tax) for single-parent families, those with disabilities, and the self-employed.

Vocational training courses have been expanded as have employment programs for populations that have difficulties participating in the labor market and for people with disabilities. There was also an increase in publicly subsidized day care centers for children of working parents.

Housing: Rent subsidies increased by NIS 600-900 a month for those eligible to receive them. However, though the committee recommended that the eligibility requirements be extended so that more households could qualify for rent subsidies, this has not yet come to fruition. The government has increased the supply of public housing, but not enough to meet the demand, leaving many families still waiting for public housing.

The proposed “Equal Neighborhood” program to revitalize underprivileged neighborhoods through infrastructure, investment, and other community programming has thus far not been implemented.

Health: Public subsidies for dental care are in the process of being implemented for seniors over the age of 75 who also receive income support, as well as for children up until the age of 14 (in the coming years this will be expanded to cover children until the age of 18).

Health services for students, which had been privatized, were returned to the authority of the Ministry of Health for some districts of the country, following dissatisfaction with the service of private providers. However, the nurse/student ratio has not been improved.

Additional recommendations that are currently under consideration are establishing health promotion and prevention centers for the elderly and a reduction in the co-payment for medicines and medical services.

Education: In the realm of education, about NIS 100 million per year were added to the budget in order to add study hours in schools serving socioeconomically weak populations. On the other hand, the recommendation to invest in preschool education was not implemented.

Spending on implementing the recommendations has increased in 2017

The price tag of the Elalouf Committee’s recommendations stood at NIS 7.4 billion per year. Due to elections in 2015, the government put few of the recommendations into effect and added only NIS 434 million to the relevant budget areas in that year. In 2016, NIS 1.9 billion was added to the budget — about 26% of the additional sum recommended.

By the end of 2017, the additional expenditure is expected to reach NIS 4 billion – or about 54% of the recommended amount. The majority of the increase is being devoted to welfare and social security.

More specifically, the money is being used for the Child Development Account program, for work grants (negative income tax) and for an additional increase in the old age income supplements. These steps are an improvement in the implementation of the committee recommendations, though they still seem insufficient to attain its declared goal.

Elalouf committy

One of the main challenges to implementation stems from the fact that the government has not as of yet established a centralized authority for combatting poverty to more efficiently manage processes that are currently spread out among multiple government bodies.

Furthermore, due to budget constraints, the additional government expenditure in 2017 is still only about half of the expenditure addition recommended by the Elalouf Committee, which was NIS 7.4 billion annually.

As a result, the government did not implement some of the central recommendations of the committee, such as increasing income support for those living below the poverty line, and it allocated very limited resources to programs like work grants, vocational training, and the purchase of additional homes for public housing.

Trends in the Labor Market

The labor market in Israel is moving from a traditional economy, based on manufacturing and production, to one of information technology and modern services. As a result, some occupations are at risk of automation – that is, the workers currently employed in these positions are likely to be replaced by machines or computers. To prepare for the needs of the future labor market, workers should be encouraged to move out of jobs that are at high risk of automation and into jobs in industries at lower risk.

In the past few years there has indeed been a decline in the share of workers in jobs at high risk of automation, although this decline has been less pronounced among Arab Israelis and immigrants than among the long-time resident and native-born Jewish working population.

Just as not all population groups in Israel are equally prepared to meet the needs of the future labor market, levels of education and the return on education also vary between the different population groups, affecting wage gaps.

04949076-2a44-44c1-afd2-f625e7dc172f (4)

Women are moving from high to low risk jobs to a greater degree than men

The changes among women were greater than among men, primarily due to an increase in the share of female workers in academic professional occupations – which require high skill levels and are at low risk of automation. A decline in clerical workers also contributed given that these positions were often occupied by women. It seems that the reason for the decline is that these professions have begun the process of automation and computerization, as evidenced by bank branch closures, outsourcing of secretarial services, and computerization of office administration activities.

More Arab Israelis are working in service and sales

In the Arab Israeli sector there has been a decline in the share of skilled workers in production and manufacturing (considered at high-risk of automation) and a relatively strong rise in their share in sales and service, occupations at lower risk. There was only a small increase in the share of Arab Israeli workers in occupations requiring an academic education, which may be due to the relatively lower skill levels in reading comprehension and math within the Arab Israeli sector (as evidenced by the OECD PIACC Survey – Programme for the International Assessment of Adult Competencies).

Many immigrants are employed as unskilled workers and are therefore at high-risk of being replaced by automation

Among men ages 45-54 who immigrated to Israel in the early 1990s, there was an exceptional rise in the share of those employed as unskilled workers, in industries like cleaning and security. This indicates that adult male immigrants have had a particularly difficult time integrating into Israel’s modern labor market.

However, a different story emerges with female immigrants. The share of female immigrants employed as unskilled workers has increased as well, yet faster changes in the mix of occupations among women indicates that their chances of improving their situation and moving from high-risk low-pay employment to more lucrative lower risk occupations over time are likely greater than men’s chances.

The two major problems facing immigrant workers are a lack of language skills and having academic education that does not match the local Israeli labor market.

Wage gaps are widening, largely due to changes in returns to education

Another notable trend in Israel’s labor market is that level of education has a greater impact on wages than it did in the past. This study considers changes over time in returns to education – that is, to what degree does a year of formal education improve hourly average wages.

The general trend in Israel since 2003 has been a rise in returns to education. This increase encourages workers to attain more education, thus improving the quality and skill level of the labor force. However, it also contributes to increasing wage gaps between workers with high and low levels of education. The hourly wage difference between those with 18 years of education (equivalent to a second degree) and those with 12 (equivalent to a high school diploma or matriculation certificate) was about 35% among men and about 40% among women in 2014 – an increase relative to 2003.

There was also a rise in returns to education among immigrant men, although the gaps remained lower than among the general male population. This may be due in part to differences in the distribution of occupations among immigrants and the long-time resident and native-born Jewish working population –among immigrants, the share of unskilled workers earning low wages increased at the expense of occupations with somewhat higher wages. In contrast, returns to education among immigrant women declined between 2003 and 2011 but increased substantially between 2011 and 2014. Among other things, the rise in later years was due to women who immigrated at a younger age joining the labor market, whose skills and education better match the Israeli labor market.

Wage gaps have increased overall, and are particularly notable between Arab Israelis and immigrants and the rest of the population

Wage gaps have increased, due to a polarization of sorts within the labor market: an increase in the share of earners receiving either low or high wages at the expense of those earning wages in the middle. During the years analyzed, many low-skilled workers entered the labor market. This trend is positive as it seems that these workers relied on the welfare system in the past, but are now contributing to the GDP. However, the influx of these workers still increases the share of total workers receiving relatively low wages. At the same time, there is a consistent rise in the share of workers with higher education in the labor supply, due to the entrance of more young, educated workers than in the past. This, in turn, increases the share of workers receiving relatively high wages.

An examination of the various population groups reveals inequality, as expressed in wage gaps between Jews and Arab Israelis and between Jewish immigrants and Jewish long-time residents/native-born. Over time, the wage gap between Jews and Arab Israelis was found to be quite stable while the wage gaps between immigrants and long-time residents/native-born narrowed. The latter was primarily due to improvement in the occupation mix over the past few years, especially among immigrant women.

 

Dennis W. Carlton

Dennis W. Carlton is the David McDaniel Keller Professor of Economicsat the Booth School of Business at the University of Chicago where he teaches in the Business School, Law School and Economics Department. His teaching and research centers on microeconomics, industrial organization, and antitrust. He has published more than 100 articles and two books, including one of the leading textbooks in
industrial organization.

He is a Research Associate at the National Bureau of Economic Research; is on the editorial boards of Competition Policy International and The Journal of Competition Law and Economics; and is the coeditor of The Journal of Law and Economics. Carlton has won several awards including being named the 2014 Distinguished Fellow of the Industrial Organization Society.

Carlton served as the Deputy Assistant Attorney General in the Antitrust Division of the Department of Justice. He also served as the sole economist on the Antitrust Modernization Commission, a Congressional commission that published its findings in 2007. He is associated with the economic consulting firm Compass Lexecon and served as President (of Lexecon) for several years.

He has served as an expert in numerous domestic and foreign cases involving issues in antitrust, regulation, and intellectual property in a wide variety of industries. He has served as an expert for several US and foreign antitrust authorities. He lectures frequently on antitrust issues. He recently served as a member of the American Bar Association Presidential Transition Task Force, Antitrust Law, 2016.

Carlton earned his PhD in Economics in 1975 from MIT, his MS in Operations Research from MIT in 1974, and his AB (summa cum laude) in 1972 from Harvard College.

Press Release: Trends in the Labor Market

Click to read the full research (in Hebrew)

Trends in the Labor Market

The labor market in Israel is moving from a traditional economy to one of information technology and modern services. As a result, some occupations are at risk of automation, that is, the workers currently employed in these positions are likely to be replaced by machines or computers.

A new Taub Center study by Prof. Claude Berrebi and Kyrill Shraberman finds that in the past few years there has been a decline in the share of workers in high-risk jobs, although this decline has been less among Arab Israelis and immigrants than among the long-time resident and native-born Jewish working population. The study also finds that the return on education has risen since 2003, particularly among women.

