Category Archives: Press Releases

Press Release – Educational Inequality in Israel: From Research to Policy

Embargo until Wednesday (4.12)  6:00 AM

To read the full publication in Hebrew, click here

Despite pervasive differences of opinion and ideological battles within Israeli society, there is one subject where there is complete agreement and that is the need to narrow educational gaps. Most agree that education is one of the keys to success in life, and that we should ensure equity in terms of educational opportunities for all children in Israel.

Many believe that narrowing educational inequalities can also contribute to narrowing economic inequality that is so prevalent. Nevertheless, educational disparities between socioeconomic groups, sectors, and ethnic groups abound. These gaps seem intransigent despite the efforts of government and the education system.

The Taub Center for Social Policy Studies in Israel has published a new book Educational Inequality in Israel: From Research to Policy, which gathers the current knowledge on a variety of issues relating to educational inequality, and discusses education policy and steps that can be taken towards change. Leading educational authorities in Israel collaborated on this book  including Professor Hanna Ayalon, Nachum Blass, Dr. Yariv Feniger, and Professor Yossi Shavit.

This book examines the issues of educational inequality in Israel. Children’s academic achievements are determined to a large extent by the economic and educational resources that their parents have available. There are tremendous inequalities among families in Israel in terms of these resources, and this contributes to a large extent to the differences in educational opportunities for the younger generation. These inequalities do not just stem from differences in family resources but also from the structure of the education system and its processes.

For example, separation of weaker and stronger students contributes to a strengthening of the inequality between these groups in terms of their achievements.  Similarly, privatization of the education system is likely to increase the achievements of students from well-off families since they can afford the expenses of private education while students from poorer families often attend schools with fewer resources providing education of a lower quality.

This all contributes to a widening of educational gaps. This book documents educational inequality in Israel and discusses the possible contribution of education policy to the narrowing of these disparities among young people. It appears that despite the advantages that stronger social status groups hold, there is hope that focused education policy can narrow the disparities, even if they cannot be eliminated. Knowing the centrality of family resources in creating educational disparities should not weaken the drive of policy makers to work towards narrowing these gaps.

If anything, it should strengthen their resolve to develop directed policies to this end. The book’s chapters discuss a variety of ways that education policy can further educational opportunities among weaker social groups in Israel.

A policy of differential allocation of student resources should be implemented

There are differences in resource allocation between socioeconomic groups, and affirmative action policies enacted by the Ministry of Education have not, as yet, brought about substantial changes. It does, however, appear that gaps in resources – especially between the Hebrew and Arab education sectors – are narrowing.

Only about 10% of the Ministry of Education budget is set aside to advance weaker population groups. The Taub Center researchers suggest changing the budgeting system by implementing a differential basket of student resources from preschool through to high school, recognizing that this is a valuable tool for advancing equity in the education system.

Allocating in this way allows the services to be concentrated in the hands of the Ministry of Education and gives them the ability to change the current situation where municipalities with different resources and needs are required to contribute the same percentage of their resources to education funding.

Differential budgeting allows the Ministry to set a separate system of compensation and incentives for teachers in schools serving weaker population groups. It is based on the school’s Nurture Index, giving priority to those institutions that are socially integrated with students from lower socioeconomic backgrounds.

Investment in early childhood brings returns both to the individual and to society

The first years of life – early childhood – are a critical period in child development. The family’s socioeconomic background is likely to impact the supply of positive and negative stimuli in the young child’s experience with long-term developmental impact including on future academic achievements. Research shows that socioeconomic gaps in early childhood tend to intensify over the child’s lifetime.

Taub Center researchers explain that inequalities in academic achievement in Israel are linked to economic inequalities for families of young children. Interventions during this critical period, while the infant’s brain is still malleable, bring greater returns than later interventions, and are also likely to narrow academic achievement gaps among children from different socioeconomic groups.

The researchers suggest several steps, including increasing accessibility and improving the quality of early childcare in day care centers and family-run daycare and increasing participation in programs of this nature; keeping child to staff ratios low in early childhood frameworks; and investing in training high-quality staff for these facilities.

In addition, the researchers recommend increasing Income Support, increasing and differentially distributing Child Allowances, and raising the work grants for those parents of young children who are low wage earners. Early intervention brings returns to the child and to society in a plethora of areas.

 

Decreasing class sizes is not a “cure-all,” although it can help students from weaker populations

Classrooms in Israel are the most crowded of the OECD countries and Israeli student achievements are middling to low relative to their peers in other countries. Does class size explain the low level of achievements?

Those who favor smaller classes claim that they allow teachers to give more individual attention to students, make teacher’s work easier, and lessen teacher burn-out, among other benefits. However, decreasing the number of students per class is an expensive proposition, and it involves enlisting many more teachers who may be less well qualified.

In the Hebrew education system, students from wealthier socioeconomic groups tend to learn in relatively large classes, and those from weaker backgrounds are in smaller classes. Thus, decreasing class sizes in this sector is most likely to benefit the wealthier students. Despite this, there is evidence that small classes can bring about an improvement in academic achievements at the primary school level and in classes for students from weaker backgrounds.

It is important to also emphasize that decreasing class size must go hand in hand with modified pedagogical methods. Thus, it is advisable to do this in schools serving weaker populations (including in the Arab education sector), primarily in primary education, and this step should be accompanied by the development of new pedagogical tools and teacher training programs.

 

Privatization and parental choice within the education system increases inequalities

There are those who see parental choice, competition, and privatization of schools as an efficient means of improving the education system, however, current research does not bear this out. The majority of studies find no clear advantages to opening registration areas or to private or independent schools that benefit from public funding in comparison to regular public education.

Studies show that choice and privatization do not contribute to improving the overall system, and are, in fact, likely to increase the level of inequality in the system. Taub Center researchers stress that we should ensure that existing choice mechanisms do not harm the public system, and that they encourage pedagogical approaches with a proven potential to improve both teaching and learning of weaker students.

The book’s researchers recommend that in cases where there is parental choice of schools, the state and the local authority should ensure that schools do not charge entrance fees (since payments of this sort are a deterrent to those students with more limited resources) and that, in cases of excess demand, students are accepted on the basis of a lottery system rather than on the basis of tests or interviews. In addition, there should be transportation available to every child in the area to make the school of choice accessible regardless of parental ability to pay.

The price of student testing and the potential for developing measurement and evaluation tools

The Meitzav exams (the Hebrew acronym for School Growth and Efficiency Measures) are intended to provide the public and decision makers with information on academic achievements and gaps. As in other countries that have adopted such exams, though, it seems that their disadvantages outweigh their advantages. Instead of the exams serving as a tool for developing policy and directing policy for narrowing educational gaps, many schools intensively prepare their students for the exams, and in some cases, there have even been reports of altering test results.

In light of this, the researchers recommend changing the Meitzav exams to tests based on a representative sample of schools that will give a picture of achievements and educational perspectives and will also enable testing over multiple years.

Data collection of this sort will lessen pressures on schools following the publication of results and will allow them to focus on real improvements. In addition, existing information sources – in the Ministry of Education, in the National Authority for Measurement and Evaluation in Education, and others – should be used to improve teaching methods in schools.

Heterogeneous student populations

The Israeli education system is divided into “four tribes,” as the President of Israel said: Hebrew State, State-religious, Haredi, and the Arab education system. Despite various attempts, it is hard to imagine much integration of these four tribes. Within each tribe, there is also considerable segregation between various groups.

Schools in the Israeli education system differ in the socioeconomic composition of their student bodies. These differences contribute to perpetuating intergenerational inequality because the composition of the student body has an impact on student achievements. For this reason, researchers are of the opinion that integration within the schools between students from the different tribes and different socioeconomic backgrounds should be encouraged, for instance through economic incentives.

Improving teacher recruitment and training for those serving the periphery

 In the past two decades, teacher’s colleges have raised their entrance requirements somewhat, but they still draw mostly students with weak academic performance.

In the past decade, there have been programs aimed at encouraging candidates with high academic skills to work with weaker populations, including monetary incentives and retraining. Nevertheless, there is still an issue of teacher attrition rates, as well as teachers with high seniority and advanced degrees tending to teach in schools serving stronger populations. One of the Ministry of Education’s programs mentors new teachers, although its efficacy has not yet been fully evaluated.

The Taub Center researchers believe that teachers from strong backgrounds should be encouraged to teach students with relatively weak backgrounds, and should be mentored during their first years of work to give them broad professional support.

Policies to narrow gaps in higher education

Opening up the higher education system has brought about a substantial rise in the share of those seeking higher degrees among Jews and Arab Israelis, and for both women and men, though female rates of higher education are higher in both sectors, and particularly among Arabs. Nevertheless, the rise did not narrow gaps a great deal between Jewish and Arab Israeli students.

About 70% of those Jews with a bagrut (matriculation) qualification continue on to higher education compared to about 50% of Arab Israelis.  A look at Jews by ethnic origin shows that about 75% of Ashkenazim, about 65% from the former Soviet Union, about 61% of Mizrahiim, and only about 51% of Ethiopian descent continue onto academic studies.

Children whose parents have an academic education are far more likely to continue on to higher education than are children whose parents do not have an academic education (76% versus 61%, respectively). There are also differences in the choice of institutions of higher learning: Muslims and Druze tend to study in colleges, while Jews (primarily Ashkenazim and those from the former Soviet Union) and Christians tend to study in the university system.

The likelihood of Arab Israelis dropping out from their degree studies is twice that of Jews. With regard to completing a degree, those of Ethiopian descent have the lowest completion rates – less than half of them complete their studies within the defined period of time. In teacher colleges, only 60% complete their studies on time while about 18% drop out.

“The study’s findings show that high school gaps have repercussions that extend to higher education, and interventions should begin early in the education system, primarily among groups with weaker socioeconomic backgrounds and among Arab Israelis,” say the researchers. They add, “Gaps in accessibility to higher education between Jews and Arab Israeli students are deep, and Arab Israelis need to be encouraged to obtain higher education and to develop their employment possibilities. In addition, preparatory courses for Arab Israeli candidates who meet entrance requirements for higher education should be increased.”

The negative implications of tracking students

Tracking students is done so that they can learn according to their abilities and interests. Tracking, though, increases inequalities since students from weaker backgrounds are often directed into tracks where their educational opportunities are limited.

Students are placed in different educational tracks in middle and high school. Following a substantial decline over the years in the extent of vocational-technological education, the Ministry of Education set a goal to once again increase attendance in those tracks.

The claims were that doing so would narrow gaps between the Center and the periphery and between wealthy and poorer population groups, would ultimately help the Israeli market place which has been hurt by a shortage of workers with vocational-technological skills, and would also strengthen the work ethic in education.

Those against the Ministry move claim that vocational-technological education perpetuates inequalities, despite the changes that it has undergone, since the weakest students are directed to those vocations that give their graduates the fewest opportunities. The researchers recommend working to limit tracking in middle school, for instance by having a more heterogeneous mix of students in classes, and encouraging even those students with difficulties to take academic track high school classes that lead to a bagrut qualification.

 

Gender gaps in education

A good deal of the discussion about gender gaps in education is concerned with girls’ inferior performance in mathematics and science, despite the fact that in all subjects and at all levels of study their achievements are no worse and even better than those of their male peers. This is true in all population groups and particularly so in the Arab education system. Nevertheless, policy planners and education researchers show little interest in how boys are consistently outperformed in language skills.

 

Gender gaps in mathematics and sciences are seen in both high school and higher education, and are expressed in the low share of women who study physics and computer science. Gender gaps in these fields reflect on gender-based gaps in wages in the labor market, since studying engineering and computer science at the academic level increase the chances of attaining lucrative employment.

Recent studies show that encouraging women to study technology related fields can help narrow the gender wage gap, and might even eliminate it.

Pedagogical interventions to narrow gaps in the classroom and school

Cooperative learning in small groups and individual tutoring for students with difficulties are two approaches that are found to be effective in advancing equity between students, and yet require little economic investment. Unfortunately, the Ministry of Education has yet to develop a clear framework for their efficient implementation in a manner that will target those students who need it the most.

Cooperative learning in small, heterogeneous groups can substitute for tracking students by academic level, and can thereby narrow inequalities inherent in tracking. This approach requires training and mentoring teachers, and organizational flexibility in teaching hours and study materials.

Its implementation requires a change in the mindset among school principals and those in the Ministry of Education. Researchers suggest that the hours of individual tutoring required by teachers should be focused on advancing low-performing students, and additional tutoring hours should be budgeted for those schools serving socioeconomically weak populations.

Professor Avi Weiss, President of the Taub Center, says: “Quality education is an investment that pays off and a path towards social mobility. It can serve as a springboard for boys and girls from weak socioeconomic backgrounds to a brighter future and economic stability. In Israel, for the most part, children from wealthy families benefit from access to better education, and the gaps between population groups are large. This harms society as a whole. A country that fails to realize the full potential of its human capital ultimately harms its economic growth.”

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; 02 567 1818 ext. 110.

 

 

Press Release – Inequalities are created in early childhood: Early childhood poverty and future academic achievements

As the year ends – a year filled with difficult stories of abuse in preschools and parent’s protests – and as a new year begins, the Taub Center is publishing a new study with the support of the Bernard van Leer Foundation on the influence of environmental factors on early childhood development and children’s future scholastic achievements.

The incidence of poverty in Israel and especially child poverty, which stands at almost 30%, is nearly the highest among the OECD countries (with the exception of Turkey). The Taub Center study examines the impact of family income during early childhood on future academic achievements for children in Israel, and, for the first time, distinguishes between infants and toddlers – birth to age 2 – and preschoolers – ages 3-5 – in order to identify differences in impact between the two groups.

The findings show that poverty experienced until age 2 has a substantial influence on learning over the child’s lifetime – on their grades in the Meitzav exams in 5th grade, as well as on their later academic achievements. When poverty is experienced from ages 3-5, similar effects were not found, something that supports the importance of investment in the first 1,000 days of a child’s life.

Economic inequality in Israel is among the highest in the OECD countries, and especially high among children – almost 30% of Israel’s children lived in poverty in 2017. More than half of all poor families are families with children. Israel also ranks among the lowest in student academic achievements among the OECD countries, with high levels of inequality in those achievements among Israeli students.

It is important to note that the first years of life are critical in terms of brain development: until age 3, the brain reaches 85% of its ultimate size, and until age 5, 95% of its ultimate size. In this period, all the developmental processes are at their peaks: cognitive, linguistic, emotional, social, perceptual, and more. For this reason, there are those who claim that the first 1,000 days of life – from conception until age 2 – are the most critical in terms of development, a period where exposure to a supportive, rich, and stimulating environment is essential for optimal development.

A new Taub Center study conducted by Dana Vaknin, Prof. Yossi Shavit, and Dr. Isaac Sasson looks at the influence of early childhood poverty on later academic achievements and for the first time separates early childhood into two groups: from birth to 2-years-old, and from ages 3 to 5.

The study looks at Jewish children in the 1990 to 1995 cohort (data for Arab Israeli students are very limited and so were not examined) at several points in time from birth to age 5, and again in 5th grade when they take the Meitzav exams which test proficiency in mathematics, Hebrew, English (as a second language), and literacy in science and technology. In addition, data on disposable family income per capita at two points in time (in early childhood and at age 10) were considered.

Inclusion in the lowest income quintile was defined as living in poverty; inclusion in the highest quintile was defined as living in wealth. Finally, other explanatory variables included the parents’ level of education, the child’s gender, and the number of siblings during early childhood and during their teens. The analysis was carried out for each of the two age groups to look for differences between them.

 

For children from birth until age 2, inclusion in the lowest family income quintile has a dramatic influence on exam scores in later life

Taub Center researchers found that there is a strong positive relationship between parents’ level of education and achievements – that is, as parents’ level of education rises so do their children’s scholastic achievements. Likewise, there was a negative influence of number of siblings during early childhood – as the number of siblings rises, scholastic achievements drop.

The most significant finding from the study is that poverty during the first two years of a child’s life has an especially strong and negative influence on later achievements, while poverty that is experienced by the child at ages 3-5 does not have the same impact.

These findings were borne out over all the scholastic tests of the 5th grade Meitzav exams: math, Hebrew, English, and science. These findings show the tremendous importance of a child’s environment during the first two years of life.

Hebrew ENG

It is important to note that per capita disposable family income is not necessarily stable for families with young children. This is due to the substantial changes in earning power of parents during this period in their lives, due to, among other things, changes in seniority, education, and workplace.
Math ENG

In addition, changes in the average number of children per family as well as government child allowances also play a part. A look at the distribution of families by family income quintiles shows that of the households with adults ages 25 to 27 in the lowest income quintile, only 30% of them remain in the lowest quintile by ages 30 to 32 while the majority have moved up: 19% moved to the second quintile, 13% to the 3rd, 10% to the 4th, and 8% have moved to the highest household income quintile.

The data testify to the mobility among parents of young children in disposable income, and explain how the impact of poverty at very young ages does not necessarily continue until children reach ages 3 to 5.

Early childhood poverty reduces the chances of attaining a bagrut certificate

The Taub Center researchers looked at the continued effects of early childhood poverty beyond the Meitzav exams, for example, on the likelihood of receiving a bagrut certificate. Controlling for previous achievements, it was found that poverty experienced during the first two years of life lowers the chances of receiving a bagrut certificate, and that there are significant differences between poverty experienced in the two age groups (birth to 2-years-old, and ages 3 to 5).

On the basis of findings from this Taub Center study, it is possible to suggest that poverty experienced from birth to two years might create a kind of “scar” that remains over time and accompanies the child through adulthood.

“We found substantial differences between the early childhood stages in everything relating to the influence of poverty on future academic achievements,” explain the researchers, and they add: “From the study, it is clear that early childhood is not a single period with homogeneous characteristics, and that special attention should be paid to the first 1,000 days of life, which have an impact on future child development.

In Israel, where about 2.5 million children are under the age of 18, and, of them, 40% are under age 6, and where the rates of childhood poverty are particularly high, it is important to understand the impact of the timing and duration of poverty on child development. This possibly explains some of the disparities in academic achievement between socioeconomic levels, which are also particularly wide in Israel.”

“The findings of this study have implications for policy in Israel; it is important to take steps that address the negative phenomena that can stem from poverty and harm children in their first thousand days,” says the President of the Taub Center, Prof. Avi Weiss. The researchers suggest the possibility of shifting a portion of child allowances towards early childhood, and in this way, offering assistance to young parents.

It is possible that allocating the child allowance differently than how it is allocated today (a universal and equal allowance) could be especially helpful to those families most in need.

Likewise, in view of the high employment rates among mothers with children up to age 3 and the large number of their young children enrolled in early education frameworks, only 20% of which are under government regulation, it is especially important to increase the number of quality, educational frameworks for very young children, especially up to age two.

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; 02 567 1818 ext. 110.

 

 

Press Release: High School Dropouts

Embargo until Wednesday (25.9) 6:00 am

Click here For the full research in Hebrew 

With the start of the school year, the Taub Center is releasing a new study by researchers Guy Yanay, Hadas Fuchs, and Nachum Blass on high school dropout rates. The findings show that the phenomenon has declined considerably, especially among weaker population groups.

Despite the overall decline in dropout rates across all population groups and genders, the research finds that dropout rates are still high among particularly vulnerable groups like immigrants and students from weak socioeconomic backgrounds.

A new study by Taub Center researchers Guy Yanay, Hadas Fuchs, and Nachum Blass looks at dropout rates among 10th to 12th grade students and finds that rates dropped from almost 10% in the 2003 school year to less than 8% in 2017.

Excluding Haredi schools, where a large portion of the students transfer to yeshivas that are not under Ministry of Education supervision, the dropout rate declined even further, from about 9% to almost 5.5%. Dropout rates among Haredi girls are low and similar to rates among girls in the other Jewish sectors.

The decline in dropout rates among students in the academic track in high school – where rates were low to begin with – was relatively small, while in the technology tracks, there was a substantial drop in rates, from 9.5% in 2003 to about 5.5% in 2017, almost halving the rate over the course of a decade.

Since the middle of this decade, the dropout rate from technological education has been almost the same as the rate from academic tracks. This is significant because today, unlike in the past, technological education gives its students similar opportunities for social mobility as academic track education. That said, there are substantial differences in dropout rates within technology tracks; in the high technology track, rates have dropped from a high of 4.5%, in 2006, to only 1.5%, in 2017 – a rate that is even lower than in the academic track.

In the medium technology track, the rate decreased from 11% to 7%. The lowest technology (vocational) track, which struggles to keep its students in the system, saw the greatest percentage point decline from 28% to 19%.
Dropout rates from academic and technology education tracks

The dropout rates from academic tracks in Arab education are twice as high as those from the Hebrew education system

In the Arab education sector, there has also been a considerable decline in the dropout rate, from 15% to about 8%. The drop is particularly striking in the Druze sector, where the rates now resemble those in the non-Haredi Hebrew education sector. However, dropout rates among academic track students in the Arab education sector are twice as high as those among students in the Hebrew education sector.

Given the high dropout rates within the academic track, it is surprising to find that the dropout rate from the technology tracks in Arab education is actually lower than in the Hebrew education sector. In terms of gender, boys in Arab education have dropout rates that are 3 times higher than girls in the sector.
Dropout rate by education sector

Within the Arab education sector, the decline in dropout rates in technological education are especially striking in the high technology track, where dropout rates are lower than in the Hebrew sector (only 1% drop out in the Arab sector), and in which there has also been an increase of more than 40% in the share of students enrolled.

A closer examination shows that the most significant factor in the declining dropout rate from Arab education is not the educational track but rather the students’ family background; students from stronger socioeconomic backgrounds study in the high technology track.

Taub Center’s researchers found that the dropout rate among boys decreased from about 11% to about 7% and among girls from about 6% to about 3.5% – a drop of some 40% for both gender groups. A between sector comparison shows that, in 2017, the dropout rate among girls in Arab education was almost 5% versus 3% among girls in Hebrew education. Among boys, the differences are even greater: about 11.5% among boys in Arab education versus 5% among boys in Hebrew education.

Looking at rates by geographic district, the researchers found there are no substantial differences between students in Hebrew education in different geographic regions of the country while, among students in Arab education, there are large differences. When socioeconomic background factors are controlled for, though, the disparities due to geographic location become non-significant in explaining the dropout rate.

An exception to this is Arab education in the Tel Aviv district, where the dropout rate remains significantly higher than in other areas, even when controlling for other factors.

Schools in the Arab education sector are more successful at preventing dropping out than in the Hebrew sector

As expected, the dropout rate rises as the school Nurture Index rises in both sectors – a higher Nurture Index score indicates lower socioeconomic status of the school and its student body. It is important to note that the level of success of schools of similar Nurture Index rankings in having their students complete 12 years of education is not the same in the Hebrew and Arab education sectors.

In fact, there is a clear advantage in favor of the Arab education sector; Arab schools at the lowest Nurture Index ranking among schools in the Arab education system (highest socioeconomic ranking) had a dropout rate of only 2%, while the rate in schools in Hebrew education with similar Nurture Index rankings was 4.5%.

In Hebrew schools with the highest Nurture Index among schools in the Hebrew education system (with the weakest socioeconomic ranking), the dropout rate was 8.5%. Among Arab education schools with a similar ranking, the rate was only 6%. This demonstrates the ability of schools in the Arab education sector to retain their students.

Taub Center’s researchers found that among new immigrants the dropout rate is particularly high – over 9%, versus 3% among Israel-born students. It is especially high for those students who immigrated after the age of 12, about 20%. For those who immigrated at a younger age, the dropout rate is declining, from nearly 10% to about 6%.

It should be noted that higher dropout rates among immigrants who arrived at an older age is not a phenomenon unique to Israel and is well known in other countries. It is possible that the high rate among those who immigrated after age 12 has to do with their leaving Israel or transferring to other educational tracks.

In summary, the researchers say: “The past few years have seen a considerable improvement in high school dropout rates. The continuous decline in the dropout rate from technological education may indicate that it is giving its students equal value to academic track education in terms of opportunities for higher education and integration into the labor market. We have also seen a narrowing of gaps between students in Hebrew education and Arab education, although the dropout phenomenon is still present primarily among weaker population groups.”

In order to further reduce dropout rates, the researchers suggest some possibilities, among them developing innovative frameworks that deal with dropouts in ways other than conventional school frameworks and targeted programs appropriate for new immigrants.

The President of the Taub Center, Professor Avi Weiss, adds: “The education system has the ability to give students from different socioeconomic backgrounds an opportunity to attain human capital skills needed for the future labor market; technology education is an important portion of this effort. Special attention should be paid to population groups with relatively high dropout rates, especially new immigrants to Israel.”

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; 02 567 1818 ext. 110.

Press Release: The Acute Care Hospitalization System in Israel- From a Vision of Decentralization to a Centralized and Out-of-Control Reality

Embargo until Thursday (15 August) 6:00 AM

The full publication in Hebrew is available here

The acute care hospitalization system in Israel is in a state of crisis, due to large gaps between the system’s needs and the public resources allocated to meet those needs, and due to the deepening involvement of the State in the system’s day-to-day management, which goes against the spirit of the National Health Insurance Law.

The second part of the Taub Center study on the healthcare system in Israel conducted by Professor Dov Chernichovsky and Roi Kfir, which is published today, deals with the regulation of the hospitalization system and government involvement in it. The researchers conclude that the deficiencies in the regulation and the over involvement of the State impact negatively on the efficient use of resources and their accessibility to the public.

These deficiencies cast doubt on the value of investment in additional hospital beds, budget, and implementation of special programs led by the State (like the program to shorten waiting times), as long as these deficiencies have not been addressed.

“Public hospitals” should be defined to ensure that accessible and equal services are available as specified by law

The 1994 National Health Insurance Law (the Law) does not define what constitutes a public hospital for the provision of entitled care to residents. As is the practice, such a hospital – even if not owned by the State – could be required to provide such care from its own, non-public, resources. Obligating hospitals to supply entitled care without securing appropriated funding gives the State power over non-proprietary budgets, including moneys that the hospital does not know with certainty that it will receive.

This can lead to situations, contrary to the stipulation of the Law, where some residents may not be able to receive hospitalization services, or where these services may be less available than to residents in other locations.

The researchers suggest defining a public hospital in the context of provision of entitled care according to the Law, irrespective of hospital ownership or its incorporated status, according to three criteria:

  1. Normative test: according to which the hospital will offer all entitled services (including elective treatments) to the public equally, in accordance with the National Health Insurance Law;
  2. Performance test: according to which the hospital operates public services like national centers of excellence, emergency and urgent care service departments, research and teaching units and the like;
  3. Economic test: according to which the majority of hospital income comes from service provision to the national service basket – that is, from the sale of services to the health funds in the framework of the National Health Insurance Law.

Public hospital financing for the provision of services required by the Law will be provided through funds stipulated by the Law, and, in addition, extra funding will be allocated through targeted funding for additional activities such as emergency care, research training, etc.

Use of the capping mechanism has achieved quantitative expansion rather than the desired restraint

In order to ensure universal and egalitarian availability of hospital services that are efficient and sustainable, some involvement of the State is required in the hospitalization market. The State regulates the number of beds and the price of hospital services in order to overcome market failures inherent in the system that may lead to “excessive hospitalizations,” which may place an unjustified financial burden on the public.

To this end, the government has put in place a “capping mechanism.” This mechanism sets a ceiling on the number of hospitalization days that each public hospital supplies to a sickness fund (not effective for services secured by Clalit Health Services (fund) through its own hospitals); above this limit, health funds pay hospitals about a third of the set price for each additional hospitalization day.

This is to deter hospitals from extending service beyond what is necessary. In practice, though, this system forces the government to increase its involvement in setting the number of hospitalization days that each hospital must supply to the health funds, and to be in control of the performance data for each institution in a dynamic environment subject to rapid technological change.

This has been an onerous task. Indeed, the capping mechanism has gotten out of control.

Due to the high fixed cost component of hospitalization, hospitals prefer rendering service even at a low marginal cost in order to more fully utilize their existing facilities or infrastructure.

The sickness funds became accustomed to these low prices and their demand for hospitalization services grew, including at the expense of community care, so, in the long run, the State ultimately subsidizes the losses borne by the hospitals from the low prices that do not cover fixed costs.

The mechanism, which was meant to be marginal and temporary, has become the norm. Simultaneously, state subsidies to both hospitals and sickness funds increased, contrary to the spirit of the Law.

Indeed, for the period with complete data, 2002-2013, hospital outputs have increased, partially for technological reasons, faster than determined by capping regulation: the quantitative norm that was set was a growth of 8%, while, in practice, hospital outputs have grown by 28%.

The mechanism has thus created a number of distortions in the system: the weakening of relative prices as a signal for priorities within the system (for instance, provision of a specific service in a hospital instead of in the community, or supplying one treatment instead of an alternate treatment using the same infrastructure and manpower); difficulties in identifying the source of deficits and a weakening of budgetary supervision; creating a dependency of the sickness funds on reduced prices and the financing of deficits of hospitalization services directly from the state budget, aside from the budget allotted by the Law; and, encouragement of private medicine at the expense of the public system, since the low prices make it difficult for the hospitals to compete against the private facilities that employ the same physicians in the afternoon hours.

The National Program for Shortening Waiting Times has brought about the financing of private services by taxpayers

In addition to implementation of the capping mechanism – and, to a large extent, due to it – beginning in 2017, the Ministry of Health has implemented a program to shorten waiting times in the public hospitals.

This was done to contend with the ability to shorten waiting times and choose one’s surgeon (usually the same surgeon as in the public institution) in the private health care system, with the surgeon and hospital receiving higher prices than the cap mechanism would allow in the public system. In this framework, the State transfers an earmarked budget of some NIS 900 million to the sickness funds annually in addition to the service basket budget, with the additional funds earmarked as incentive payments to the medical staff.

In addition, beginning in 2018, a 6 month cooling-off period for physicians was mandated, preventing physicians from referring their patients in the public health system to their private practices.

As in the case of the capping mechanism, though, this program also involves the State in reporting and supervision tasks at an unreasonable level. In order to avoid the bureaucracy, sickness funds used the designated moneys from the public system to perform surgeries in private facilities and hospitals that allowed physician choice, utilizing the mechanism of supplementary private insurance.

In this manner, the program to shorten waiting times in the public facilities ended up financing surgeries in private facilities at the expense of tax payers.  Public facilities remained in a relatively weakened position vis-a-vis private institutions in competing for the services provided ‘after hours’ by the same physicians employed in the public facilities.

An inefficient system

According to the research findings, there was an increase of about 20% in productivity (2002-2013) in the creation of services for the basket of hospitalization services. It would be expected that this increase would allow the system and hospitals to improve their financial performance and possibly also that of the health funds, and to also improve the availability of hospitalization services to the public.

Hospital and health fund deficits, though, grew, and public services remained lacking as evidenced by the need for a program to shorten waiting times. This means that the regulation policies – primarily the capping mechanism and the public-private mix – have resulted in systemic inefficiencies – including undue shift of elective services from the public to the private system – that have harmed every aspect of the public system’s financing and services.

“The State has set as its goal to restrain the supply of services in order to ensure funding of entitled care, has implemented a mechanism of low prices that obligated its greater intervention, and has required an acknowledgement of the deficits that now require it to encourage more service rather than to restrain them,” says Professor Dov Chernichovsky. “The State created a complicated bureaucratic mechanisms rather than make reasonable improvements to the regulatory mechanism and lessen its involvement in the system.”

The researchers raise several possible steps to address the existing distortions in the system:

  • Divest ownership and management of hospitals by the State in order to allow it to properly regulate the system and ensure availability of resources.
  • Clearly define “Public hospitals.”
  • Eliminate the capping mechanism and the program to shorten waiting times, and create a transparent framework that includes pricing calculations that accurately reflect the costs of supplying the service basket, both in and of themselves and relative to the costs of alternatives in the community.
  • Direct financing of cost components specific to public hospitals, like emergency services, national excellence centers, teaching, research, emergency systems, and the like, that are not included in the health basket.
  • Develop a mechanism that will allow physician choice in the public system, as in the private system.
  • Adopting a pricing mechanism to share risk and to direct capacities similar to those used in other countries – mechanisms such as the DRG system (Diagnostic Related Groupings), like the differential pricing mechanism that the government is developing. This will allow health funds and hospitals to come to arrangements without government over involvement. The only thing the government needs to ensure is that there is no harm to the service users.

In conclusion, Professor Dov Chernichovsky says, “the planning and supply of services should be decentralized by giving autonomy to the competing agencies – sickness funds and hospitals – with minimal State supervision, to regulate the status of public hospitals and to get the government out of the business of hospital ownership and management, and to reduce over-involvement in the system, as is accepted in the rest of the developed world.”

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.

 

 

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.

 

 

 

 

 


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.


 

 

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.

 

 

 

 

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.

 

 

 

 

 

 

 

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.

 

 

 

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. 

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.

 

 

 

 

 

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.”

 

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.

 

 

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.

 

 

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.

 

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.

 

 

 

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.

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).

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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.

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.

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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.

 

Why is productivity so low in the Start-Up Nation?

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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.

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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.

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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.

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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.

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.


 

 

Press Release: The Scholastic Achievements of Arab Israeli Pupils

Click here to read the full study in Hebrew. 

The Scholastic Achievements of Arab Israeli Pupils

A new Taub Center study, coinciding with the start of the school year, shows that despite significant disparities in budget between the Jewish and Arab Israeli sectors, the scholastic achievements of Arab Israeli pupils have greatly improved

Many research studies conducted in the past have compared the scholastic achievements of pupils in the Jewish sector to those of pupils in the Arab Israeli sector, and have pointed to growing disparities between them. However, a new Taub Center study by Nachum Blass finds that there has been significant improvement in the achievements of Arab Israeli pupils in recent years and the gaps between this sector and the Jewish sector have narrowed. Despite the fact that there are still significant disparities in budget per pupil and per class, the gaps between the sectors in the level of education and seniority of teachers have almost completely closed, as have the gaps in the number of pupils per class.

The research finds that, when comparing pupils of similar socioeconomic backgrounds, the achievements of pupils in the Arab Israeli sector have improved considerably, approaching those of pupils in the Jewish sector and even surpassing them in some areas. Thus, in order to narrow the gaps, we need to focus more generally on addressing socioeconomic issues.