The main study findings:

  • Between 2013 and 2015, there was a rise in the relative share of workers in occupations at low risk of automation, and a decline in the share of occupations at high risk.
  • In the Arab Israeli sector, there was a rise in the share of workers in occupations at relatively low risk, particularly workers in sales and services. In contrast, among immigrants, the share of those working as unskilled workers (classified as high risk) among workers aged 45-54 who came to Israel at the beginning of the 1990s has increased, something that may indicate difficulties in their integration.
  • The hourly wage difference between those with 18 years of education and those with 12 was about 35% among men and about 40% among women in 2014 – an increase relative to 2003. The smallest wage difference between education levels was among immigrants.
  • In the Arab Israeli sector, workers’ skill levels are relatively low: the share of those with high-level skills in reading comprehension and mathematics is only 1% in contrast to 10-13% in the Jewish population (according to the OECD PIAAC Survey – Programme for the International Assessment of Adult Competencies).

In the past few years, there has been considerable debate on the subject of occupations at risk of disappearing from the labor market as the result of modernization processes, as seen in the move from a traditional economy where manufacturing and production are the engine of the market, to an information technology and services economy, where high-tech and services are the major growth engines.

A new Taub Center study by Prof. Claude Berrebi and Kyrill Shraberman adds another layer to this debate and examines the trends in the risk of automation in the economy between 2013 and 2015. The study looks at changes in the relative share of various occupations in the market place and presents the changes by the risk-of-automation ranking of the occupations.

The changes are presented for the entire economy, and also broken down into men versus women as well as between selected population groups (Jewish long-time residents/native-born, Arab Israelis and immigrants who came to Israel since 1990).

The study finds that the relative portion of workers in low-risk occupations has risen, while the share of workers in high-risk occupations has declined – evidence of a continued labor force modernization process. The changes among women were greater than among men, primarily due to an increase in the share of workers in academic professional occupations.

At the same time, the share of clerical workers has declined overall – occupations in which the share of women has been particularly high. Berrebi and Shraberman also found a significant decline in the share of women employed in these occupations – a process that might indicate that certain administrative positions have already undergone the process of automation and computerization (as evidenced by bank branch closures, outsourcing of secretarial services, and computerization of office administration activities).

The rise in the share of low-risk job positions, resulting apparently from increasing demand for workers in jobs requiring high skill levels, influences the average wage.

More Arab Israelis are working in service and sales; immigrants working as unskilled workers are at high-risk of being replaced by automation

The Taub Center study findings show that in the Arab Israeli sector there has been a decline in the share of skilled workers in production and manufacturing (considered at high-risk of automation) and a relatively strong rise in their share in sales and services as well as in clerical work, occupations at lower risk.

A possible explanation is that the process of automation has meant that unskilled, though low-skilled workers have moved from manufacturing, production and construction work to work in sales and service. There was a small change (an increase of 1%) in the share of Arab Israeli workers in occupations requiring an academic education.

This is low relative to the Jewish population (an increase of 1.9%), and as a result, the average wage rise was also lower among Arab Israelis. A possible reason is the relatively low skill level within the Arab Israeli sector: the share of those with high level skills in reading comprehension and mathematics among Arab Israelis ages 16-64 is only 1%, versus 10-13% among the Jewish population (according to the PIAAC survey of adult competencies).

An additional explanation is that the process of automation has meant that unskilled workers have moved from manufacturing, production and construction work to work in sales and service. Among immigrants, there has been a rise in the share of skilled workers and a smaller increase in the share of workers in academic professions (relative to long-time residents/native-born).

An exceptional rise in the share of unskilled workers (like cleaning and security workers) is seen among men ages 45-54 who came to Israel between 1990 and 1995. According to the researchers, “the data point to the difficulties of integration among this adult male immigrant group who have been in Israel over a decade and have experienced difficulties adjusting to the modern labor market.”

Women who came to Israel since 2008 have particularly high employment rates as unskilled workers in almost all age groups. Their chances of improving their situation and moving from high-risk low-pay employment to more lucrative lower risk occupations over time are greater than men’s chances.

The major impediments to immigrant integration in the labor market are language issues – Hebrew and sometimes English. Immigrants in general, and women immigrants in particular, are characterized by higher rates of higher education that do not match the local labor market.

Thus, they often compromise by accepting employment in occupations that do not require an academic education. That said, immigrants are employed at slightly higher rates than Jewish long-time residents/native-born Israelis.

eng-cropped

A rise in education-based gaps contributes to a widening of wage gaps; more among men than among women, and among immigrants the gaps have widened

The second part of Berrebi and Shraberman’s study deals with changes over time in returns to education. That is, to what degree does a year of formal education improve hourly average wages (controlling for additional worker characteristics like potential experience, sector and occupation).

The findings show that since 2003, there has been an overall rise in returns to education. This increase encourages workers (primarily younger ones) to attain more education, thus improving the quality and skill level of the labor force.

The rise in return to education also contributes to increasing wage gaps between workers. In 2003, the hourly wage for men with 18 years of schooling (equivalent to a second degree) was about 31% higher than wages for those with 12 years of schooling (equivalent to a high school diploma or matriculation certificate). In 2011, the gap was about 40% due to a rise in the contribution of years of education to workers’ wages.

In 2014, the gap was 35%, that is, higher than in 2003 but lower than in 2011. The narrowing of the gaps between 2011 and 2014 was primarily due to a rise in wages of men of all education levels and a drop in the return on years of education to wages.

Among women, the gaps in the correlation between hourly wage and education in 2003 between those with 18 years of schooling and those with 12 years was about 27%. In 2011, the gap increased to about 37% and in 2014, it was about 41%. According to Berrebi and Shraberman, the reason for the rise in the gap was changes in the mix of occupations that women are employed in between 2003 and 2014.

Among Arab Israeli men, the wage gap between educated workers and those with less education was similar to the overall wage gap in 2003. By 2014, there was a decline in this gap in contrast to the overall trend seen among men. The difference lies in the fact that the rise in wages over those years for Arab Israeli men was more moderate than among the general male population. Thus, the returns on education remained lower.

Among immigrant men, there was also a rise in returns to education, although the gaps remained lower than among the general male population. Wage gaps among an immigrant with 18 years of schooling and one with 12 years of schooling were only 14% in 2003 and 22% in 2014.

Differences in the distribution of occupations among immigrants and Jewish long-time residents/native-born had a considerable contribution to the differences between these groups.

The relative share of immigrants in low-wage occupations was higher relative to long-time residents/native-born as was the share of those with an academic education employed in occupations with middle to low wages. Thus, returns to education were lower among immigrants.

A different trend is seen among immigrant women. In this group returns to education declined between 2003 and 2011 due to a rise in the relative share of women employed in middle to low-wage occupations (sales and services, clerical workers, technicians) and a decline in their share in skilled occupations, unskilled occupations and managerial positions.

In contrast, between 2011 and 2014, there was an increase in returns to education among women immigrants as the result of a rise in the share of those employed in academic professions, a continued rise in their share in employment in occupations like technicians and a decline in their employment in clerical work.

Among other things, the rise was thanks to women who were younger when they immigrated and whose skills and education match the Israeli labor market.

The Taub Center researchers note that the “rise in returns to education in combination with increase in labor supply of those with higher education, indicates a continued rise in demand for workers with high skill levels. It is reasonable to assume that their wage levels will continue to rise.”

Wage gaps have increased, primarily between Arab Israelis and immigrants and the rest of the poplation

Since the beginning of the 2000s, there has been an observable trend of a narrowing of the wage gap between high and low wages, although since 2013, there has been a widening of this gap in the labor market.

Inequality is expressed in wage gaps between Jewish long-time residents/native-born and Arab Israelis and between immigrants and Jewish long-time residents/native-born. In an examination of trends over time, the gap between Jews and Arab Israelis was found to be quite stable while the gaps between immigrants and long-time residents/native-born narrowed.

This was primarily due to high levels of employment of immigrants and an improvement in the occupation mix over the past few years, especially among immigrant women. High levels of employment of immigrants might contribute to narrowing of labor gaps too.

Berrebi and Shraberman note that “the trends that have been described contributed to an acceleration in the process of polarization in employment and wages accompanied by a growth in inequality in the labor market. These trends also reflect, though, positive trends, like modernization of the labor force.”

In their words, “the rise in the wage gap is influenced by the entrance of low-skilled workers into the labor market, who in the past, it seems, relied on the welfare system and now contribute to the GDP. The major reason, though, is the consistent rise in the share of those with higher education in the labor supply, due to the entrance of more young, educated workers than in the past.”

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision making process in Israel and to advance the well-being of all Israelis.

For details, or to arrange an interview, please contact Anat Sella-Koren, Director of Marketing, Communications and Government Relations at the Taub Center for Social Policy Studies in Israel: 050-690-9749.


 

 

 

 

 

 

Do smaller classes mean better educational achievements?

The end of the school year, and preparation for the start of the next, provide a timely opportunity to evaluate large education policy trends. In fact, it was at this same time of year a couple years ago that parents and students in Israel took to the streets in what was deemed the “sardines protest” to demonstrate against overcrowded classrooms in Israel’s education system.

As part of the protest, parents from all over the country sent cans of sardines to the office of Minister of Education MK Naftali Bennett, to illustrate how students were packed into Israeli classrooms the way sardines are packed into a can.

The campaign drew legitimacy from international data on class size and student achievements. Of the 34 countries that participated in the relevant OECD study, Israel placed fifth in terms of large class size, with an average of 27 students per primary school class and 32 students per middle school class. At the same time, a look at Israeli student achievements on the OECD’s international PISA (Programme for International Student Assessment) exams, which test 15-year-olds in mathematics, reading and science, shows Israeli students to be in the lower half of the attainment ranking for all subjects tested.

It’s not a new phenomenon, nor one specific to Israel, that both parents and many teachers see smaller classes as a way to improve the achievements of students. Yet researchers Reut Shafrir, Yossi Shavit and Carmel Blank recently found that, when isolating class size from other factors that could influence student achievements – such as parental education levels and prior academic achievements – there is no notable relationship between class size and achievements in eighth grade.

The main challenge in trying to understand how class size affects student performance is that class placement is often not randomly determined, but rather reflects systemic educational considerations that themselves could potentially affect student achievements. For example, relatively low-achieving students are often placed in smaller classes from the start, in the hope that this will help improve their performance.

The study, which was published by the Taub Center, analyzes data on scores of students who took the Israeli Meitzav exams in language arts (Hebrew) in 2006 and 2009 as well as background data on these same students. In the initial analysis, the researchers found that there is actually a positive relationship between class size and achievements in Israel; the scores of students in large classes are seemingly higher than those of students in smaller classes.

However, when separating out parental education levels and prior achievements, the researchers found that the relationship between class size and achievements is not statistically significant in either direction. In this model, the greatest impact on a student’s Hebrew Meitzav exam score in Grade 8 is the score of the same student on the Grade 5 Hebrew Meitzav exam – that is to say, prior achievements. Higher levels of parental education were also found to be correlated with greater student achievements.

English box

Earlier studies in other countries indicate that ethnic minorities and those belonging to lower socioeconomic strata are likely to benefit more from smaller classes than others. The researchers evaluate the hypothesis that the impact of class size on achievements varies between students of different socioeconomic backgrounds and between stronger and weaker students in Israel. Yet the hypotheses did not hold up: no difference in the relationship between class size and achievements was found among the groups.

There are two important caveats to the researchers’ findings on class size. First, the result refers to eighth-grade test scores only, and does not guarantee that the same is true for, say, first graders. Second, while grades might not depend on class size, the classroom experience could certainly be affected, a factor that may be no less important than academic outcomes.

Similarly, small classes could facilitate the use of teaching methods that may help students achieve – for example, individualized or small-group instruction – but it is unclear whether teachers working in small classes do, in fact, take advantage of the possibilities that such classes present. If teachers use forms of instruction similar to those commonly employed in large classes, they may effectively neutralize the small-class advantage.

 

What’s Brewing in Israeli Society?

Save the Date - Taub Center Jerusalem Bar Event June 11

Join us for a beer and to hear from renowned leaders in the fields of Israeli social entrepreneurship, policy, and economy

The event will take place in English and is free of charge. Please register here:

Speakers:

Yanki Margalit (Social Entepreneur and High-Tech Investor) – “The Last Machine: Toward a World Without Work. As the era of robots and artificial intelligence become more advanced, the need for work and human thinking is declining. What will the world look like when working becomes obsolete?”

Col. (Res.) Miri Eisin (Former PM Advisor and Spokesperson; Taub Center Board Member) – “Israeli Society Through the Anglo Eye. What assumptions do Anglo Israelis make in their understanding of what Israeli society is, and what it should be?”

Gilad Brand (Taub Center Researcher) – “The Cost of the Cost of Living: Are prices in line with what we earn?”

*האירוע יתקיים באנגלית – הכניסה חינם*

A Picture of the Nation 2017

The past few years have been good in many respects: unemployment has declined, more Haredim have entered higher education and the labor force, employment of women is higher than ever, and social expenditure has been rising. In addition, there are substantial trends of improvement in the education system, and it appears that Israelis continue to be healthier than their European counterparts.

At the same time, Taub Center studies show worrisome trends: people are spending more on healthcare, Israel has an aging population and appropriate steps need to be taken to prepare accordingly, current sources of economic growth are not sustainable, and disposable income poverty rates continue to be higher than in any other OECD country.

These and many other findings are to be found in the Taub Center for Social Policy Studies’ new booklet A Picture of the Nation 2017. Each page of the booklet includes a graph and accompanying short text based on Taub Center studies of the past year. The booklet presents a comprehensive, user-friendly picture of the state of Israeli society and its economy in terms of macroeconomics, welfare, health, education, and labor markets.

Highlights from the Taub Center’s A Picture of the Nation 2017:

Macroeconomics: The past year has seen an increase in employment, a decline in unemployment, and a large rise in GDP; unfortunately, it appears that this positive trend will not continue and new sources of growth must be found.

  • The economy is growing nicely, but it is not expected to continue at its current pace. In 2016, there was a large and unexpected rise of 4% in GDP. It appears that this is an outlier and not a trend, though. The causes of growth in the past year were a one-time investment (Intel in Kiryat Gat) as well as a rise in the import of cars following expected changes in taxation. Taking a long-term view, growth in the Israeli economy has been disappointing. This was primarily due to stagnation in productivity in non-high-tech and manufacturing industries, mostly in the business sector. Labor productivity went down slightly over the past year, continuing a five-year trend, apparently also due to the entrance into the labor market of new populations with low skill levels.
    • Israel is ranked 22 out of 34 OECD countries in GDP per capita, and has held this ranking for a number of years. The gaps between Israel and other countries with lower rankings have narrowed, but the slow growth in income per capita may push Israel’s ranking even lower.
    • The employment rate in Israel today is very high and seems to have nearly peaked. A factor that is likely to lower the employment levels is the aging of the Israeli population. In the last five years, the share of those of working age in the population (ages 25-64) lowered the GDP per capita by 2 percentage points, and this trend is expected to continue and to lower growth by about 0.6% per year until the end of the decade.
    • In the past decade, the growth in human capital has declined considerably. After several years in which human capital was a major driver of growth, it appears that the contribution of this component to economic growth is getting close to running its course. Data show that more and more workers entering the labor market have studied at colleges opened in the past 20 years (primarily law and business majors); unfortunately, the academic quality and level of education offered at these colleges is lower than at universities.
    • Israel is ranked 52 in terms of ease of doing business according to a 2016 World Bank report, and below most of the OECD countries. This ranking indicates the need to streamline the bureaucratic process.1

      Welfare: The expenditure on welfare and on the War Against Poverty has risen, but disposable income poverty rates in Israel are still the highest in the OECD

      • The market income poverty rate (before taxes and transfer allowances) is lower than in most of the OECD countries. When household disposable income poverty is examined, though, Israel is in last place, along with Mexico. The large difference between the two types of poverty (market versus disposable income) indicates a lack of success of government policy in reducing poverty through taxes and the welfare system. Among other things, this is due to Israel’s low tax burden and its large populations that are characterized by low human capital, low labor participation rates, and large families.
      • In 2017, additional funds are expected in the War Against Poverty to bring its budget up to NIS 4 billion (about 54% of the amount recommended by the Elalouf Committee). This is higher than the NIS 1.9 billion allocated in 2016, which was about 26% of the recommended amount. The majority of the addition to the 2017 budget will be earmarked for the “Savings for Every Child” program, negative income tax and an addition to the income assurance allowance for the elderly.
      • Social expenditure (including education, health and welfare) was NIS 192 billion in 2015, its highest level since the beginning of the century. Total expenditure on social welfare is about NIS 94 billion, which is 21% of the total government expenditure. The majority of the rise in welfare was in the area of transfer allowances, reflecting demographic changes (like the aging of the population) and an increase in expenditure for individuals with disabilities. In contrast, expenditure in areas like institutional care and the array of social services has declined over the years.
      • About 80% of the Ministry of Labor and Social Affairs budget is allocated for outsourcing, and 94% of the outsourcing payments go to long-time service providers (though they comprise only 56% of the service providers).
      • Among households headed by individuals over age 66, the share of homeowners is 77%, and more than half of this population has an occupational pension. The share of households that neither own a home nor have income from occupational pensions declined from 20% in 2003 to 16% in 2015. The differences between population groups are substantial: long-time Jewish residents are much better off than Arab Israelis and new immigrants (although the latter’s situation has improved significantly over time).2Health: Israelis are living longer and in better health, although they also spend more on healthcare. There are substantial inequalities in healthcare: low-income earners cannot afford to buy a healthy food basket and they spend a large percentage of their income on healthcare. Those living in the periphery wait longer for medical procedures
        • Israel is ranked in 9th place in the world in terms of life expectancy (about 82 years), and 10th place in terms of healthy life expectancy (about 71.7 years). The disease burden in Israel declined by about 17% per person between 1990 and 2015, mostly due to increased longevity. One of the most prominent factors contributing to the disease burden is diabetes, which primarily affects those with low income. In fact, its portion of the disease burden increased by about 60% over the same period. The overall health of the population in Israel is slightly better than in other leading European countries, even when one takes into account Israel’s relatively young population. The overall large advantage in disease burden is likely to recede, though, due to the aging population, and the state must take appropriate measures in time to deal with these expected demographic changes.
        • The rate of those purchasing supplementary insurance offered by the health funds in Israel jumped from 50% to 80% between 1999 and 2012, and some 40% of the population also purchase private insurance.
        • Households in the highest income quintile spend almost three times more on healthcare than households in the lowest income quintile, yet as a percentage of income, the average expenditure is far lower in the top quintile (4.8%) than in the lowest (9.5%).
          • In the metropolitan areas, waiting times for medical surgeries are shorter than in the periphery. For instance, waiting times in the southern district are double those of Jerusalem. In addition, in the north there are 2.2 physicians per 1,000 population, while in other districts there are at least 3.2.
          • A healthy food basket is not purchasable for many. The Ministry of Health recommends a Mediterranean diet rich in vegetables, fruits and whole grains. But the average family in the lowest income quintile would have to spend 65% of their income to purchase a healthy food basket, something that makes it inaccessible.33333333