 

The main study findings:

  • There are considerable disparities in budget per pupil in the Arab Israeli sector and the Jewish sector (about NIS 20,000 per primary school pupil in the Jewish sector compared with about NIS 16,000 in the Arab Israeli sector), though the increase in budget per pupil over time was greater in the Arab Israeli sector.
  • The share of teachers with an academic degree in the Arab Israeli sector exceeds the share within the Jewish sector.
  • In primary and middle school, enrollment rates in the Arab Israeli sector have risen substantially, mostly among girls (from 59% to 94% between 1990 and 2015).
  • The share of pupils taking matriculation exams in the Arab Israeli sector is similar to the share in the Jewish sector, and in the Druze sector the share is even higher.
  • Gaps in pupil scores on math and science matriculation exams have narrowed; in English and computer science, the gaps remain large.
  • There was a notable increase in the share of Arab Israelis admitted to higher education institutions, as well as in the share of academic degree holders who are Arab Israeli.
  • With regard to pupils’ achievements on international exams, the gap between Jewish and Arab Israeli pupils on the high school PISA exams was large (104 points), and remained large when pupils were classified by socioeconomic background.

 

A new study by Taub Center Researcher Nachum Blass examines the changes that have taken place in the education system within the Arab Israeli sector, both in terms of resources allocated and educational outcomes. The study shows that, although there are still gaps between the Arab Israeli and Jewish sectors, education in the Arab Israeli sector has, in many respects, greatly improved.

One example of this is the quality of teachers. Blass shows that the share of teachers with an academic degree in the Arab Israeli sector exceeds the share in the Jewish sector at every level of education (95% versus 91% in early childhood education, for example). The share of teachers with a Master’s degree has grown at a faster rate and is approaching that of Jewish teachers, even though in post-primary education there are still notable gaps between the sectors in this regard (about 29% in the Arab Israeli sector compared with 43% in the Jewish sector).

Another aspect examined in the research is class size. Blass shows that the Ministry of Education’s efforts to reduce the size of classes did not bring about considerable change in the Jewish sector, but in the Arab Israeli sector the results were more impressive; in 2015, the number of pupils per class in Arab Israeli primary and middle schools was lower than in the Jewish sector, and only in high school was it higher.

 

Enrollment rates in the Arab Israeli sector increased substantially, especially among girls

The Taub Center study shows that within only 15 years, the Arab Israeli sector has almost completely closed the gap in enrollment rates for 4-5-year-olds. Enrollment rates in primary and middle school have also grown and have reached almost full enrollment. Since 1990, enrollment has risen from 90% to 97% in the Jewish sector and from 63% to 93% in the Arab sector. Particularly striking is the rise in enrollment among girls in the Arab Israeli sector, from 59% to 94%.

In addition, there was an increase in the percentage of Arab Israelis admitted to higher education institutions within Israel and in the share of Arab Israeli degree holders out of all degree holders, as well as a decline in the share of Arab Israelis not accepted to Bachelor’s and Master’s programs. Furthermore, thousands of Arab Israeli students study in academic institutions in Jordan, in the Palestinian Authority, and in other countries.

Despite this progress, it is important to note that in 2015 only 36% of Arab Israelis aged 25-34 had more than 13 years of schooling, compared with 72% among Jews of the same ages.

 

The scholastic achievements of the Arab Israeli sector rose in a number of subjects and, when classifying pupils by socioeconomic background, the gaps between the two sectors narrowed

The 2016 RAMA (the National Authority for Measurement and Evaluation) data indicate that among Arabic-speaking pupils, there was a substantial increase in math scores and a moderate increase in English scores on the fifth grade Meitzav exams. These increases narrowed the gaps between the Arab Israeli and Jewish sectors in these subjects. On the eighth grade test the gap in scores narrowed in science and technology, but the gap in math scores increased, and the gap in English remained unchanged.

In his study, Blass shows that the differences in scores over the last ten years on all subjects are indeed large in fifth and eighth grades (26 on English in fifth grade, 63 in eighth grade). However, when the pupils of each sector are divided into three groups according to the school’s nurture index, the differences in scores are much lower: in both fifth and eighth grades the differences are cut in about half (in the lowest socioeconomic group – a gap of 14 points on the English exam in fifth grade, and 33 points in eighth grade). In the middle socioeconomic group, the scores of the Arab Israeli pupils sometimes exceed those of the Jewish pupils.

According to Blass, the gaps may actually be even smaller: “Dividing pupils into three groups by nurture index is too crude and undercuts the achievements of pupils in the Arab Israeli sector because the proportion of pupils within the Arab Israeli sector who belong to the weaker socioeconomic deciles is higher than that of the Jews,” he says. “Within the weakest socioeconomic group, the proportion of Arab Israeli pupils from the low socioeconomic backgrounds is higher than the share of Jewish pupils, and it is reasonable to assume that the average score of Arab Israeli pupils in these weaker groups is lower than that of Jewish pupils.” Blass suggests a more nuanced division into deciles according to nurture index may present the achievements of Arab Israeli pupils in a more positive light.

The improvement in the achievements of Arab Israeli pupils is also apparent at older ages. The share of those taking the matriculation exams in the Arab Israeli sector is similar to that in the Jewish sector (81% versus 84%), and in the Druze sector it is even higher (90%). The gap between Jewish and Arab Israeli pupils in the percentage who qualify for a matriculation certificate out of those who took the exams has dropped from 17% in 2000 to 12% in 2015. Since 2000, the rate of improvement in the Bedouin sector has been similar to that in the Jewish sector and the percentage of Druze pupils who qualify for a matriculation certificate is about 66% – higher than that of Jewish pupils, which stands at 62%.

Percentage of age cohort...

Between 2005 and 2014, there was a significant drop in the number of Jewish pupils taking the matriculation exams, mainly for demographic reasons: a reduction in the size of the age cohorts and an increase in the proportion of Haredi pupils within the cohorts. In the Arab Israeli sector, on the other hand, the number of those taking the matriculation exams almost doubled.

What about qualifying for a matriculation certificate? Classifying pupils taking the matriculation exams by math level indicates that in the Jewish sector there has been a large decrease in the number of pupils taking four or five units of math, and an increase in the number of pupils taking three units of math. In the Arab Israeli sector, the number of pupils taking the exam at the four-unit level rose by about 2%, those taking five units of math dropped by about 3%, and the number taking three units rose by more than 100%. This increase reflects the positive development that there is a greater percentage of pupils from weak socioeconomic backgrounds among those qualifying for a matriculation certificate. The average score of those who take the matriculation exams is very similar in all sectors.

In English, on the other hand, the success gaps are still large: in the Jewish sector 58% pass the exams, in the Arab Israeli sector – 14%, and in the Druze sector – 25%. In chemistry and biology there was an increase in the percentage of those qualifying for matriculation exams in the Arab Israeli sector, and the share is greater than the share of those qualifying in the Jewish sector. A possible explanation for this is a growing awareness among parents and pupils of the potential benefit of pursuing professions that enable integration and advancement and tend to be more common within the Arab Israeli population, such as the pharmacy and medical fields. The share of Arab Israeli pupils passing the physics and computer science matriculation exams actually decreased, and was lower than the share in the Jewish sector.

Achievements on international exams: improvement has halted within Israel’s borders

In contrast to the achievements presented thus far, Blass shows that the gaps between the sectors have narrowed to a lesser degree on international exams, and in some cases have remained unchanged – even among pupils from similar socioeconomic backgrounds. On the 2011 PIRLS exam (primary school), Blass found that the stronger the socioeconomic background, the higher the exam score, and the gaps showing an advantage for Jewish pupils did not narrow when classifying pupils by socioeconomic groups.

A similar relationship between exam scores and socioeconomic background is also found on the 2015 TIMSS exam (middle school). The gap between the scores of all Jewish pupils and all Arab Israeli pupils is large (70 points) but, when comparing pupils of the same socioeconomic background, the gap between the average math score in each sector is relatively small: only 12 points in the highest socioeconomic group. It follows that at least some of the gap in math scores between the two sectors are rooted in the pupils’ socioeconomic backgrounds.

On the 2015 PISA exam (high school), the overall gap between the sectors stands at 104 points (out of 800), and mostly remains even when pupils were classified by socioeconomic background. Within the lowest socioeconomic group, the gap between the sectors was reduced to 67 points, in the middle group it remains similar to the overall gap, and in the high socioeconomic group the gap is even larger.

Why are the scholastic and educational achievements of Arab Israeli pupils similar to those of Jewish pupils in some areas (and even higher in some cases) while in other areas their achievements are much lower? Many claim that test scores do not reflect pupils’ true abilities, due to a large-scale phenomenon of copying answers. However, data from the Ministry of Education (2017) show that the percentage of voided exams due to cheating stands at less than 1%. Even if there is indeed large-scale copying on tests, it does not explain the high rates of enrollment and exam-taking. Another possible explanation is the crude division of pupils into three groups by sector and nurture index level, which underestimates the achievements of Arab Israeli pupils, as discussed above.

Taub Center researcher Nachum Blass sums up his findings by saying, “the large gap in achievement between Jewish pupils and Arab Israeli pupils can be explained to a great extent by their socioeconomic backgrounds, and, if we want to reduce this gap, we should focus more generally on addressing socioeconomic 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.

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.

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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.


 

 

 

 

 

 

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.

               

       

 

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.

 

 

 

 

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.

 

State of the Nation Report 2016

Click here to read the full State of the Nation Report 2016.

State of the Nation Report 2016

The annual report of the Taub Center, released today (December 28th), offers a snapshot of the socioeconomic condition of Israel in 2016 relative to other countries and in comparison to the past. The report includes research studies in the areas of employment, economic growth, education, health, social welfare, and public spending. Each section of the book includes an introduction that presents the recent and current trends in that area of research. The editor of the report is Professor Avi Weiss, Executive Director of the Taub Center and Professor of Economics at Bar-Ilan University.

Selected findings from the studies in the “State of the Nation Report 2016”:

Gender Differences in the Labor Market: Wages and Employment Polarization

Hadas Fuchs (Researcher at the Taub Center)

  • This chapter examines the causes of the gender wage gap in Israel, and finds that most of the wage gap can be explained by differences in the personal characteristics of men and women in the labor market. The most influential factor on the wage gap is that men work more hours than women: differences in work hours were responsible for 57% of the wage gap between men and women in 2010-2011.
  • The second most influential factor is the difference in occupations pursued by men and women, which accounts for another 14% of the gap. Gender polarization in occupations has actually been declining over the years but remains high, though similar to the OECD average. A large share of women, especially among those with academic degrees, are still working in industries characterized by low wages. Although an overall higher percentage of women than men have an academic education, there is a great difference in the fields studied by women and men, which is reflected in differences in their occupations and wages, as well.
  • A third factor influencing the wage gap is the overall lower level of achievement of women in the field of mathematics. The study’s analysis confirms previous findings showing that better grades on the mathematics matriculation exam and on the quantitative section of the psychometric exam positively influence wages. Yet the trend has deeper roots – women start moving away from scientific studies as early as elementary school. The share of female students in technology fields rose slightly with the years, yet remains low at only 20%-30%. The study found that there is a majority of male workers in the technological fields, which are the most profitable, and even among female graduates with a degree in computer science, there was a drop in those actually working in the field. After taking all of these factors into account, there remains a small wage gap that is unexplained.
  • In light of the central role that studying technology and sciences and working in more lucrative occupations play in wage gaps, one method for closing the gaps could be to raise awareness about the economic significance of selecting a particular academic field of study. In addition, women should be encouraged to study scientific professions. Assuming that some women do not choose technological professions because of the typically long work hours in these fields, increasing the availability of part-time jobs in these industries could help close the gaps.

en-fig-1

 

Challenges of Haredi Integration in Academic Studies

Eitan Regev (Senior Researcher at the Taub Center)

  • This study examines the patterns of Haredi (ultra-Orthodox) integration into academic studies based on a unique database. From 2008-2014, the number of Haredim newly enrolled in academic learning institutions increased almost threefold: from 1,122 to 3,227. About 1,600 Haredi women and 450 Haredi men graduated with an academic degree in 2014, as compared to only about 650 women and 200 men in 2012.
  • The number of Haredim with an academic degree is much lower than estimates from past surveys, which were based on self-reported data. According to official records, only about 2.4% of Haredi men and 8.3% of Haredi women aged 25-35 had an academic degree in 2014, compared with 28% of secular men and 43% of secular women.
  • In recent years, admissions requirements have eased for Haredi students entering academic studies. 53% of all Haredi students were accepted to academic institutions in 2014 without matriculation and psychometric exams (and in many cases, without even attending an academic preparatory program (mechina)), as compared to only 26% in 2000. When looking at private colleges alone, 79% of the Haredi students were accepted without matriculation or psychometric exams between 2000 and 2014.
  • The weakest subject among Haredi students is English. Among Haredim, the average score on the English section of the psychometric exams is 20 points lower (out of 100) than the average score among non-Haredi Jews.
  • The research shows that the combined dropout rate of Haredi students (from mechinas and academic programs) is especially high – standing at 58%, compared to 30% among non-Haredi Jews. Most of the dropouts were students studying at Haredi campuses of academic colleges or at the Open University.
  • In all sectors, but especially among Haredim and Arab-Israelis, men’s dropout rates are significantly higher than dropout rates for women. These gaps persist even after controlling for relevant variables such as field of study, socioeconomic status, matriculation and psychometric scores, student’s age and country of origin.
  • An analysis by streams within the Haredi sector, conducted for the first time in this study, reveals that the stream with the highest rate of academic studies is Chabad, with 29% of women and 15% of men pursuing academic studies. Among women in the three other major streams (Lithuanian, Hassidic, and Sephardic), women from the Lithuanian stream pursue academic studies at the highest rates (15%) and their dropout rates are the lowest (29%).

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Is Less Really More? On the Relationship between Class Size and Educational Achievement in Israel

Reut Shafrir, Yossi Shavit (Principal Researcher and Education Policy Program Chair at the Taub Center) and Carmel Blank

  • Many believe that reducing the number of pupils per class is a tool for improving student achievement. In contrast to the prevailing assumptions, the researchers of the Taub Center study found a positive relationship between class size and achievement in Israel: the grades of pupils in large classes are seemingly higher. However, a closer analysis reveals that this relationship is spurious and is due to the fact that, on the whole, high-achieving pupils are placed in large classes, while the pupils placed in smaller classes are relatively lower achievers.
  • When controlling for parental education levels and prior attainments, the relationship between class size and achievement is not statistically significant. 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. Parental education is also found to be positively and significantly related to achievement.
  • Earlier studies indicate that ethnic minorities and those belonging to lower socioeconomic strata are likely to benefit more from smaller classes than others. To determine whether the relationship between class size and achievement differs among various populations, the researchers used a model that added interactions between class size and parental education level as well as between class size and prior achievement. The hypothesis that the impact of class size on achievement varies between students of different socioeconomic backgrounds and between stronger and weaker pupils was refuted: no difference in the relationship between class size and achievement was found among the groups.

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Private Expenditure on Healthcare in Israel

Dov Chernichovsky (Principal Researcher and Health Policy Program Chair at the Taub Center), Haim Bleikh (Researcher at the Taub Center) and Eitan Regev (Senior Researcher at the Taub Center)

  • This study examines Israeli households’ private healthcare expenditure (as opposed to public spending) as a means of evaluating the effectiveness of the healthcare system and disparities in access to medical services. In 2014, private healthcare expenditure was about 906 NIS per month, on average, or about 5.9% of the average household expenditure (net). This rate has increased since 1997, when the average household dedicated 3.9% of its monthly expenditure to health needs.
  • Between 1995 and 2014, the annual rate of growth for private expenditure on medical services was 2.6% on average. During the same period, public spending on health grew by only half of that – 1.3% annually, on average.
  • The healthcare expenditure burden decreases as household income increases. In 2014, the average household in the lowest income quintile spent 9.7% of its disposable income on healthcare services, compared to 4.7% of disposable income spent in the average household in the highest income quintile. In terms of money spent, the highest-income households (top quintile) spend nearly three times more than the lowest-income households (bottom quintile) on health –1,418 NIS per month as compared with 498 NIS per month, on average.
  • Spending on supplemental medicine, primarily for dental care and commercial health insurance premiums, increases as income increases. Private spending on healthcare services that are equivalent to those provided by the public health insurance plans also increases with higher incomes.
  • Average spending on deductibles for all households is 91 NIS, though households in the lowest income quintile spend more on average than those in the highest quintile: 96 NIS a month compared with 92 NIS a month. This is related to the relatively high share of elderly Israelis in the lowest income quintile, but also shows that the relative expenditure burden is greater for low-income earners. Spending on deductibles acts as a regressive tax that contradicts the values of social justice and equality at the foundation of the National Health Insurance Law.

 

Household Expenditures on Preschool Education

Kyrill Shraberman (Researcher at the Taub Center) and Nachum Blass (Principal Researcher at the Taub Center)

  • From 2003 to 2012, the average household preschool expenditure per child (ages 2-5) rose by 43% in real terms. The rate of increase was higher than the increase in per capita income (net) and consumption expenditure during the same period, meaning that the relative burden of spending on preschool increased. Frustration with this burden was expressed in the social protests of 2011 and led the Trajtenberg Committee, formed after the protests, to fully implement the Compulsory Education Law for 3-4-year-olds beginning in the 2012-2013 school year. Due to the increase in government spending on education, household expenditure on preschool decreased by about 3% after implementation of the law.
  • Populations with the highest consumption levels (quintile 5) and the lowest levels (quintile 1) increased spending on preschool education to the level of about 35% of consumption expenditure between 2003 and 2011, yet spending fell by 5-6% between 2011 and 2014. For those with mid-range consumption levels (middle quintiles), the increase in the first period was greater overall, and remained fairly stable during the second period. Therefore, the financial burden of preschool expenditures increased for those in the middle quintiles to a greater extent than for those in the highest and lowest quintiles.
  • The preschool expenditure burden borne by a typical Jewish household is three times greater than the burden borne by a typical household in the Arab Israeli sector, yet the gap has been shrinking since 2012.
  • While the expenditure burden increased for households in central Israel in the early 2000’s, there was a decline after the Compulsory Education Law was fully implemented. Simultaneously, the preschool expenditure burden has increased for households in the periphery over the past few years, almost closing the gap in burden between the center and periphery of the country.
  • Full implementation of the Compulsory Education Law resulted in an increase in the number of 3-4-year-olds attending preschool (by 9 percentage points in the Jewish sector and 13 percentage points in the Arab Israeli sector). The law also resulted in a 10% decline in the average parental payment for 3-4-year-olds. However, it is worth noting that most of the expenditure decline was concentrated among families of higher socioeconomic standing, since families in the lowest quintile already received government support for preschool tuition before the full implementation of the law.
  • Despite the rise in public expenditure on preschool education after implementation of the law, the total national resources allocated to preschool education, relative to GDP, did not change. This is because the increase in public share of funding for preschool education (covering 79% of preschool expenditures on average until 2011 and 92% in 2012-2013) was offset by a decline in private share of funding (which was about 21% on average until 2011 and dropped to 8% in 2012-2013).

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Israel’s Economic Growth: On the Way to a Lost Decade?

Gilad Brand (Researcher at the Taub Center)

  • For years, GDP per capita grew by 2%-2.5% per year, yet from 2012-2016 it slowed to an average annual growth rate of about 0.9% – a slower rate than other developed countries with a similar per capita GDP. To examine the sources of the slowdown, the chapter breaks the sources of economic growth down into factors related to production and productivity. The results show that the main driver of economic growth over the past decade was an increase in employment rates, which contributed about 35% of growth in the past decade and almost half of the growth between 2012 and 2015. At the same time, there has been a decline in the contribution of human capital to Israel’s economic growth and a slowdown in investment in physical capital per worker. Productivity has declined as well – a trend that has continued since 2012.
  • Alongside changes within the working population, it seems that the expansion in the labor market and its contribution to growth have reached a standstill; the share of Israelis in the working-age population (25-64) is on the decline, and this trend is expected to intensify in the coming years as the “baby boomers” reach retirement. This process slows employment growth and is expected to detract 0.6 percentage points annually from potential growth through the end of the decade. In addition, the growth of populations in which employment rates are low and education levels are low or the education is not relevant to the labor market, is expected to detract from economic growth.
  • As existing sources of growth are depleted, there is a need for policies that will offset the economic impact of the above trends. Without a global economic recovery or growth-enhancing structural reforms, it is reasonable to expect slow economic growth in the coming years. Solutions that could encourage sustainable and balanced growth include vocational and technological training for low-wage workers, increased competition among local businesses and investment in infrastructure.

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Public Welfare Expenditure

John Gal (Principal Researcher and Welfare Policy Program Chair at the Taub Center) and Shavit Madhala-Brik (Researcher at the Taub Center)

  • The budget allocated to social welfare services stood at 94 billion NIS in 2015, which is about one-fifth of total government expenditure – an allocation that has remained relatively stable for several years. More than 80% of the budget is dedicated to social security programs.
  • Half of the total National Insurance Institute allowances are dedicated to benefits for older Israelis. This portion of the expenditure stood at about 40% in the early 2000s and has increased notably in recent years, mainly due to Israel’s aging population.
  • The number of people receiving income support, which serves as a safety net for those without income, decreased substantially due to changes in eligibility requirements for the program as well as the integration of a larger portion of the population in the labor market. In 2003, there were approximately 155,000 families in the program, yet only 98,350 in 2015.
  • The earned income tax credit, which is designed to help low-income workers without affecting their motivation to work, reached utilization rates of 70% of those eligible in 2014. However, due to the low value of the work grant, the sum dedicated to the negative income tax is still low, and constitutes less than half a percent of government expenditure.
  • Expenditure on employment – which includes employment services, vocational training, programs for integrating specific populations into the labor market and more – is relatively small and has not risen greatly over the years. These data support the claim raised in OECD reports that Israel’s investment in employment is limited in comparison to other welfare states.
  • Between 2000 and 2015, the Housing Ministry budget dropped by 70%. The primary decline took place in the mortgage assistance branch (96%). In addition, there was a decrease of about 40% in the supply of public housing apartments between 1999 and 2016. Although 806 apartments were purchased from the beginning of 2015 through August 2016, this is not enough to address the growing number of people waiting for public housing – about 3,000 in 2016.
  • Two years after the release of the Elalouf Committee recommendations, about half of the committee’s recommendations have been fully or partially implemented, including: increasing income support for the elderly, expanding the work grant (negative income tax) and increasing the amount of rental subsidies for those eligible. However, it seems that the main goal emerging from the recommendations – cutting the poverty rate in half over 10 years – does not have the capacity to be realized. The cost of implementing the committee’s recommendations was estimated at 7.4 billion NIS a year, yet the actual budget allocated by the government to date is only 1.9 billion NIS. In addition, two key recommendations of the committee were not implemented – significantly increasing income support and concentrating efforts to tackle poverty under one central institution.

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Poverty and Inequality in Israel: Trends and Decompositions

Haim Bleikh (Researcher at the Taub Center)

  • The study examines the relative share of each of the three major population groups in Israel’s working age population – Haredi (ultra-Orthodox), Arab Israeli, and non-Haredi Jews – in inequality and poverty indices from 2002-2014. During this period, market income (household income from work, occupational pensions and capital, before the deduction of compulsory payments) inequality decreased consistently, but the decline was only reflected in disposable income (market income plus transfer payments, after the deduction of compulsory payments) in recent years. For the majority of the period, most of the contribution to changes in income inequality came from the non-Haredi Jewish population.
  • The overall poverty rate among working age Israelis did not change between 2002 and 2014, but the composition of the poor population changed substantially. In 2002, the share of poor Haredi and Arab Israeli households out of all poor households stood at 44%, as compared with 54% in 2014 – an increase that exceeds the rate of growth among this group’s share in the overall working age population.
  • Over the years, there has been a decrease in the inequality and poverty indices in market income among the elderly population. However, when analyzed as three population groups (long-time residents, new immigrants – those who immigrated since 1990 – and Arab Israelis), the data show substantial income gaps between the groups as well as differences in their disposable income poverty rates.

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The Outsourcing of Welfare Services: Trends and Changes

Shavit Madhala-Brik (Researcher at the Taub Center) and John Gal (Principal Researcher and Welfare Policy Program Chair at the Taub Center)

  • Since 2000, there has been a considerable increase in services outsourced by the Ministry of Labor and Social Welfare. In that same year, the Ministry spent about 2.3 billion NIS, or about 70% of its total budget, on outsourcing services (in 2015 prices). In 2015, when the Ministry’s budget amounted to about 6 billion NIS, outsourcing spending increased to 80% of the Ministry budget, reaching 4.8 billion NIS. This money was dedicated to outsourcing in the areas of rehabilitation, intellectual developmental disabilities, correction services, and personal and social services.
  • Most of the service providers for the Ministry of Labor and Social Welfare are “veteran” providers, and have worked with the Ministry for at least one year prior to 2015. Veteran providers receive 96% of total outsourcing payments. This result reflects the fact that public tenders place emphasis on the experience of service providers and that, in various fields, it is important to retain the same providers so as to prevent damage to service recipients.
  • The share of the 50 largest suppliers (receiving more than 20 million NIS each year) was only 2% among all of the outsourced service providers used by the Welfare Ministry in 2015, but they received about 46% of the total resources allocated to outsource payments (compared to 49% in 2000). 48 of the largest suppliers are also veteran providers. Overall, 58% of the largest providers in 2015 were veteran for-profit businesses, 38% were veteran nonprofits and 4% consisted of new organizations.
  • Service providers to the Welfare Ministry include nonprofits alongside for-profit business entities. Over the years there has been an increase in the number of nonprofits and in the spending allocated to them while, simultaneously, there was a decline in the number of business providers. In 2000, the Ministry received services from 431 nonprofits and 2,554 business entities (out of a total of 2,985 providers), yet by 2015 the number of nonprofits had doubled to 872 and the number of business entities had dropped to 1,825 (out of a total of 2,697 providers). Nonetheless, half of the total payments in 2015 went to nonprofits and half to business entities.

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Twelve Years Since the National Task Force for the Advancement of Education in Israel (the Dovrat Committee): What has changed?

Nachum Blass (Principal Researcher at the Taub Center)

  • The Dovrat Committee for the advancement of education in Israel, established in 2003, proposed a substantial rise in teachers’ wages to improve their status and increase the attractiveness of the profession. Indeed, between 2003 and 2013 the real wages of male teachers rose by 24% and female teachers’ salaries rose by 35% as a result of the Ofek Hadash (New Horizon) and Oz LeTmura (Courage to Change) wage agreements. In 2013, male teachers’ wages were 8% higher than the average wage of other male employees (though lower than the average wage of their counterparts with academic degrees) and female teachers’ wages were 41.2% higher than the average wage of other female employees (13% higher than the average wage of their academic counterparts). However, Israeli teachers’ salaries are still below the OECD average wage (purchasing power parity, USD): $28,281 in Israel compared to $42,675 on average in the OECD (for teachers with the same level of education and experience).
  • The number of new teachers increased by 55% between 2005 and 2014 and, during the same period, the retention of teachers remained stable, and even declined slightly. The continuous rise in teachers’ education level and relative stability in average seniority (two variables that are often related to the quality of teachers) indicate, at the very least, stability and likely even a rise in the quality of teachers in the education system. Also, between 2005 and 2013, teachers’ rankings on job satisfaction social surveys conducted by the Central Bureau of Statistics rose from tenth to third place – higher satisfaction than engineers, software developers, lawyers, and other professionals who earn higher wages.
  • From 2000-2016 the nominal Ministry of Education budget grew at an unprecedented rate of 142%, and the real budget by 86%. The increase in education spending was mostly due to wage agreements with teachers’ organizations and the full implementation of the Free Compulsory Education Law for 3-4-year-olds. Between 2005 and 2012, both overall expenditure on education and spending per pupil in Israel grew at a faster rate than in the OECD. Most of the increased spending went to pre-school (budget increased by 38%), primary, and special education (the budget of each rose by about 20%).
  • Over the last decade, in parallel to the changes in Israel’s education system, there has been a rise in achievements both on Grade 5 and Grade 8 Meitzav exams as well as an improvement in Israel’s scores – even though the change was not accompanied by a corresponding improvement in Israel’s ranking on international exams such as TIMSS, PIRLS, and PISA. The share of pupils who studied in Grade 12 and took the matriculation exams rose, and those who qualified for matriculation certificates out of the entire age group rose from 46% to 56% between 2006 and 2015. Students in the state-religious education system, as well as Druze and Ethiopian students – for whom substantial funds were invested during this period – attained higher achievements than would have been expected on the basis of their socioeconomic profiles.

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Equality and Multiculturalism in Public Education: Reflections on Present and Future Proposals

Nachum Blass (Principal Researcher at the Taub Center) and Yossi Shavit (Principal Researcher and Education Policy Program Chair)

  • This opinion piece highlights the need to rethink the underlying ideology behind public education. In this new framework, the authors emphasize the importance of equality as the guiding principle of the education system while not sanctifying uniformity if this would violate the right of each community to educate according to its worldview. Different sub-populations could maintain separate educational systems under the following conditions: they would be obligated to teach a core curriculum determined by the Ministry of Education, though the core subjects would not exceed 30% of the basic curriculum. Beyond the core studies, each educational framework would have relative freedom in its curriculum, so long as it does not incite violence or violate the law.
  • Budgets for each educational framework would be equitable and progressive, irrespective of the national or religious identity of the students, and would give priority to students from low socioeconomic backgrounds. In addition, it would be prohibited to divide students on the basis of socioeconomic background or prior academic achievement, and students would be expected to conduct themselves in accordance with the standards determined by each individual school.

 

A Healthy Food Basket in Israel

Janetta Azarieva, Ben Orion, Rebecca Goldsmith, Avidor Ginsberg, Ran Milman, and Dov Chernichovsky (Principal Researcher and Health Policy Program Chair at the Taub Center)

  • The monthly cost of a healthy food basket, based on the latest nutrition recommendations of the Ministry of Health, is about 844 NIS per adult and 737 NIS per child. The basket components shown in the chapter were selected to represent the best diet in terms of balancing costs and meeting nutritional needs.
  • The most expensive component of a healthy food basket for an adult is “animal protein and beans,” representing 40% of the cost of the basket. In contrast, the least expensive component – fats – represents only about 4% of the expense of the basket.
  • For households with the lowest incomes, the average monthly spending required for the recommended healthy food basket is actually higher than households from higher income quintiles; this is because as average family income declines, the average number of household members increases.
  • The average share of spending required to pay for a healthy food basket by a household in the lowest income quintile is 9 times higher than that required by a household in the highest quintile (about 65% versus 7% of income respectively).
  • Households in the second and third income quintiles do not spend a sufficient amount to purchase a healthy food basket, whether due to personal preference or because they cannot afford it. In the lowest income quintile, the price required to purchase the basket does not allow households to acquire the healthy food basket without giving up other necessities.

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Why is men’s life expectancy so high in Israel?

Alex Weinreb (Principal Researcher at the Taub Center)

  • In 2013, the average life expectancy for men in Israel was 81 years, in contrast to the OECD average of 77.7 and a world average of 68.8 years.
  • Considering other variables that influence longevity – including wealth and education levels, the health system and the country’s general demographic profile – the Israeli advantage is large and increasing.
  • An analysis based on a sample of more than 130 countries found that military service added more than three years to male life expectancy.
  • This conclusion is reinforced in data showing the differences in the average life expectancy of men and women in Israel and in the OECD. In 34 OECD countries, women live an average of 5.5 years longer than men, but in Israel, where military service is shorter and in most cases less physically demanding for women, women’s life expectancy is only 3 years longer.
  • Another factor that supports the study’s conclusions is that there is a relatively low mortality rate among Jews in Israel from diseases that are associated with low levels of physical activity, such as heart disease (cardiovascular and cerebrovascular) and certain types of cancer. For the most part, Arab Israelis do not serve in the military and, according to data from the Ministry of Health, their rates of diagnosis of heart and vascular diseases are higher than the rates within the Jewish population.
  • While military service is an important component in public health, it has not yet been discussed in the academic literature on general health factors, nor has it been discussed in Israeli health literature.

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Embargo – the press release and accompanying materials are under embargo until Wednesday 12/28 at 6:00am.

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 Itay Matityahu, Director of Marketing and Communications at the Taub Center for Social Policy Studies in Israel: 052-290-4678 or Anat Sella-Koren, 050-6909749.

 

Why is men’s life expectancy so high in Israel?

PRESS RELEASE: Why is men’s life expectancy in Israel so high?

 

A new study by the Taub Center for Social Policy Studies in Israel finds a relationship between the longevity of men in Israel and army service, which contributes to Israeli men’s better physical fitness

 

Main findings:

  • In 2013, the average life expectancy for men in Israel was 81 years, in contrast to the OECD average of 77.7 and a world average of 68.8 years.
  • Considering other variables that influence longevity – including wealth and education levels, the health system and the country’s general demographic profile – the Israeli advantage is large and increasing.
  • An analysis based on a sample of more than 130 countries found that military service added more than three years to male life expectancy.
  • This conclusion is reinforced in data showing the differences in the average life expectancy of men and women in Israel and in the OECD. In the 34 OECD countries, women live an average of 5.5 years longer than men, but in Israel, where military service is shorter and in most cases less physically demanding for women, women’s life expectancy is only 3 years longer.
  • While military service is an important component in public health, it has not yet been discussed in the academic literature on general health factors, nor has it been discussed in Israeli health literature.

In 2013, life expectancy for men in Israel was 81 years. According to WHO data from that year, this ranks Israel in second place in the world out of 170 countries, alongside Iceland, Singapore and Switzerland, with only San Marino ranking higher. What explains this ranking? Prof. Alex Weinreb, a principal researcher at the Taub Center, examines the reasons for this high life expectancy and finds that one of the central variables is mandatory military service.