            Education: The share of Arab Israelis in the education system has declined; the growth in the Haredi sector has slowed, although the share of “weak” pupils among Haredim has increased. More Haredim are beginning higher education, but many of them drop out

            • Following full implementation of the Compulsory Education Law for 3-4-year-olds, the share of household expenditure on preschool in national expenditure dropped from about 21% in 2011 to 11% in 2013. Alongside this, though, there was an increase in expenditure on preschool for 2-year-olds.
            • There have been substantial demographic changes within the education system: In the past few years, the share of Arab Israelis in the education system has fallen, and the rate of growth of the Haredi stream has slowed (although it has still grown faster than the other streams).
            • Between 2011 and 2014, the portion of pupils from weak backgrounds in the Haredi stream has increased, while in the Arab Israeli sector, there has been a dramatic reduction.
              • There has been a substantial growth in the number of Haredim studying in institutions of higher education, although the share of those holding a first degree is still very low. In 2014, 3,227 Haredim began studying for a degree and the share of Haredi students reached approximately 8% among men and 15% among women. However, only about 2.4% of Haredi men and 8.3% of Haredi women ages 25-35 actually hold an academic degree. Furthermore, when the data are broken down by Haredi streams, a substantial portion of those acquiring higher education were found to be from the National Religious stream (who studied in Haredi supervised institutions). When they are removed from the equation, only about 6% of Haredi men and 12% of Haredi women are studying for a first degree.education

              Labor Markets: Female employment rates are higher than ever, women work closer to home, computer literacy is quite low among Haredim and Arab Israelis, but relatively high for other Israelis.

            • In 2014, female employment rates in Israel reached an all-time high – 74.3% – and this rate continued throughout 2015. This figure places Israel above the OECD average (67.4%). Jewish women are employed at a particularly high rate (higher than the rate in all but one OECD country), although Arab Israeli women are employed at a lower rate than in any OECD country. Male employment rates in Israel are below the OECD average, although these gaps are closing.
            • The gap that had opened between real wages and worker productivity has closed since 2014. It seems that the gap opened when consumer prices, which affect real wages, increased faster than producer prices (the overall price of goods and services in the market) to which nominal wages are linked. As a result, consumer buying power eroded. The past two years have seen a rise in real wages. This, however, seems to have stemmed from the two prices first diverging and then converging, and cannot be expected to last.
            • An international survey of digital competency shows that only 27% of adults in Israel were ranked in the highest competency levels versus 31% on average in the other OECD countries. Among non-Haredi Jews the level of computer literacy is good relative to other countries, while among Haredim, the level is low, and even lower among Arab Israelis.
            • Women work fewer hours, and this is the main reason for the gender wage gap in Israel. The second most important explanatory variable for wage gaps is occupation and industry. Women tend to choose work that allows part-time employment, like teaching; occupations that are characterized by lower hourly wages. An additional factor is that women have lower attainments in math than men, and it has been shown that high achievement in math is linked to high salary levels. After weighting several variables that were likely to influence wage gaps, the portion of wage gap that remained unexplained plummeted from 30% to 6% and it is possible that the remainder is due to unobserved variables such as the propensity to bargain over salary. This suggests that it is important to examine the differences in life choices of men and women in order to understand whether wage gaps are due to discrimination or to choice.
            • Married women tend to work closer to home than married men, and so their opportunities are more limited; this may also explain part of the gender wage gap.
            • Gender polarization in choice of industrial branch may begin in high school, because although girls have higher overall achievements and higher rates of bagrut qualification, they tend not to choose the hard science majors (math, computers and physics). Girls and boys score the same on Meitzav tests in fifth grade; but, by high school, gaps have opened. To change this, girls need to be encouraged to study science and math in primary school or even earlier.
            • Only 27% of computer science students are female, and among computer science graduates, many are employed in education or other industry groups and not in the lucrative field they studied. This could be due to the long hours in the technology field and, if such is the case, shorter work hours or more flexible opportunities to work from home could encourage more women to enter the high-tech field.
              mobility level

              To read the full booklet on the Taub Center website, click here.

              The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

               

       

 

Preparing for the future: long-term care in Israel

The number of elderly Israelis (aged 70 and older) is expected to double from about 610,000 today to about 1.24 million by 2035. As a result, Israel’s disability levels – which are by nature higher among the elderly – are expected to grow even faster than the growth of the general population over the same period of time.

This substantial demographic change will increase the demand for long-term care – an issue that has already proven challenging in Israel.

elderly population expected to double

Long-term care helps people of all ages who require functional, mental, or social assistance for day-to-day activities. In practice, unsurprisingly, most of the need for long-term care is concentrated in the elderly population.

Taub Center findings show that Israel’s long-term care system is inequitable and inefficient compared to developed OECD countries with similar social welfare systems (such as France, Germany, the Netherlands and the United Kingdom). Israel’s spending on long-term care relative to GDP is as high as those countries that have introduced universal long-term care insurance – yet Israel has no such universal insurance.

Israel also has a larger percentage of recipients whose long-term care is provided by the community rather than by institutions: about 19% of long-term care is provided by the community in Israel as compared with only 9% for OECD countries. While this is desirable in principle, one possible explanation for this phenomenon is that there are relatively limited options and access to institutional care in Israel.

What does all of this mean? In the near future more Israelis will need long-term care and yet our current system is not prepared for this and has many disadvantages. The total amount of money spent on long-term care in Israel – including community care, institutional care, and premiums on long-term care insurance – is estimated at NIS 15.3 billion in 2014.

Yet the government only covers a little over half, or NIS 8.3 billion, of this spending. Total private financing, by comparison, is estimated at 7.3 billion NIS (2014).

Private funding of long-term care in Israel is three times higher than the OECD average (45% as compared with 16%). Most of this private care is home-based. The money that households spend on long-term care is divided among a number of different areas: about 39% of household spending on long-term care goes to payment for caregivers (often foreign workers), about 37% goes to assisted living facilities, and about 22% goes toward insurance premiums.

Public funding, regulation and oversight for long-term care is divided among the National Insurance Institute, the Ministry of Health, the Ministry of Social Services, and the kupot holim (health funds). This fragmentation contributes to inefficiencies in the public system.

share of private long-term care triple of oecd

Thus, the burden of long-term care falls heavily on the elderly and their families. This burden is financial, physical and emotional, in part because of the difficulty of navigating the relevant bureaucracy. Moreover, in many instances family members have to scale back or quit work in order to care for their aging parents.

Most pressed are middle class households who, on the one hand, cannot afford to hire caregivers or afford privately funded assisted living facilities, and on the other hand are not poor enough to qualify for state supported institutional care.

Taub Center data show that nearly all countries with social welfare systems similar to that of Israel provide long-term care through publicly-oriented solutions, such as combining compulsory insurance payments with public funding, rather than relying so heavily on private spending, in order to provide universal long-term care options to their citizens.

In light of these findings, Researchers Prof. Dov Chernichovsky, Dr. Avigdor Kaplan, Mr. Eitan Regev, and Prof. Yochanan Shtessman offer possible options for long-term care reform in Israel, including:

• Establish a universal basic basket of long-term care services that is separate from the medical care basket.

• Fund the long-term care basket through existing public sources in addition to mandatory contributions collected from all Israeli
residents. Raising the retirement age presents another opportunity to ease the level of funding required by the government.

• Allow residents to buy private discretionary long-term care insurance to supplement their public entitlement under universal coverage.

• Establish a single, dedicated government authority that has complete responsibility for all long-term care management, rather than the current segmented system.

offer possible options for long-term care reform in Israel

These policy options would reduce the burden on families, increase public responsibility, and make the system more equal and efficient. Prioritizing reforms to the system now can ensure that Israel is better prepared to care for its growing elderly population.

Revisiting Israel’s Healthcare Priorities

The study  examines the years of healthy life in terms of disease burden, a measure that takes into account both disability/poor functioning and death.  It compares Israel to other developed countries, highlights the impact of different health conditions on the country’s overall disease burden and outlines the challenges ahead of us in this arena

A new approach to determining healthcare priorities in Israel

What is the price of the rise in life expectancy?  With the rapid increase in life expectancy and population aging in Israel, consideration should be given not just to the number of years lived, but also to the quality of those years.

A new Taub Center study by Liora Bowers and Prof. Dov Chernichovsky examines the years of healthy life in terms of disease burden, a measure that takes into account both disability/poor functioning and death.  The study compares Israel to other developed countries, highlights the impact of different health conditions on the country’s overall disease burden and outlines the challenges ahead of us in this arena. 

Some major findings from the study:

  • A baby born in Israel today can expect to live 71.7 years in good health – a figure that is about a decade less than total life expectancy (82.1 years). Furthermore, healthy life expectancy is growing at a slower rate than total life expectancy. 
  • Disease burden from heart disease and lung cancer are notably lower than in other countries and the burden of heart disease and stroke have decreased by a remarkable 58% in the last 25 years.
  • On the other hand, obesity and high sugar consumption are larger risk factors in Israel than in other countries, particularly among children.
  • Diabetes is responsible for nearly 90% more disease burden in Israel than in Europe, and its prevalence among the poor is substantially higher than that among higher-income individuals.

Without major government regulations to promote healthy behaviors, particularly ensuring access to healthy foods and marketing of unhealthy foods – with a specific emphasis on younger populations – Israel is set to experience substantial increases in disease burden in the coming decades.