 

Israelis live longer than expected

What influences life expectancy in a country? There are generally accepted criteria for estimating expected longevity in various countries. Some of the criteria are related to a country’s general level of development, like wealth, level of education and measures of inequality. A second group of criteria includes the amount of expenditure on health and the accessibility of health systems, while a third group examines demographic characteristics like population growth rate, crowding, and fertility rates.

Prof. Weinreb’s analysis shows that together these criteria explain more than 80% of the variance in life expectancy among countries. More important from an Israeli perspective, the same model also shows that after accounting for differences in those criteria across countries, actual life expectancy in Israel is much higher than the predicted level: it is 6.3-7.2 years higher than its predicted level (depending on the model). When countries are ranked on “deviation” from predicted life expectancy, Israel is in second place globally (after Samoa), and it is top-ranked among all OECD countries.

A secondary set of analyses shows that Israel’s better-than-predicted life expectancy has been consistent for at least 20 years, and has been increasing over time: the gap between predicted life expectancy and actual life expectancy for Israeli men was 3.8 years in 1990 and 5.85 years in 2000.

 

The sea breeze helps, but it is not enough

Since the accepted criteria do not explain the observed longevity in Israel, additional variables known to influence life expectancy were taken into consideration, which required reducing the sample size to 133 countries.  The first set of variables is related to geographic characteristics, and includes whether the country has a coastline. Countries located along the coast place high on the longevity scale, and there is some scientific documentation for the positive health effects of living by the sea. There is also evidence that living at a distance greater than 40 degrees from the equator lowers life expectancy, and so this variable was also added to the equation. The addition of these variables to the usual model explains approximately 2.1 years of Israel’s higher than predicted life expectancy and decreases the deviation of Israel from its predicted life expectancy to 5.4 years. Even after accounting for these factors, Israel remains it at the head of the OECD country ranking, although it drops to fourth place in the ranking among all 133 countries studied.

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A second set of variables added is related to religiosity. Many studies point to the positive relationship between religiosity and health, in both developed and developing countries. There are no data on average levels of religiosity in many countries, so the level was judged using proxy variables that looked at the strength of the relationship between religion and state worldwide (2007 to 2012). When these were inserted into the model, Israel’s deviation from its predicted life expectancy fell a further 1.8 years to 3.65 excess years, placing it in 4th place in the OECD ranking and 20th place among 133 countries.

The indirect contribution of military service to Israel’s men

A third set of additional variables that stand at the center of this study are related to compulsory military service. In three of the four countries with the highest life expectancy in the world for men there is compulsory military service, and among the five leading OECD countries, only one, Japan, has not had some type of compulsory service in the past 30 years. In order to reflect the potential influence of compulsory service on men’s life expectancy, four related variables were measured. In each case, calculations were based on military service data from 1990, since one of the main hypotheses was that the likely health benefits of compulsory service—operating through high levels of physical activity—are most pronounced in the long term, as men reach their 40s.

The Taub Center study first distinguished between countries with some sort of compulsory service in 1990 and those without. After that, levels of defense expenditure out of GDP were added to the calculations. The analyses that included these two variables show that in countries with compulsory service in 1990, the life expectancy of men in 2013 was higher by about 1.5 years than in countries without compulsory service. Considering this factor lowers Israel’s deviation from the predicted level of life expectancy to 2.9 years, explaining approximately six months of Israel’s higher than predicted life expectancy. This places it in 5th place in the OECD ranking and 21st place among 133 countries that were examined.

The final model that was tested takes into consideration the interaction between military spending as a percent of GDP and length of military service, treating this as a measure of the overall societal investment in terms of time and financial resources. This measure had the largest effect on life expectancy. It lowered Israel’s deviation from predicted life expectancy by more than 3.5 years, to only 0.07 years above the predicted level. It moved Israel from 4th place among OECD countries in terms of its deviation from expected life expectancy to 22nd place, and to 70th place among the 133 countries examined (versus 20th place in the model based on the basic variables, demographic characteristics and the level of religiosity).

This is a highly significant effect. This variable alone (the interaction between military spending as a percent of GDP and length of military service) essentially explains Israeli men’s longevity over and above the effect of other variables that were tested. In other words, if Israel did not have the compulsory military service and spending that it currently has, male life expectancy in Israel would probably be much lower. The Taub Center’s Prof. Weinreb notes, “even if a contribution to public health is not a goal of compulsory military service, it has important bearing on future policy decisions. It is possible to influence health through investment in institutions that are not directly related to health care, and, in Israel, the army is one of the agencies with a particular status that allows it to impact public health.”

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At ease: How exactly does military service contribute to longevity?

Compulsory army service is not a cure all, but there is some evidence supporting its positive influence on public health. One of the characteristics of military service is physical training, and, according to data from the “Global Disease Burden” project, in Israel, there is a relatively low mortality rate from diseases that are influenced by physical exercise, like heart disease (cardiovascular and cerebrovascular) and certain types of cancer. The mortality patterns among Arabs and Jews in Israel also support the relation between military service and health. For the most part, Arab Israelis do not serve in the military, and, according to data from the Ministry of Health, the rates of diagnosis of heart and vascular diseases among them are higher than among the Jewish population. Additional support for the study’s findings is provided by the gap in life expectancy between men and women. In the 34 OECD countries, women live an average of 5.5 years more than men. If compulsory service has a positive impact on public health, and primarily on men (whose service is longer than women’s and is characterized by a much more rigorous physical regiment), then the expected gap between men and women would be less. Indeed, the gap in Israel is only three years.

The complete study on life expectancy of men in Israel will appear in the State of the Nation Report 2016 which will be published at the end of December.

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 Itay Matityahu, Director of Marketing and Communications at the Taub Center for Social Policy Studies in Israel: 052-290-4678.

It’s been two years since the Elalouf Committee released its recommendations: What’s happening with the War Against Poverty?

PRESS RELEASE: It’s been two years since the Elalouf Committee released its recommendations: What’s happening with the War Against Poverty?

 

A new Taub Center Policy Brief to be presented on December 1st at the Taub Center’s annual conference, which this year will be on the subject of innovations in poverty policy, looks at the implementation of the recommendations of the Committee for the War Against Poverty. It shows that two years after the committee’s final report, only half of the recommendations have been adopted in full or in part. The researchers warn that since a centralized authority for combatting poverty has yet to be established and due to budget constraints (the budget is about one-quarter of what was estimated as necessary by the committee), it will be difficult to reduce poverty rates in any real way.

 

Main findings:

  • About half of the committee’s recommendations have been implemented in part or completely. Among those that have been implemented are raising the old-age pension for those elderly living in poverty, increasing the number of family social workers who deal with the poor population, expanding the supply of day care facilities, and enlarging the amount of public housing. Other significant recommendations, like the opening of savings accounts for each child (“Empowerment Grants”), are set to begin in 2017.
  • A central recommendation of the committee – merging activities that deal with poverty into the hands of a single, centralized authority which would be under the auspices of one of the main government ministries – has yet to be implemented. It seems doubtful that it will happen in the near future.
  • Committee estimates for implementation were about NIS 7.4 billion per year; in practice, the government has allocated only NIS 1.9 billion to date. The disparity stems from those recommendations that have yet to be implemented like increasing income security benefits and the lower than recommended level of resources allocated to those action items that have been implemented, including expanding the work grant (negative income tax), vocational training and the purchase of additional homes for public housing.

A new Taub Center Policy Brief written by Prof. John Gal, chair of the Taub Center Social Welfare Policy Program, and Shavit Madhala-Brik, Taub Center researcher, examines for the first time the implementation of the conclusions of the Elalouf Committee. After a careful check of the recommendations and the situation in practice, the research shows that while about half of the recommendations have been implemented, the major aims are very far from being fully realized.

 

The aim: To reduce poverty by about 50%

The Committee for the War Against Poverty (headed by MK Eli Elalouf) was an initiative of the Minister of Social Affairs and Social Services, 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 bring about a reduction of 50% in the poverty rate, bringing the Israeli rate in line with the OECD average poverty rate. A similar effort has not been made in Israel since the early 1970s, and since then the social gaps have grown substantially.

During the course of the committee’s work, its 50 members prepared a long list of recommendations in the areas of housing, health, education, social security, and welfare. A central point in their recommendations was creating mechanisms to ensure that those in need would become aware of their rights and have access to the services and benefits to which they are entitled.

 

The situation in the field: Where do the recommendations stand today?

The Taub Center study examined the implementation of the central recommendations of the committee in the two years since their publication (2015 and 2016), as reflected in implementation data in the state budget and the proposed budget for 2016.

In the area of welfare and social security several recommendations were implemented. Among them:

  • 150 family social work positions were added.
  • The income security benefit for the elderly was increased. Beginning in January 2016, the benefit was increased by between NIS 130 and 175 for individuals, and NIS 510 and 540 for couples. According to the proposed budget for the coming years, an additional increase is expected in 2017 (an increase in expenditure of NIS 350 million) and in 2018 (an additional NIS 200 million).
  • A general increase in those budget lines that target the elderly and families in distress within the community (within the framework of the program, the Family Empowerment Initiative, literally “A Sigh of Relief”), both in 2015 and in the proposed budget for 2016.

Other recommendations that are in the process of implementation are finding solutions for resolving debt for those living in poverty, as well as “Empowerment Grants” (“A Savings Account for Every Child”), which are scheduled to begin in January 2017. Alongside these action items, Gal and Madhala-Brik note an important recommendation that has not been implemented: increasing the income security benefit to the level of two-thirds of the poverty-line income level (which is defined as about half of the median disposable income level for a household).

In the area of the economy and employment, some of the committee’s recommendations have been implemented, including:

  • Expanding the employment benefit (negative income tax) for single-parent families, those with disabilities, and the self-employed. The change is likely to increase the number of those eligible by about 55,000, and its cost is about NIS 130 million.
  • Expanding the vocational training system: the number of those participating increased in the past year by about 20%.
  • Enlarging the supply of public subsidized day care facilities for children of workers: there has been an increase of 6% in the expenditure related to this field in the 2015 budget and about 30% in the proposed budget for 2016.

In the area of housing, which was singled out by the committee as a central focus for dealing with poverty, many recommendations were proposed, and several are planned for implementation within the next few years:

  • The amount of rent subsidies for those eligible has increased between NIS 600 and NIS 900 a month. The budget lines have increased accordingly in the 2015 budget and the proposed budget for 2016.
  • Enlarging the stock of available public housing: as of August 2016, about 806 housing units were added to the public housing stock and an agreement was signed with the Jewish Agency to build 2,650 flats for seniors.

Among those recommendations not implemented are enlarging the circle of those eligible for rent subsidies and a program called “A Worthwhile Neighborhood” for neighborhood renewal.

In the area of health, a few recommendations were implemented including:

  • Public subsidies for dental care are in the process of being implemented for seniors over the age of 75 who also receive income assurance.
  • Student health services have reverted to the Ministry of Health in the Southern district. In the Northern district, the services will revert to the Ministry in January 2017. In the remaining districts, an agreement with “Natali” (“Healthcare Solutions”), for provision of health services for an additional four years was reached. At the same time, recommendations for improving the ratio of nurses in the schools to one for every 1,500 pupils was not implemented.
  • Public dental care for children up until the age of 14, and in the coming years, until the age of 18 was implemented.

Additional recommendations that are currently under consideration are those for establishing health promotion and prevention centers for the elderly and a reduction in the co-payment for medicines and medical services.

In the area of education, the Taub Center researchers noted the implementation of the recommendation to increase differential budgeting: about NIS 100 million a year were added to the budget for the purposes of increasing study hours in schools considered to be socioeconomically weak. On the negative side, they noted that the recommendation to invest in centers for preschool age children was not implemented.

In conclusion, Gal and Madhala-Brik note that there are quite a few positive points for the Committee for the War Against Poverty. From the perceptual perspective, the committee succeeded in putting the subject of poverty on the public agenda, strengthened the government involvement in ensuring that citizens realize their rights and contributed to the development of new systems to deal with the problem. From a practical point of view, the committee brought about a change in various policies that have the power to contribute to a reduction in poverty rates, and it will be seen if this trend continues to expand over the coming years.

Nevertheless, in light of the Taub Center research findings, there is serious doubt if the steps taken thus far (and those planned) will actually fulfill the targets of the committee and the principal among them: bringing the poverty rates in Israeli society down and close to the level in the OECD countries. As Gal and Madhala-Brik have said, “the doubt arises in part from the fact that the government has not as yet established a central authority to deal with poverty which makes inter-ministerial action difficult. Furthermore, the additional government expenditure in practice stands at NIS 1.9 billion (the change in the 2016 budget versus the 2014 budget) – a far cry from the expenditure addition recommended by the Elalouf committee, which was NIS 7.4 billion annually.” The discrepancy stems from the fact that the government did not implement some of the central recommendations of the committee, like increasing income security benefits, and allocated very limited resources to programs like employment grants, vocational training and the purchase of additional homes for public housing.

 

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The implementation of the Elalouf Committee recommendations is a central subject under discussion in this year’s Taub Center Annual Conference, on the subject of “Innovations in Poverty Policy”. The conference will be held on December 1 in Jerusalem. For additional details or to register, click here.

The study about the Elalouf Committee and the implementation of its recommendations will appear in the chapter “Public Expenditure on Welfare,” which will be included in the Center’s annual State of the Nation Report 2016. The report is due to be published at the end of December.

 

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 Itay Matityahu, Director of Marketing and Communications at the Taub Center for Social Policy Studies in Israel: 052-290-4678.

What’s the cost of a healthy food basket?

PRESS RELEASE: What’s the cost of a healthy food basket?

 

A new study by the Taub Center for Social Policy Studies in Israel describes the components of a healthy food basket and its cost to the consumer. The research also examines whether households at different income levels purchase such a basket.

 

Main findings:

  • The monthly expense of a healthy food basket is about NIS 844 for an adult and about NIS 737 for a child.
  • The most expensive component in a healthy food basket for an adult is “animal protein and legumes,” representing 40% of the cost of the basket. In contrast, the least expensive component – fats – represents only about 4% of the expense of the basket.
  • For households with the lowest incomes, the average monthly spending required for the recommended healthy food basket is actually higher; this is because as average family income declines, the average number of household members increases.
  • The average share of spending required to pay for a healthy food basket by a household in the lowest income quintile is 6.6 times higher than that required by a household in the highest quintile (about 44% versus 7% of income respectively).
  • Households in the three lowest income quintiles generally do not purchase a healthy food basket, whether due to personal preference or because they cannot afford it.

 

A new study by Prof. Dov Chernichovsky, chair of the Taub Center Health Policy Program and chair of the National Nutritional Security Council, Janetta Azarieva, Ben Ariyon, Rivka Goldschmit, Avidor Ginsberg, and Ron Milman defines for the first time what comprises a healthy food basket and examines its significance in terms of household budgets. The main elements of the research, which are presented here, show that a large portion of Israeli households do not purchase the recommended basket, whether due to personal preferences for less healthy and cheaper foodstuffs or due to economic considerations that limit their capacity to maintain a balanced, healthy diet.

 

Adjusting the food basket to a healthier and lower-cost lifestyle

As previous research by the Taub Center has shown, between 2005 and 2011, the price of food in Israel increased substantially. Due to this rise, the majority of food categories became more expensive relative to other countries in the OECD. For example, milk products in Israel were only 6% more expensive in 2005, but were 51% higher in 2011 than the average in the OECD countries. Similarly, bread, grains and baked goods were 19% cheaper than in the OECD in 2005, but rose to a level that was 26% more expensive six years later. Despite the sharp rise in prices, no notable steps have been taken in Israel to define a recommended realistic and healthy food basket that takes household income into consideration.

The Taub Center study presents a basket that reflects the “Israeli food pyramid” according to Ministry of Health recommendations. This basket is based on a Mediterranean diet, which has the advantages in four key dimensions: (1) the health dimension – proper nutrition can prevent disease; (2) the environmental dimension – a diet that is based primarily on vegetarian elements is less harmful to the environment and to animals; (3) the social-cultural dimension – a Mediterranean diet encourages the social and family aspect of eating and family nutrition; (4) the economic dimension – a diet of raw foods is generally less expensive than one composed of processed foods.

 

Eating healthy – a basic right or a luxury?

The basket is built to ensure proper nutrition and as low an expense as possible considering Israeli dietary patterns. The Taub Center study presents an adult food basket that includes all of the major food groups: grains, vegetables, fruit, milk protein, animal protein, legumes, and fats. The price of the recommended healthy basket is NIS 844 per month for an adult, and NIS 737 for a child (the calculation is done using median prices for products in each category). The most expensive component in the food basket is “animal protein and legumes,” which includes eggs, chicken, meat, and dried legumes. This component comprises about 40% of the total cost of the basket, while grains make up 23% and milk proteins compose 11% of the cost of the basket. The least expensive element in the food basket is fats, whose cost is only 4% of the total.

Components of a healthy food basket, according to Taub Center recommendations

Demographic data show that as the average income level per family drops, the average number of household members rises – and, as a result, the average monthly expenditure for food is also higher. This means that there are large discrepancies between the cost of a food basket for households at different income levels: for a household in the lowest income decile with an average of 4.37 family members, the average monthly expense of a healthy food basket is NIS 3,450. In contrast, in the highest decile, the average number of household members is 2.46 and the average monthly spending for a healthy food basket is only NIS 2,039.

The research also finds that a household in the lowest income quintile has to spend an average of 44% of its overall net income in order to purchase the recommended healthy food basket. The average household in the highest quintile, though, only needs to spend 7% of its net income to finance the recommended basket. This fact means that, in practice, those in the lowest three income quintiles do not purchase the healthy food basket recommended in this Taub Center study.

In the case of a household in the lowest quintile, with total income of NIS 3,807, the recommended basket costs NIS 3,295, while actual spending on food is NIS 1,462. It is clear that it is unaffordable for the lowest quintile to purchase the recommended basket, and this could well be the reason that in practice, this group buys less healthy, but cheaper food or smaller quantities of the healthier options.

Average per household expenditure on food, out of net income

Chernichovsky concludes: “As a rule, as the income level declines, families forego fruit and vegetables in favor of grains and high-fat foods, and they do not actually purchase the healthy food basket.”

 

 

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 Itay Matityahu, Director of Marketing and Communications at the Taub Center for Social Policy Studies in Israel: 052-290-4678.

The relationship between labor productivity and wages in the Israeli market place: Are workers getting the same bang for their buck?

PRESS RELEASE: The relationship between labor productivity and wages in the Israeli market place: Are workers getting the same bang for their buck?

 

Click here to read the full study on the relationship between labor productivity and wages in Hebrew. 

 

A new study by the Taub Center for Social Policy Studies in Israel explains why, at the end of 2015, real wages in the business sector were similar to those in 2001, whereas during the same period, labor productivity per worker rose by 15%. The research shows that the weakening of the link between productivity and wages was caused by the rapid increase in consumer prices relative to the price of produced goods, following years of similar growth.

 

The separation of the two indices in the last decade was caused to a large extent by the swift increase in housing and food prices during this time. While these two items are a considerable share of the consumer basket for the typical Israeli household, they only marginally reflect the change in the prices of goods and services produced in the market. The rapid increase in the consumer price index relative to the GDP price index led to an erosion in the value of a worker’s output, contributing to the weakening of the relationship between real wages and labor productivity.

 

The main study findings:

  • Gross real wages in the business sector in 2015 were similar to wages in 2001, even though productivity rose by about 15% in the same period – which would typically have been reflected in wages.
  • In contrast to the oft-heard claim, the erosion of wages was not caused by a weakening of the bargaining power of workers. In fact, workers’ share in the GDP has remained relatively stable over the past few decades.
  • In the last decade, inflation has been concentrated to a greater extent in the prices of food and housing, and barely reflects the change in prices of goods and services produced in the market. Food and housing are responsible for about 75% of the increase in the consumer price index in the past decade, although their share in the average household consumer basket is only 42% and no more than 11% in the business GDP price index. The concentration of inflation in these items contributed to the weakening of the relationship between real wages and labor productivity.
  • Some steps that would address this issue include efforts to reduce the prices of food and housing by way of eliminating import and entrance barriers in the food sector and increasing competition, as well as through increasing the supply of housing.

 

In the last 15 years, gross real wages in the business sector, which represents the purchasing power of workers, has remained almost static. In contrast, labor productivity (which reflects output per worker) increased by about 15%. Many researchers have looked at why the rise in productivity has not translated into a rise in real wages, as expected. Among the reasons given is the claim that the fruits of economic growth do not trickle down to the worker level due to a weakening of the bargaining power of workers. A new study by Gilad Brand, a researcher at the Taub Center, refutes this claim.

Productivity per worker and real wages

Productivity per worker and average wage for a salaried employee, reduced by the GDP deflator
The explanation offered by the Taub Center research is that, to a large extent, a change in the mix of factors contributing to inflation led to a decrease in the growth rate of real wages. The study shows that inflation in the last decade was concentrated in those areas that impact households more than producers, a development that contributed to a weakening of the relationship between real wages and productivity. While a comparison of labor productivity per worker and average wages in nominal terms shows that an increase of 1% in productivity translated to an increase of 1% in worker wages (that is, the expected relationship between wages and productivity remained), gross real wages did not rise during this period due to the rise in consumer prices.

According to the paper’s author, Taub Center Researcher Gilad Brand, “During this period, the typical household consumer basket became more expensive at a faster rate than the average price of goods and services produced in the market. This discrepancy caused an erosion in the value of the marginal output of the worker relative to his/her consumer basket. In other words, the nominal salaries of workers have increased in accordance with rising labor productivity. However, this does not mean that workers, as consumers, are getting more bang for their buck, since consumer prices have offset the increase in productivity.”

Inflation is concentrated in items that are consumed much more by households than by producers

The main contributors to the increase in the average household consumer basket during this period were food and housing, which were responsible for about 75% of the rise in the consumer price index in the last decade, even though they compose only 42% of the average household consumer basket. The weight of these two items in the business GDP price index is much lower and stands at no more than 11%, such that the household consumption basket became more expensive more quickly than the average of goods and services produced in the market. As a result, productivity growth did not translate into increased purchasing power for the workers.

Contribution to the CPI by main consumer categories

Policy makers should concentrate on those items that contribute to the erosion of wages

The significance of the Taub Center research findings is that although the rise in productivity brought about a corresponding rise in wages, due to the vastly greater increase in the consumer basket relative to production prices, the value of the wages to the worker did not improve. Since the stagnation in wages is due to a great extent to the increase in the prices of food and housing, one of the ways to address this issue is for policy makers to concentrate their efforts in these two areas. In the area of food, various steps can be taken, including direct subsidies in the agriculture sector, eliminating trade barriers, and increasing competition. In the area of housing, steps that concentrate on increasing the supply of housing should be considered.

 

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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 052-290-4678.

 

Demographics in the Education System: Pupil Composition and Transfers between Education Streams

PRESS RELEASE: Demographics in the Education System: Pupil Composition and Transfers between Education Streams

 

Click here to read the full study on demographics in the education system

A new study by the Taub Center for Social Policy Studies in Israel finds that, in recent years, the rate of growth in State and State-Religious schools has risen, while the rate of growth in Haredi (ultra-Orthodox) and Arab Israeli schools has slowed. Nonetheless, Haredi schools are still growing at the fastest rate. The main explanation for this trend is changes in fertility rates among the different segments in Israeli society. Another possible explanation is that pupils tend to transfer from more religious to less religious school systems, though the scope of these transfers is limited and therefore they explain only a small portion of the change.

 

Key Findings:

  • Since 2000, the growth rate in the Haredi and Arab Israeli school systems has declined. While the number of pupils in Arab Israeli schools grew at a rate of 6.7% between 2000 and 2001, it only grew at a rate of 2.3% between 2014 and 2015. In Haredi schools, the growth rate was 6.7% between 2000 and 2001 and 5.1% between 2014 and 2015. However, the State stream experienced a growth of 0.3% between 2000 and 2001 and a growth of 3.1% between 2014 and 2015. The State-Religious stream grew by 0.6% in the first period examined, and by 3.5% in the second.
  • Between 2000 and 2015, only about 2% of pupils transferred between different educational streams, which indicates that selecting an educational stream is an ideological and values-based decision that does not generally change over time.
  • Among those who did transfer between education streams, there is a trend of pupils moving from more religious to less religious school systems at every important juncture: from preschool to first grade, from primary school to lower secondary school, and from lower secondary school to upper secondary school.
  • The fertility rates among Haredi women during the period studied decreased by about 10%, and the rate of growth in the share of children entering Haredi preschools decreased by 50%.

Significant changes took place in the major education streams between 2000 and 2015. Until the middle of this period, there was consistent growth in the number of Haredi and Arab Israeli students in Israel’s education system. However, during the second half of this period, the growth rate decreased in these streams and accelerated in the State-Religious and State education streams. Against this backdrop, a new study by Taub Center researchers Nachum Blass (Principal Education Researcher) and Haim Bleikh explores the movement of pupils within Israel’s education system between 2000 and 2015. The research focuses on transfers between schools under different types of supervision and between the different sectors—Arab Israeli, Haredi, State-Religious, and State—and between official schools and schools that are recognized but not official (and vice versa).

 

Within the Jewish sector, pupils are transferring from more religious to less religious systems

In general, the percentage of pupils who transfer to a different educational stream by the time they complete secondary school is low, standing at about 2%. The “net” transfer (after measuring those who left and joined each stream) is even lower, standing at less than 1% of all pupils. This fact suggests that parents carefully consider the educational and ideological orientation of the school where they send their children, and their choice remains constant over the years.

In the Taub Center study, Blass and Bleikh track transfer trends throughout the years of schooling—including at the main junctures of transition from preschool to first grade, from primary school to lower secondary school, and from lower secondary school to upper secondary school—and find that, since the early 2000’s, the trend has been for pupils to move from more religious to less religious streams. Thus, in the most recent school year (2014-2015), approximately 3,800 pupils left Haredi preschools for State-Religious or State schools, while only 2,200 children from State-Religious and State preschools joined Haredi schools for the first grade. During the same period, about 4,000 pupils transferred from State-Religious preschools to State primary schools, while only about 1,700 made the transfer in the opposite direction. In contrast, about 1,700 pupils transferred from State-Religious to Haredi schools, while about 3,000 pupils transferred in the opposite direction. That being said, when examining the data it must be noted that there has been an absolute growth in the number of pupils in the system (the number of pupils grew, and therefore the number of transfers grew accordingly, as well). In addition, it may be that ideological considerations do not come into play as much when choosing a preschool as they do when choosing a primary school, but rather the choice is sometimes made based on proximity, price, and teacher quality, among other factors.

Number of pupils transferring between educational streams

Net change in the number of pupils in each educational stream from kindergarten to the first grade

A similar trend was found in the transition between the sixth and seventh grade. Between 2000 and 2001, about 700 students transferred from Haredi to other types of schools, while in 2014-2015 the number of those who transferred to a different education stream rose to about 1,400 pupils (it must be taken into account that during the same period the number of pupils enrolled in sixth grade in Haredi schools doubled, and also that the Haredi stream does not separate lower secondary school from primary school). However, about 2,000 pupils left State-Religious schools between 2000 and 2001 as compared with 2,700 pupils between 2014 and 2015 (and in this case the transfer rate was slightly higher than the overall growth in the number of pupils). State schools experienced a growth of 1,200 pupils from transfers during the earlier period as compared with 2,500 during the later period (overall the number of pupils increased by 4,000). In later grades, the share of pupils transferring to different types of schools decreases, but the same trend can still be found among education stream transfers between the seventh grade and the ninth grade.

 

Fertility rates also matter: secular and religious families are having more children than in the past, while Haredi birth rates have declined

As mentioned above, only 2% of all pupils transfer between education streams (the share of those who transfer between Hebrew-language schools is double that of the Arab-language schools). Due to the limited scope of the transfers, they cannot alone explain the changes in the demographic composition of Israel’s school system. Another possible explanation is the change in fertility rates in different population groups. Between 2000 and 2014 there was an increase of 16.5% in fertility rates within the Jewish population (from 2.67 to 3.11 children per woman, on average), compared to all the other population groups that experienced a decrease: 27% among Muslims, 10% among Christians, and 23% among Druze.

When the data is broken down by level of religiosity within the Jewish population, it appears that the fertility rate among the secular population rose by 10% between 2000 and 2009, and by 15% among the religious population. Among traditional Jews the fertility rate has barely changed, while among Haredim it decreased by 10%. Recently, there has been a slight increase in fertility rates among Haredi women and a slight decrease among secular women. It should be noted that, despite recent changes in birth trends, the fertility rate among Haredi women was still 3.5 times higher than among secular women during this period (6.53 children per Haredi woman, on average, as compared with 2.07 per secular woman in 2009).

Blass and Bleikh note that another factor that influenced the Arab Israeli share of the total pupil population in preschools is the increase in enrollment rates. At the beginning of the period studied, the Compulsory Education Law was implemented for children ages 3-4 in communities of lower socioeconomic status, many of them Arab Israeli. Coupled with high reproduction rates, the result was a 5% increase in the share of Arab Israeli pupils in public preschools between 2000 and 2007, reaching its peak at about 25% of all pupils.

Distribution of pupils in education system by stream

In 2011, the Trajtenberg Committee recommended that the Compulsory Education Law be implemented nationally, which caused enrollment rates of children ages 3-4 to rise in the public schools – especially among populations that had either previously sent their children to private preschools, or among those that had not sent their children to preschools due to the high cost. The increase in enrollment across the entire population, along with the decline in natural population growth among Arab Israelis, resulted in a steady decline in the percentage of Arab students among all students in public preschools between 2007 and 2015.

 

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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications at the Taub Center for Social Policy Studies in Israel: 052-290-4678.

 

 

Your Place in Line: Waiting Times in Israel’s Public Hospitals

PRESS RELEASE: Your Place in Line: Waiting Times in Israel’s Public Hospitals

 

A new study by the Taub Center for Social Policy Studies in Israel has found that patients in the large metropolitan area hospitals (Tel Aviv, Haifa and Jerusalem) have shorter waiting times for medical procedures than those at hospitals in the Northern and Southern districts. According to the study, steps such as improving collection and accessibility of waiting times data, setting targets for hospitals and enforcing them, and creating appropriate incentives are likely to shorten waiting times for procedures in public hospitals.

Click here to read the full policy brief on Waiting Times in Israel’s Public Hospitals

 

Main findings:

  • There is a negative correlation between the supply of hospital beds and waiting times for elective surgery. In Jerusalem, Tel Aviv and Haifa, the supply of beds is the highest in the country (2.2-2.5 beds per 1,000 population), and the waiting times are 15%-30% shorter than the national average. In contrast, in the Southern district, there are only 1.3 beds per 1,000 population, and waiting times are about 44% longer than the average.
  • Between 1999 and 2012, the share of Israelis holding both types of private health insurance (supplementary and commercial) nearly quadrupled, and stood at about 40% in 2012. This phenomenon may come from the feeling among Israelis that they do not receive effective care in the public healthcare system. Since the public and private system rely on the same healthcare workforce, the existence of supplementary insurance leads to longer lines in the public system and thus further proliferation of private care.
  • When measuring waiting times in 27 public hospitals in Israel, it was found that there is large variation between institutions. For example, there is a difference of nearly a year in waiting times for knee replacement, tonsillectomy and deviated septum procedures between the hospitals with the longest and shortest waiting times.
  • At hospitals owned by Clalit Health Services, the median wait time is the longest – about 15% higher than the national average. In hospitals that function as non-profits, wait times are the shortest – 32% less than the national average.
  • 23 OECD countries have stated that waiting times are an important policy issue (including Israel), 15 of which have strategic plans to deal with the challenge. In contrast, there is still no such plan in Israel.

 

The National Health Insurance Law established that every resident is entitled to receive healthcare within a reasonable time and at a reasonable distance from his/her place of residence. To date, no guidelines have been set regarding “reasonable time or distance,” and this remains one of the main challenges facing policy makers in the field of healthcare in Israel. A new study by Liora Bowers, Taub Center Director of Policy, and Prof. Dov Chernichovsky, Taub Center Health Policy Program Chair, examines the issue of waiting times for medical care in Israel, differentiating between hospitals in the periphery and center, individuals who do and do not hold private insurance, and hospitals owned by various parties. This is one of the first studies in Israel that looks at waiting times for elective surgeries from an international comparison perspective.

 

Lack of trust in the public system?

According to the Taub Center study, private payment for medical care is becoming more and more common among the Israeli public. The share of those with supplementary insurance (offered by the country’s health funds) increased by about 60% between 1999 and 2012. It has reached the point where almost four out of five Israelis (80%) hold this type of insurance. In parallel, the share of those with commercial health insurance has risen by about 80%, with about 40% of the population holding private commercial health insurance in 2012. It may be that people are concerned that they will not get satisfactory healthcare through the public system, fears which are intensified by the fact that patients at public hospitals cannot choose their treating doctor, as well as due to the lack of transparency and the lack of information regarding expected waiting times.  Patients are also encouraged by the system to shorten waiting times by choosing to activate their private insurance.

It is important to understand that waiting times are a mechanism for rationing care in a system where patients are not deterred by the cost of care because they do not pay a significant portion of the cost. Nonetheless, there is evidence that lengthy wait times are a burden on society since they increase the likelihood of more complex hospitalizations and poorer outcomes, potentially leading to increased healthcare costs. In addition, long waits are likely to influence the patient’s ability to work and the quality of their leisure time and increase dissatisfaction levels with the overall healthcare system.

 

Waiting for surgery? That depends on where you live

Among the leaders of the healthcare system, there is a widespread feeling that the average waiting times represent a mix of two different population groups: on the one hand, the “haves” – Israelis who are well-off, have personal connections, the ability to stand up for their rights and who thus have access to quick medical care; and on the other hand, the “have-nots” – patients from weaker population groups who lack financial means, who often have to wait a long time for their medical treatment.

The Taub Center study also looked at waiting times for elective medical procedures by location of residence and found that the median waiting time for surgery in the large metropolitan areas (Jerusalem, Tel Aviv and Haifa) are substantially shorter than waiting times in hospitals in the North and South of the country. In Jerusalem, waiting times are about 28% shorter than the national average, while in the South, waiting times are the longest in the country – about 44% longer than the national average. The long waiting times in the periphery parallel the limited healthcare resources allocated to these areas, and particularly the number of inpatient beds. In Jerusalem, Tel Aviv and Haifa, the supply of beds is between 2.2 and 2.5 beds per 1,000 people, while in the Southern district, the supply is only 1.3 beds per 1,000 people. In 2013, the supply of doctors per 1,000 people in the North was only two-thirds as high as in other parts of the country (2.2 versus 3.2 or more, respectively), while the supply of other healthcare professionals (such as pharmacists, physiotherapists, occupational therapists, etc.) in the North and South was half that of other regions (2.1 and 2.2 versus 4.0 or more, respectively). It should be noted that there are efforts underway to narrow these gaps, including the opening of a medical school in Safed and additional pay for doctors who work in the periphery. It is still too early to assess the result of these actions.

Waiting times and hospital beds by district in Israel

The study by Bowers and Chernichovsky also found substantial disparities among public hospitals in waiting times for elective surgeries. For example, a patient waiting for knee replacement surgery in one hospital in Haifa has an average wait of three weeks, while a patient waiting for the same surgery in the South has a wait of over a year.  Among other things, long waiting times for elective procedures in hospitals are likely due to overcrowding: the supply of hospital beds in Israel is among the lowest in the OECD, and due to this, occupancy rates are also among the highest of the developed countries – at about 96%.

An additional finding is that waiting times relate to the ownership of the hospital. In hospitals owned by Clalit Health Services, the median waiting times are the longest – about 15% longer than the national average – while at hospitals that are non-profits, waiting times are the shortest – 32% less than the national average. Waiting times in government hospitals are about 23% less than the national average. The long wait times at Clalit hospitals may be explained by two factors. First, Clalit also runs hospitals, in contrast to the other health funds, and so in most cases it refers its patients to its own hospitals. This can limit the ability of its health fund members to choose other hospitals on the basis of shorter waiting times. Secondly, there are claims that Clalit Health Services has succeeded in limiting the impact of private funding within the hospitals it operates, and so the pressure on the publicly funded procedures is greater.

In an international comparison, the Taub Center study found that wait times for elective surgeries are shorter in Israel than in other OECD countries, although one difference must be taken into consideration. In most developed countries, waiting times are measured from the point when the patient is referred for treatment until surgery is performed while in Israel, the wait time is only measured from the date when the surgery in the hospital is set. 23 of the OECD countries (including Israel) determined that waiting times are an important healthcare policy issue and 15 of these countries have addressed this issue via a national strategic plan. Israel has yet to have a plan of this type.

 

The state’s role guarantees, incentives and enforcement

According to Bowers and Chernichovsky, there are several steps that the state can consider to deal with this issue. First, there is tremendous importance to improving the Ministry’s ability to evaluate the performance of the healthcare system. The Ministry of Health declared in 2014 that the measurement of waiting times for elective procedures from the time of referral as well as real-time data accessibility was on its agenda, although it’s unclear if there has been progress on these issues. Nonetheless, the initiative by the Ministry to collect data on waiting times for elective procedures at the various institutions and to publish these figures regularly (this has begun only partially) is a significant step. Transparency and efficiency in the system will allow patients to choose a hospital in real time on the basis of waiting times, which will help to balance demand.

An additional step that is likely to help is to require health funds to meet waiting times that are considered reasonable from a medical perspective and to track this information. One of the central issues on this subject is how to enforce such waiting times guarantees. An OECD study examining 13 countries showed that all of those countries provide patients with guaranteed waiting times, so that the patient knows what to expect. Some of the countries use a model of negative enforcement. In England, for example, a medical department that does not meet the waiting time targets could lose 5% of its monthly funding. There are also examples of positive enforcement. Sweden gives a generous budget to municipalities that provide medical treatment or surgery within 90 days of the referral – and this method has proven to be very effective. Another option is to give the patient the right to choose between public and private care. For example, in Portugal, the patient can turn to the private system – at the state’s expense – once the waiting time in the public system has reached 75% of the pre-established waiting time.

The Taub Center study also underlined the importance of cooperation among stakeholders. “A reform in waiting times will not succeed if it is not done in cooperation with the health funds,” state the researchers. They write that one of the recommendations of the German Committee to Strengthen the Public Health System (2014) was that the health funds would allow patients to choose from among three different public hospitals; and in this way, disparities in waiting times could be lessened. In addition, better integration between community care and hospital treatment could reduce the need for inpatient medical care. Another action that could help address this issue is to provide payments to hospitals on a per case basis rather than a per day basis, which improves incentives to treat more patients.

In conclusion, Bowers and Chernichovsky say, “in the last 15 years, there has been a substantial rise in the percent of Israelis purchasing private medical insurance, and it may be that the lengthy waiting times in the public system play a key role in this trend. A combination of transparency and reporting on accurate waiting times data, alongside the commitment of hospitals to meet guaranteed waiting times and their enforcement by the state, will help the general public to manage its expectations, and will help to lessen uncertainty and restore patient faith in the public system.”

 

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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications at the Taub Center for Social Policy Studies in Israel: 052-290-4678.

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 business, marriage or purchasing a home. At age 21, the savings can be used for any purposes (in accordance with Government Decision Number 362).

  • At the end of the savings period, each child will have at his disposal NIS 12,200 (NIS 13,000 if withdrawn at age 21), and NIS 23,930 if the child’s parents were able to add the additional monthly savings (NIS 25,000 at age 21).
  • Cost to the state for the first year is estimated at about NIS 110 million, and the annual cost after the program is fully operational is estimated at about NIS 2.4 billion.

Option 2 (The Committee for War on Poverty)

This option presents a program based on the recommendation of giving an “Empowerment Grant,” as presented in the Report of the Committee for the War Against Poverty. According to the proposal, the grant will be given to those children who are economically disadvantaged and whose parents do not receive income tax credit on savings programs (pensions, advanced study funds (keren hishtalmut), provident funds, etc.). In this framework, after a child is born, mothers are given the option of investing their maternity grant on behalf of their newborn. In addition, a minimum monthly investment of NIS 50, for example, would be taken out of the child allowance, with the government investing a matching sum (1:1 matching ratio). The family has the option to opt out of the program and continue to receive the full child allowance amount. This option proposes a real interest rate of 5%, which will be subsidized by the Ministry of Finance (in contrast to the other options, which offer the market interest rate).

  • At the end of the investment period, when the child reaches age 18, savings will amount to about NIS 37,370. The savings account can be used toward education or vocational training, opening a business or other long-term investments.
  • The costs of this option in the first year are about NIS 12 million, assuming one-third of eligible families choose to participate and save until a child turns 18. Once fully implemented, the annual costs are expected to be about NIS 580 million.

Option 3 (Center for Social Development, 2010)

This option is based on a preliminary program designed especially for Israel by the research team at the Center for Social Development, at Washington University in St. Louis in 2010. At the time, the proposal served as a basis for early discussions in Israel about the idea of child development accounts. The program proposes opening a long-term savings account for all children at birth as the default option, but allows parents to opt out should they so choose. Instead of receiving a maternity grant, the amount of the grant will be invested in an account and NIS 50 monthly from the child allowance will be directly deposited into the account and matched by the government (1:1 matching ratio) for the child’s first five years. For low-income families who choose to participate, the state will put in an additional NIS 100 monthly (2:1 matching ratio) for the first five years. In addition, the state will deposit NIS 1,000 at two points during the program: when the child enters first grade and when the child enters middle school.

  • The accumulated savings is expected to reach about NIS 22,120 for children from low-income families and NIS 16,500 for all other children. The savings are intended to be used for higher education, vocational training, renovation or purchase of an apartment, purchase of a car, or opening a business.
  • Assuming that one-third of families participate and invest NIS 50 per month, the annual cost to the state upon full implementation is about NIS 355 million

A comparison of savings options and costs

Option 4 (The Combined Program)

This alternative proposes a long-term savings grant for each child, with a higher savings amount for children from economically disadvantaged backgrounds. Similar to the proposal from the Committee for the War Against Poverty (Option 2) and that proposed by the Center for Social Development (Option 3), this program also gives new mothers the option of depositing their maternity grant into an account in the child’s name. In addition to this first deposit, the state will deposit NIS 50 monthly until age 18 for all children. For those children living in poverty, there will be an option to save an additional sum of money – either NIS 10 or NIS 50 monthly – out of the child allowance, with a matching amount contributed by the government (1:1 matching ratio). Identifying the children entitled to additional savings will be done based on the family’s entitlement to allowances and other welfare services: disability allowances, income supplements, work grants, or children in rehabilitation boarding schools or rehabilitation-therapeutic settings for a year or more.

  • At the end of the savings period, each child will have accumulated NIS 13,060. Children eligible for higher savings whose parents took advantage of the full benefit and deposited NIS 50 per month will have accumulated about NIS 36,500.  This amount can be used for higher education, vocational training, opening a business or purchasing an apartment.
  • Assuming that one-third of families eligible for the additional savings participate and choose to deposit NIS 50 a month, the program is expected to have an annual cost of NIS 2.5 billion upon full implementation.

As can be seen in the figure, there are substantial differences between the options. In order to select among the alternatives, policymakers must weigh in on several issues. One central issue is the target amount of money that those participating in the program should ultimately receive when they are of age to withdraw the money. An additional important question is the target population: is the program intended for all young people, specifically for low income populations, or for some combination of the two? That is, will this program be available to everyone, with additional special terms for children from families of limited means? Another central question in selecting among the alternatives is the desires of the participants. In some of the options, the basic savings is not dependent upon whether the parents choose to participate in the program or contribute to the account, while other options rely on parents’ decision to participate and allocate monthly savings. As the research indicates, there are large differences between the options in the budgetary cost of implementation. The costs to the state upon full implementation of the programs range from NIS 355 million and NIS 2.48 billion per year. In addition, the matching mechanisms required in all but Option 1 are not simple, and there would be challenges in their implementation.

Conclusions

Child development accounts rest on the assumption that there is a need to confront poverty and inequality with a variety of tools. This includes both allocating resources to target populations today in order to ensure that they are able to live with dignity and have access to essential social services, while at the same time enabling savings so that when these youth reach adulthood, they have sufficient assets to integrate successfully into society. Many countries over the past decade have adopted social policies to assist in asset-building and this approach is proposed here for Israel. In light of the findings of the Taub Center, there is room for an asset building program in Israel. As Prof. Gal of the Taub Center says, “So long as the adoption of such a program is in addition to transfer allowances and reasonable access to services, and does not come in place of these services, it is likely to make a real contribution to the group of programs that attempt to deal with the high levels of poverty and inequality in Israeli society.”

As mentioned, a few days ago the government approved regulation that deals primarily with aspects related to the financial management of the savings account for each child, and currently discussions are underway on the final structure of the program.  As research from various countries shows, it seems that programs aimed at asset building for the entire population, while also providing for a greater level of assistance to young people from poor families (progressive programs), have the best chances of succeeding in reducing poverty and enjoy more public support and stability. Findings from the current analysis indicate that although this approach requires a large amount of resources and is complex to administer, it gives young people considerable assets at the end of the program and will help confront inequality.

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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications at the Taub Center for Social Policy Studies in Israel: 052-290-4678.

A Picture of the Nation 2016

PRESS RELEASE: A Picture of the Nation 2016

The booklet presents a picture of Israel across various topics, such as the cost of living, housing, inequality, labor force trends, wages, education and health. Among the new findings in this publication: transfers between educational streams, industries that cause productivity gaps and the share of young adults who own their home.

A Picture of the Nation 2016 Taub Center

For the fourth consecutive year, the Taub Center for Social Policy Studies in Israel is publishing A Picture of the Nation, a booklet of original, user-friendly and easy-to-read figures and accompanying explanations. The publication presents the situation in Israel’s society and economy in several key areas: welfare, health, education, labor market trends, productivity, and price levels. The publication, based on Taub Center research, presents an overall picture of the socioeconomic situation in Israel, highlighting areas in which Israel performs well, those where improvement can be seen, and those in which a change of course is needed.

For the first time, this booklet presents infographics designed by students from HIT (Holon Institute of Technology), which are based on findings from selected Taub Center studies.

 

Among the most striking findings in the Taub Center’s A Picture of the Nation 2016:

  • After controlling for the national security component of taxes and expenditures, the share of taxes in Israel is among the lowest in the OECD countries – a fact that attests to government policy of less involvement in market activities. The relation between the sources of revenue and their use, though often ignored, is critical in understanding public policy. Tax receipts as a share of GDP in Israel are much lower than the OECD average. As a result, Israel’s revenues are lower, and so, too, is the country’s ability to invest in a variety of areas, including infrastructure and welfare programs. (pg. 13)
  • Old-age pensions have risen while child allowances have decreased. Between the years 2000 and 2014, among all the cash benefits of the National Insurance Institute, the vast majority of expenditure was for those benefits earmarked for the elderly – the Old-age and Survivors allowance and the Long-term Care allowance. Over the years, there has been a clear, increasing trend in spending devoted to this population, a fact that primarily reflects the demographic trend of an aging population. In contrast, there has been a decline in child allowance payments, following changes in the legislation between 2002 and 2004 that reduced this benefit. (pg. 22)
  • The majority of the population purchases supplementary health insurance or commercial insurance in addition to the health coverage provided by the state. Out of 20 OECD countries, Israel ranks third in the share of citizens holding private health insurance. In 2012, about 80% of the population had supplementary insurance offered by the health funds, and slightly over 40% held commercial insurance. Many Israelis are double-insured, as almost everyone who has private insurance is also insured through supplementary insurance. The share of those purchasing supplementary insurance increased by almost 60% between 1999 and 2012, and the share of commercial insurance holders grew by almost 80% in the same years. Almost all households with high income have supplementary health insurance, while only about half of households in the lowest income levels have such coverage. These figures indicate inequality in access to high-quality, timely medical care – an issue that has raised concerns in the past few years. (pg. 31)
  • Trends in pupil transfers between education streams shows evidence of a move away from more religious educational settings. Among Jews, movement from more religious schools to less religious ones is greater than movement in the opposite direction. That is, more pupils transfer from Haredi schools to state and state-religious schools and from state-religious to state schools than move from the state schools to the more religious schools. The largest number of transfers was from state-religious education to state education, a figure which is even more notable given the small share of state-religious schools in the education system (about 15%). (pg. 38)
  • Across all sectors, women are more educated than men. Across population groups, the share of women who hold a bachelor’s degree is greater than men. The difference is especially large in the Haredi sector, where the share of women with a first degree (about 26%) is about twice as high as that of men. The low share of degree holders among Arab Israelis indicates the importance of accessibility to higher education for this population sector. The group with the highest share of degree holders is secular Jews, followed by Jews who consider themselves national-religious. (pg. 44)
  • Seven industries are responsible for about 75% of the labor productivity gap between Israel and the OECD. Labor productivity is an important factor in determining workers’ wages. Productivity in Israel is low relative to the OECD, and the gap is widening over time. The majority of the productivity gap between Israel and the OECD stems from seven industries where the productivity gap is particularly large – the majority of them in the service sector. The “other business services” sector (which includes legal and accounting services) is responsible for a gap of about $3.32 per work hour, which is about 27.7% of the total gap between Israel and the OECD. Additional industries that contributed substantially to the total productivity gap are wholesale trade (16.4%), hotels and restaurants (9.0%), retail trade (5.7%), food and tobacco (5.4%), and land transport (5.4%). In contrast, it appears that those industries that were opened to imports and exposed to meaningful competition from abroad (like the textile industry) were forced to become more efficient in order to survive; this is manifested via a rise in their productivity levels and a narrowing of their gap relative to the OECD. (pg. 70)
  • In general, men earn higher wages than women, except among Haredim and Arab Israelis. Among Haredim, and in contrast to other population groups, women’s wages are higher than men’s; among Arab Israelis the gap between men and women is relatively low. The difference between population groups is explained by different levels of education and participation rates in the labor force. In the Arab Israeli population, the majority of women holding a bachelor’s degree are working while those women without a degree are employed at much lower rates. In contrast, the majority of Arab Israeli men work regardless of their education level. Thus, the wages of women in this group are heavily weighted by those with a high education level, while the wages of men in this group are heavily weighted by those with a lower education level. (pg. 78)
  • The price of housing and rental properties has risen sharply since 2007, while real wages have not risen since 2000. Since the beginning of the millennium, nominal wages have risen in parallel with the consumer price index, such that real wages have not risen for at least 15 years. Housing prices and rental prices have risen much faster than the CPI – although each has risen at a different rate, in contrast to theoretical projections. The shortage of affordable, long-term housing in the rental market allows housing prices to move even further away from the expected level of prices in a balanced market. This situation underlies the importance of the creation of an organized rental market in Israel. (pg. 85)
  • Among young couples, the home ownership rate has decreased. As long-term rentals are not viable options in Israel, young couples tend to dream of home ownership, even at a high price. It is not surprising that a very high share of over 45-year-old Israelis live in a home they own – primarily because these homes were purchased before the sharp rise in prices at the end of the past decade. Younger populations, though, have been greatly influenced by the rise in prices. Among those aged 35-44, the share of singles who do not live in a flat they own rose to about 36% in 2014 in contrast to less than 30% in 2004. Among those aged 25-34, the share rose more than 10 percentage points during the same period, with more than 60% living in a flat they do not own. (pg. 86)

The Picture of the Nation Report covers a variety of additional areas, including new research on topics such as the employment of mothers, tax receipts, and poverty rates in Israel.

Click here to read the full Picture of the Nation 2016. 

Share of fathers taking parental leave in Israel and the OECD

Men earn significantly more than women in most sectors, but not among Arab Israeli and Haredi sectors

Decreasing home ownership for young couples in Israel

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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 052-290-4678.

International exams: Why do we think they are so important? And are we right?

Download the complete paper on Israeli students and international exams

In Israel, it is customary to attribute the utmost importance to achievements in international education exams. A new study by Taub Center principal researcher, Nachum Blass, claims that the preoccupation with the results of these tests is disproportionate. The research examines a large number of indices that influence the educational attainments of Israel relative to the OECD countries, and points out that, given the resources that are invested and the conditions under which the education system in Israel operates, there is no reason to expect higher achievements on international exams. In addition, the study shows that high achievements on these tests do not necessarily predict a better economic future for the country.

 

Study findings:

  • A teacher with a BA beginning a career in primary education in Israel earns 67% of the average salary of his counterpart in the OECD. A teacher in secondary education earns on average 59% of the earnings of his OECD counterpart. (2012 data)
  • The expenditure per pupil in Israeli preschools is about 13% of the per capita GDP, as opposed to an average of 21% in the OECD. The respective expenditures in upper secondary education are 19% versus 26%, and only in primary school education are expenditures in Israel similar to those in the OECD: 23% of GDP per capita.
  • There is no proven link between a country’s past educational achievements and its current economic functioning. Thus, for example, the correlation between the achievements of a country’s pupils on the SIMS exam in 1985 and the per capita GDP measured in 2010 was negative and close to zero (-0.09).
  • Despite Israel’s low ranking on international tests, Israelis have registered more patents than graduates from countries whose students performed better – a finding that gives testimony to inventiveness and success in international markets. Israel ranks third worldwide in the number of patents per billion dollars of GDP.

 

The subject of pupil achievement on international exams in Israel has preoccupied the Ministry of Education for many years, and, from time to time, even creates a storm – as happened when a large improvement in scores on the 2011 tests caused some to question its validity. A new study by Principal Researcher Nachum Blass of the Taub Center for Social Policy Studies in Israel comes out against what he terms the excessive obsession with the results of these tests. Blass compares Israel with 8 OECD countries (that were chosen on account of their full participation in the international tests or on account of interesting developments in their education systems) and reaches two conclusions: 1) Israel’s investment in education is low relative to the developed OECD countries, and, therefore, one should not expect the results in Israel to be higher than in other countries; 2) a high ranking of pupil achievement on international tests is not correlated with higher future socio-economic indices in those countries.

Are we the chosen people? Why Israeli expectations from pupils in the local education system are exaggerated

Blass claims in his research that the expectation of better outcomes in international exams is, at its core, based on national pride and myths such as being “the people of the book,” while, in practice, the variables that are known to impact pupil achievement do not give Israel an advantage over other countries and, at times, quite the opposite.

  • Israelis are better educated than in the OECD, but the gap is closing: The share of higher education graduates in the overall population in Israel, and especially among the Jewish population, is high relative to most of the OECD countries as well as to the OECD average. However, this advantage is decreasing substantially among Israelis aged 30-34. This shows that the advantage Israeli children receive from their parents’ levels of education still exists, though it is lessening.
  • Teacher salaries in Israel are low relative to the OECD: Salary is one of the most important factors in attracting and retaining high-quality teachers. The starting salaries of teachers in Israel are very low on international scales (although they increase with seniority). In 2012, an unexperienced primary school teacher with a BA degree in Israel earned about 67% of the average salary of a teacher with similar characteristics in the OECD, but with seniority the percentage rose to 88%. In lower secondary schools, the statistics are 59% and 72%, respectively.
  • Comparing teacher salaries with the salaries of workers with academic degrees in other professions, we see that a primary school teacher in Israel earns 87% of the average salary of an academically-educated worker in other professions, as opposed to a ratio of 85% on average in the OECD. In lower secondary schools, the ratio is 85% in Israel and 88% on average in the OECD. In upper secondary school, Israel has a ratio of 88%, versus an average in the OECD of 92%.

Figure 1 english

  • In Israel, the per pupil budget relative to GDP is low in comparison to the OECD: An additional criterion for examining Israel’s situation is the portion of the total budget allocated to education; on this measure, too, Israel lags behind. In 2011, the expenditure per preschool pupil relative to per capita GDP stood at 13%, versus 21% in the OECD. At the upper secondary school level, the expenditure per pupil was 19% versus 26% on average in the OECD. Only at the primary school level does Israel have a ratio that is similar to the OECD average – 23% (It should be noted that one reason for the difference in allocations is that the share of children in Israel’s population is much higher than in the OECD, and closing this gap would require considerable resources).

Figure 2 english

There is no proof of an influence of the international test scores on the future economic condition of a country

According to Blass, another reason the scores on the international tests should not be given so much weight is that the relationship between success on these tests and either the quality of the education system or the middle or long-term economic performance of the country has yet to be proven. For example, in 2010 the correlation between the achievements of countries whose students took the 1985 SIMS test and the two indices of GDP in those countries – per capita and per hour worked – is negative and close to zero (-0.09 and -0.05, respectively). The results show that even if there is a correlation between knowledge and scholastic achievement and socioeconomic indices, the results of the international tests do not necessarily reflect the level of knowledge, and the knowledge conveyed through the education system is just one of many components that affect the economy.

Despite the low test results, Israel is a world leader in registered patents

According to Blass, “although the education system in Israel is not counted among the world’s best in terms of international test scores, and despite all of its problems, the achievements of Israeli society in the fields of economics, culture and science indicate that it can be proud of the results.” As evidence, he presents the number of patents that graduates of Israel’s education system have registered relative to the number in other countries, which testifies to the originality and creativity of graduates of the education system. In 2008, Israel was ranked third in the world for the number of patents per billion dollars of GDP, and showed a large lead over those countries whose pupils scored higher on the 1985 tests. In the US, for example, whose SIMS score in 1985 was higher than Israel’s by a point and a half (51.4 versus 49.9), only 1.12 patents per billion dollars of GDP were registered in 2008, while in Israel the number was 2.58. The ratio for the Netherlands, whose SIMS score in 1985 was higher than Israel’s by 10 points, was only 1.72.

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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 052-290-4678.

The Young Unemployed and Unemployment Benefits in Israel

To open the full policy brief click here. 

 

A new study by the Taub Center for Social Policy Studies in Israel looks at the implications of the proposed change to the unemployment law and compares unemployment benefits in Israel to other welfare states. The research shows that implementing the change will deepen the disparity between older unemployed individuals and younger ones, who already have fewer rights. In addition, the change in the law will bring about a substantial reduction in the number of young unemployment benefit recipients and will primarily harm women, families with children and Arab Israelis.

 

Study findings:

  • Between the years 2000 and 2014, the share of young adults (under age 30) among those receiving unemployment benefits went down by nearly half, and today stands at only 16%.
  • The eligibility period for receipt of unemployment benefits in Israel today (prior to the change in the law) is at least 12 months of employment out of the 18 months prior to unemployment – a policy that is similar to most European countries. After the proposed change, the policy in Israel is likely to be much stricter relative to other European countries primarily for the young unemployed.
  • In 2007, the amount of unemployment benefits paid to young adults (under age 28) was reduced. Thus, the level of benefits available to young adults is lower to begin with, irrespective of their salary level.
  • Due to differences between younger and older adults regarding the duration of unemployment benefits, according to the current law unemployed individuals over the age of 35 are entitled to 3.5 times more days of unemployment benefits than are individuals under the age of 25.
  • The proposed change will lead to a savings of NIS 78 million in social welfare expenditures, but will substantially decrease accessibility to unemployment benefits for the young unemployed. It will primarily negatively impact women (about 64% of all of those affected) and unemployed individuals with families (23% of those previously receiving benefits will no longer be eligible).

The subject of unemployment benefits is currently high on the public agenda following proposed changes to the unemployment benefits law. According to the proposal, the eligibility period required in order to receive benefits (which is currently 12 months of employment out of the 18 months prior to unemployment) will be lengthened to 24 out of the preceding 30 months for those under the age of 30 and 18 out of the 24 months prior to unemployment for those between the ages of 30 and 35. A new policy brief by Taub Center Principal Researcher Prof. John Gal and Researcher Shavit Madhala-Brik discuss the law and the implications of the proposed changes for young adults, examining them relative to the provisions in the law related to older unemployed individuals as well as to what is common in other welfare states. The findings show that the proposed changes would make the eligibility requirements for unemployment benefits for young Israelis particularly strict compared to the requirements in other welfare states.

 

Young unemployed: More women and academic degrees holders & fewer days of unemployment benefits

The share of young unemployed individuals among all those receiving unemployment benefits is relatively small in Israel. Between 2000 and 2014, the share of unemployment recipients under the age of 30 trended down, and it currently stands at 16% of total unemployment benefits recipients. In contrast, the share of the unemployed between the ages of 30 and 34 in the same years shows no substantial change.

Taub Center researchers Gal and Madhala-Brik point out that the majority of unemployment recipients between the ages of 25 and 29 are women and a third have an academic education. Among unemployment recipients between the ages of 30 and 34, the share of those with an academic education is higher and stands at about 40% of the unemployed in this age group.

Over the course of 2013, 289,000 individuals registered with the employment services, with about 85% placing a claim for unemployment benefits. Out of the remaining 15% who registered but did not place a claim, about 60% were under the age of 34. According to the Taub Center researchers, there are several reasons why a claim might not be submitted, including that the eligibility requirements regarding prior employment have not been met.

There are existing differences in the law with regard to the entitlement period for younger and older unemployed individuals. Those over the age of 35 can receive benefits for a period between 138 and 175 days while those under the age of 25 can receive benefits for 50 days and those between the ages of 25 and 28 are entitled to 67 days of benefits. Thus, an individual over age 35 is entitled to 3.5 times more days of unemployment benefits than someone under the age of 25 (see figure).

E Fig 1 Unemployment

The employment eligibility requirement, that is, the number of months of employment out of the qualifying period, is a central feature of unemployment insurance. As stated, the current requirement is 12 months of employment out of the 18 months prior to unemployment. This is a similar policy to what is common in many European countries.Until 2007, the level of unemployment benefits was the same for everyone, regardless of age. In that year, in the framework of the Economic Arrangements Law, benefits were reduced by 25% for those under the age of 28. Thus, the level of the unemployment benefit paid to young adults is already relatively low, regardless of their wage level (which is also on average low). The average daily benefit level among unemployment recipients age 24 and under is NIS 113, the average for those between ages 25 and 29 is NIS 149, while the average for all age groups is NIS 182.

 

Time is money: The proposed change will lengthen the required employment eligibility period to beyond what is common in the Western world

There are countries, however, where the conditions are less rigid. In Iceland, for example, only 3 months of employment out of the preceding 12 months are required. In Hungary, while 12 months are required, they can be accumulated over a period of three years preceding unemployment. As can be seen in the table, the ratio between the number of months of employment required and the qualifying period is high relative to other welfare states – meaning that the conditions to receive unemployment in Israel are more rigorous.

E Table 1 Unemployment

As stated, the proposed change in the law includes lengthening the employment eligibility period for younger individuals. The Taub Center study by Gal and Madhala-Brik shows that this change will raise the ratio between required months of employment and the qualifying period to 75% for unemployed individuals in the 30-35-year-old age group and to 80% for the under 30s – figures that are exceptional among welfare states and indicate a unique level of stringency for receipt of unemployment benefit requirements for young adults in Israel.

 


The day after the changes to the law for young adults
 

Since first legislated, unemployment laws in Israel have undergone many changes. One that was adopted in 2007 related to the eligibility period for discharged soldiers. Previously, discharged soldiers were exempt from an eligibility period, but the change in the law set entitlement requirements for them, as well: a period of 6 months of employment out of the 12 months following discharge from the army. In practice, the number of discharged soldiers who received unemployment benefits in 2014 was particularly low and stood at 1,796 (relative to 29,901 in 2006).

E Fig 2 Unemployment

The proposed change to the law will mean that about 15% of those receiving benefits today (about 11,000 unemployed individuals) will not be entitled to benefits. According to Gal and Madhala-Brik, this impacts individuals whose average unemployment benefit level is lower than average. The figure presents the distribution of unemployed individuals who will lose their benefits following the change to the law and shows that the majority of those harmed will be women: about 7,100 women (about 64% of the total group) will no longer be eligible for unemployment benefits versus about 4,000 men (about 36%). Another group that will be seriously harmed is those with one or two children: about 23% of parents with two children previously receiving benefits will no longer be eligible for unemployment benefits after the change to the law.

Gal and Madhala-Brik conclude that “it is reasonable to assume that the populations that will be harmed by the law do not have a firm economic base to provide alternate income during their unemployment. In addition, the period of benefit entitlement for younger individuals is shorter than for older adults. The suggested change will bring an annual savings of about NIS 78 million in welfare expenditures, but will seriously reduce access to unemployment security for young adults who find themselves unemployed. In light of this, it is recommended to re-examine this step which is likely to harm the most vulnerable among the unemployed population.”

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.

 

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 052-290-4678.

Women and Parents in the Labor Market – Israel and the OECD

To download the full policy brief in English, click here. 

A new Taub Center study, published to mark the occasion of International Women’s Day, compares employment among women and the employment rights of parents following childbirth in Israel and the OECD. In recent decades, there has been an increase in employment rates among women – particularly among mothers with young children. With regard to payment rate and length of paid leave over a woman’s lifetime, Israel performs better or similar to that of other OECD countries. However, when it comes to leave benefits for men and the design of parental leave benefits, Israel could learn from its OECD colleagues.

Study findings:

  • Israel is one of only five OECD countries that do not grant any parental leave specifically to fathers. As a result, only 0.4% of individuals taking parental leave in Israel are men (the lowest percentage among 24 OECD countries) compared to an average of 16% in other OECD countries.
  • Many OECD countries allow parents to use their parental leave benefits on a part-time basis, and a number of countries require employers to allow parents to reduce their working hours.
  • Most OECD countries only pay a portion of the parent’s monthly salary during the paid maternity leave period – unlike Israel, which grants 100% salary replacement. In 1995, only about half of women aged 30-40 with children ages 0-4 were employed, while in 2011, the figure rose to 69%. Today, the employment rate among women with young children is almost as high as that of women without young children.
  • To align with the OECD, Israel would need to grant fathers 10 days of paid leave following the birth of a child, provide one standard unpaid parental leave benefit of six months, and allow the use of parental leave benefits via a return to work on a part-time basis.

 

Women in Israel: Employed more than in OECD countries; earn less than men; and one-third employed in part-time work

A new Taub Center study by Director of Policy Liora Bowers and Researcher Hadas Fuchs shows that Israeli women are employed at relatively high rates: in 2014, the employment rate of Israeli women was 7 percentage points higher than that of women in the OECD. The employment figures among Israeli women are improving over time: in 2014, the employment rate of female Israelis aged 25-54 stood at 74% – an increase of 20 percentage points from 1990. Among Jews in this age group, employment rates of men and women are nearly identical.

About 34% of employed women work part-time, with half of such women citing that caring for their children is the main reason for their limited employment. Despite the increase in the share of women employed, there remains a 14% gap in hourly wages between men and women, similar to the average in OECD countries.

According to Bowers and Fuchs, most of the increase in female employment was recorded among mothers of young children, particularly those without an academic degree. In 1995, only about half of women aged 30-40 with children ages 0-4 were employed, while in 2011, the figure rose to 69%. By comparison, among men aged 30-40 who were fathers of young children, there was no change in employment rates between 1995 and 2011, with 84% employed in both periods.

The employment rate for mothers of children aged 0-4 who have an academic degree increased from 78% in 1995 to 84% in 2011, while the increase in employment among women without a university education was greater: from 47% in 1995 to 57% in 2011. In 2015, this figure stood at 61%.

New Fig 4

 

Benefits for fathers: Many OECD countries promote equality

In general, Israeli society – in terms of culture and government policy – encourages both fertility and women’s labor market participation. Government policies include job protection during pregnancy and for up to one year after birth, 100% of salary replacement during the months of paid maternity leave, and a one hour paid reduction in working hours during the four months following maternity leave. However, in some areas, there is a gap between Israel’s policies towards parents and the policies of other OECD countries.

While in Israel, it is possible for both parents to share in the parental leave granted, in practice, policy does not encourage this division. Bowers and Fuchs’ study shows that 20 OECD countries provide paid (partial or full) paternity leave for fathers immediately after birth, and about 75% of fathers take advantage of this benefit. By contrast, Israel does not give any paid paternity leave to fathers. Another benefit which promotes equality between parents in the OECD is granted during a child’s early years. There are 13 countries that provide some paid parental leave that is specifically allocated to fathers.