In 2015, the life expectancy in Israel stood at 82.1 years, placing Israel ninth globally.  This remained fairly stagnant over the last couple years and represents a fall from the country’s fifth place ranking in 2013.  Yet, although there has been a substantial increase in life expectancy over the last decades, this is no guarantee regarding quality of life.  According to a new study by the Taub Center, there has been a slower rise in the number of years lived in full health and functioning.

A baby born today in Israel is expected to live 71.7 years in good health, all told, about a decade less than the 82.1 years of total life expectancy.  Further, it appears that the rise in the number of healthy years lived in Israel is slightly lower than that of other countries known for their longevity.  The data indicate that Israel faces a problem, and it is no longer possible to consider good health only in the context of life and death.

Since 1995, Israel has provided universal healthcare coverage.  The Health Basket Committee annually convenes to select new medications and procedures to add to the public health basket per the allocation from the government budget.  The committee, as well as policymakers and the public, focuses primarily on technologies that prevent death, and devotes fewer resources to addressing the disease burden caused by non-fatal diseases such as orthopedic problems, depression, migraine, and hearing and vision problems.

Even though they do not directly lead to death, these conditions impose a large burden on many and exact a heavy price: from the patient, in terms of pain and decreased functioning and quality of life; from family members, who must care for the patient; and from society and the economy in terms of lost working days or reduced productivity.

A new Taub Center study by Liora Bowers and Prof. Dov Chernichovsky examines changes in disease burden between 1990 and 2015.  The study utilizes the Institute for Health Metrics and Evaluation (IHME) database, an international dataset collected over a number of years across all countries in the world. Poor health is measured in DALYs – Disability-Adjusted Life Years, which take into account years lost to both death and disability. Using this measure, the researchers compare the quality of life alongside total life expectancy in Israel, and identify the trends in Israel in comparison with those of European countries.

The researchers point to Israel’s comparative advantages alongside its shortcomings, and anticipate the challenges that the health system will face in light of the aging of the population over the next 20 years.

Back pain, diabetes and depression are among the main causes of disease burden in Israel today

Bowers and Chernichovsky examined the health conditions that take the greatest toll on Israel’s population today in terms of DALYs. Contrary to conventional wisdom, when considering the many people affected and the duration of suffering, the burden caused on society by back and neck pain is even higher than that of heart disease. The five conditions causing the greatest disease burden are neck and back pain, heart disease, diabetes, vision and hearing problems, and depression (in that order).

Liora Bowers noted that “the burden of heart disease and stroke decreased significantly (58 percent)  since 1990, as part of a known international phenomenon attributed to better detection and treatment, and the development of new medications effective at lowering cholesterol and blood pressure. On the other hand, an increase in body mass index (BMI) and in diabetes rates has had the opposite effect, and mitigated the reduction in heart disease that might have otherwise been seen.”

Diseases related to high blood pressure such as heart disease, kidney disease, stroke and diabetes are strongly affected by diet. Although the Mediterranean diet in Israel – which includes high consumption of vegetables, fruits and legumes – has proven health benefits, Israelis also tend to consume relatively high amounts of sugar, and not enough whole grains. Almost half of Israeli children drink sugar-sweetened beverages every day, rates that are even higher than in the United States.

High blood sugar levels are the most significant risk factor for disease burden in Israel and are responsible for about 61% more disease burden than in Europe, after taking into account differences in the population age structure. Obesity is also a major problem in Israel (particularly among the country’s children) and causes about 21% greater disease burden here than in Europe.

The Ministry of Health has taken a significant step in addressing this problem by prohibiting the sale of unhealthy food products in schools and recommending labeling unhealthy products with clear and prominent labels and limiting the marketing of unhealthy food for children. However, a major problem facing the public is the high cost of a healthy food basket that contains sufficient fruits, vegetables, nuts and healthy oils, which are unaffordable for many.  Furthermore, food price regulations in the country are currently based on economic and agricultural considerations, with no input from the Ministry of Health regarding nutritional considerations.

Compared to Europeans, Israelis today suffer more from diabetes, kidney disease, anemia, birth defects, and depression, and the health system is poised to face higher burden from cancer, heart disease and stroke, dementia and mental illness

The Taub Center study shows that Israel has a significantly lower death rate caused by lung cancer, heart disease, stroke, and liver disease, even after controlling for Israel’s younger population. One key reason for this finding is the lower rates of tobacco smoking and alcohol consumption. However, despite overall declines in smoking rates in Israel over time, 20% of Israeli tenth graders report having smoked a cigarette compared to 17% of their European counterparts, and the age of smoking initiation is earlier than in the past.

The disease burden from diabetes is nearly 90% higher in Israel than in Europe (age-adjusted), and kidney-related disease, which requires dialysis treatment or a transplant, also causes nearly double the burden. Israel also suffers a higher burden from anemia, birth defects and depression.

Anemia affects many women during pregnancy, causes fatigue and weakness, and may lead to premature labor or a low birthweight baby. In addition, it is very common among young children and has been linked to cognitive, motor, and language delays. This can be solved through effective iron fortification of food, as has been done in other countries, and increasing public awareness.

Bowers and Chernichovsky also studied the causes of disease burden in Israel in comparison to Europe, whose population is older, on a non-age adjusted basis.  The goal here was to better understand which health problems are likely to affect Israel in the coming decades as its population ages. The effect of the age distribution on a society’s health is clear. An examination of disability-adjusted life years shows that the impact of neck and back pain, heart disease, stroke, Alzheimer’s, lung cancer, falls and anxiety is higher in Europe, mainly, though not only, due to the fact that it is an older population.

In conclusion, Bowers states, “The common link across many of the leading health problems is lifestyle.  By promoting better nutrition and physical activity, through food regulations and through designing healthy school and living environments, policymakers in Israel can proactively lengthen the years of healthy life.  Ranging from back pain to diabetes to depression, the main way to ensure a healthier aging population down the road is to focus on prevention efforts, particularly on the young and those of lower socioeconomic status.”

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

 

 

 

 

Manna for all: Who can afford to eat healthy in Israel?

A basic, healthy food basket assures adequate nutrition that is essential for proper body, mind and social functioning. It is seen as a basic right in modern societies, not unlike the right to education and healthcare. In Israel, there has not yet been a meaningful attempt to define this basic healthy food basket and to examine its affordability in terms of household income, even though about 130,000 households in Israel suffer from nutritional insecurity and an even greater number suffer nutritional deficiencies.

The research by Dr. Janetta Azarieva, Ben Orion, Rebecca Goldsmith, Avidor Ginsberg, Ran Milman, and Prof. Dov Chernichovsky is a first attempt to define this basket and to analyze its significance for families of varying socioeconomic statuses.

A healthy food basket is divided into several food groups. The Ministry of Health has determined the basket according to the Mediterranean food pyramid as well as according to local eating patterns in Israel. This basket gives preference to natural, unprocessed foods that are organic – fruits, vegetables, whole grains, legumes, and nuts – in combination with relatively small amounts of animal-based foods: eggs, milk products, fish, chicken, and meat. The relative share of the food groups within the basket and the recommended daily serving sizes are based on the calculations of the US Department of Agriculture and the Israeli Ministry of Health definitions.

There are a number of advantages to the balanced diet that the basket represents. First, it is healthy, prevents heart disease and can promote longevity. Second, it is based primarily on vegetable products and so is less harmful to the environment and to animals.   Raw foods are also less expensive, in general, than processed animal-based foods products. Another advantage is that it encourages social-familial eating and home-cooked food.

In order to calculate the costs of the overall basket, various product prices were examined. Since the recommended daily serving in each food group can be made up of various components – for example, the grains food group includes bread, pasta, etc. – the median-priced food item was chosen in each group. In addition, in order to lower the cost of the basket while not falling below the minimal requirement for full nutritional value, several principles were followed. Food items that were inexpensive, accessible, and that reflected the balance between nutritional value and local consumption patterns were selected. In addition, the quantity of the food item selected reflected the minimal amount necessary to attain the required nutritional value. So, for example, expensive cuts of meat were eliminated from the basket and replaced with eggs and legumes as a source of protein.

After calculating the cost of a serving, this figure was multiplied by the number of servings recommended for each age group. The calculation for an adult was based on the average number of servings for men and women in the 25-50-year-old age group. For children, the calculation was based on the average number of required servings for each age group through age 18. The monthly cost of a basic healthy food basket for an average adult in 2015 totaled about NIS 844 per month, and for the average child, the cost was NIS 737. The share of animal-based protein and legumes represents about 40% of the cost of the adults’ basket; grains represent about 22% of the cost; and vegetables, fruit and milk products each account for about 11% of the total basket cost. The share of foods rich in fats represents about 4% of the cost of the basket. This distribution is similar to that of the recommended basket for children.

After the calculations of the cost of the basket and its components, the study looked at its cost to households. Naturally, the cost of the basket to a household increases in relation to the number of members in the household. In addition, the average monthly expenditure necessary to purchase the basket declines as household income increases, since there is a negative correlation between household size and income level in Israel.