New Fig 1

The results of this policy are seen in the share of men who take advantage of such leave. On average, 16% of individuals taking some leave to care for a child in the OECD are men, compared with only 0.4% in Israel. In Germany, for example, the introduction of a policy which granted two months’ extra paid leave on condition that the father actually takes this leave catapulted the share of fathers who chose to stay home with their baby from 3% in 2003 to 29% in 2012. In Iceland and Norway, nearly half of individuals taking advantage of parental leave are men.

Women Figure 2

 

Taking leave without a pay cut

The Taub Center study by Bowers and Fuchs is the first to compare the total period of leave granted to mothers over their lifetime, rather than the length of leave given per birth. Fertility rates in Israel are higher than those in the OECD (an average of 3 children per woman in Israel, compared with 1.7 on average in the OECD). As such, it is more costly for the country to provide for the same length of maternity leave per child (paid and unpaid), because of the financial cost to the state and the impact on the broader economy. When comparing the length of maternity leave throughout a woman’s lifetime that is granted at the equivalent of her full salary, Israel is close to the OECD average: 42 weeks of full salary equivalent compared to 44 in the OECD. Israel’s figure is higher than that of 19 other OECD countries.

The situation in Israel is better than that in the OECD in one important area. Israel is generous in its maternity leave payment, granting 100% of the mother’s wage during the paid leave, up to a ceiling of NIS 1,460 per day. In families where the father takes some of the leave, the benefit is also paid at 100% of his salary – even though generally the wages of men are higher. By contrast, in 21 OECD countries, leave is paid out at only a portion of one’s salary for those earning an average salary – that is, in most OECD countries, although maternity leave is longer, women receive less than their full salary.

New Fig 3

According to Bowers and Fuchs, “Israel’s policy, which includes full payment during maternity leave – even if for a shorter duration – can be considered good for several reasons. First, only a partial payment of salary during leave, as is common in many countries in the OECD, may discourage fathers from taking time off because the financial cost to families would be greater. Furthermore, a reduction of income at just the time when expenses are higher due to the birth of a child adds an additional burden on families. Finally, the provision of a long stretch of maternity leave for women may encourage women to be out of the labor market for a longer period of time, which may ultimately hurt their long-term earning potential and labor market participation.”

One important area in which Israel differs from the OECD is with regard to unpaid leave. In Israel, a woman is eligible for 12 weeks of unpaid maternity leave following the 14 weeks of paid leave. Afterwards, one can take “leave without pay” for up to a quarter of the length of employment with a particular employer, up to a maximum of one year. However, this benefit is not well known and only 12% of women take more than a total of six months of leave per child. In other OECD countries, the common practice is to give any woman who has worked over 12 months for an employer the full leave benefits – and to explicitly call it “parental leave.” According to the Taub Center study, an Israeli mother with full benefits and the average number of children is entitled to paid and unpaid leave of 200 weeks over her lifetime, in comparison to 127 weeks in the OECD on average.

As such, to align with the OECD, Israel would need to simplify the existing unpaid leave system, combining the two benefits (the 12 weeks of maternity leave and the additional “leave without pay” of one-quarter the length of employment) into one six month leave under the name “parental leave” and granting this benefit to any woman who has worked at least 12 months for their current employer.

 

Business as usual: In the OECD, the return to work is more gradual than in Israel

The return to work following childbirth is a period of major transition for families. The Taub Center study shows that various countries provide flexibility in the transition back from parental leave and into the labor market. These steps include allowing for a reduction in working hours and in general, flexibility for employees in hours worked and the location from which the employee may work.

Various OECD countries allow parents to use their parental leave benefits in several intervals during their child’s first years, rather than only immediately after maternity leave. In Austria, for example, each parent can postpone up to 13 weeks of leave to take until a child is seven years old. Doing the same in Israel may help women return to the workplace sooner after maternity leave – promoting labor market continuity for mothers and allowing parents to leave to be with their children later on, for example, during the long school and daycare vacation in August. About half of OECD countries allow parents to return to work gradually – by utilizing parental leave benefits to return to work on a part-time basis. In addition, more than half the countries require employers to allow parents of young children to work part-time. In most such countries, the worker also has the right to return to full-time employment when they request to do so.

Bowers and Fuchs highlight the steps that would be required if Israel chose to align its policies with those common in the OECD:

  • Grant fathers paid leave of 10 days at full salary for each child born;
  • Combine the 12 weeks of unpaid maternity leave and up to one year of “leave without pay” benefits into one six-month benefit renamed “parental leave,” to be provided to a parent who has worked at least twelve months with their current employer;
  • Allow parents to use some of the leave currently granted by the law (e.g., the 12 weeks without pay) to return to work part-time – and extend the period of leave in proportion to the scope of the position. Thus, if a parent previously working full-time chooses to return to work at a 60% position, she can do so for a total of 30 weeks.

The Taub Center for Social Policy Studies in Israel 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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 052-290-4678.

Municipal Involvement in the Financing of Teacher’s Working Hours in the Education System

To read the full study click here.

A new study by the Taub Center for Social Policy Studies in Israel shows that only 4% of total working hours of teachers are funded by the municipalities. Municipalities with socioeconomically stronger populations fund more working hours within the schools in their districts relative to municipalities located in weaker socioeconomic areas, which reduces the effectiveness of the affirmative action policies of the Ministry of Education. At the same time, however, municipalities allocate more resources to schools within their districts that have weaker socioeconomic profiles – an action that strengthens affirmative action efforts. The overall effect is that municipal allocation of working hours served to slightly reduce the effect of affirmative action efforts by the Ministry of Education.

Study findings:

  • Municipalities fund an average of 2 working hours for teachers per week per class, which is less than 4% of the total hours.
  • Socioeconomically stronger municipalities are able to allocate greater resources to their pupils; although they also enact affirmative action within their districts by allocating more to pupil populations from lower socioeconomic backgrounds.
  • The Ministry of Education’s affirmative action initiatives result in an allocation of 32% more hours to socioeconomically weaker populations. The effect of municipality financing, however, counteracts these efforts, resulting in only 27% more hours being allocated to weaker pupil populations.

A new study conducted by Taub Center Principal Researcher Nachum Blass, and by Noam Zussman and Shay Tsur from the Research Department at the Bank of Israel, examines the extent of resources allocated by municipalities to the education system. The research examined the hypothesis that differences in the level of municipality funding of education counteract the Ministry of Education’s policies of affirmative action. The analysis is based on data collected within the framework of the audit of working hours allocated to schools report, a study that is conducted for the Ministry of Education nearly every year in primary and lower secondary schools. The analysis focuses on official primary schools in the state (Jewish, non-religious) education system in the school years 2000-2001 through 2008-2009.

Investing in pupils. Who is responsible?

Funding of education in Israel is divided between central government, municipalities, households, and additional agents such as non-profit educational organizations. This phenomenon arouses wide public debate. One of the claims is that stronger municipalities allocate greater resources to education within their districts than weaker municipalities, and in this way, they reduce the effect of affirmative action policies of the central government. According to the research findings, from the years 2000-2001 to 2008-2009, municipalities funded on average about 2 weekly working hours per class in the primary school state (Jewish, non-religious) education – which is less than 4% of the total hours, and close to one-third of the hours that are allocated from sources other than the Ministry of Education.

Stronger municipalities fund more working hours of teachers.

There is a positive correlation between the socioeconomic ranking of municipalities and their investment in primary state education. For each increase of 1,000 shekels in the average income that a municipality receives from its residents, there is an average increase of 0.4 working hours per class. At the same time, an increase of just 1% in the municipal debt per resident (partial debt divided by the number of residents) leads to a decrease of about 0.36 working hours.

The Taub Center study shows clearly that more affluent municipalities allocate more hours from their own resources than those municipalities with an intermediate or low socioeconomic ranking. These differences are also considerable when schools with the same socioeconomic ranking in municipalities with different rankings are compared. For example, a school with pupils from low socioeconomic backgrounds that is within an affluent municipality benefits from a greater allocation of working hours than a school with pupils from low socioeconomic backgrounds within a municipality with a low socioeconomic ranking.

A similar picture is reflected in an examination of the relative share of working hours that are funded by municipalities – more affluent municipalities fund about 10% of the working hours as opposed to 2% in weaker municipalities.

Affirmative Action?

Stronger municipalities – and especially the Tel Aviv-Yafo municipality – allocated more manpower working resources to primary schools than did weaker municipalities. Despite this, the negative effect of municipal funding on affirmative action was minor, because municipalities themselves also took affirmative action steps within their districts. On average, classes in schools with pupils from lower socioeconomic backgrounds received 2-3 weekly hours more than classes in schools with pupils from high socioeconomic backgrounds within the same municipality.

Nonetheless, the research notes that the affirmative action implemented by the municipalities is less extensive than that of the Ministry of Education. For example, stronger municipalities allocate an average of 4 more weekly working hours to classes in schools where the pupils come from the intermediate socioeconomic cluster than to those from higher socioeconomic backgrounds, while the Ministry of Education allocates an additional 8 hours for such pupils.

According to Blass, Zussman and Tsur, municipalities’ policies on the allocation of working hours reduced the scope of the Ministry of Education’s affirmative action efforts (as measured by working hours of teachers allocated to pupils from low socioeconomic backgrounds as opposed to those from high backgrounds). During the period examined, the number of hours allocated by the Ministry of Education for pupils from low socioeconomic backgrounds was 32% higher than the number of hours allocated to pupils from high backgrounds and, after taking into account the hours financed by local authorities, the gap decreased to 27%.

Similar to the funding of working hours, the issue of affirmative action within the municipalities is also positively correlated with socioeconomic ranking. More affluent municipalities have policies of affirmative action, while those ranked in the middle often have little or poorly defined policies.

Non-profits narrow the gaps, but parents widen them

During the period under study, the number of weekly work hours per class in state (Jewish, non-religious) education funded by a source other than the Ministry of Education is about 6 hours, which is about 11% of the total weekly working hours. From 2000-2001 to 2008-2009, various non-profit organizations funded an average of 3.3 weekly hours per class, parents funded about 0.9 hours, and the rest was funded by municipalities.

In the words of the researchers, “when it comes to affirmative action, the impact of non-profit funding for the allocation of working hours is in the opposite direction of parental funding. While non-profits take a clear stand on affirmative action – favoring weaker populations – the financial contribution of parents is mostly seen in schools where the population is of greater socioeconomic means.”

PR Graph Eng

The Taub Center for Social Policy Studies in Israel 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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 054-290-4678.

State of the Nation Report 2015

The Taub Center’s annual State of the Nation Report published today (Wednesday) presents a broad overview of Israel’s current socioeconomic position in comparison to the past and to other countries. The report includes 13 studies covering topics related to labor markets, productivity, education, health, welfare, and public expenditures.  The Report was edited by Prof. Avi Weiss, Executive Director of the Taub Center and Associate Professor of Economics at Bar-Ilan University, and Prof. Dov Chernichovsky, Taub Center Senior Researcher and Health Policy Program Chair.

cover

 

A selection of findings from chapters in the State of the Nation Report 2015:

 

Occupations at Risk: Computerization Trends in the Israeli Labor Market

Shavit Madhala-Brik (Taub Center Researcher)

eng figure 1

 

  • About 40% of Israel’s employment is in occupations that are considered “high risk” of undergoing a process wherein computers or machines will replace manpower within the coming two decades.  This is a global trend that exemplifies modern, advancing economies, and in the United States and Germany, for example, an even greater share of employment, 47% and 49% respectively, work in high risk occupations.
  • The Taub Center study is based on a model that classifies occupations by their risk of computerization in the future. The occupations that are at highest risk are those that are characterized as repetitive and technical, such as bookkeeping and data entry. In contrast, those occupations deemed to be low risk include those that require skills such as creativity, social intelligence, proficiency in negotiation, and the ability to understand complexity. According to the analysis, occupations such as economists, historians and bus drivers are at medium risk of computerization, while occupations such as doctors, social workers, choreographers, and psychologists are classified as being at low risk.
  • Many employees in occupations at high risk of computerization come from more vulnerable population groups: those without an academic education, low wage earners and younger employees. The group at highest risk is non-Jewish men. About 52% of work hours among this group are in construction and building occupations – occupations in which most of the jobs are at high risk of computerization. In 2011, about 59% of hours worked by individuals aged 15-24 were in occupations at high risk of computerization. Taub Center Researcher Shavit Madhala-Brik asks, “What will young adults do for work in the coming decades after these jobs have become computerized?”
  • The computerization process has been evident in the past two decades, as there has been a decline of 9% in the relative share of work hours in high risk occupations out of all work hours. For example, between 1995 and 2011, there was a decline of 38 percent in the employment of metal workers, tinsmiths, blacksmiths, and welders. Likewise, there has been a large shift of workers without an academic education into occupations in the service industry (similar to the trends seen in the United States).
  • The Taub Center study recommends several preparations for these changes in the labor market: the expanded use of vocational training programs that are targeted at populations that may drop out of the workforce, securing their employment potential for the long term; the regular updating of educational programs to ensure their relevancy; and the establishment of a government body to spearhead and coordinate on the subject with various relevant parties such as training institutions, academic institutes and schools.

The Cost of Living in Israel: An International Comparison and Historical Perspective

Gilad Brand (Taub Center Researcher)

eng figure 2

  • The Taub Center research addresses the question of whether it is indeed “expensive to live in Israel,” and corroborates the prevailing sentiment that ignited the social protest movements of the past several years.  It does so through an examination of price levels in Israel relative to other countries over the last 25 years, after controlling for the effect of the exchange rate.
  • When taking into account per capita income, consumption prices in Israel are high relative to those in the majority of developed countries. This phenomenon has, for the most part, been persistent since the beginning of the 1990s and is not simply a result of the strong shekel of the past few years.
  • Taub Center Researcher Gilad Brand’s international comparison found that after accounting for exchange rate fluctuations, consumption prices in Israel were at a level commensurate with per capita income in only 4 out of the past 25 years; in all other years, prices levels were far higher. This finding was largely unique to Israel, and confirms that consumption prices in Israel have generally been relatively higher than in other developed countries, given the comparatively low level of incomes in Israel.
  • An examination of price levels by consumption category revealed a substantial and rapid rise in food prices alongside a corresponding increase in the profit margins in the industry. It appears that the profit margin increase was the result of changes in the structure of the market, which resulted in a decline in competitiveness alongside a low share of imports. In contrast, there were substantial price reductions in consumption items that were exposed to competition in the 1990s, such as clothing and footwear. These findings and other research evidence highlight the importance of continued exposure of the market to imports as a means of increasing competition, lowering prices, and improving consumer welfare in Israel.

The Socioeconomic Situation of Young Adults in Israel

Hadas Fuchs (Taub Center Researcher)

eng fig 3

  • The share of students among the 18-34 year-old population increased from 9% in 1995 to 15% in 2011. The majority of the increase comes from students enrolled in academic colleges. Over the last decade, the relative number of students enrolled in an Israeli university has declined, and in 2014 there were 65,000 students in universities (with 96,000 students enrolled in colleges). The data show that in the past few years, the growth in the share of students has slowed down.
  • Taub Center Researcher Hadas Fuchs found that, among young adults, women are better educated than men. The share of academics among those aged 31 to 34 is higher for women both in the Jewish population (49% for women versus 42% for men) as well as in the Arab Israeli population (21% for women versus 18% for men).
  • Young adults are both beginning their higher education and entering the labor force at a later age than in the past. This is particularly true for men. The employment rate among those aged 18 to 22 has declined from 31% in 1995 to 28% in 2010, and the share of men in this age group who are neither employed nor studying for an academic degree has increased from 76% to 81% among Jews and from 35% to 42% among Arab Israelis.
  • Between 1995 and 2011, among Jews, there was an increase in the share of students who were employed, and today about 65% of all students are employed. More than 55% of Jewish students work in part-time employment during their first 3 years of studies, and a good number of them are employed in sales and service occupations. It seems that, at least in the first few years of studies, young adults are not acquiring relevant work experience that will help in their future career choices; rather, they work to earn money.
  • Individuals aged 31 to 34 integrate into the labor market at similar rates to those of older individuals, and are employed in similar occupations. Nonetheless, there has been a decline in the real hourly wage for this age group between 2004 and 2011. This decline is explained partially by a drop in the number of years of experience of young graduates in the labor market as their studies, and then subsequently their employment, is often delayed by a year.  In addition, the lower wages are explained in part by the increase in the percent of students, and by an increase in the share of young adults working in the service industry.
  • Since 2005, there has been an increase in the share of those aged 22 to 28 living with their parents. The rise may be due, among other factors, to a delay in the marriage age; nonetheless, the rise is considerable even when unmarried individuals alone are examined. This trend may be related to a rise in housing prices, as well as to the delayed entry of many young adults into the labor market.
  • Between 2003 and 2014, the share of married couples aged 25 to 30 living in a home that they own declined by 19 percentage points and stood at only 44%. This decrease aligns with the delay in initiating studies and began prior to the sharp rise in housing prices. In the same years, young couples in the 31 to 34 year-old age group who live in a home that they own declined by 9 percentage points and stood at 60%. For this group, most of the decline occurred after the rise in housing prices began.

Causes for the Widening of Productivity Gaps Between Israel and the OECD Countries: A Multi-Year Study

Eitan Regev and Gilad Brand (Taub Center Researchers)

eng figure 4

  • Over the past decades, the productivity gap between Israel and other OECD countries has widened. This Taub Center study reveals that there are five large branches that account for 81% of the widening of the productivity gap within the private sector. The most striking of these is the wholesale trade industry, which contributed 30% to the widening gap even though it represents only 8.6% of total work hours in the private sector. Additional industries that contributed to the widening of the productivity gap in disproportional terms were telecommunications and postal service, food, metal products and production, and publishing and printing.

o  Taub Center researchers Regev and Brand found that a substantial factor in the ability of an Israeli industry to narrow productivity gaps relative to the OECD is the extent of exposure of the industry to competitive imports. This is apparently due to the pressure to become more efficient when competition from outside of Israel is substantial. In industries with less exposure to imports, productivity gaps widened relative to the OECD.

o  Service industries that are non-tradable (that is, industries that operate only in the local market) are a major factor underlying productivity gaps relative to the OECD and in the widening gap over time. This fact is likely indicative of shortcomings in the local business environment, such as monopolies and structural and regulatory obstacles that harm competition and ultimately limit the pace of productivity growth – as well as the overall improvement in the standard of living.

o  Differences in the average number of work hours per worker between Israel and other OECD countries can explain, at most, about half of the gap in productivity per work hour, but do not explain the widening of the gap that has occurred in the past two decades.  Differences in the relative share of the various industries in Israel as compared to the OECD also do not explain the widening of the gap – and even serve to narrow it slightly, particularly as the high productivity high-tech and finance industries account for a larger share of the private sector in Israel relative to the OECD.

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The Dual Labor Market: Trends in Productivity, Wages and Human Capital in the Economy

Gilad Brand and Eitan Regev (Taub Center Researchers)

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  • The Israeli economy is characterized by a duality. At one end are the high-tech and other advanced industries, with high and quickly rising labor productivity. At the other end are industries characterized by low productivity and minimal growth. This second group represents about 60 to 65% of the private sector, and its productivity levels have not increased much since the 1990s despite the rapid technological developments since. This is an anomaly relative to other developed countries.
  • The growth in the productivity gap within the private sector sheds light on different trends in the labor market since the 1990s, among them the growth in income inequality and the stagnation in the real average wage.
  • The high-tech and other advanced industries are very different from the rest of the private sector, not only with regard to productivity, but also in terms of the characteristics of their workers and the returns on education for these workers. The likelihood of a worker with a secondary school education working in a branch with high productivity and high wages declined by 14%. The likelihood of a worker with an academic education working in branches with low wages and low productivity fell by 15%.
  • At the same time as employment mobility between sectors declined, the relationship between the wages in the high productivity and low productivity sectors also diminished. Until the early 2000s, there were wage differences between industry sectors with varying levels of productivity, but there was almost full correlation between the growth of salary across these sectors. In later years, the correlation almost completely disappeared.  An empirical examination reveals that growing differences in worker characteristics in the two sectors led the sectors down different paths with regard to productivity and wages.
  • Taub Center Researchers Brand and Regev propose that the solution to the widening gap lies in diversifying the Israeli export base and creating vocational training programs that will strengthen employment mobility between the sectors. These tools will expose larger segments of the labor market to employment with companies that are exporters, which pay higher wages and enjoy rising productivity. Such actions may also put pressure on wages even in branches that sell primarily within the local market and that are characterized by low productivity levels. This pressure might encourage companies in these branches to streamline their processes, ultimately leading to a narrowing of gaps within the Israeli labor market.

Poverty and Inequality in Israel: An International Perspective

Haim Bleikh (Taub Center Researcher)

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  • Israel’s poverty and inequality rates, when calculated based on market income (gross income from work, capital and private pensions), are close to the OECD average. In contrast, the rates using disposable income (after transfer allowances and direct tax payments) are among the highest of Western countries. These rates are affected by the demographic structure, the relative size of the elderly population and differences in welfare systems – all of which have an impact on the income structure and particularly market income.
  • When examining the population for which the head of the household is aged 59 and under, Taub Center researcher Haim Bleikh  found that poverty rates and inequality in Israel are even greater relative to other developed countries, both in terms of market income and disposable income.
  • One of the reasons for the low public expenditure (as a share of GDP) in Israel relative to that in other developed countries is that overall tax revenues (as a share of GDP) in Israel are among the lowest. The connection between tax revenues and public spending has substantial implications for the ability to reduce disparities in Israel. As such, public discourse should focus on both the sources and uses of the budget collectively – rather than on each component separately.
  • Employment rates of individuals aged 15 to 59 rose in Israel between 2002 and 2011, and the gap between the employment rate of this population in Israel and the OECD average narrowed. Nevertheless, during this same time period, there was an increase in disposable income poverty rates among households that include a wage earner in this age group.
  • At the beginning of the new millennium, 73% of all coupled households of working age in the OECD countries had two or more wage earners; the parallel figure for Israel was 57%. A decade later, the OECD average was 75%, while for Israel, this figure increased more substantially, to 65%.
  • About 20% of retirement-age individuals in Israel are below the poverty line in terms of disposable income, compared to 12% on average in the OECD countries. Notably, however, income from pensions (both public and private) for elderly individuals in Israel (as a percent of GDP) is not lower than the average in other developed countries. This finding suggests that there are large gaps in income among the elderly population in Israel. Therefore, a balance must be found between increasing economic incentives that will expand employment and labor income among this population and finding solutions and resources to assist this population and ensure that they do not fall behind, particularly the elderly who are not entitled to work pensions or who have not saved sufficiently for a comfortable pension.

Public Expenditure on Welfare

Johnny Gal (Chair of Taub Center Welfare Policy Program) and Shavit Madhala-Brik (Taub Center Researcher)

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  • Public expenditure on welfare was about NIS 86 billion in 2014.This amount has shown slow growth since the middle of the past decade, principally due to an increase in transfer allowances targeting the elderly population. At the same time, there has been a decline in expenditures for social welfare.
  • About 80% of the overall expenditure on welfare is devoted to social security, a category that primarily includes allowances from the National Insurance Institute. Expenditure on social welfare, such as housing and family services, represent only 20% of the overall expenditure.
  • The number of households under the care of the Ministry of Social Affairs and Social Services was 464,000 in 2014, about 20% of the total households in Israel.
  • The largest expenditure of the Ministry of Social Affairs and Social Services is on personal and social services that are intended primarily for families and that are supplied through municipal social service offices via a variety of frameworks. In 2014, the Ministry financed about 6,450 workers in these various departments, the vast majority of whom are social workers (about 5,000). The Ministry financed 75% of the costs of social services while the municipalities funded the remaining 25%.
  • Daycare for infants and toddlers was the subject of lengthy discussion in the Trajtenberg Committee that was established following the 2011 social protests. The budget of the division of infant and toddler daycare within the Ministry of Economy increased by 57% between 2010 and 2014. In 2014, the expenditure in this area came to more than one billion NIS.
  • The general social security expenditure has remained relatively stable over the years, although there have been substantial changes in some allowances. Old-age and survivor’s allowances as well as long-term care allowances together represent the largest expenditure (48%) among the various allowance types. The number of benefit recipients for these allowances increased by 32% and 66%, respectively, since 2000 – a trend that demonstrates the aging of the population.
  • There has been a sharp decline in the number of recipients of income support: from a high of 158,000 families in 2003 down to 103,000 families in 2014. This decline was due to an increase in employment as well as changes in the eligibility requirements. The number of families entitled to child allowances grew substantially, although there was a simultaneous sharp reduction in the value of the entitlement; in some cases, the amount received by a household was reduced by half.
  • Following government reform, the expenditure on services and allowances for Holocaust survivors went from 0.25% of GDP in 2000 to 0.33% in 2014. Today, the amount of this expenditure reflects about 5% of the total social security expenditure.

 

The Relationship Between Social Capital and Health in the Haredi Sector

Prof. Dov Chernichovsky (Taub Center Senior Researcher and Chair, Taub Center Health Policy Program) and Chen Sharony

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  • In Israel, studies find a positive correlation between a locality’s socioeconomic status and the life expectancy of its residents. Nevertheless, in cities with a high concentration of Haredim (ultra-Orthodox Jews) – Bnei Brak, Jerusalem and Beit Shemesh – life expectancy is substantially higher than would be expected given these cities’ low socioeconomic status. In addition, the vast majority of Haredim (73.6%) consider their health to be “very good,” in contrast to only 50% among other segments of the population. Only 18.7% of Haredim reported that they suffered from a health problem of any kind, compared to double that figure or more among other population groups.
  • Haredi communities have high levels of social capital, as expressed in a high number of social relationships, high levels of satisfaction with family relationships, strong social support systems and high levels of volunteering.
  • There is a significant positive correlation between being Haredi and the likelihood of self-reporting very good health.  There is also a positive correlation between self-reporting good health and high social capital. This finding supports the hypothesis that Haredim in Israel have high social capital and perceptions of good health that contribute to longevity (although these findings may be related to social norms that frown on complaining, particularly to people from outside of their community).
  • Chernichovsky and Sharony found that, on average, life expectancy was 3 years higher among Haredi men in these three communities than would be expected based on their socioeconomic status. Among Haredi women, life expectancy was 1.5 years higher than would be expected based on their socioeconomic status.  The authors suggest the discrepancy between the genders might be related to differences in the level of interactions with friends, as expressed by multiple synagogue visits by males over the course of the day.

Tracking and Attainment in Israeli Secondary Education

Carmel Blank (Taub Center Education Policy Program Fellow), Prof. Yossi Shavit (Chair, Taub Center Education Policy Program) and Dr. Meir Yaish

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  • Israeli secondary education offers pupils four main educational tracks. The main track, which includes the majority of pupils (60%), is the academic track. The other three tracks are technological tracks: the prestigious engineering track, which consists of  about 15% of secondary school pupils; and two other tracks – the technological track (16% of pupils) and the vocational track (10% of pupils). Despite the changes that have occurred in tracking over the years, socioeconomic factors continue to affect pupil assignment to educational tracks.
  • Jewish pupils in the technological and vocational tracks generally come from lower socioeconomic groups and from relatively weaker educational backgrounds. Among the Arab Israeli population, there has been a rise in the demand for technological education, which is considered appropriate for pupils who might otherwise drop out of school.
  • The highest rates of bagrut qualification come from the ranks of the engineering track (82%). In the academic track, the share of those with a bagrut qualification is 70%, and in the vocational track, the share of those finishing secondary school with a bagrut qualification is 40%. These gaps are related to pupil socioeconomic characteristics in each track as well as to prior educational attainment. However, when the effect of the pupils’ background variables was controlled for, the gaps remained between bagrut qualification rates. This suggests that pupils in the academic and engineering tracks receive better preparation for the exams than those in the technological/vocational tracks.
  • The share of girls in the academic track (about 56%) and in the vocational track (about 59%) is relatively high, while girls are underrepresented in the engineering track (39%). The authors suggest that this could be due to girls’ reluctance to major in math and sciences.
  • Only 12% of pupils changed tracks between 10th and 12th grade, which indicates that for most pupils, the 10th grade track is permanent. The majority of changes are from the technological/vocational tracks to the academic track, a very encouraging finding, although the majority of those who transfer are from strong backgrounds with high previous educational achievements. These are pupils who manage to “correct” their educational tracking and shift to the academic track.
  • The drop-out rates from the technological track (5.5%) and the vocational track (5.2%) are substantially higher than from the academic track (2.9%) and the engineering track (1.4%).

The Increase in the Number of Income Earners and Its Impact on Household Income

Ayal Kimhi and Kyrill Shraberman (Taub Center Researcher)

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  • Between 2003 and 2011, the average number of income earners per household in Israel grew from 1.18 to 1.32. At the same time, the average size of households did not change substantially. Overall, income for the typical household rose as a result of the increased number of earners.
  • The stagnation of real wages since the beginning of the millennium might explain the increase in the number of income earners. Having additional members enter the labor market helped households maintain, and even increase, the standard of living to which they were accustomed.
  • The income tax reductions initiated between 2003 and 2011 helped some households improve their situation despite the stagnation in real wages. For example, between 2003 and 2014, the average direct tax rate (including income and social security taxes) for individuals without children earning the average wage declined from 26.1% to 16.5%. Nevertheless, a good number of employees (about half of those in the labor market) earn less than the income tax threshold, and were therefore not directly affected by these rate reductions.
  • Average real income from labor grew by 5% between 2003 and 2011, although the economy grew 21% in real terms during the same period. This means that income from labor eroded relative to the average standard of living in Israel. This is also evidenced by the decline in the relative share of labor in the national income: from 59% in 2000 to about 55% in 2010.
  • The increase in the number of income earners cannot be an ongoing solution to the stagnation in real wages that Israeli households are experiencing, as employment rates are approaching their maximum potential (except among Haredi men and Arab Israeli women).

The Change in the Tax Burden on Households Between 2003 and 2011

Moshe Hazan

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  • Tax policy between 2003 and 2011 primarily benefitted households in the top three income deciles, contributing to greater net income inequality and a sense among the middle class of an erosion in their standing. During this period, households in the 1st (lowest) through 5th deciles benefited from a reduction of about NIS 130 to NIS 430 in their tax burden, while households in the 8th to 10th (highest) deciles enjoyed a tax reduction of between NIS 800 and NIS 2,500 per month.
  • Between the years 2003 and 2011, the largest decline in tax burden was for households in the lowest decile: 8.9 percentage points. The other deciles experiencing the largest reduction in taxes were households in the 9th and 10th deciles, with a reduction of 5.7 percentage points and 4.5 percentage points, respectively. Households in 2nd, 3rd and 4th deciles saw a reduction in overall taxes on the order of 2.5 percentage points.
  • In 2011, the direct tax burden (the percent of income tax out of gross income) was lower than in 2003 among all of the deciles; naturally, however, wealthier households enjoyed a greater reduction since they pay the majority of income tax. The direct tax burden on households in the lowest decile was 6.2% of gross income in 2011, a reduction of 1.4 percentage points relative to 2003. In contrast, during this period, households in the highest decile enjoyed a reduction of 6.1 percentage points in their direct tax burden, which stood at 27.2% of gross income in 2011.
  • The indirect tax burden, which is defined as the percent of tax on consumption out of net income, was lower in 2011 than in 2003 for all income deciles. In 2003, the indirect tax burden stood at 34.7% of net income for the lowest decile, in contrast to 26.1% in 2011. In the 5th decile, the indirect tax burden fell from 18.9% to 17.0%, while for those households in the top decile, the indirect tax burden fell from 13.3% in 2003 to 12.7% in 2011. In both years examined, the closer households were to the lowest deciles, the higher their indirect tax burden.

Contract Workers in Israel

Noam Gruber

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  • In Israel, it is common to distinguish between two types of contract workers: agency contract workers, who work under the direct supervision and guidance of the client, and service contract workers, who provide a service for the client but remain under the direction and supervision of the contracting agency. There are important differences between the two types of workers. Service contract workers are older (on average 44.5 years old in 2011) and are less educated than the overall working population, and there is a high share of immigrants and women among them. In contrast, agency contract workers are generally a younger group (on average 36.5 years old in 2011), and their characteristics are more similar to those of the general working population.
  • In the past few years, there have been many claims that the use of contract workers is much more prevalent in Israel than in other developed countries. This study dispels these claims and demonstrates that this misperception is due to incorrect definitions and classifications of workers. To this day, most studies compare the overall rate of contract workers in Israel (aggregating both agency contract workers and service contract workers) to the rate of agency workers in other countries (the international figures generally do not include outsourced or subcontracted workers that are similar to service contract workers in Israel). As a result, the phenomenon in Israel is overestimated.
  • The number of service contract workers more than doubled between 2000 and 2011, while the number of agency contract workers decreased by half.
  • The share of immigrants among service contract workers declined somewhat between 2000 and 2011, although at the end of the period it still remained high (61.5%). In contrast, during the same period, the rate of immigrants among the general working population decreased from 41% to 32%. The share of women among service contract workers also fell relative to the beginning of the previous decade, although in 2011 it stood at 57.4% and was still higher than that of the general working population.
  • Another characteristic of service contract workers is the relatively large number of workers who are employed in a part-time capacity. The share of service contract workers in full-time employment is 53.7%, a figure that is substantially lower than the share among non-contract workers (83.9%).  Many service contract workers (about 25%) would like to increase their positions but are unable to do so.
  • The Taub Center study suggests various policy steps regarding contract workers. The author recommends encouraging the employment of agency contract workers, who are by and large younger and better educated, through longer contracts that enable their employment without requiring their recruitment as employees. In contrast, Gruber suggests protecting service contract workers from exploitation through greater wage transparency; their paystub should clearly show the amount paid to the worker and the amount paid to the contracting agency. In this manner, all parties will be able to assess if the contract work relationship is worthwhile, and clients will not be able to ignore their responsibility to ensure that workers are paid according to the law.
  • The author also suggests that the Contractors Law should be expanded so that it also covers non-profits that serve as contracting agencies (such as those created by municipalities). In addition, he suggests that the law should be changed to include service providers in all areas and not just those who provide guarding, security and cleaning services, as the law currently prescribes.

Inequality in the Education System: Who Opposes and Who Gains from the Gaps?