When the population is divided into income deciles and the share of required expenditure from income is examined, there are large gaps between the two lowest and two highest income groups both in the percent of expenditure out of income as well as in the actual expenditure on food. In practice, the average share of expenditure that is required to purchase a healthy food basket for a household in the two lowest income deciles is 9 times higher than in the two highest income deciles. In the highest income decile, the average expenditure required to finance a basic healthy food basket is the lowest, since the average number of household members is the lowest: 2.46. The average family in the top income quintile has to spend about 7% of their income (about NIS 2,143) to pay for a healthy food basket for all family members, while their actual expenditure is 10%. In contrast, data on the six lowest income deciles show that they actually do not have enough money to pay for a healthy food basket. In the lowest income decile, for example, the average number of household members is highest at 4.37, and thus, the monthly expenditure that is needed to buy the healthy food basket is the highest at NIS 3,450. A family in the lowest two income deciles needs to spend about 65% of its monthly disposable income (NIS 4,965) to buy a healthy food basket while in actuality, the family spends about 42% of its income on food.

healthy food basket

It is hard to know if in the four lowest deciles (and in particular, in the two lowest deciles) the lower expenditure in practice than what would be required is the result of a preference for less expensive food (and possibly, less healthy) and a different set of priorities or whether it results from financial constraints. Nevertheless, it seems that relative to the higher income deciles, where the decision whether or not to purchase a healthy food basket is most likely an issue of awareness and preference, in the lowest and poorest income deciles, the purchase of a healthy basket is not a viable option in light of household income constraints and other vital household expenditures.
monthly household expenditure on food in Israel

Division of Labor: Wage Gaps between Women and Men in Israel

Wage gaps between women and men in Israel have narrowed over the years, but are still large. A new Taub Center study reveals that the most substantial factor behind the disparity is the fact that, on average, women work fewer hours than men, but another key factor is that women are more likely to be employed in lower-wage occupations and industries.

The wage gap between women and men in Israel’s labor market ranges from 32% to 42% (depending on the calculation method used). This difference has been studied extensively, and opinions differ as to its source; some attribute it to discrimination against women, while others maintain that the gap is rooted in essential differences between the genders and in their differing occupational preferences. A study by Taub Center Researcher Hadas Fuchs that was recently published in the Taub Center’s State of the Nation Report 2016, sought to assess the status of women in the labor market, focusing on the causes of the male-female wage gap. Fuchs assessed the gap in light of employees’ personal and demographic characteristics, including number of working hours, education level, and the occupations and industries in which the employees worked. The assessment included data from 2010-2011.

Fuchs’ calculations indicate that the most important factor behind the gender wage gap is the number of work hours, with 57% of the gap being due to women’s smaller position scope (i.e., less than full-time employment) (see Figure 1). In 2015, 34% of working women aged 25-54 were employed part-time, versus 17% of men; even among those with full-time jobs, women worked fewer hours.

Article Graph 1 final

The second most important cause, which is responsible for 14% of the wage gap, is the difference between the occupations and industries in which men and women work. Men work in occupations where the average wage tends to be higher (as shall be seen below). By contrast, the number of years of schooling variable reduces the gap by 5%, as on average, women are better-educated than men – and a higher education level raises the average wage.

Overall, more than two-thirds of the wage gaps arise from the variables that Fuchs assessed, among them one’s years of experience, position scope, family status, and education.  The portion of the gap that is not explained by these variables could  reflect discrimination, but it might also be due to attributes that could not be measured in this study, such as personal abilities, the exact job held by a given employee, or more precise detail regarding occupation. So that the “personal ability” component (which is presumably a major determinant of wage) could be taken into account, Fuchs used a special Central Bureau of Statistics database, which, in addition to the data shown above, also included matriculation and psychometric exam scores. These exams reflect, to a certain degree, the requirements of the labor market, and scores on these exams can thus serve as a good indicator of an employee’s “quality” in terms of remuneration for their work. This database contains information for those who were ages 29-31 in 2008.

One of the most interesting findings obtained through this estimation is that the occupation/industry component has a greater impact on wage gaps [in the 29-31 age group] than in all age groups taken together – a fact that underscores the importance of occupational choice in determining women’s future wages. Among those with academic degrees, this component had the greatest impact on the wage gap, explaining over half of the disparity (as seen in Figure 2).

Differences in matriculation and psychometric exam scores increase the wage gap; their joint contribution to the explained gap was 13%. Fuchs explains this by noting that, although women have a higher matriculation average than do men, five units of mathematics study and the quantitative portion of the psychometric exam have relatively great influence on wage, and women tend to have lower achievements in these spheres. In this calculation, the unexplained wage gap was only 6%.

Article Graph 2 final (update)

 

In light of the major role of mathematics attainment in determining wage, the study examined the gender gaps in this sphere at various stages along the lifecycle. The data indicate that women’s lower achievements in math are discernible from a young age; among Jewish Israelis, girls’ achievements on the Grade 5 GEMS exams in mathematics are lower than those of boys (though girls outperform boys in English), while on the PISA tests their achievements are lower in math and higher in reading. In secondary school fewer girls study math at the 5-unit matriculation level, and their average score is lower.

At the academic level, in all degree programs, women account for at least half (and often more than half) of students, but they tend to study therapy and education-related fields.  In contrast, men comprise the majority in the mathematical and scientific disciplines, which are associated with higher average salaries. In 2014, for example, only 27% of students in mathematics, statistics and computer science were women.

Gender polarization continues into the labor market, where a high percentage of women are still employed in education and a very low percentage in high-tech occupations. Even among computer science graduates, a relatively high percentage of women do not go on to work in this field. The reason for this may be that women enter occupations, such as education, that provide them with flexible working hours and part-time employment options, and avoid occupations that are regarded as demanding in terms of the number of work hours, such as technology, science and finance (as shown by Figure 3).

eng3

Given these findings, it appears that in order to reduce wage gaps, it is important to raise awareness of the impact that choice of academic field has on wage. Additionally, the contribution of mathematical ability to wage, and women’s lower attainments in math-related fields from an early age, highlight the need to persevere with programs that encourage women to study scientific subjects at a high level.

The question of why women do not enter STEM (science, technology, engineering, mathematics) fields, which are considered prestigious and known to offer high salaries, should also be examined in greater depth. Fuchs notes that the reason for this may be that women are still thought to be their children’s primary caregivers, and to bear most of the responsibility for housework. If this is indeed the reason, then one should consider the possibility of offering work-schedule flexibility and shorter work days to both men and women, which would enable suitable women who so desire to enter these fields, fulfill their potential and reduce overall gender wage inequality.

 

Long-Term Care in Israel: Funding and Organization

Long-Term Care in Israel: Funding and Organization

The share of Israelis aged 70 and older is projected to double in the coming decades, and the needs for long-term care among this generation will increase accordingly. A new Taub Center study presents a concerning picture of long-term care and poses the challenging question: how can the healthcare system prepare to cope with these inevitable demographic changes? According to the study, the first one comparing Israel and the OECD on this topic, Israel’s long-term care system is unequitable and inefficient, and the share of private funding in Israel is three times higher than the OECD average. The authors offer several potential solutions for restructuring long-term care, including the option of defining long-term care, which is not solely for the elderly, as part of a universal basket of coverage that is protected by law and managed by a designated authority.

Israel’s population is expected to age substantially in the coming decades. The share of elderly in the population, particularly those aged 75 and older, is expected to double from about 610,000 today to about 1.24 million by 2035, while the rest of the population is projected to grow by about 31%. Consequently, the disability level, which is by nature higher among the elderly, is expected to grow by 43%, a growth rate that is 16% faster than that of the general population during this time period. While the increased life expectancy among Israelis is a welcome development, it requires better preparation for the growing health needs of those who are living longer. Illness and functional impairment drive a growing need for in-home care, and in more severe cases, inpatient nursing homes. The changing ratio between the age groups – more of those aged 70 and older compared to those aged 15-69 – is expected to exacerbate the challenges related to caring for one’s parents and increase the burden on Israeli households.

The new Taub Center study by Prof. Dov Chernichovsky, Prof. Avigdor Kaplan, Eitan Regev, and Prof. Yochanan Shtessman examines the issues of funding and organization in long-term care. In addition, the study compares the long-term care system in Israel to those in OECD countries for the first time. Based on these comparisons and the experiences of other countries, the researchers propose potential solutions to regulating the market for long-term care in Israel.

Projected population growth by age group and in the total level of disability

Only half of spending on long-term care is publicly funded, and responsibility for the area is spread across several ministries

The long-term care system in Israel faces a number of challenges, including a lack of sufficient coverage for the entire population, funding issues, a multitude of authorities responsible for matters related to long-term care, and a lack of preparedness for the future. The Taub Center study shows that Israel’s total national expenditure on long-term care – including community care, institutional care, and premiums on long-term care insurance – is estimated at NIS 15.3 billion in 2014, and the government covers about half, or NIS 8.3 billion, of this expenditure.

Public funding is currently distributed among the following agencies:
• The National Insurance Institute covers funding and subsidies for in-home nursing care for about 160,000 elderly Israelis at a cost of NIS 5.31 billion, about 64% of total public funding in this realm.
• The Ministry of Health and the Ministry of Social Services fund assisted living facilities for about 14,000 of Israel’s elderly. These cost around NIS 2.1 billion, representing about 26% of public funding for long-term care.
• Through kupot holim (health funds), the state finances complex nursing care (for those with both complex medical problems and long-term care needs) for about 1,600 elderly Israelis, costing NIS 891 million and representing some 10% of public funding for long-term care.

The fragmentation of responsibilities between the different ministries leads to inefficiency and hurts the continuity of care. Most importantly, this leads to suffering among elderly Israelis and their families. Furthermore, the right to institutional care is not universal and is means-tested. This financial structure leaves behind middle class households who are not poor enough to qualify for financial assistance for long-term care, but are not wealthy enough to afford privately funded assisted living facilities.

The burden on households is great and growing

The Taub Center study shows that household expenditures on long-term care are divided among a number of different areas: payment to employ caregivers (often foreign workers), which costs about NIS 2.6 billion per year (about 39% of private spending on long-term care) and assisted living, which costs NIS 2.5 billion (about 37% of private spending). The remaining NIS 1.6 billion in private spending, which represents some 22% of total private expenditures on long-term care, goes toward insurance premiums.

In considering these expenses, it is important to note the lack of clarity in the number of people covered by long-term care insurance. As of 2014, according to estimates by the Insurance Commissioner, 5.31 million people had long-term care insurance in Israel, including both individual and group plans. However, according to the Central Bureau of Statistics’ Family Expenditure Survey, the rate of those covered by long-term care insurance is much lower. It appears that the gap between the two estimates stems from underreporting and a lack of awareness of insurance policies that are available through both the health funds and workplaces. Regardless, not all Israelis have access to long-term care coverage. Extensive reliance on private funding combined with the sharp increase in the anticipated need will exacerbate the issue of care for family members and increase the burden on Israeli households.

Where is Israel relative to OECD countries? Less equal and less effective

The Taub Center research presents, for the first time, Israel’s long-term care situation as compared to OECD countries. The researchers suggest that, in terms of spending on long-term care relative to GDP, Israel falls near the Nordic countries (about 1.4% of GDP) – but these countries have introduced universal long-term care insurance while Israel has introduced no such coverage. Conversely, Israel’s expenditure level is higher than countries like Australia or Germany, where the long-term care system is similar to that of Israel’s. Israel’s expenditure is particularly high considering that its elderly population is smaller (as a share of the total population) than that of the other countries assessed. As such, the international comparison shows that Israel is not effectively distributing or providing care given the resources it allocates.

Another prominent characteristic in Israel’s long-term care system is that the share of private expenditure on care is nearly 45%, almost triple that of the OECD, which stands at 16% on average. The study also shows that Israel stands out in the share of care for patients aged 65 and older that is provided in the community: about 19% versus 9% for the OECD countries for which data is available. This figure may indicate a greater commitment to caring for Israel’s elderly in the community, but it could also reflect the relatively limited options and access to institutional care available in the country. In such situations, a large amount of the burden falls on families to fund care independently – whether by paying for care provided by foreign workers or by missing work days to care for their elderly family members. This extensive reliance on households furthers inequality between families at different income levels: households that are unable to afford long-term care at home or in assisted living facilities must bear the burden on their own.

As part of its international comparison, the Taub Center study examined long-term care solutions in place around the world. The data show that nearly all countries with social service funding structures similar to Israel’s chose publicly-oriented solutions, combining compulsory insurance payments with public funding and thereby enabling the existence of an efficient and equitable universal long-term care system.

Expenditure on extended long-term care by funding sources, OECD countries, 2010-2011

Government proposals for handling long-term care contradict one another

In an attempt to regulate the funding of long-term care, the government has presented two contradictory initiatives. A reform introduced by Israel’s Ministry of Finance would transition the long-term care insurance that is based on group premium payments (through pensioner associations and workplaces) to a system that revolves around individual premium payments. The Ministry of Health’s proposed reform would institute universal long-term care insurance through use of funds from the health tax and by transferring the full responsibility of long-term care to the health funds, thus reducing the burden on families. In the words of the researchers, “the two proposals fail to address the fundamental issue in the area of long-term care: the selective entitlement to institutional care and the split among the various agencies involved in organizing and providing long-term care.”

Taub Center researchers found that the Ministry of Finance and Ministry of Health proposals do not sufficiently address the primary problems associated with long-term care in Israel. The Ministry of Finance’s approach, which seeks to further privatize long-term care, has not proven effective in other parts of the world. The funding available through a private insurance system is relatively limited, as low-income earners cannot afford the premiums and high-income earners often prefer to make other arrangements, such as paying for in-home care. Additionally, private insurance premiums are relatively high due to the high risk associated with accurately projecting the growth of the population and anticipating its long-term needs. Young people do not tend to purchase long-term care insurance. A system that would require young adults to be insured would prevent them from living without care in their old age, while simultaneously enlarging the funding sources for the care of the older generation.

Regarding the Ministry of Health’s aim to universalize long-term care, at least partially, Prof. Chernichovsky states that this approach is “compatible with international trends and suitable in terms of public finance,” but noted that it lacked certain basic elements. “This proposal focuses on the medical aspects of long-term care without meeting other needs such as social support. In nearly all other OECD countries, long-term care is managed separately within the welfare system, not in the healthcare system. As such, the current proposal of the Ministry of Health does not sufficiently address fragmentation in the Israeli system and the funding sources that are required in order to expand long-term care.”

Possible paths to long-term care reform: mandatory long-term care for all, public funding from existing sources, and raising the retirement age for women today and for men over time

In light of the issues raised while mapping the system and comparing Israel to other developed countries, Taub Center researchers offer considerations for reform, including the regulation of the long-term care system. Possible options include:
• Including long-term care in the universal basic healthcare basket.

• Financing: the basic basket could be funded through existing public sources in addition to a mandatory fee collected from all Israeli citizens. Given the expanded life expectancy of Israelis, raising the retirement age presents another opportunity for funding. At the same time, given the high cost of long-term care and increased needs, Israel may need to maintain income tests for certain entitlements, as is done in a number of OECD countries.

• Private insurance: supplementary long-term care insurance may be made available alongside universal care.

• Establishment of a single, dedicated authority: the responsibility for all long-term care management could be designated to a single authority. The authority would provide long-term care services offered by independent providers and medical services through the health funds, as is the norm today. The authority could ensure continuity of care and that the system operates more equitably and efficiently than it does today.

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

 

Long-Term Care in Israel: Funding and Organization

Long-Term Care in Israel: Funding and Organization

The share of Israelis aged 70 and older is projected to double in the coming decades, and the needs for long-term care among this generation will increase accordingly. A new Taub Center study presents a concerning picture of long-term care and poses the challenging question: how can the healthcare system prepare to cope with these inevitable demographic changes? According to the study, the first one comparing Israel and the OECD on this topic, Israel’s long-term care system is unequitable and inefficient, and the share of private funding in Israel is three times higher than the OECD average. The authors offer several potential solutions for restructuring long-term care, including the option of defining long-term care, which is not solely for the elderly, as part of a universal basket of coverage that is protected by law and managed by a designated authority.

Israel’s population is expected to age substantially in the coming decades. The share of elderly in the population, particularly those aged 75 and older, is expected to double from about 610,000 today to about 1.24 million by 2035, while the rest of the population is projected to grow by about 31%. Consequently, the disability level, which is by nature higher among the elderly, is expected to grow by 43%, a growth rate that is 16% faster than that of the general population during this time period. While the increased life expectancy among Israelis is a welcome development, it requires better preparation for the growing health needs of those who are living longer. Illness and functional impairment drive a growing need for in-home care, and in more severe cases, inpatient nursing homes. The changing ratio between the age groups – more of those aged 70 and older compared to those aged 15-69 – is expected to exacerbate the challenges related to caring for one’s parents and increase the burden on Israeli households.

The new Taub Center study by Prof. Dov Chernichovsky, Prof. Avigdor Kaplan, Eitan Regev, and Prof. Yochanan Shtessman examines the issues of funding and organization in long-term care. In addition, the study compares the long-term care system in Israel to those in OECD countries for the first time. Based on these comparisons and the experiences of other countries, the researchers propose potential solutions to regulating the market for long-term care in Israel.

Projected population growth by age group and in the total level of disability

Only half of spending on long-term care is publicly funded, and responsibility for the area is spread across several ministries

The long-term care system in Israel faces a number of challenges, including a lack of sufficient coverage for the entire population, funding issues, a multitude of authorities responsible for matters related to long-term care, and a lack of preparedness for the future. The Taub Center study shows that Israel’s total national expenditure on long-term care – including community care, institutional care, and premiums on long-term care insurance – is estimated at NIS 15.3 billion in 2014, and the government covers about half, or NIS 8.3 billion, of this expenditure.

Public funding is currently distributed among the following agencies:
• The National Insurance Institute covers funding and subsidies for in-home nursing care for about 160,000 elderly Israelis at a cost of NIS 5.31 billion, about 64% of total public funding in this realm.
• The Ministry of Health and the Ministry of Social Services fund assisted living facilities for about 14,000 of Israel’s elderly. These cost around NIS 2.1 billion, representing about 26% of public funding for long-term care.
• Through kupot holim (health funds), the state finances complex nursing care (for those with both complex medical problems and long-term care needs) for about 1,600 elderly Israelis, costing NIS 891 million and representing some 10% of public funding for long-term care.

The fragmentation of responsibilities between the different ministries leads to inefficiency and hurts the continuity of care. Most importantly, this leads to suffering among elderly Israelis and their families. Furthermore, the right to institutional care is not universal and is means-tested. This financial structure leaves behind middle class households who are not poor enough to qualify for financial assistance for long-term care, but are not wealthy enough to afford privately funded assisted living facilities.

The burden on households is great and growing

The Taub Center study shows that household expenditures on long-term care are divided among a number of different areas: payment to employ caregivers (often foreign workers), which costs about NIS 2.6 billion per year (about 39% of private spending on long-term care) and assisted living, which costs NIS 2.5 billion (about 37% of private spending). The remaining NIS 1.6 billion in private spending, which represents some 22% of total private expenditures on long-term care, goes toward insurance premiums.