Nachum Blass (Taub Center Senior Researcher)

  • In the past few years, the Ministry of Education has dealt with a number of issues to try to advance equality in education. Senior Researcher Nachum Blass’ perspective is that although the value placed on equality is high, oftentimes policy is determined by the opinions and for the benefit of more well-established groups who greatly influence public discourse.
  • In this chapter, Blass raises several interesting examples that, in his view, highlight inequality within the education system:
    • School budgeting methods: The current budgeting formula calls for allocating differential funds to schools based on the socioeconomic characteristics of the student population.  In reality, this formula changes little from the existing method, in which only a small fraction of resources is dedicated to affirmative action, with insufficient extra hours funded to help narrow the gaps between the various populations. For example, while the Shoshani Committee’s recommendation from 2002 (which was implemented in 2004 and changed to a different method in 2008), called for pupils from weaker socioeconomic backgrounds to receive 70 weekly teaching hours, the current method has them receiving only 46 weekly hours (in third grade State schools with an average class size of 35 pupils).
    • An additional (second) teaching assistant in pre-compulsory kindergarten: The decision to add a teaching assistant in pre-compulsory kindergarten classes with more than 30 pupils was done simultaneously in all locations, without any consideration for pupil characteristics. Even the higher subsidies to weaker socioeconomic municipalities that were included in the original decision were canceled due to pressure from other municipalities.

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    • Reducing class size: The “sardine protest” to reduce class size was primarily in more well-established communities in the center of the country. Following those protests, it was decided to devote resources to a gradual reduction in overall class size in primary and lower-secondary schools. This decision will primarily benefit more well-established populations, since schools with pupils in low socioeconomic standing (primarily Arab Israelis and Haredim in cities with a large Haredi population) were more overcrowded and were already slated for a reduction in their class size.
    • The protests in Christian schools: Christian schools, which are classified as “recognized but not official,” are budgeted at 75% of the level of recognized schools. At the beginning of the school year, these institutions went on strike and demanded budget equality with the schools in the Haredi network of “Maayan Torani” and the “independent” schools, which have the same legal status but receive full budget allocation. Christian schools are discriminated against relative to pupils in these two systems, although they are not discriminated against relative to other Jewish institutions (private or semi-private) that are also classified as “recognized but not official.” As a consequence, their battle could create a precedent that would weaken public education. The differential budget is one of the tools that the Ministry of Education has to strengthen public schools, which, in contrast to certain private institutions, do not set admission requirements and are required to use an official educational program. If their demands are met, Christian schools will receive full budgeting and the doors will open for the establishment of additional private schools – something that will serve to increase polarization in the education system.

 

The press release and accompanying materials are available for publication starting Wednesday (23/12/15) at 6:00am

 

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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 054-290-4678. 

 

 

Reforming Consumer Insolvency Policy in Israel

To read the full document, click here (in Hebrew only)

A new study by the Taub Center for Social Policy Studies in Israel finds that the treatment of debtors who fall behind on their debts in Israel is harsh relative to other countries. The sanctions imposed are severe, and the opportunities for debtors to extricate themselves from debt and to proceed with their lives are limited. In light of this, the study presents a recommendation for comprehensive reform in the credit market that will be an improvement for both debtors and the credit market as a whole.

 

Study findings:

  • As of 2012, debtors with household debts languished an average of about 12 years in the debt enforcement and collection process before even applying for bankruptcy, and even those who obtain a bankruptcy discharge had to wait an average of around five years. In all, very few Israelis received a discharge from household indebtedness.
  • Sanctions on debtors in Israel are harsh compared to all of the many European and North American countries studied, and they do not appear effective in improving debt collection rates.
  • The reform in the credit market should include three components: establishing an effective credit rating system; the cancellation of sanctions imposed on debtors;  and the adoption of effective methods for allowing those who are insolvent to obtain a fresh start after making reasonable efforts to repay their debt.

 

In the past few years, the Knesset has dealt with several aspects of consumer indebtedness, including the cancellation of the  sanction of imprisonment for debtors who are unable to make their payments (2014), a temporary order to allow a widespread exemption from debt for those of limited means (2015), improving access to  bankruptcy relief (2015), and establishing an effective credit rating system (2015). A new study by Dr. Asher Meir conducted for the Taub Center examines the subject in depth and compares treatment of insolvents in Israel with accepted practices in other countries.

According to the study, the treatment of debtors in Israel is exceptionally harsh. Meir found that it is very hard for those in debt to continue with a normal life due to invasive sanctions and obstacles in the bankruptcy process. These difficulties prevent debtors from getting a fresh start, forcing them to remain tied to an unlimited repayment schedule.

In light of the findings, the Taub Center study recommends a comprehensive reform for dealing with insolvency and the credit market in Israel. The reform must include three components: (A) a complete elimination of sanctions against debtors of limited means; (B) adoption of a simple and comprehensive track for a fresh start that will enable debtors to continue with their lives after making a reasonable effort to repay their debt; (C) the creation of a credit rating database that includes  both positive and negative credit history.

The Problem: A shortage of information in the credit market.

The Solution: Sharing information

In all credit markets there are gaps between the information  available to the lender and that which is available to the borrower. These gaps create a situation in which problematic borrowers may receive loans at competitive rates even though their chances of repaying such loans are poor because the lender is unaware of the potential borrowers’ credit behavior and history. In contrast, all borrowers – even those with a good chance of repaying the loan – pay a “risk premium” to the lender, which insures against failure to repay. Another example of difficulties arising from information gaps is that experienced lenders, such as banks, are likely to offer credit to borrowers who are unfamiliar with the credit market at relatively high interest relative to their actual risk level. According to the Taub Center research, these information gaps move Israel further away from having a perfectly competitive credit market, one in which competition results in charges that reflect the true risk to the lender, and in a fair and reasonable degree of responsibility on the part of the borrower.

Meir notes that sharing credit information about the customer would improve the functioning of the market in several ways. First, it would limit the number of loans given to problematic borrowers, since the information on individual borrowers and their habits, as well as information on the overall borrowing population, will be translated into qualitative estimates of the risk to the lender. In addition, cooperation can be an educational tool for borrowers; poor repayment habits will be reflected in a credit report and a low credit rating, and such information sharing will encourage the client to engage in responsible fiscal management. The result will be higher overall rates of loan repayment, which will also bring about cheapening of the credit given to households.

From the perspective of the borrower, as his credit information is more transparent, his bargaining power will be raised in two ways. First, when the client knows his credit rating, he can better identify excessively high interest rates. Furthermore, when credit information reaches other lenders, competition will be created, resulting in more borrowing opportunities for the borrower.

The Taub Center study points out that Israel already has the Credit Information Service Law whose purpose is to provide credit information and repayment history about borrowers. The law, however, does not allow lenders to see highly valuable positive credit information (what bills were paid in a timely fashion), because collection of this information is possible only when customers sign a special waiver. As of 2012, fewer than 100 people had signed such a release form. As a result of the low quality of credit information, the number of requests for consumer credit reports has been quite low: in 2012 it was just one million – that is, one for every five citizens in the adult population of Israel. In the US, by contrast, there are 13 credit reports for each adult, that is, 80 times more than in Israel. To turn the information-sharing system into an effective one, Meir notes, it is important to add a critical mass of citizens and businesses to it.

The solution, according to Meir, is to adopt the recommendations of the government committee which called for the establishment of a centralized credit data base including positive information, which will enable all those who extend credit access to information enabling them to better evaluate credit risk. This is in contrast to the current system in which the majority of financial information and credit history is held by the bank. “The more we improve the flow of  information on the individual borrower’s behavior, as well as on the risks for all borrowers, the closer we approach a true competitive market.” says Meir.

The Problem: Harsh sanctions against debtors

The Solution: Eliminating sanctions and reliance on credit information

Meir found in his research that the sanctions against debtors who are unable to repay their loans in Israel are draconian relative to accepted practice in other countries. Specifically, in Israel there are two particularly painful sanctions against those classified as “of limited means,” that is, those who are unable to repay their debts in full. These two sanctions are a prohibition from leaving the country and restrictions on financial activities such as holding bank accounts and using credit cards. In a detailed examination of practices in other countries, Israel was unique in its dealings with debtors. Among the countries studied, the harshest sanctions are taken against those who fail to pay child support, and even in these cases, the use of the sanctions noted above is not common.

The Taub Center study notes that the “limited means” status does not indicate guilt or fault in repayment, only an inability to pay in full, and as such, it is particularly problematic to impose sanctions that damage earning power and the ability to conduct a normal life. In addition to harming the borrower himself, a system based on sanctions is likely to harm the credit market as well. The average client may also  hesitate to take credit knowing that routine incidents, like the loss of one’s job or an economic crisis, are likely to have harsh repercussions – and so the demand for credit is subdued. According to Meir, these defects are intensified by the fact that these sanctions have not been found to have any real influence on the repayment rates.

In this context, the study notes that in the past years there has been a trend of relaxing the sanctions of imprisonment and revocation of driver’s licenses of those in debt. Nevertheless, Meir recommends removing punitive sanctions altogether, and in their place, relying on information sharing as a way of preventing problematic borrowers from taking loans that they cannot repay.

The Problem: A slow and complex bankruptcy system

The Solution: Establishment of an effective path towards a fresh start

Today, the law in Israel recognizes bankruptcy as the only way for  debtors to start over. Despite this, Meir shows in his research that the bankruptcy process does not provide a practical solution to households that have sunk into debt. In 2007, there were over 50,000 Israelis recognized as of limited means, yet only a few thousand started the bankruptcy process. Of these, only a few hundred received bankruptcy status after five years, and this after a long and exhausting process.

According to the Taub Center study findings, based on a random sample (and calculated as an estimate for all bankruptcy cases), about a third of household bankruptcy cases are rejected, and about half were still in process five years after the first filing.

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Opening a bankruptcy file is not the beginning of the lengthy legal route for debtors who find themselves in trouble. In almost all cases, prior to bankruptcy filing there is a lengthy collections process. On average, of those who filed for bankruptcy in 2007, procedures for collections began as early as 1995 – an average time frame of about 12 years for dealing with collections on these cases. There is no doubt that this is a long and frustrating process that is not accessible as a solution for someone who is unable to pay back his debt.

The solution to this problem, according to Meir, is opening an effective route to a fresh start, based on a time-limited repayment period set in advance. This  procedure could take place within the Enforcement and Collection Authority without the involvement of the courts. In this way it would be simplified and streamlined and would be transparent to all parties. The study notes that many Western European countries have adopted a procedure of this type in the past decades and have found it an effective and successful model. In Belgium, Denmark and Sweden, for example, repayment periods are limited to five years, and in France the ceiling for repayments is being reduced from eight to seven years beginning in 2016.

In conclusion, Meir says “the existing institutional structure in Israel, its economic characteristics and the example of insolvency policies from other countries all point to moving towards a policy of cancelling debt. According to the most desirable model, declaring that a debtor is of limited means would result in a structured process, and at the end of the legally prescribed period the debtor would be absolved of his debt automatically.” Meir notes that a similar idea was brought forward in Amendment 47 to the Enforcement and Collection Law, and in the temporary order “to absolve debtors of limited means.” This legislation would advance absolving debtors for simple cases or in cases that do not justify filing for bankruptcy. Similar arrangements should be made in the civil law on a permanent basis.

 

The Taub Center for Social Policy Studies in Israel 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.

 

To read the full document, click here (in Hebrew only, English coming soon)

 

 

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications at 054-290-4678 or 02-567-1818.

Arab Israeli Pharmacists in the Israeli Labor Market

To read the full document, click here (in Hebrew only)

A new study by the Taub Center for Social Policy Studies in Israel shows that Arab Israeli pharmacists integrate well into the Israeli labor market, although they have more difficulties than their Jewish counterparts. The researchers recommend policy steps that will help narrow the gaps between them and Jewish pharmacists

Study findings:

  • Since 2005, more than one-third of all licensed pharmacists (Jews and Arab Israelis) hold academic degrees from Jordan.
  • In the study sample, there are large wage differences between female Jewish pharmacists and their Arab Israeli counterparts, apparently due to differences in seniority and management level. All of the female Arab Israeli pharmacists who were interviewed earned less than NIS 10,000 per month, compared to only 40% of their Jewish counterparts. In contrast, among male pharmacists in this study, there was almost no difference between wages of Jewish and Arab Israeli pharmacists.
  • Work relations and daily interactions between Jewish and Arab Israeli pharmacists are described as positive and even lead to social connections and the lessening of prejudices.
  • It takes a considerably longer time, on average, for Arab Israeli pharmacists to find an internship than their Jewish counterparts, especially for those who studied abroad.

A new study conducted by Prof. Noah Lewin-Epstein, Prof. Alexandra Kalev, Erez Marantz, and Shimrit Slonim for the Taub Center attempts to examine how educated Arab Israelis integrate into the Israeli labor market. To do this, the research focused on the pharmacy field, where there has been an influx of Arab Israelis over the past decade – many of whom work in businesses owned and managed by Jews. The researchers pointed to the advantages of equal integration of educated Arab Israelis into the labor market and among them, the considerable contribution to the development of the Israeli economy and increasing interactions between Arab Israelis and Jews, which can reduce prejudices and may serve to reduce feelings of hostility. At the same time, the research also showed that the path of professional integration for Arab Israelis also includes several challenges – beginning with the internship stage and extending to limited opportunities for advancement. The authors suggest several policy steps to overcome the difficulties identified.

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The Taub Center study consists of in-depth interviews with pharmacists, managers and owners of pharmacies, and the quotes are taken from these interviews (all names are pseudonyms to protect the anonymity of the participants).

Arab Israeli Pharmacists: Study Abroad, Work in Israel

By 2000, about 20% of pharmacists in Israel were Arab Israelis, a rate that is somewhat higher than their share in the overall adult population. Between 2000 and 2010, along with the overall growth of this field, there was an influx of Arab Israelis, raising their rate to almost a third of those employed in this profession.

A key factor in the demographic shift in the composition of pharmacists in Israel relates to the changes in higher education opportunities among the Arab Israeli population. Following the signing of the peace treaty between Israel and Jordan in 1994, Arab Israelis found the door open to enter institutions of higher education in Jordan. Several groups took advantage of this opportunity: those who did not take the psychometric exams in Israel; those who could not meet the university entrance requirements; or especially women, who preferred studying in an environment matching their life style. These foreign graduates then returned to integrate into the Israeli labor market. In fact, more than one-third of the licenses issued since 2005 (for Jews and Arab Israelis) were to graduates of Jordanian institutions.

Integration of Arab Israelis Pharmacists: Difficulties Finding Internships, Fewer Opportunities for Advancement

Internships

The Taub Center study examined the integration of the interviewed pharmacists into the labor market at all the stages of the career path. The findings show an essential difference between Jews and Arab Israelis in their entrance into the labor market, specifically in their search for internships. Among Jewish graduates, finding an intern position is a relatively short process and the majority secure a position before they even graduate. As Odelia said: “I didn’t look for an internship because I already worked here as a pharmacist’s assistant; it was clear that I would do my internship here. I made sure I had an intern spot for later.”

For Arab Israeli graduates, though, it can be quite difficult to find an internship, and the search can take anywhere from one month to as long as two years. The process is especially difficult for graduates of Jordanian universities for several reasons. First, they cannot gain experience during their studies by being a pharmacist’s assistant, which paves the way to an internship. Another reason is that many Jewish employers are concerned about the quality and level of pharmacy studies in Jordan. These difficulties lead Arab Israeli pharmacy graduates to compromise on their internship placement, oftentimes to begin working for no pay (which is illegal), or even to work as an assistant- a position that is usually reserved for students.

As Nadim (an Arab interviewee who graduated from a Jordanian institution) explained, “The hardest part was finding an internship. It was nearly impossible. In the end, I did my internship in Eilat. I moved from the north to Eilat.”

Entrance into the Labor Market

According to the Taub Center study, the job search is also much longer for Arab Israeli pharmacists than it is for Jewish pharmacists, although it is considerably shorter than the search for an internship. The main reason for this, as explained in the interviews, is that Arab Israeli pharmacists tend to stay on in their place of employment after the internship ends. In contrast, Jewish pharmacists tend to switch their place of employment after their full accreditation. Of those interviewed, only 8% of the Jewish pharmacists continued to full employment where they interned, compared to 33% of the Arab Israelis.

Representation in Management

As Lewin-Epstein, Kalev, Maratz and Slonim note, despite their high level of representation in the profession, Arab Israelis are underrepresented in management positions. Of those interviewed, 47% of the female Jewish pharmacists had management roles, while no female Arab Israelis were in these positions. Among men, 27% of Arab Israeli pharmacists held management positions, as opposed to 62% of male Jewish pharmacists. This can be partly explained by the fact that among those interviewed, the Arab Israelis were, on the whole, younger than their Jewish counterparts and so had not yet had enough time to be promoted to management positions.

According to the interviewees, Arab Israeli pharmacists are advanced equally to management positions within the pharmacies. When looking at more senior positions involving decision making or regional management, though, those interviewed felt that there are almost no Arab Israelis in those positions. As Sayid said, “There is nowhere in the medical field (pharmacy field) in Israel, whether the organization is a chain or an institution, where the manager is an Arab Israeli. It just doesn’t happen.” There is also a feeling of discrimination regarding employment by large pharmaceutical companies. According to those interviewed, pharmaceutical companies make army service a requirement for hiring and thereby effectively exclude Arab Israelis.

English figure 3 (but figure 2)

Wages

As can be seen in the table, wage differences between male pharmacists are negligible. Nevertheless, it does appear that male Arab Israeli pharmacists work more hours or shifts to get to the wage level of their Jewish counterparts. As Yehuda, a Jewish pharmacy owner, noted: “They (the Arab Israeli pharmacists) want to work all the time; it doesn’t bother them. They will even work 18 hours.” Moreover, there are pharmacists and employers who noted that there are certain pharmacies that pay Arab Israeli pharmacists less and see them as a “cheap labor source.”

The Taub Center study highlights that among female pharmacists, differences are substantially greater in pay between Jews and Arab Israelis. It is highly likely that the differences seen were due to professional seniority since the majority of female Arab Israeli pharmacists only entered the profession in the last few years. As noted, the research sample did not include any female Arab Israeli pharmacists in management positions, that is, the sample did not include those at higher wage levels.

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The Personal Side: “In the end, we all work together and we all do the work”

Overall, the personal relations and day-to-day interactions between Jewish and Arab Israeli pharmacists were characterized as positive, and even as an educational experience for the Jewish pharmacists who encountered the opportunity to get to know Arab Israelis. Varda, a Jewish manager, told of her attitude change: “I said to my mother: ‘Look, they are good. Simply good. They do good work and they are good people.’”

In general, from the interviews certain ethnic issues came up, like dealing with dress habits or the use of Arabic between colleagues at work. The big picture, though, is encouraging to some extent since it indicates a level of collegiality and cooperation on the basis of professionalism. Furthermore, the direct contact at work between Jewish and Arab Israeli pharmacists leads them to get to know and respect one another.

In contrast to professional relations on the job which are for the most part characterized as positive, tensions between Jewish customers and Arab Israeli pharmacists are more common. From the interviews, it appears that customer dissatisfaction is often expressed in terms of the pharmacists’ ethnic group. As many of those interviewed said: “When you are arguing with someone and you don’t want to give them something because there is a problem, the customer will suddenly say, ‘No, you don’t want to give it to me because you are an Arab.” According to the study, the most important thing in these types of cases is how the system responds; many times pharmacists do not have the full support of their employer, and the customer service policy is sometimes perceived as requiring the acceptance of prejudice.

Another systemic problem that needs to be addressed is the issue of Muslim holidays. In most cases, pharmacists say that their needs are taken into consideration by employers and colleagues. It seems, though, that there is no organized policy surrounding this issue, and those who cannot find someone to take their shift must work even on their religious holidays.

Policy Recommendations

  1. Encourage the employment of Jordanian graduates

As has been said, some employers are reluctant to give internship positions to Jordanian graduates, either out of fear that the quality of their training is lower or because graduates are not familiar with the local labor market. To remove these obstacles, the researchers recommend that the state run special training programs for these graduates to acquaint them with the local pharmaceutical market, and also to act as a bridge between employers looking for interns and Arab graduates. The authors of the Taub Center study also recommend that the state subsidize internships, especially for honors students from Jordan. These steps serve not only the Jordanian graduates but also the state, which has not opened additional pharmacy schools due to its reliance on foreign graduates.

  1. Protecting employee rights
  2. Religious and religious-holiday rights – public policy can act to protect and enforce religious rights of workers. One step is to raise employee awareness of their rights to vacation days on religious holidays and overtime pay for working on holidays, as set in law. The researchers recommend developing policies that take into consideration the difficulties of the month of Ramadan, and that requires an employer to take steps like ensuring certain work days with shifts that allow for the fast and also allow longer breaks for food, with pay, for those who consent to work the evening shifts.
  3. Abuse by customers – thegovernment is currently considering a law against abuse at work that requires the employer “to deal efficiently with cases of abuse in work relations that come to the employer’s attention, as well as to try to prevent a recurrence of abuse and repair any damage caused following such abuse.” Advancing this law, as well as raising awareness among pharmacists and their employers is crucial and will help create a safe environment that can help limit the damage of such experiences.

Publication of this press release and the material it is based on are under embargo until Monday, August 24, 7:00

To read the full document, click here (in Hebrew only)

The Taub Center for Social Policy Studies in Israel 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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 054-290-4678.

Agency Workers in Israel: A Deeper Look

Embargo until 7:00 03/08/15

The study distinguishes between two types of agency workers – those from employment agencies and contract service workers – and demonstrates that while employees of employment agencies can benefit from this mode of employment, contract service workers are a weaker, more vulnerable group whose legal rights need to be improved.

Study findings:

  • The share of new immigrants among contract service workers, a particularly weak group who generally suffer from poor working conditions, declined slightly between 2000 and 2011 although at the end of this period, it still remained high (61.5%). In contrast, during the same period, the share of new immigrants among all employed persons decreased from 41% to 32.3%.
  • The proportion of contract service workers employed full-time was 53.7%, a percentage that is significantly lower than the overall rate among workers; 35% of them would want to increase their work hours but are unable to do so.
  • The share of women who are contract service agency workers has declined since the beginning of the decade, although in 2011 it was still higher than the percent of females among all employees (57.4% versus 45.4% respectively).
  • The number of contract service workers doubled from 2000 to 2011, while the number of employment agency workers, who are generally a stronger group, declined by about 50%.

In the past few weeks, the subject of agency workers has again risen to the top of the public agenda, with major complaints about this employment method and the corresponding conditions of this group of workers. A new study by Dr. Noam Gruber, which will be published in the Taub Center’s upcoming annual publication, State of the Nation Report 2015, presents important research findings that shed new light on the subject. The study negates the claim that the number of agency workers in Israel is higher than in the rest of the world, and shows that the reason for this conjecture is that the term “agency worker” has become a catch-all for temporary workers of all sorts (whether directly or indirectly employed). In Gruber’s words, “This lack of clarity, which is only made worse by the dearth of organized research findings, makes it difficult to estimate the scope of the phenomenon in Israel and compare with the rest of the world, and leads to exaggerations and inaccuracies.”

What is the rate of contract service workers in Israel? It depends on who you ask.

Around the world, it is generally accepted that there are two types of temporary workers: those hired through an employment agency who work under the supervision of the client, and workers who are outsourced (or subcontracted), a method whereby the client buys the service but does not directly supervise the workers. For example, if a company employs a programmer through an employment agency, and the company is responsible for supervising the programmer’s work, then the programmer is considered an employment agency worker. In contrast, if a company pays an outside agency for programming work and as a part of the service the programmer works in-house, while paid and supervised by the outside agency, then the programmer is considered a contract service worker. As the Taub Center research shows, in Israel both types of workers are generally referred to as “agency workers,” although there are substantial differences between the type of work and employment conditions. This is the source of the exaggerated estimates of the number of agency workers in Israel as compared to other countries, because outside of Israel, the numbers refer primarily to employment agency workers. Moreover, the employment agency law in Israel defines “service contractors” as those who provide services in the areas of security, guards and cleaning.

English figure 1

In order to make a valid comparison, using OECD data, Gruber compared the employment rate only through employment agencies in Israel and elsewhere. As can be seen in the first figure, when just employment agency workers are examined (“Israel 1” in the figure), their rate out of all employed persons is relatively low – about 0.8%. According to the study, the reason for higher, exaggerated estimates is that the number of nursing care workers are added in to the rate (“Israel 2” in the figure) as well as security and cleaning workers (“Israel 3”), even though they are classified as contract service workers and their characteristics are not similar to employment agency workers.

Characteristics of agency workers: more women and immigrants, fewer work hours

The Taub Center study shows that the distinction between employment agency workers and contract service workers conceals essential differences in the socioeconomic profile of workers. Firstly, the two groups are distinguished by the age of the workers. In general, employment agency workers are relatively young in comparison to workers overall. In 2011, the median age among all employed persons was 39, while the median age of employment agency workers was 33. The median age of contract service workers, on the other hand, was 46. Moreover, the share of students working as contract service workers in 2000-2011 (7.9%) was lower than their share among all  employed persons (9.2%), while their representation among employment agency workers was substantially higher (11.9%).

English figure 2

The research suggests that employment through employment agencies allows younger workers to gain experience in the labor market and is a pathway to long-term employment. According to data from Ciett, the international confederation of private employment agencies, 68% of employment agency workers were unemployed prior to this employment, while only 32% were unemployed after their stint as agency workers. Gruber says, “One could claim that the employment experience and the flexibility of this type of work are useful to both employer and employee, and in the more rigid labor market this type of employment fills a serious need.”

English figure 3

Another characteristic of agency workers is the relatively high rate of female employees. The figure shows that the share of women among all employed persons is on the rise (45% in 2000 and 47% in 2011). Among agency workers, the rate of women workers has actually declined since the previous decade, although it is still higher than among all employed persons, especially among contract service workers (57.4%).

The share of immigrants is also relatively high among agency workers. Between 2000 and 2011, the rate of employed persons among immigrants dropped from 41% to 32.3%. The rate of their employment in employment agencies also was in decline, although it remained higher than their overall rate of employment: 42.8% in 2011. Among contract service workers, the rate of new immigrants is particularly high and its decline is much more modest; in 2000, the rate was 65.4%, and in 2011, it fell to 61.4% – a rate that is double their representation among all employed persons.

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The Taub Center study also highlights that an additional characteristic of agency workers is that they generally work in part-time positions. The findings show that a large number of them would like to work more hours, but were unable to find additional work. This rate is 35.2% among employment agency workers, 25% among contract service workers and 21.4% of non-agency workers.

Policy recommendations: encourage employment agency employment, and require transparency from contract services

In light of the Taub Center findings, Gruber says, “The two groups of agency workers in Israel – employment agency workers and contract service workers – have substantially different characteristics and require different policy steps. Employment agency workers are, in general, a younger group made up of a relatively high proportion of students. Relative to contract service workers, they are closer to the general employed population in terms of education level, the rates of women and immigrants, and their number of work hours. In the past few years, following legislation that limited employment through employment agencies to 9 months, there has been a significant drop in their numbers: from 57,000 in 2000, to 23,000 in 2011. This is an important employment channel that provides flexibility in manpower management for employers, and allows young people to accrue experience in the labor market and to earn a living while they are pursuing their studies. In light of this, lengthening the permitted employment period through an employment agency should be considered to allow these workers, particularly students, employment continuity and the chance to gain more work experience.”

“In contrast,” adds Gruber, “when referring to contract service workers, the situation is very different. Unlike employment agency workers, their numbers have risen over the years: from about 75,000 in 2000 to about 124,000 in 2011. This is generally an older and weaker group of workers, who in most cases do not have the ability to unionize and stand up for their rights.” In order to protect their legal rights, Gruber suggests requiring transparency: “Every service contractor will be required to submit both to the worker and to the client a monthly report that shows all payments to the worker alongside the payments made by the client. The client will share the responsibility  for legally paying the agency workers (and cannot use the service contractor as a buffer against claims of employment law violations), and all parties will understand the agent’s fees and will be able to evaluate whether it is worthwhile or whether it is preferable to employ the worker directly.”

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The Taub Center study also warns against taking populist steps that are likely to cause more harm to the workers: “If a law requiring public agencies to hire contract service workers as permanent employees is implemented, it is reasonable to assume that many of these workers will end up unemployed, as their employment will not pay off for the employer.”

In addition to these steps, Gruber recommends the following:

‒      Improve legislation in the area of agency workers, and have systematic data collection: currently there are differences in the treatment of non-profit workers and the various employment agency workers, according to their area of work. The law should be amended such that the classification of “service contractor” includes everyone who gives service through an agency in any area – and not just in the areas of guarding, security and cleaning work. Likewise, in order to improve the available information, the Taub Center study recommends widening the classification for agency workers in the Central Bureau of Statistics’ surveys.

‒      Improve flexibility in the labor market: in many cases, especially in the public sector, direct employment would be preferable  to employment through a contractor both for the employer and the employee, and the biggest obstacle is the requirement to offer a tenured position to employees. The situation is created where permanent employees are unionized while temporary workers have few rights. Gruber notes that “if we wish to lessen the harm to weaker employees, employment terms in the labor market must be made more flexible, especially in the public sector, and the rights of agency workers must be enforced, particularly those of the contract service workers.”

The Taub Center for Social Policy Studies in Israel 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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 054-290-4678.

Mental Health Reform: Pitfalls and Prospects

To read the full document, click here

Study findings:

  • From 1995 until 2013, the mental health system has “lost” NIS 1.8 billion – the difference between the budget that the system would have received if the previous reforms had been implemented on time and what it actually received.
  • The budget for community rehabilitation for the mentally disabled soared from 2% to 25% of the overall government budget for mental health. As such, the percentage of the total mental health budget comprised of inpatient psychiatric care fell from 80% in 1999 to 59% in 2013.
  • Despite the reform’s plans to expand services within the community, the governmental budget for mental health clinics fell by 40% between 1999 and 2007.
  • Since 1996, the rate of full psychiatric hospitalizations has fallen: from 1.15 hospitalizations per 1,000 persons in 1996 to 0.5 in 2013.

 

In July 2015, a new mental health reform went into effect in Israel. This reform, which shifts responsibility for the insurance and treatment of inpatient and ambulatory mental health services to the health care funds (HMOs), signals a meaningful change in mental healthcare services in Israel. Research by Prof. Uri Aviram, a Taub Center for Social Policy Studies Policy Program Fellow and former head of the Israel National Council for the Rehabilitation in the Community of Persons with Mental Disabilities, and Sagit Azary-Viesel, takes an in-depth look at the mental health system prior to the reform and the circumstances leading to its implementation, and points out critical points to ensure the reform’s success.

The Mental Health System Prior to the Reform

There was a substantial decline in psychiatric hospitalizations, that is, more patients were being treated in the community – although outpatient care budgets saw no commensurate increase. 

The reform integrates mental health services into the overall health system, and aims to apply the system’s principles of justice, equity and mutual care to the mental health services as well. One of the foundational principles of the reform is to move the locus of care from psychiatric hospitalization, which often removes the patient from the community and possibility of leading a fulfilling life, to community-based rehabilitation services.

Eng Fig 1

According to the Taub Center study, following the previous mental health reform there was a decline over the years in the rate of full psychiatric hospitalizations – from 1.15 hospitalizations per 1,000 persons in 1996 to 0.5 in 2013. The length of hospitalizations was also shortened, and overall annual psychiatric inpatient care days declined significantly.

In parallel with the decline in inpatient care numbers, there was a substantial increase in the number of those treated within the community. While the budgets of the psychiatric hospitals did not change over the period, the relative portion of inpatient psychiatric care from the overall government budget for mental health care declined from 80% to 59%, since the budget for rehabilitation services rose sharply: from only 2% in 1999 to 25% in 2013. Despite the intentions of lawmakers to strengthen ambulatory care, the budget designated for clinics in the period preceding the reform was reduced from 13% to 9% of the government mental health budget – a move that negatively impacted the availability and accessibility of clinics, and an issue that should improve with implementation of the newest reform.

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Implementing the Reform

The effort to initiate foundational reform in mental health services and to shift responsibility from an inpatient-based service to the community-based health funds has been ongoing for close to four decades. The current reform is the fifth attempt to change the system.

In Aviram’s estimation, the past failures prevented the mental health system from receiving a larger budget; from 1995 to 2013, the mental health system lost NIS 1.8 billion – the difference between what the system would have received if its budget had been updated along with the health funds’ budgets, and the budget that it actually received as part of the government system.

Eng Fig 3

In order to ensure the reform’s success where the previous attempts failed, the Taub Center study highlights 18 main points that decision makers must bear in mind. According to Prof. Aviram, “When the reform decision was made, there were many questions left unanswered or with lingering differences of opinion. The decision was made to forge ahead and deal with issues as they arose. The decision was appropriate, because it is doubtful that the reform would have happened otherwise.”

Points for the Reform’s Success

A re-examination of the target population

One of the aims of the reform is to double the rate of those receiving mental health care in clinics to 4% of adults and 2% of children. Those in the health funds consider this estimate too low and unequal; in some city centers and among more well-off populations, the rates are higher than this target already, while in other places, primarily in the geographic periphery and among specific population groups, like Haredim and Arab Israelis, the rates are far from this target. According to Aviram, it is imperative to identify how realistic these targets are.

A clear definition of the law’s requirement to provide services “within a reasonable time and at a reasonable distance”

One of the demands made of the health funds was to provide those in need of treatment with mental health services within a reasonable amount of time and at a reasonable distance from their home. This flexible delineation has been the subject of a great deal of criticism, including in the State Ombudsman’s 2015 report. The absence of a clear definition of these terms is very serious for the psychiatric population, generally considered particularly disadvantaged and suffering, in addition to their disabilities, from issues of stigma and social marginalization. Reform advocates must pay close attention to this subject and should define these concepts more clearly, as was done in the dental health care law.

Setting the length of treatment and its nature

There is a lack of agreement regarding the length of treatment in the framework of the reform, which sets nine visits for an adult and twelve visits for a child, and whether this defined treatment period is sufficient to meet patients’ needs. There is also a difference of opinions regarding who should be responsible for determining the length of treatment.

Private healthcare

The reform includes an option for privately funded mental health services. While the fee is regulated, it is nonetheless significantly higher than the copayment in public healthcare clinics. This fact raises concerns that a two-tier system will develop where those who can afford to pay will buy private care, and this will lead to differences in the quality of therapists and treatment in the public and private systems. There is no doubt that this situation goes against the principles of the reform, and it is important to track developments and prevent the growth of special, higher-quality mental health services only for those of means.

Family physician involvement in mental healthcare services

One of the underlying ideas of the reform was to connect family physicians to the mental healthcare services. Many in the field, however, feel that family doctors are not ready or able to take on this added responsibility. In their words, they do not have enough knowledge, there is not enough time to train them for this, and they are not given enough time per patient to deal effectively with the needs of those suffering from mental illness. The reform was set in motion without the full cooperation of family doctors, and they claim that their professional union was not engaged, either. Moreover, during the deliberations on the reform, the psychiatric internship requirement was removed for doctors specializing in family medicine. In light of this, it is very possible that connecting family medicine could be problematic since the involvement of family physicians in the mental health system was an important part of the reform plans and goals.

Privacy issues

In light of the structural changes involved in the reform, there is a question regarding the transfer of information. There is a need to pass patient information to the new authority, while at the same time ensuring the patients’ right to privacy. The director-general of the Ministry of Health has recently decided that it is not possible to get patient permission and that the information should be transferred to the health funds unless the patient specifically objects (and since the mechanism is not yet finalized, it is not even clear if the patient will be asked).

Hospitalization alternatives and conflicts of interest

It is reasonable to assume that the health funds and other agencies will try to find and develop alternatives to hospitalization, out of the desire to keep patients in a less restrictive environment (needs permitting), as well as out of a desire to cut costs. Alternatives could include clinics as well as outpatient departments in psychiatric hospitals in the community. However, the Taub Center study showed that in the past decades, no new clinics or psychiatric hospital outpatient departments were opened and, to date, no government-funded psychiatric hospitals have been closed. As such, there is no way of knowing how the State will act – particularly in light of the conflict of interest, since the majority of hospitalization and community rehabilitation services remain in the hands of the government and under the authority of the Ministry of Health. It is unclear how this will be resolved. What will happen, for instance, if the Ministry of Health, as the owner of a psychiatric hospital, wants to maintain its level of activity while the health funds are seeking to curb inpatient referrals and find alternatives?

In summary, Prof. Aviram says: “In order to support the reform’s implementation in line with its original goals, it is imperative to gather those social and political agents for whom this reform is most important and to create a social-political lobby to work for this. In addition, within the Ministry of Health there needs to be a supervisory agency to oversee the reform’s implementation, to strengthen the existing regulatory bodies that were created for this purpose, to respond appropriately to the issues that arise during the implementation phase, and to encourage unbiased evaluation of the reform’s results and achievements.

“This is important because financial resources will be allocated to research and evaluation of the reform – which should not be forced to compete with other demands on funding – and the administrative mechanism that will be created will have enforcement authority. If these two things don’t happen simultaneously, and if the leadership of the Ministry of Health doesn’t give the political and administrative support to the reform’s implementation, it is doubtful whether this reform will meet its goals.”

The Taub Center for Social Policy Studies in Israel 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.

For details, or to arrange an interview, please contact Itay Matityahu, Director of Marketing and Communications 054-290-4678.

To read the full document, click here

The Taub Center for Social Policy Studies in Israel appoints Itay Matityahu as Director of Marketing, Communications and Government Relations

Matityahu will replace Gal Ben Dor, who held this position over the last two and a half years. The management of the Taub Center appreciates her contribution to developing the marketing and communications department at the Center and wishes her every success as she begins her studies toward a Master’s degree in the United States.

Itay Matityahu, who holds an accounting degree, served for three years as the deputy chair and executive director of the Students’ Union for the academic division of the Management College in Rishon LeZion. Thereafter he founded “Mitorrerim” (literally “waking up”), a social movement with the goal of training youth for community work through activity in education and leadership and their integration as active participants in the local scene. In the past year, Matityhau also founded “Haderech Hakala L’hitnadvut” (“The Easy Way to Volunteer,”) an umbrella organization connecting about 60 non-profits and potential volunteers looking to contribute to the community..

In his role at the Taub Center, Matityahu will be responsible for a variety of areas: ongoing communication with Israeli and foreign media; government relations; organizing seminars and conferences; developing and maintaining partnerships with various organizations; and, distributing Taub Center materials and research (in the fields of economics, health, education, labor, and welfare) through the internet and social media.

The Taub Center for Social Policy Studies in Israel 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.

 

Contact Information:

Itay Matityahu

Email: itaym@taubcenter.org.il

Mobile: +972-52-290-4678

Office: +972-2567-1818

 

 

Education and Employment Trends Among Ethiopian Israelis

A new Taub Center study points to an improvement in education and employment among the younger generation of Israelis of Ethiopian origin in comparison to the older generation. However, there is still a long road ahead to close the gaps between them and the rest of the Jewish population.

Highlights from the study:

  • 9% of Ethiopian Israelis who moved to Israel at an older age are employed in occupations that require high-skilled workers, compared to 21% of Ethiopians who were born in Israel or moved as young children and 39% of the rest of the Jewish population (according to the most recent data available).
  • 20% of Ethiopian Israelis who were born in Israel or moved at a young age hold an academic degree, as compared to 40% of the rest of the Jewish population in Israel.
  • Among employed Israelis of Ethiopian origin who moved to Israel after the age of 12, about 50% of women and 17% of men work in cleaning or kitchen services, rates dramatically higher than among other segments of the population.
  • For Ethiopian Israelis with an academic degree, rates of labor market integration into occupations that demand highly skilled workers are similar to the rest of the Jewish population, with the exception of underrepresentation in management positions.

Hadas Fuchs and Gilad Brand, researchers from the Taub Center for Social Policy Studies in Israel, studied the education and employment characteristics of Israelis of Ethiopian origin between the years 1998 and 2011.

According to the Central Bureau of Statistics, the gross monthly cash income for Ethiopian Israeli households was about NIS 11,453 – about 35% less than the average population income of about NIS 17,711 per household. This gap can be explained by the findings of this study, which indicate that the education levels of Israelis of Ethiopian origin are lower than those among the rest of the Jewish Israeli population. Likewise, their labor market status is less favorable in regards to their professions and wages alike.

Education gaps between Ethiopian Israelis and the rest of the Jewish population are shrinking, but are far from disappearing entirely.

The rate of Ethiopian Israelis with a bagrut certificate is 53%, compared to 75% among the general population of Jewish high school students.

Fuchs and Brand from the Taub Center examined the education of the Ethiopian Israeli population compared to the rest of the Jewish population and found that deep gaps exist both at the high school and university levels. The rate of Ethiopian Israelis who qualify for a bagrut certificate reached 53%, compared to 75% among all students tested in the Hebrew-speaking school systems.

The Taub Center study found substantial educational gaps in the share of academic degree-holders across various groups. Of the Ethiopian Israelis born in Israel or who moved at a young age, only 20% hold an academic degree – half the rate (40%) among the rest of the Jewish population in Israel. The academic education rate among Ethiopian Israelis who moved to Israel after the age of 12 is only 6%, and most of these 6% actually arrived in Israel between the ages of 13 and 18.

English figure 1

A more encouraging finding is the improvement in the high school education of the young generation that was educated in Israel, compared to the older generation. The high school graduation rate among Ethiopian Israelis who moved to Israel at an older age is only 36%. In comparison, the rate of high school graduates among those who were educated in Israel is about 90%, a similar rate to the rest of the Jewish population.

Employment: high employment rates but with lower wages

There has been a significant rise in the employment rates of Ethiopian Israeli women, but most are employed in low-wage jobs.

Fuchs and Brand from the Taub Center found that the employment rate among Ethiopian Israelis at prime working ages (25-54) rose substantially over the past decade and stabilized in the years 2009-2011 at 72% – only slightly lower than the employment rate of the non-Ethiopian Jewish population, in which the employment rate is about 79%. This rise is true for males and females alike, though among women the increase was particularly sharp; only about 35% of Ethiopian Israeli women were employed between 1998 and 2000, compared to 65% between 2009 and 2011.

The improvement in employment for Ethiopian Israelis can be seen in the scope of work hours, as well. The number of employees holding part-time positions decreased rapidly over the past few years among this population, and occurred in parallel to an increase in the employment rate – that is, both the employment rate and the scope of full-time employment have grown.

Only 9% of Ethiopian Israelis who arrived in Israel at an older age are employed in occupations that demand high-skilled workers.

Along with the rise in employment rates, it is important to understand the occupations in which Ethiopian Israelis are employed. The Taub Center researchers found that among adults aged 30-35 (the age group selected in order to ensure the reliability of the sample) only 9% of the Ethiopian Israeli population that arrived in Israel at an older age is employed in occupations that require highly skilled workers, compared to 39% among the remainder of the Jewish population (including management positions).

As is the case with the education findings, the employment characteristics of Ethiopian Israelis who were educated in Israel are better than those who arrived at an older age. Nevertheless, gaps still exist between them and the rest of the Jewish population. About 21% of those Ethiopian Israelis educated in Israel are situated in the top levels of the labor market, as compared to about 40% among the rest of the Jewish population, and about 60% are employed in occupations for low-skilled or unskilled workers, compared to 41% among the rest of the Jewish population.

Furthermore, Fuchs and Brand discovered a relatively high employment rate for cleaning and kitchen services among Ethiopian Israelis who arrived in Israel at an older age – 50% of the women and 17% of the men are employed in this field of work. It is important to emphasize that this finding is relevant only for those who arrived after 12 years of age; the employment rates in cleaning and kitchen services among the Ethiopian Israelis who were educated in Israel is similar to the rest of the population (3.9%). A more comprehensive test conducted by the researchers demonstrated that the probability of working in cleaning is highly correlated to years lived in Israel and age of arrival. The probability of working as a cleaner is higher among those who have spent fewer years in Israel and arrived at a later age (up until 20 years of age).

English figure 2

In order to test for the presence of discrimination that would make it more difficult for Ethiopian Israelis to integrate into the labor market, Fuchs and Brand from the Taub Center checked the employment characteristics of those with an academic degree. They found that among this group of Ethiopian Israelis, there is no substantial difference from the rest of the population, with the exception of lower representation in management positions. In other words, those with an academic degree generally integrate into positions that require higher education.

English figure 3

Similarly, when examining the wages of Ethiopian Israelis with an academic degree, one can see that despite their integration into the upper echelons of the labor market, their income is lower than other earners in this category. These gaps apparently are caused by a high concentration in the academic majors and professions with relatively lower wages. For example, many Ethiopian Israelis with an academic degree who are categorized as working in “occupations requiring a high skill level” have chosen careers as social workers and teachers, where the wages are relatively low. This finding suggests that there may be less access to the academic majors and professions considered more prestigious and which lead to higher wages. Thus, higher education in and of itself is not sufficient to close gaps, but there must be an effort to ensure that there is proper representation of Ethiopian Israelis in the fields of study that will allow them to integrate into higher paying jobs.

Taub Center Researcher Hadas Fuchs summarizes: “The Ethiopian Israeli community is worse off than the rest of the Jewish population. That being said, there are substantial differences between those who moved to Israel at a later age and those who grew up in Israel. The former are characterized by low education levels, and though they integrated into the labor force, they did so at the bottom of the labor market. Take for example the years 2006-2011, during which half of the employed women who arrived in Israel after the age of 12 worked in cleaning or kitchen services. The education levels of Ethiopian Israelis who were educated in Israel along with the rest of the Jewish population are improving with time. Beyond that, the rate of Ethiopian Israelis who are working in a profession that matches their academic degree is similar to the rest of the Jewish population, though there is low representation in the professions with the highest relative wages and in management positions.”

Researcher Gilad Brand expands and explains, “It is implied that the relatively low education rates in the Ethiopian Israeli community are the main cause for the relatively low numbers in the labor market. This finding supports the importance of modern and high-quality education, with an emphasis on accessibility to the fields considered most prestigious, as a medium for integrating properly into the labor market.”

For the full document, click here (password to open the document: newtaub2015)

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communications 054-464-2333.

The Taub Center for Social Policy Studies in Israel 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.

New Taub Center Publication: A Picture of the Nation 2015

Press Release – not for publication until June 18, 7:00

The Taub Center for Social Policy Studies in Israel has published the third annual A Picture of the Nation – a booklet of original, unique, and user-friendly figures consisting of one graph, accompanied by a short explanation, on each page. The pamphlet presents a picture of Israeli society and its economy in a number of key areas: the cost of living, housing, inequality, the labor market, the shadow economy, the elderly population, education, and health. The booklet, based on Taub Center research, details where Israel is doing well, where improvement can be seen, and in which areas a change of direction is in order.

In addition to the pamphlet, Taub Center researchers have created interactive graphs, published here for the first time, that present topics such as the changes in wages from labor over time and poverty and inequality levels in Israel and the OECD.

Prominent findings of the Taub Center’s A Picture of the Nation 2015 report include:

  • The rate of food imports is very low, and imports represent only 16% of total private food expenditure. Taub Center findings show that in other industry sectors, import rates are much higher: furniture (about 40% of consumption), footwear, clothing and personal items (about 70% of consumption), and household goods (about 80% of consumption). The barriers to importing food mean that the local food manufacturers are virtually without competition – allowing them to charge high prices for their products. (Page 7)
  • In those food groups with the highest demand, such as meat, breads and grains, and fresh fruit and vegetables, the import rates are low. Competition in the food industry does not reach the food groups in highest demand. The majority of private food expenditure in Israel is on bread and grains, meat products, fresh fruit, milk products, and beverages – categories with especially low import rates.In contrast, food groups with especially high import rates, like sugar products and fish, represent just a small part of private spending on food. (Page 8)
  • Haredim make use of larger mortgages than in the past to purchase apartments. The percent of apartments purchased by Haredim is relatively high, although over time, their ability to do so is decreasing. Among Haredim, the average level of monthly mortgage payments has risen in the past decade by 72%, even though the prices of the apartments that they purchase have risen by only 6% (due to a shift towards the West Bank). This indicates a significant dwindling of resources in the Haredi sector. (Page 5)
  • On international achievement tests, the share of pupils who excel has risen and the share of weaker pupils has declined in contrast to the OECD trend. Between 2006 and 2012, the share of Israeli pupils who excelled on the international PISA exams rose slightly, and the share of weak pupils declined by about 7%. In contrast, in the OECD countries, there was a decline in the share of excellent pupils, and the share of weak pupils declined by only about 2%. Despite the improvement, the share of weak pupils in Israel is still high relative to the OECD average – about 29% in Israel versus about 18% in the OECD. (Page 50)
  • Inequality among households in Israel is among the highest in the OECD, although the trend continues to show a decline. Inequality in disposable income (that is, after taxes, allowances and benefits) has narrowed slightly in the past few years, although it still remains among the highest among developed countries. According to Taub Center researchers, some possible explanations include: demographic differences between Israel and other countries, large income gaps in the labor market, and the low effectiveness of the governmental social safety net in narrowing gaps relative to other countries. (Page 18)
  • Most of the income from rental properties goes to the wealthier segments of society. The top income quintile enjoys two-thirds of the income from rental properties. Taub Center findings show that for households in this top quintile, the average income from rent is about NIS 1,500 per month (double the income from rent of the other four quintiles). Taub Center researchers report that since the number of renters is higher among the lower quintiles, this only serves to widen the income gaps – rent money passes from the weaker economic groups to the stronger ones. (Page 20)
  • Interactive motion charts: Changes in hourly wages: 1997-2011. The figure demonstrates the changes over time in hourly wages of workers across income percentiles – starting with a decline in overall wages during the course of the second intifada, a moderate rise in the following years, and then an additional decline that began in 2008 with the worldwide recession. The most striking trend is that the wages of the lowest percentiles rose more than others over the period, apparently due to rises in the minimum wage. In contrast, the hourly wage of workers in the upper percentiles only rose slightly compared to their 1997 level. (For the figure, click here and select “Wage Changes per Work-Hour.”)
  • Interactive motion charts: Poverty and inequality rates. The figure shows data on poverty and inequality in Israel and other developed countries. The poverty rate in Israel has risen over the years (although there has been a slight decline in the past few years), and it is high relative to most of the developed countries, both for individuals and for families. Inequality among Israeli households is also very high relative to the developed world, and the trend indicates a long-term increase. In terms of depth of poverty (the distance of the average income of a poor family from the poverty line or how poor a poor family is), the situation in Israel is worsening – the average income of poor families in 1992 was 26% lower than the poverty line, and in 2010 it was 31% lower. (For the figure, click here and select “Poverty and Inequality.”)

 

To read the pamphlet on the Taub Center website, click here (password to open the document: taub2015). To receive a hard copy, contact the Taub Center.

 

Publication of this Press Release and the material it is based on is under embargo    until 7:00, June 18, 2015

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communications 054-464-2333.

The Taub Center for Social Policy Studies in Israel 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.

New Taub Center Publication: Objectives and Recommendations for the 34th Government of Israel

Not for publication until May 28, 7:00

As the new government begins its work, the Taub Center for Social Policy Studies in Israel presents a series of goals and recommendations for the country in the socioeconomic sphere. The authors map out the challenges facing the new government in the areas of macroeconomics, the labor market, education, welfare, and health and give detailed, viable steps that can be taken to make serious improvements in these areas. The paper’s writers are experts in their fields who have based their work on their depth of knowledge in these areas, both in Israel and beyond.

Overall, there is a common theme: Israeli society shows a high degree of inequality and growing gaps among households, which might prove to be the greatest challenge facing Israeli society to date.

These recommendations carry a budgetary price tag, but they are worthwhile and necessary investments. Implementing these changes will serve to strengthen Israeli society for all its citizens.

For the full document, click here.

Among the recommendations:

Reducing poverty and social gaps

Raising the level of the income supplement for the needy elderly to bring their incomes to the poverty line. This income supplement is intended for elderly who have no income other than the regular old-age pension. This allocation is currently lower than the poverty-line income level, leaving a quarter of Israel’s elderly below the poverty line. As Prof. Johnny Gal of the Taub Center points out, the recommended increase in the supplement would not entail a major expenditure; it would, however, significantly ease the plight of Israel’s needy elderly.

Creating a system that encourages people to save money. Prof. Johnny Gal proposes adopting the American model of the “Child Development Account,” which ensures that young people growing up in poverty start their adult lives with a reasonable amount of capital – savings to which the government and their own families both contributed. The matching funds method is used to encourage families to save – for every amount the family deposits, the government adds a supplementary sum. The maternity grant that every Israeli mother receives could serve as the initial deposit for this kind of savings plan.

 

Expanding access to welfare services

Enact a social services law. The current Welfare Services Law (1958) does not provide an adequate framework for the social services system. It does not ensure the citizen’s right to social services, nor does it specify what sort of social services package Israeli citizens should be eligible for; in fact, its failure to set nationwide norms actually creates inequality between local authorities. Prof. Gal recommends that this law should be replaced by one that is consistent and clear, and that enables the system to operate in an efficient and transparent manner.

Establish citizen rights centers. At present, many needy families do not fully avail themselves of the services and allowances to which they are entitled in the social services, social security, housing and health care systems, due to lack of knowledge or bureaucratic obstacles. Making these entitlements accessible would greatly ease their plight. Prof. Gal proposes that citizen rights centers, staffed by social service professionals, be established alongside all social services agencies.

 

Necessary reforms in the healthcare system

Shorten waiting times for medical procedures in the public healthcare system. In order to shorten the lengthy waiting periods for medical procedures in Israel’s public healthcare system, Taub Center Senior Researcher and Health Policy Program Chair Prof. Dov Chernichovsky recommends that maximum wait times should be set for each type of treatment. Likewise, a transparent scheduling system should also be established for surgeries and imaging procedures, and measures should be taken to ensure optimal use of underutilized public infrastructures.

Reduce out-of-pocket expenditures on medical treatment. Approximately 40 percent of Israel’s health spending is privately funded, compared with just 24 percent on average in the OECD countries. Prof. Chernichovsky proposed that in order to reduce the necessity of private spending, the needs for which Israelis seek private insurance must be addressed. Firstly, there should be free physician choice in public hospitalization. Secondly, those aged 75 and over should be exempt from copayments for medications to treat chronic disease.

Increase government funding and transfer supplemental insurance payments to the public healthcare system. Taub Center senior researcher, Prof. Dov Chernichovsky suggested that funding for the public healthcare system should be expanded through two sources. First, government funding should be gradually and responsibly increased – subject to structural changes and improved performance – to 75 percent of total funding, a level that is similar to other countries with national health insurance. Second, the money from supplemental insurance sold by the health funds and bought by members – some NIS 3.5 billion per year – should be transferred from the private healthcare system to the public healthcare system.

 

Employment

Improve the negative income tax mechanism. Employment grants (negative income tax) have been proven to be effective in both closing gaps and encouraging employment. Nevertheless, their use is low in Israel relative to other countries in the world. It is possible to use these incentives to encourage work among weaker populations – including minorities, older adults and those with disabilities. Prof. Ayal Kimhi suggests that the size of the grant and the range of qualifying incomes should be increased, and the criteria and application process should be simplified – ideally through the enactment of an automatic mechanism.

Exempt low-wage workers from the pension savings obligation and improve their employment conditions. Low-wage earners are strapped financially and yet they are currently required to pay into occupational pension plans, like most Israeli workers. One problem that arises, though, is that especially low-wage workers are required to set aside money for a future goal that may be less important than their current needs. Prof. Kimhi suggests that the recommended policy change would exempt very low wage workers from the pension payment obligation, while still requiring employers to make contributions on their behalf. Another problem with the pension system is the high management fees paid mainly by small savers. This problem can be addressed by creating a special pension track for low-wage earners under full supervision of a public authority.

 

Narrowing educational gaps

Make use of substantial differential budgeting. Educational gaps in Israel are high relative to the developed world. The researchers, Prof. Yossi Shavit, Dr. Yariv Feniger and Nachum Blass advise that to address these gaps, educational institutions should be budgeted according to objective and uniform measures of need that take into consideration not only enrollment figures but also the socioeconomic status of the pupils served. Differential budgeting should ensure that every pupil receives all of the tools necessary to succeed, including small classes, adequate study-track offerings, appropriately-trained teachers, well-equipped classrooms, and teaching aids.

Limit tracking in the high schools. In Israel, it is customary to differentiate between academic and technical-vocational tracks at the high school level. Matriculation certification (bagrut) rates and the rates of those who continue to higher education are lower among technical-vocational track graduates than academic graduates of similar educational achievement and social backgrounds. Likewise, more pupils from the lower socioeconomic sectors study in technical-vocational tracks than do pupils from the higher classes. This means that tracking perpetuates class inequality in the school achievement area. Taub Center researchers advise that to avoid this, it is recommended that technical-vocational education be delayed until the post-secondary level and that high school tracking be curtailed.

Reduce educational inequality outside of the school setting. Israel currently has no education policy that addresses educational processes outside of school hours: learning-disability assessment, remedial instruction and tutoring (private instruction). These services depend almost entirely on the family’s ability to finance them privately. Taub Center researchers Prof. Yossi Shavit, Dr. Yariv Feniger and Nachum Blass recommend that a public body be created for the evaluation and management of learning disabilities, to ensure that all social groups have access to this service. Moreover, the Ministry of Education should allocate resources and work with local authorities to establish high-quality learning centers and expand existing centers, and offer eligible pupils tutoring at a subsidized rate.

 

Long-term demographic trends

Institute core studies in the Haredi school system and sever links between employment, yeshiva study and military service. About 10 percent of Israel’s working-age population is Haredi (ultra-Orthodox), and current demographic trends indicate that this sector’s population share is increasing rapidly and will represent a quarter of the total working-age population within four or five decades. The Haredi school curriculum, especially for boys, does not provide its graduates with skills that enable them to participate in the labor market. Dr. Moshe Hazan and Dr. Noam Gruber recommend the following solution: the immediate introduction of core studies into the Haredi education system as a condition for the system to receive state funding. In addition, the links between employment, yeshiva study and military service should be cut to integrate Haredi men more easily into the labor market.

 

Housing

Tax rental property income and transfer authority for housing, planning and the collection of construction and city property taxes to local authorities. There has been an extraordinary rise in housing costs over the last few years. Dr. Moshe Hazan and Dr. Noam Gruber recommend that in order to improve the situation in the short term, income from rental properties should be taxed at a level similar to income from other sources. In order to ensure long-term change, the marketing of land and the responsibility for developing infrastructures should be transferred to the relevant municipal authorities in the hopes of eliminating some of the bureaucracy that currently slows down building. To encourage local authorities to invest in housing (which is not particularly profitable for them), it is proposed to allow the authorities to set property taxes as well as the taxes for property development.

 

The full list of recommendations (for details in the complete document, click here):

The economy (Dr. Moshe Hazan and Dr. Noam Gruber) – institute core studies in the Haredi school system; sever links between employment, yeshiva study and military service; tax rental property income; transfer authority for housing, planning, and the levying of construction and city property taxes to local authorities; eliminate taxes and relax regulations on food product imports; establish a single, unified authority to regulate the natural gas market; re-evaluate the level of public expenditure; ease the bureaucratic burden on small businesses and set objectives for the tax collection and enforcement authority; encourage the use of automatically-generated income statements and electronic reporting mechanisms

Welfare (Prof. Johnny Gal)– increase the old-age supplement so that the income of needy elderly reaches the poverty line; raise income assurance allowance to bring recipients to only one-third below the poverty line level; improve coordination between the negative income tax mechanism and the income assurance allowance; create an initiative to encourage saving; enact a social services law; significantly increase the number of social workers in the public welfare system; establish citizen rights centers

Education (Prof. Yossi Shavit, Dr. Yariv Feniger and Nachum Blass)– improve the quality of instruction throughout the system, with particular emphasis on institutions that serve disadvantaged populations; make significant use of differential budgeting; limit tracking in the high schools; reduce educational inequality outside of the school setting; reduce class size; improve discipline

The labor market (Prof. Ayal Kimhi) – encourage employment among Haredim, Arab Israeli women and those with low education levels; move to an employment model that offers flexibility to employers and protection for employees; improve negative income tax; evaluate minimum wage hikes in greater depth, and improve labor law enforcement; exempt low-wage workers from the pension savings obligation and improve their employment conditions; make the retirement age more flexible

Healthcare (Prof. Dov Chernichovsky) – create a hospitalization authority; continue development and increase budgets for the mental health system; expand eligibility for dental care funding; regulate long-term care insurance; shorten waiting times for medical procedures in the public healthcare system; reduce out-of-pocket expenditures on medical treatment; increase the system’s manpower supply; increase government funding and transfer money from payments for health fund supplemental insurance to the public healthcare system

Publication of this Press Release and the material it is based on is under embargo    until 7:00, May 28, 2015

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communications 054-464-2333.

The Taub Center for Social Policy Studies in Israel 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.

 

Taub Center for Social Policy Studies in Israel announces the appointment of Prof. Avi Weiss as new Executive Director of the Center

Prof. Weiss holds a doctoral degree from the University of Chicago. He has presided as a member of the senior faculty of Bar-Ilan University since 1988 and served as Chair of the Economics Department between 2005 and 2008. His area of expertise is Applied Economics and his research focuses on industrial organization, antitrust, labor economics, law and economics, and behavioral and experimental economics. Weiss is the editor of The Economic Quarterly – the journal of the Israel Economic Association – and as the associate editor of Economic Inquiry. In the public domain, Prof. Weiss served as Chief Economist and Deputy Director of the Israel Antitrust Authority between 2003-2005; was a member of the Anti-Dumping Commission of the Ministry of Industry and Trade between 1999-2003; served as a member of the Subcommittee on the Cost of Living and Competition of the Trajtenberg Commission on Social and Economic Change; and acted as a consulting member of the Bachar Intra-Agency Committee for Reform of the Financial Sector. Today he is a member of the Competition Task Force of Israel’s Grand Strategy Forum. Prof. Weiss has been a research fellow at IZA (a labor market research center) in Germany since 2000. Throughout his academic career, Weiss has published more than forty articles in refereed journals and professional books.

Prof. Weiss was selected following a thorough search process conducted by a specialized search committee, with the aid of unbiased professionals from the field. He will be serving as the Center’s fourth executive director since its establishment in 1982. The Taub Center would like to thank Acting Director Dr. Zvi Feine for his service during this period of transition.

Weiss is happy to be joining and leading the senior research staff of the Taub Center – Prof. Dov Chernichovsky, Prof. Yossi Shavit and Nachum Blass – and the experienced and skilled research team in conducting social and economic research for the sake of the State of Israel’s future. In his words, “I am very excited to be joining and leading such a skilled and professional staff, who are the reason the Taub Center and its research are at the heart of Israel’s public conversation. I will work tirelessly to enable the Taub Center to continue advancing the public discourse in a wide array of social and economic subjects through the production and presentation of in-depth and unbiased research findings to the general public. Under my leadership, our goal will be to present both positive findings and findings that present challenges to Israel’s public policies, to explore policy alternatives for those currently in place and to recommend to policy-makers changes that can help them continue to lead the country in the desired directions.”

The Taub Center for Social Policy Studies in Israel 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communication: 054-464-2333.

 

Study math and succeed: A new study by the Taub Center shows that studying math in high school has a direct effect on labor market achievements

The study answers questions like: Does the level of math studied in high school have an effect later in life? Is it worth making the effort to study higher-level math or is a lower level sufficient? What is the role of natural learning skills  in the entire picture?

To this end, a unique data base was constructed that followed a group from bagrut [matriculation] exams, through higher education and to the beginnings of their career paths (age 29). The research was funded in partnership with the Trump Foundation.

Studying math at a higher level could lead to narrowing gaps between men and women

The Taub Center study found that gender affected the level of math studied; 44% of women took 3-4 units of math as opposed to 33% of men. In contrast, 10% of men took their bagrut exams at the 5 unit level, as opposed to 7% of women.

When comparing genders, significant differences were found. First, among those who took 4 units of math, the share of women with an academic degree is significantly greater than the share of men with an academic degree. Nonetheless, in those areas of study that lead to professions with higher wage levels – like economics and business administration, the exact sciences and computer sciences – the majority of matriculating students are men. It was also found that increasing the level of study for those who did 4 units of math (using a hypothetical formulation) to 5 units significantly increases the likelihood of their completing an academic degree, especially among women, and also had an effect on their choice of a field of study. The most notable differences are a reduction in the tendency to study social sciences and an increased tendency to study medicine, economics, business administration, exact sciences, and computer sciences. In particular, the frequency of studying computer sciences increased by half among men and more than three times among women. The frequency of studying economics and business administration went up only slightly for men but increased significantly among women. As a rule, moving from 4 to 5 units of math enables entrance into fields of study that result in higher wage levels later. The impact is greater for women then for men, and so this move narrows the gender gaps in the distribution of academic fields of study.

The effect of academic field of study on wages differs substantially for men and women. Men with an academic degree in Jewish studies, social sciences and law earn (per hour) less than those without an academic degree, while men with a degree in education, medicine and life sciences, economics and business do not earn more than those without a degree. Among women, though, a degree in Jewish studies, humanities, education, medicine and life sciences, social sciences, and primarily economics and business means higher salaries relative to those without a degree. A degree in engineering and the exact sciences or in computer sciences contributes significantly to the wage level for both men and women, although its contribution is greater for women.

Kimhi and Horovitz found that there is also importance to nationality, and apparently the opportunity to study math at a higher level is not equally accessible to all – the number of Jews studying math at a higher level is substantially higher than the number of Arab Israelis or any other minority group. Among Christians and Druze there is a greater tendency to study math at a higher level than among Muslims or other minority groups.

Substantial income differences between those who test at the 3, 4 and 5 unit level

The Taub Center study found that for those completing 5 units of math, monthly income and hourly wage were double the monthly income and hourly wages of those who did not take math at all. Income increased with the level of math studied even when comparing students who received the same score on the bagrut exams, and this fact is especially pronounced in the move from 4 units to 5 units of study. Beyond this, the higher the matriculation score in math, the higher the income level, and this was especially true in the move from a score of 81-90 to a score in the 91-100 range. For example, when the income levels of those who took 5 units of study were examined, the largest gap found was between those who scored between 81-90, and earned NIS 56 per hour, and those who earned NIS 78 per hour and scored between 91-100. That is, income is closely correlated with the level of math studies and the bagrut score.

It was also found that academic degrees that are considered prestigious are worth more in the labor market. Computer science degree holders earn 77% more than those without an academic degree, 90% more than those with a degree in Jewish studies or the humanities, and 40% more than the next group in the degree ranking – graduates of engineering and the exact sciences. On the other hand, there is no significant income gap between graduates of universities and graduates of colleges. Moreover, in certain fields, those without an academic degree earn more than those with a degree – primarily among those with a higher level of math. For example, for those who have studied 3 or more units of math, the wages of someone without a degree are higher than those of someone with a degree in the social sciences.

In addition, Kimhi and Horovitz found that the higher the number of units of math studied, the more likely the individual is to be employed in a more prestigious profession (Figure 1). The rate of academic professionals rose from 4% among those who took the exam at less than a 3 unit level to 49% among those who studied at the 5 unit level. An interesting finding is that the rate of managers does not change significantly in the move from 3 to 5 units of study.

Trump Graph1E
Kimhi explains: “Studying math at a higher level makes it possible to be accepted to a more prestigious academic study track, which leads to higher level employment and higher wages. In essence, the importance of learning higher level math is two-fold. First, it directly contributes to the students’ skill level, and second, the very fact that these students have chosen to study math at a higher level indicates their increased capabilities and motivation. We can assume that these two factors help students gain acceptance to prestigious university departments, and at a later stage, also increases their ability to earn more in the labor market.”

The study also found a relationship between the number of units of math studied and the area of academic study (Figure 2). Among those who studied 5 units of math there is a higher rate of graduates in computer science, engineering and the exact sciences, while among those who studied 3 and 4 units there is a higher rate of degree holders in the social sciences, arts and humanities. Holding a degree in computer sciences raises one’s income considerably, but  degrees in engineering and the exact sciences, as well as degrees in economics and business, also have a positive contribution – they are all more common among those who have studied math at a higher level.