In considering these expenses, it is important to note the lack of clarity in the number of people covered by long-term care insurance. As of 2014, according to estimates by the Insurance Commissioner, 5.31 million people had long-term care insurance in Israel, including both individual and group plans. However, according to the Central Bureau of Statistics’ Family Expenditure Survey, the rate of those covered by long-term care insurance is much lower. It appears that the gap between the two estimates stems from underreporting and a lack of awareness of insurance policies that are available through both the health funds and workplaces. Regardless, not all Israelis have access to long-term care coverage. Extensive reliance on private funding combined with the sharp increase in the anticipated need will exacerbate the issue of care for family members and increase the burden on Israeli households.

Where is Israel relative to OECD countries? Less equal and less effective

The Taub Center research presents, for the first time, Israel’s long-term care situation as compared to OECD countries. The researchers suggest that, in terms of spending on long-term care relative to GDP, Israel falls near the Nordic countries (about 1.4% of GDP) – but these countries have introduced universal long-term care insurance while Israel has introduced no such coverage. Conversely, Israel’s expenditure level is higher than countries like Australia or Germany, where the long-term care system is similar to that of Israel’s. Israel’s expenditure is particularly high considering that its elderly population is smaller (as a share of the total population) than that of the other countries assessed. As such, the international comparison shows that Israel is not effectively distributing or providing care given the resources it allocates.

Another prominent characteristic in Israel’s long-term care system is that the share of private expenditure on care is nearly 45%, almost triple that of the OECD, which stands at 16% on average. The study also shows that Israel stands out in the share of care for patients aged 65 and older that is provided in the community: about 19% versus 9% for the OECD countries for which data is available. This figure may indicate a greater commitment to caring for Israel’s elderly in the community, but it could also reflect the relatively limited options and access to institutional care available in the country. In such situations, a large amount of the burden falls on families to fund care independently – whether by paying for care provided by foreign workers or by missing work days to care for their elderly family members. This extensive reliance on households furthers inequality between families at different income levels: households that are unable to afford long-term care at home or in assisted living facilities must bear the burden on their own.

As part of its international comparison, the Taub Center study examined long-term care solutions in place around the world. The data show that nearly all countries with social service funding structures similar to Israel’s chose publicly-oriented solutions, combining compulsory insurance payments with public funding and thereby enabling the existence of an efficient and equitable universal long-term care system.

Expenditure on extended long-term care by funding sources, OECD countries, 2010-2011

Government proposals for handling long-term care contradict one another

In an attempt to regulate the funding of long-term care, the government has presented two contradictory initiatives. A reform introduced by Israel’s Ministry of Finance would transition the long-term care insurance that is based on group premium payments (through pensioner associations and workplaces) to a system that revolves around individual premium payments. The Ministry of Health’s proposed reform would institute universal long-term care insurance through use of funds from the health tax and by transferring the full responsibility of long-term care to the health funds, thus reducing the burden on families. In the words of the researchers, “the two proposals fail to address the fundamental issue in the area of long-term care: the selective entitlement to institutional care and the split among the various agencies involved in organizing and providing long-term care.”

Taub Center researchers found that the Ministry of Finance and Ministry of Health proposals do not sufficiently address the primary problems associated with long-term care in Israel. The Ministry of Finance’s approach, which seeks to further privatize long-term care, has not proven effective in other parts of the world. The funding available through a private insurance system is relatively limited, as low-income earners cannot afford the premiums and high-income earners often prefer to make other arrangements, such as paying for in-home care. Additionally, private insurance premiums are relatively high due to the high risk associated with accurately projecting the growth of the population and anticipating its long-term needs. Young people do not tend to purchase long-term care insurance. A system that would require young adults to be insured would prevent them from living without care in their old age, while simultaneously enlarging the funding sources for the care of the older generation.

Regarding the Ministry of Health’s aim to universalize long-term care, at least partially, Prof. Chernichovsky states that this approach is “compatible with international trends and suitable in terms of public finance,” but noted that it lacked certain basic elements. “This proposal focuses on the medical aspects of long-term care without meeting other needs such as social support. In nearly all other OECD countries, long-term care is managed separately within the welfare system, not in the healthcare system. As such, the current proposal of the Ministry of Health does not sufficiently address fragmentation in the Israeli system and the funding sources that are required in order to expand long-term care.”

Possible paths to long-term care reform: mandatory long-term care for all, public funding from existing sources, and raising the retirement age for women today and for men over time

In light of the issues raised while mapping the system and comparing Israel to other developed countries, Taub Center researchers offer considerations for reform, including the regulation of the long-term care system. Possible options include:
• Including long-term care in the universal basic healthcare basket.

• Financing: the basic basket could be funded through existing public sources in addition to a mandatory fee collected from all Israeli citizens. Given the expanded life expectancy of Israelis, raising the retirement age presents another opportunity for funding. At the same time, given the high cost of long-term care and increased needs, Israel may need to maintain income tests for certain entitlements, as is done in a number of OECD countries.

• Private insurance: supplementary long-term care insurance may be made available alongside universal care.

• Establishment of a single, dedicated authority: the responsibility for all long-term care management could be designated to a single authority. The authority would provide long-term care services offered by independent providers and medical services through the health funds, as is the norm today. The authority could ensure continuity of care and that the system operates more equitably and efficiently than it does today.

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan socioeconomic research institute. The Center provides decision makers and the public with research and findings on some of the most critical issues facing Israel in the areas of education, health, welfare, labor markets and economic policy in order to impact the decision-making process in Israel and to advance the well-being of all Israelis.

 

Yisrael Beiteinu Workshop

On January 22, the Taub Center was pleased to host Members of Knesset from the Yisrael Beiteinu party for a workshop on Israel’s key social and economic issues. The meeting included a snapshot of Israel’s socioeconomic trends, as well as in-depth presentations by Taub Center researchers on Israel’s education system and women’s labor market participation.

Brand new Taub Center research was presented from the Center’s annual flagship publication, The State of the Nation Report 2016. The workshop began with an overview of Israel’s key socio-economic issues in a number of fields, presented by Executive Director Prof. Avi Weiss.

Principal Researcher and Education Policy Program Chair Prof. Yossi Shavit discussed some of the challenges facing Israel’s education system, highlighting the role of policymakers in improving the system and reducing achievement gaps. Principal Researcher Nachum Blass then built on Prof. Shavit’s presentation, delving into demographic trends of students and addressing a number specific questions raised by the party.

To conclude, researcher Hadas Fuchs presented new findings on the gender wage gap in Israel and labor market participation trends by gender, focusing on different factors that affect women’s wages and employment.

Thank you to Minister of Defense Avigdor Lieberman, Minister of Aliyah and Immigrant Absorption Sofa Landver, MK Robert Ilatov, MK Oded Forer, MK Yulia Malinsovsky, and to Yisrael Beiteinu’s staff and advisors for joining us. We look forward to continuing these pivotal conversations about the key social and economic issues affecting the lives of Israelis.

Long-term savings accounts for children

A new Policy Brief by the Taub Center for Social Policy Studies in Israel examines various alternatives for long-term investment accounts for children, ahead of a program that will be implemented in January 2017. The program seeks to ensure that every young person entering adulthood will have assets available to integrate successfully into Israeli society.

Click here to read the full policy brief on long-term savings accounts for children

In today’s Israel, with particularly high poverty rates and inequality, tens of thousands of young people complete their high school education or their military/national service and must begin their adult life without the resources to fulfill their potential. The implementation of a child development accounts program will allow these same young people to enter adulthood with a lump sum of money to help them start the journey.

Globally, there is a trend toward child development accounts. In Israel, the legal infrastructure for such a program was established through the Economic Arrangements Law. A few days ago, the Finance Minister signed regulation that establishes a mechanism for savings for each child and discussions are currently underway ahead of final approval of the program.  This new Policy Brief authored by the Chair of the Taub Center’s Welfare Policy Program, Prof. John Gal, and Taub Center researcher Shavit Madhala-Brik, in conjunction with Prof. Michal Grinstein-Weiss and Meredith Covington from Washington University’s Center for Social Development presents various options for savings programs and examines the social and budgetary implications of each.

 

The importance of child development accounts and the situation in Israel

In the last twenty years, the use of asset building tools has grown as a means of combating poverty and inequality. Underlying this concept is the assumption that families and individuals who want to advance and improve their situation need resources to invest in education, housing and the labor market. This assumption is further strengthened by the fact that lower income families tend to have a greater number of children, and so the likelihood that these children will lack essential resources to fully develop their abilities is even higher.

Over the past several decades, various programs have been developed in Israel, with the aim of providing a foundation of assets for young people beginning their adult lives.  This includes, for example, programs giving scholarships for higher education to residents of the periphery and other specific target populations such as Haredim (ultra-Orthodox), as well as grants and savings deposits for soldiers completing their military service and individuals completing national civil service.  However, the size of these programs is relatively small, and the target audience does not reflect the entire population.  The Taub Center study presents an array of options, including some that offer asset-building programs to the entire population and some that are designed for specific population segments.  A detailed description of the differences among these programs and their implications is presented in the study.

 

Investment program options

The study presents four child development account options:

Option 1 (Economic Arrangements Law)

This alternative is based on the proposal approved in the framework of the Economic Arrangements Law of 2015. The program would be for all new children born, wherein the state would budget NIS 50 per month for each account, as well as a variable lump sum at withdrawal (NIS 500 for redemption at age 18 and NIS 1,000 if redeemed at age 21). Parents who can afford to do so may add NIS 50 per month to the savings account for their child.

The savings account can be used at age 18 toward education, opening a