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The Taub Center’s research study found that studying 5 units of math is also directly positively correlated with income (that is, statistically controlling for various variables), especially among women. In order to examine the effect of different variables, the researchers controlled for a variety of socioeconomic characteristics: gender, religion, family status, children, homeownership, father and mother’s country of origin, immigrant status, and area of residence. In addition, they took into consideration other bagrut scores that could indicate learning skills and intelligence. Even after all of these variables were taken into consideration, a theoretical scenario analysis showed that moving a student from 4 to 5 units of math study (without a change in his bagrut score) could increase wages by 10% – of this 6% is the direct effect and 4% is due to increased income from the fields of study characteristic of someone learning 5 units of math (primarily computer sciences). The direct effect means that even when the other variables are statistically removed, including the field of academic study, the economic employment sector and profession, differences in income remain to some degree between those examined. Even in this situation the results differed between men and women; while the direct effect is 6% for both men and women, the indirect effect through field of study is 3% for men and 5% for women, which reflects the greater impact of higher level math study on women’s choice of academic field of study. All in all, the effect of moving from 4 to 5 units of math increases the wages of men by 9% and those of women by 11%.

The main conclusion that arises from the study is that the level of math study is of great importance for labor market achievements, including employment rates and income level, and academic field plays a considerable role in this. Studying math at a higher level enables acceptance to more prestigious academic departments like engineering, sciences and computing, and this in turn, has an impact on finding quality employment at higher wage levels.

A decline in the number of those testing at the 5 unit level – a national challenge

Despite the knowledge that math study influences academic studies, there is a continuous decline in the rate of those taking the bagrut exams at the higher math levels – from 20% to some 13% of all examinees between 2006 and 2011. In a recent Taub Center study, Senior Researcher Nachum Blass wrote that a possible reason is the strengthening of the approach that judges a school by its bagrut certification rate, which in turn greatly influences the administrative policy of schools and teachers, and the strengthening of the functional approach to the bagrut certification, that places greater emphasis on the overall average score. Teachers and students make a calculation of what is preferable: a relatively high score on a lower level test or a lower score on a higher level test (say, more units of math), and in this way, both students and schools have come to the conclusion that testing at a lower level is preferable.

In contrast to what is commonly believed, though, the researchers found that there is a positive correlation between the test score and the number of units of study; that is, the test score is higher, on average, as the number of units of study is higher (Figure 3). Thus, the fear of a lower score when testing at a higher level of study is not necessarily justified.

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Moreover, when testing the scenario in which the math study level was increased from 4 to 5 units while the bagrut score was simultaneously reduced by 10 points, it was seen that the reduction in the score decreased the effect of raising the level of study, but did not negate it completely: the average increase in wages in this case was 7% versus 10% if the score remained the same.

In Kimhi’s words: “On the national level, this decline [in students taking the highest level math exam] is cause for concern regarding Israel’s ability to rely on the elite technology sector as an engine for economic market growth.” In order to deal with this decline, the researchers suggest a variety of solutions. First, find a way to make math studies more attractive and less threatening by improving the quality of teaching – not only at the high school level, but also later on. Second, increase awareness among students and their families of the importance of math studies by explaining and familiarizing them with academic institutions and the business sector. Third, offer economic incentives to schools to increase the share of students that take bagrut exams in math at the higher levels. Kimhi adds: “It is appropriate to finance the implementation of these solutions differentially, so that increasing math studies will become a central tool in narrowing socioeconomic gaps.”

The Taub Center for Social Policy Studies in Israel 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communication 054-464-2333.

Announcing The State of the Nation Report 2014

State of the Nation Report, 20142014 SNR cover

Taub Center for Social Policy Studies in Israel

The Taub Center’s annual report, published today (Wednesday), presents a comprehensive picture of Israel’s 2014 socioeconomic situation in comparison to other countries and to the past.  The Report brings together 13 studies in the areas of society, economics, labor, education, social welfare, health, and public expenditures.

A Selection of Findings from the State of the Nation Report, 2014:

Cost of Living

Making Ends Meet: Household Expenditures, Income and Savings in Israel
Eitan Regev (Taub Center Researcher)

  • The average Israeli family cannot “make ends meet;” across all population groups in Israel, expenditures exceed income.  High housing prices are the primary reason for this phenomenon, and for non-Haredi (non-ultra-Orthodox) Jews, the purchase of an apartment is the factor that shifts them from a positive to a negative monthly balance.  The average household cannot purchase an apartment without assistance, which usually comes from their parents’ gradually decreasing savings.
  • Among non-Haredi Jews, average monthly expenditures are NIS 864 higher than monthly income; among Muslims, this gap is NIS 1,919; and among Haredi Jews, the deficit between expenditures and income stands at NIS 3,209 – approximately one-third of their reported income.

Figure 1 enlarged

 

  • Total monthly benefits and support received by Haredi households stand at NIS 3,256, compared to less than NIS 2,000 for households in the other population groups.  The disparity between Haredi Jews and other population groups in terms of the level of financial support they receive is largely the result of funding from organizations other than the National Insurance Institute (the source of the majority of support for other population groups), including the Ministry of Social Affairs and Social Services, the Ministry of Construction and Housing, the Jewish Agency, and yeshivas.  Haredi households receive NIS 1,331 per month, on average, in support from these institutions, while the total monthly support that the average Haredi household receives is NIS 3,256.
  • Although there has not been a notable increase in the price of apartments purchased by Haredi households over the past decade, their average monthly mortgage payments increased by 72% in real terms, and the share of mortgage holders among them increased substantially. Because the financial resources of Haredi households have dwindled considerably over the last decade, they are forced to take out much higher mortgages than in the past in order to buy an apartment at the same price.
  • Between 2003 and 2012, the percentage of purchasers buying an apartment to live in among Haredi and non-Haredi Jewish households was similar. However, the percentage of purchasers of apartments for purposes other than to live in (e.g., for use as investments or for providing for the residence of one’s children) among Haredim is more than double the rate among non-Haredi Jews.  The average monthly spending on real estate among Haredi Jewish households jumped substantially between 2007 and 2012, from NIS 1,374 to NIS 3,190, in comparison to an increase from NIS 1,407 to NIS 1,847 in the same years among non-Haredi Jews.

The Israeli Housing Market
Dr. Noam Gruber (Taub Center Senior Researcher)

  • In recent years,Israeli housing prices have risen rapidly; between
    April 2007 and July 2013,
    prices increased by 53% in real terms.  This rise is due both to increased demand on the one hand – driven mainly by low interest rates and preferential tax treatment – and to rigid supply on the other, rooted in the complex bureaucracy of the construction process, an inherent conflict of interest at the local level, and a high prevalence of condominium apartment living in Israel, which poses an obstacle to urban renewal.
  • Despite the escalating prices of recent years, the percentage of households that do not own an apartment has actually declined, from 27.7% in 2006 to 26.5% in 2012.  Furthermore, the share of households that own two or more apartments has risen nearly four-fold, a finding that reflects an expansion of investment activities in the real estate market.
  • The percentage of young households in the 25-34 age range that do not own a home has increased from 43% in 2003 to 54% in 2012.  In contrast, the share of those aged 65 and over who do not own a home has actually declined.

Figure 2 enlarged

  • There is a clear correlation between housing prices and the number of housing starts in Israel.  In the early 2000s, there was a steep decline in housing starts, with about 1,000 fewer housing starts per month.  The number remained low until 2008, when housing prices began to recover and the number of housing starts began to rise, ultimately returning to its level at the beginning of the decade. The upward trend in housing starts was halted, and even reversed, in mid-2011.
  • The residential construction process in Israel takes an average of 13 years – of which only two years are for construction while the remaining 11 years are devoted to bureaucratic processes – assuming the construction plans are ultimately approved. The stages of the process that stand out for their length are those of district committee approval (five years on average) and local committee approval (three years on average).  By comparison, in most European Union countries, the maximum amount of time needed to obtain a building permit is 8-12 weeks.
  • Israel has very high residential density, as reflected by a low number of rooms per person by international comparison – even relative to countries with higher population densities. Out of 36 countries examined, only 5 countries have a lower average number of rooms per person than does Israel.

 

The Macro Picture and the Labor Market

Labor Market Reform in Israel and the Flexicurity Option
Prof. Dan Ben David, (Taub Center Executive Director) and Liora Bowers (Taub Center Director of Policy)

  • An examination of economic and social indicators in Denmark and Israel shows that in Denmark, the employment rate of men in prime working ages (35 to 54) is 8% higher than in Israel, labor productivity is 63% higher than in Israel, and average annual wages are 57% higher. Moreover, disposable income inequality is one-third lower in Denmark than in Israel, and disposable income poverty rates are 62% lower in Denmark

Figure 3 enlarged

  • The Flexicurity countries (countries characterized by policies that provide relatively high levels of hiring and firing flexibility to employers alongside a financial safety net and employability for workers) have consistently enjoyed the highest employment rates among all developed country groupings since the early 1980s. Conversely, Israel’s low employment rate has placed the country consistently at the bottom of the list, alongside the Mediterranean countries, until recent years.An examination of economic and social indicators in Denmark and Israel shows that in Denmark, the employment rate of men in prime working ages (35 to 54) is 8% higher than in Israel, labor productivity is 63% higher than in Israel, and average annual wages are 57% higher. Moreover, disposable income inequality is one-third lower in Denmark than in Israel, and disposable income poverty rates are 62% lower in Denmark.
  • The chapter proposes labor market reforms based on the advantages of Flexicurity and applicable to Israel.

Labor Income Inequality Trends in Israel
Prof. Ayal Kimhi (Taub Center Deputy Director) and Kyrill Shraberman (Taub Center Researcher)

  • Wage disparities between the 90th percentile and the 50th percentile in Israel are higher than in the rest of the OECD countries.
  • Wage disparities between the 50th percentile and the 10th percentile decreased sharply between 1997 and 2011.  While in 1997, Israel had the highest wage gap between these groups among OECD countries, by 2011, five other countries had larger wage disparities in the bottom half of the income distribution than did Israel.
  • The 7th and 8th income deciles are those primarily hurt as a result of the labor market changes that took place between 1997 and 2011.  Their wages increased at a slower rate relative to those of both lower- and higher-wage earners, and as a result, the wage distribution has become even more polarized.  If workers in the 6th to 8th income deciles may be regarded as middle or upper-middle class, this finding indicates that the gap between the middle and lower classes has narrowed, while the gap between the middle and upper classes has widened.

Figure 4 enlarged

  • In occupations characterized by either low or high wages, work hours increased relative to those occupations characterized by salaries in the middle of the wage distribution.  In essence, a wide range of such middle class workers were made worse off by changes in the labor market, as a result of a relative decrease in both their wages and their work hours.
  • The wage disparities between workers with 16 or more years of education and those with no more than a high school education grew from 83% in 1997 to 88% in 2011.  The return on higher education (i.e., the education wage premium) is greater for men than for women and it only increased for men.  The education wage premium in low-wage occupations rose, while it decreased for higher-wage occupations.  In other words, higher education is becoming economically beneficial for low-wage workers as well.
  • At the beginning of the last decade, income from labor represented two-thirds of Israel’s national income.  Starting in 2001, the share of the national income pie coming from labor has decreased, reaching 62% in 2011.  This means that a smaller portion of national income reaches workers via income from labor, while a larger portion of national income is transferred to the wealthy.  Capital income is concentrated in the upper income deciles, a fact which intensifies the labor market’s already-existing polarization.

The Shadow Economy in Israel
Dr. Noam Gruber (Taub Center Senior Researcher)

  • The size of the shadow economy in Israel is estimated at about 20% of GDP, double that of
    many developed countries.  It is estimated that halving the size of the shadow economy would increase government tax revenue by 3-4% of GDP, or about NIS 30-40 billion.
  • The tax benefits granted by law are particularly biased in favor of large companies. For example, the four largest companies (out of 829 companies with preferential status) receive 60% of the benefits.  The top decile of companies (by revenue) pays a corporate tax rate of 6.8%, less than half of the rate paid by the lowest decile (17.6%). Large companies take advantage of their bargaining power vis-à-vis the government and pay less in taxes relative to benefits – to such an extent that the taxes they pay are even less than the cost of the benefits they receive.  Israel’s tax policies create a greater burden on small businesses than on large ones, and this discrimination may be viewed by the public as a justification for the norm of tax evasion.
  • An international comparison of the tax burden (i.e., VAT/sales tax, corporate tax and dividend tax) as a share of total income, shows that the overall tax rate for small businesses in the country is high relative to Western countries – about 58%, in comparison to the OECD average of 51.5%.

Figure 5 enlarged

  • In 2012, a company in Israel had to spend an average of 235 working hours (about 20 hours a month) to complete the required tax filing process, in contrast to an average of 163 hours in the European Union, 175 hours in the United States, and less than 100 hours in some European countries.  Such a bureaucratic burden is even more onerous to small businesses due to its high cost relative to the businesses’ revenue and particularly their profit.
  • The Israeli Tax Authority does not establish goals for enforcement or service, nor does it operate with budgetary transparency. The Tax Authority apparently allocates less than 1% of its budget for enforcement, such that it is no surprise that enforcement is lenient and limited and that even punishment does not serve as effective deterrence against tax evasion.
  • In countries without a mandatory tax filing requirement, the size of the shadow economy as a share of GDP is about 21%, higher on average than in countries that have a mandatory filing requirement, where the size of the shadow economy is about 16.5% of GDP.  The average cost of tax collection as a share of tax revenues is lower in countries that have a mandatory filing requirement. That is, the data do not support the Tax Authority’s claim that the implementation of mandatory filing would necessarily entail higher costs.

Education                                                                                                                               

Integration of Arab Israelis and Jews in Schools in Israel

Dr. Uri Shwed, Prof. Yossi Shavit (Taub Center Education Policy Program Chair), Maisalon
Dellashi, and Moran Ofek

  • The number of students in mixed schools (those including Jews and Arab Israelis) increased 59% in the years 2003-2013.  In the same period, the number of students in schools without Arab Israelis grew by 9%, and the number of students in schools without Jews grew by 33%.  The share of secondary school students out of all students at mixed schools increased from 52% in 2003 to 58% in 2011.
  • Special education accounts for a substantial portion of mixed schools; among the mixed schools in the Jewish education system that have up to 5% Arab Israeli students (228 schools), 49 are special education schools.  Among mixed schools in the Jewish education system in which the share of Arab Israeli students is between 6% and 50%, special education schools represent a majority.  Among Arab Israeli mixed schools with Jewish students, about one-quarter are classified as special education schools.
  • Analysis of the mixed schools (excluding special education) according to the socio-economic level of the locality in which they are situated shows that mixed schools are prevalent in areas populated mainly by members of the middle and upper-middle class.  Among the lowest socioeconomic clusters, in which the majority of localities are Arab Israeli or Haredi, there is not a single mixed school.  In socioeconomic clusters 3 and 4 (lower middle class), about 4% of students study in mixed schools, while in socioeconomic clusters 9 and 10 (upper-middle and upper class), a greater share of students – around 10% – study in mixed schools.  In fact, mixed schools are concentrated primarily in socioeconomic clusters 5 and higher.  It is important to note, however, that mixing is common mainly in the weakest neighborhoods of the various localities.

Figure 6 enlarged


Trends in the Development of the Education System
Nachum Blass (Taub Center Senior Researcher)

  • The growth of the education budget between 2008 and 2013 enabled the reduction of average class size – the growth in the number of classes was greater than the growth in the number of students.  In the lower secondary schools, there was clear growth in the number of classes (18%), which brought an 11% reduction in average class size.  The average number of students per class in upper secondary schools in the same years decreased by 5%.
  • The educational achievements of Israel’s students have improved; according to 2013 data, not only did the rate of eligibility for matriculation increase to 53.4% of the relevant age group (for the first time since the establishment of the state), but the rate of studying and application for matriculation also increased by more than 3%, a very meaningful achievement when considering the weaker groups within the population.
  • Israeli students improved their results on the international exams (on the latest exams of PISA, TIMSS and PIRLS).  When comparing their achievements to those of students in other countries that participate in all of the exams, a bright picture emerges with regard to Israel’s advancement, both in terms of average scores and in terms of the reduction in the share of weaker students and the increase in the share of stronger students.
  • The share of students taking the matriculation exam for 5 units (the highest level) of mathematics decreased from 20% in 2006 to 13% in 2011.  The share of students taking the matriculation exam for 4 units of mathematics also decreased in the same period, from 29.5% to 26.5%.  The share of students testing in 3 units of mathematics increased by 10%.  This figure should be viewed in light of the substantial increase in the share of students of low socioeconomic background among the twelfth-grade student population.
  • The growth in the education system budgets between 2005 and 2013 somewhat
    compensated for the continued discrimination in funding against the Arab Israeli sector of the education system.  In primary education, the budget per class in the Arab Israeli sector was higher than that of the Jewish sector as early as 2005, but the budget per student was substantially lower (This is due to a much higher average class size in the Arab Israeli sector).  While in primary education, the additional funding provided per class in the Arab Israeli sector was similar to that provided in the Jewish sector, because the size of Arab Israeli classes has decreased, the allocation per student in the Arab Israeli sector has increased much more (45% in the Arab Israeli sector and 25% in the Jewish sector). A similar process took place in secondary education; however, even though the allocation per student in Arab Israeli secondary schools has increased at a higher rate, it is still lower than the allocation per student in Jewish schools.

Figure 7 enlarged

Poverty and Social Welfare

Poverty within the Elderly Population in Israel
Prof. Haya Stier and Haim Bleikh (Taub Center Researcher)

  • The poverty rate among the elderly (Israelis who have reached the retirement age) is decreasing over time, despite an increase in the poverty rate among the general population. This result is primarily due to pensions, with poverty rates among those who are eligible for pensions at a very low level.  Even so, in terms of disposable income (after taxes and transfers), one of out of every six elderly households in Israel is below the poverty line.
  • Examination of the depth of poverty – the gap between the average income of poor households and the poverty line – reveals that in 2011, the average income of poor households with elderly persons was about 24% below the poverty line, in comparison to an average of 36% below the poverty line for poor households without elderly persons.  Nevertheless, the depth of poverty among both groups rose and the situation of the poor elderly is worse today, on average, than it was in the past.
  • Division into population groups clearly indicates that the poverty rate among elderly Arab
    Israelis is the highest – almost 60% live below the poverty line, as compared to 18% of immigrants from the former Soviet Union and 11% of Jewish veteran Israelis (those born in Israel or who immigrated before 1990).  In the last few decades, the poverty rate among Jewish veteran Israelis has decreased, as has been the case among immigrants from the former Soviet Union over the last few years.  However, among the elderly Arab Israeli population, the poverty rate is high and stable – approximately 50% in most years between 1997 and the present, including a peak rate of 60% in 2010.

Figure 8 enlarged

  • About two-thirds of elderly Jewish veteran Israelis enjoy income from pensions.  Only 20% of immigrants from the former Soviet Union receive a pension, although this rate is on the rise.  Fewer than 15% of elderly Arab Israelis receive pensions due to the continuing challenges facing the Arab Israeli population within the labor market.
  • Among immigrants from the former Soviet Union who live in a household headed by an elderly person, transfer payments from the government reduce the share of poor households by 76%; among elderly former Soviet Union immigrants living in households headed by a younger (non-elderly) person, transfer payments reduce the share of poor households by 85%. Among veteran Israelis, the reduction in poverty due to government transfers reaches 69% of households headed by working-age individuals and 67% of households headed by elderly individuals.  Among Arab Israelis, the reduction is much lower among both types of living arrangements, standing at only 23% for households headed by an elderly individual and 32% for households headed by working-age individuals.
  • Living arrangements, particularly among the population entirely dependent on government subsidies, affect the likelihood of elderly individuals above retirement age finding themselves under the poverty line.  Those heading their own households are more likely to be poor than those living within the framework of an extended family (i.e., households headed by working-age adults).

Welfare Budgets for Israel’s Elderly Population

Sagit Azary-Viesel (Taub Center Researcher) and Prof. Haya Stier

  • The total budget allocated to the elderly increased from NIS 19.8 billion in 2005 to NIS 25.9 billion in 2012, but a detailed examination of the assistance provided through various programs reveals budgetary erosion in some areas, such as in housing.
  • Total allowances granted by the National Insurance Institute for the elderly, which help keep the elderly above the poverty line, have increased. Nonetheless, the level of benefits has eroded over time relative to the increase in the overall standard of living.
  • Between 1990 and 2012, the average expenditure per capita on long-term care benefits increased from NIS 1,859 to NIS 2,561 per month (in 2012 prices). The number of those eligible for the long-term care benefit has also increased over the years, despite the rise in the entitlement age.  During these years, the number eligible increased nearly five-fold – a sharp rise, even relative to the growth in the size of the elderly population during that time.  In 2012, the share of long-term care benefit recipients among the over-65 population was 21%, as compared to 8.3% in 1991.
  • Aside from allowances, many services are granted to the elderly, but such services and their budgets are dispersed among various government ministries.  This dispersion impacts the ability to monitor the use of budgets, leads to the wasting of resources and results in diminished uptake of benefits among the elderly population.
  • A budget analysis of the Unit of Service to the Elderly at the Ministry of Social Affairs and Social Services 2005 through 2012 shows a gap of tens of percentage points between the original budget and actual spending.  Actual spending in 2012 was only 46% of the approved budget for the Unit in that year.

Figure 9 enlraged

  • The average rent assistance provided to those eligible has eroded substantially; from 40% of average rent costs in 2005 to 25% of average rent costs in 2012.  The erosion mainly stems from a substantial increase in rent costs, at a rate of about 5% on average per year, in contrast to minimal increases of about 0.3% on average per year in the level of assistance. In addition, funding for assisted living has decreased over time, even though the size of the elderly population has grown, particularly the specific population for which this assistance is intended. In addition, the share of the elderly population that lives in public rental housing has declined, from 13.6% in 2003 to 11.4% in 2011.

Patterns of Food Expenditures in Israel
Prof. Dov Chernichovsky (Taub Center Health Policy Program Chair) and Eitan Regev (Taub Center Researcher)

  • The per capita expenditure on food in the lowest income quintile is NIS 517 per month.  In
    the highest income quintile, the expenditure stands at NIS 1,224 monthly, that is, 2.4 times that of the lowest quintile.
  • In 2005, most food products in Israel were cheaper in comparison to the OECD, but within six years alone, all food categories (aside from vegetables and fruit) have surpassed the OECD in terms of price. Dairy products in Israel were only 6% more expensive than the OECD average in 2005, but were 51% more expensive in 2011; fish products were 30% cheaper in 2005, but were 25% more expensive than the OECD average in 2011.  Fruits and vegetables, as noted, remain slightly cheaper in Israel than in the OECD in 2011, but in 2005, they were substantially cheaper (a gap of 15% in 2011 versus 40% in 2005).  The sharp rise in food prices in recent years in Israel has negatively impacted the makeup of food consumption, especially among poor families who have to forgo more fruits and vegetables, dairy products and fish.

CaptureFigure 10 enlarged

Healthcare

Financing and Workforce Trends in the Healthcare System
Prof. Dov Chernichovsky (Taub Center Health Policy Program Chair) and Eitan Regev (Taub Center Researcher)

  • Public funding of healthcare expenditures relative to GDP in Israel has declined over time.  This stands in contrast to trends in the United States and the OECD, where the share of public funding has increased, such that the gap between Israel and developed countries is widening.  In 1995, Israel, the US and the OECD countries all spent between 5-6% of GDP on public expenditures for healthcare; in contrast, in 2011, the US spent more than 7%, the OECD countries spent almost 7% and Israel spent less than 5%.  That is, relative to its resources, Israel devotes a very little – and declining – share to public funding of the
    healthcare system.
  • Over the last three decades, the supply of young doctors (aged 35 and under) per thousand people has decreased by 60%.  In parallel, the supply of older physicians (aged 65 and over) in the population has increased by 95%.  Given the overall decline in the share of doctors relative to the population in Israel, the trend of aging among physicians could lead to a further, substantial reduction in the supply of physicians in the workforce.

Figure 11 enlarged

Health Status and Healthcare System Budgeting in Israel in the Context of Disability Adjusted Life Years (DALYs)

Prof. Dov Chernichovsky (Taub Center Health Policy Program Chair) and Liora Bowers (Taub Center Director of Policy)

  • The study examined the Israeli health system in terms of the DALYs (Disability-Adjusted Life Years) metric. While measures of health system performance in Israel and globally are generally based on mortality rates, the DALYs metric is based on the burden of disease caused by both premature death and illness and disability, thereby providing a more comprehensive picture of health status.
  • While cardiovascular diseases and major cancers are responsible for 42% of mortality, their contribution to overall disease burden (measured by DALYs) stands at only 18%. In contrast, orthopedic problems and major depressive disorders, which contribute to 19% of overall disease burden, are almost non-existent among the causes of death.

Figure 12 enlarged

  • In the public healthcare system budget (based on the capitation formula used to fund the HMOs), current allocations for the 15-54 year-old age groups, populations which are very important in terms of their role within households and in the labor market, are relatively low compared to this population’s share of disease burden based on DALYs.
  • The Health Basket Committee dedicates almost half of its annual budget to treatments of cancer-related illnesses, which are among the main causes of mortality.  In contrast, new funding for treatment of orthopedic and mental health disorders, which are among the key causes of disease burden, is minimal. This is due in part to the narrow mandate of this Committee, which is not permitted to recommend alternative treatment methods that do not entail new technologies.

 

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.

 

This press release and related materials are for publication only as of Wednesday, 17/12/14 at 6:00 am.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communications 054-464-2333.

 

 

Taub Center study: Countries implementing Flexicurity policies exhibit considerably better socioeconomic outcomes than Israel

  • Flexicurity countries are also characterized by higher rates of employment and lower rates of poverty and income inequality than Israel.
  • The Taub Center study examines how Flexicurity works and suggests policy directions for implementation in Israel as part of a comprehensive labor reform.

In their new study, “Labor Market Reform in Israel and the Flexicurity Option,” which will be published in the Taub Center’s upcoming State of the Nation Report 2014, researchers Prof. Dan Ben-David and Liora Bowers focus on a set of labor market policies known as Flexicurity.  Such policies provide relatively high levels of hiring and firing flexibility to employers alongside providing a financial safety net and employability for workers.

Combining some of the developed world’s lowest productivity levels with its highest rates of poverty and income inequality, Israel is situated on socioeconomic trajectories that are unsustainable in the long run.  The country is in need of extensive education and labor market reforms.  The Ben-David and Bowers study focuses on employment, and examines the issue of Flexicurity and its applicability to Israel.  This is a system currently in place, in various forms, in the Nordic countries of Denmark, Norway, Finland and Sweden, along with the Netherlands (together, the “Flexicurity countries”).

The study highlights the range of flexibility in the labor market and financial and employability security among different country groupings (Figure 1).

E Flexicurity Fig 1

While the Flexicurity countries and the Continental countries (Austria, Belgium, Germany, and France) both provide a strong financial safety net for individuals during transition periods, the Flexicurity countries invest more heavily in active labor market policies to help the unemployed reenter the labor market, and also grant substantially more hiring and firing flexibility to employers.  Nonetheless, both country groupings perform similarly well on socioeconomic indicators such as wages, productivity, employment, poverty and inequality – demonstrating that no one set of policy prescriptions is ideal for all countries.  It is important to note, however, that both the Flexicurity and Continental country groupings have much better economic and social outcomes than Israel (as can be seen in Figures 2 – 6).

E Flexicurity Fig 2 E Flexicurity Fig 3 E Flexicurity Fig 4

E Flexicurity Fig 5 E Flexicurity Fig 6

The Taub Center study also determined the share of Israeli workers in each economic sector, and provides a breakdown between workers who are covered under collective bargaining agreements and those who are not (Figure 7).  Sectors where employees have high job protection include the public sector, water and electricity, and portions of manufacturing and banking.

E Flexicurity Fig 7

One possible proxy for employment flexibility is the share of employees covered by collective agreements.  In Israel, an estimated 50 percent of employees are covered by such agreements.  As shown in Figure 8, there is a positive relationship between coverage rate of employees and hourly wages.  On the lower left side of the figure, with the lowest rates of collective agreement coverage and lowest average hourly wages are workers in hotels and restaurants.  Close by are the agriculture and construction sectors, also with low coverage rates and low hourly wages.  At the top far right of the diagram are the electricity and water workers.  This sector comprises a relatively small number of workers; nearly all are covered by collective agreements and their average wages are the highest of all the sectors.

E Flexicurity Fig 8

While the positive link between collective agreement coverage and hourly wages appears to be quite strong, this relationship should nonetheless be qualified.  For example, hourly wages are also linked to education levels and there tends to be a positive relationship between number of years of education and coverage rates as well as between the share of academics in each sector and coverage rates.  On the other hand, it is not obvious that this link is due to higher productivity, since Israeli collective bargaining agreements invariably contain clauses providing for higher wages to individuals with academic degrees – whether or not the academic education received is even related to their work and actually increases productivity.

Flexicurity policies reflect an attempt at finding a win-win arrangement between workers, employers and policymakers.  Productivity improvements need to be a fundamental facet of Flexicurity policies, since higher productivity paves the way for higher living standards that make it possible for the government to incur the substantial budgetary costs that accompany implementation of such policies.  Therefore, such a solution needs to encompass flexibility in the labor market, along with financial support for the unemployed (limited in time) and continuous training provided by the government and employers.

The requirements for success of the Flexicurity model are flexible labor markets, lifelong learning for employees, active labor market policies and social security systems that provide financial support during transition periods.  Moving Israel towards a Flexicurity model entails various benefits as well as challenges.  It would be highly beneficial to implement policies that would improve the country’s competitiveness, including substantially spurring its currently low labor productivity.  Improvements in the social welfare system that would be reflected in lower rates of poverty and income inequality are particularly essential to the model, given Israel’s weak performance in this area – though there is concern about the possible adverse effects on employment if these changes are not part of a comprehensive policy.

Various aspects of Flexicurity policy could be applied in Israel and could yield considerable socioeconomic improvements.  According to Ben-David and Bowers, for Flexicurity to succeed, both the public and private sectors should be more aligned with regards to employment flexibility.  This would require greater flexibility in the public sector, including such practices as: facilitation of hiring from outside the public sector and greater mobility between the public and private sectors; decentralization of human resources management to provide departments and managers with greater discretion; and a closer connection between individual performance and their compensation and promotion.  To more closely align with much of the private sector, the public sector (and parts of the inflexible private sector, such as banking/insurance), also need to move away from the norm of lifelong employment and rigid dismissal and tenure policies.

The Taub Center study makes it clear that for Israel, applying key elements of Flexicurity means much greater expenditure on welfare alongside the initiation of new labor activation programs, such as a revamped “Wisconsin program” meant to train and connect the unemployed with new opportunities.   The researchers add that “ensuring the continued availability of childcare, which is relatively accessible in Israel – and growing due to the expansion of universal preschool starting age three – is an important contributor to labor market participation.”

The Flexicurity model’s generous income support benefits create adverse incentives for prompt re-entry into the labor market.  Ben-David and Bowers note that it is possible to counter these disincentives with activation policies and monitoring systems.  They state that “in Israel, policies such as a more substantial negative income tax could help provide incentives to work.  Much better enforcement of existing labor laws (notably on minimum wage, working hours and discrimination) is imperative to encourage labor market participation by and provide security for lower-skilled workers.”

Another key principle of the Flexicurity system is the obligation of the government, employers and individuals to lifelong learning.  The Taub Center researchers point out that “employment contracts stipulating continued learning, and government-supported career guidance, training and education opportunities are an important policy response to increased job insecurity.”

In summary, while implementation of the full Flexicurity system is not a politically feasible or economically viable option for Israel, there are certainly facets of the system that the country can and should implement.  The overarching policy goal should be to enhance productivity, growth and employment while providing a serious social safety net for Israelis that offers adequate financial peace of mind during job transitions, in which they are assisted in improving their job skills.  These policy options are indeed possible, but their implementation will require an extensive and systemic reassessment of Israel’s national priorities.

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communications 054-464-2333.

Taub Center Conference on Strategic Planning and Long-Term Thinking in Policymaking

Main findings and quotes from the Taub Center 2014 Conference on “Strategic Planning and Long-Term Thinking in Policymaking”

  • Prof. Dan Ben-David presented findings from his research, including new and particularly concerning data showing that since international testing began, Israel’s ranking in terms of pupil achievement in core studies has steadily deteriorated. Over the past 15 years, Israeli pupils consistently ranked at the bottom of the list of countries (Table 1). In addition, since 1999, Israel has had the highest achievement gaps in the Western world between pupils of different groups, and as Ben-David notes, “it is no surprise that Israel’s large educational gaps later manifest themselves in some of the highest inequality rates in the West.”
  • Prof. Momi Dahan critiqued the way that decisions are reached: “Israelis invest more effort in the process of buying a kettle than we do in designing policy. The future we desire is relatively obvious, but we’re not doing what we need to do in order to make it happen.”
  • Prof. Omer Moav criticized policymakers who, in his opinion, make decisions that are economically irrational.  Such policymakers include Minister of Finance Yair Lapid, MK Shelly Yachimovich, MK Tamar Zandberg and MK Stav Shafir: “Stav Shafir says that in order to ease the housing problem, we must regulate rent prices – but the impact of such a policy would be to reduce rent prices to below the equilibrium level. The fact is that everywhere that rent control has been implemented, it has led to a shortage of housing, poor construction and neglect of properties.”
  • Prof. Steven Popper spoke based on his experience of working with the Israeli government: “The institutions of government created in an earlier era, when Israel was founded, are not necessarily well-suited to challenges the country faces today.”
  • Minister Silvan Shalom: “If we pay less for electricity, water and gas – that will truly fight against the high cost of living.  Effective planning can help lower the price of goods.”
  • MK Avishay Braverman, Chair of the Knesset Economic Affairs Committee, criticized the government: “Israel is a corrupt society. Each minister works only for himself and each minister wants to be Prime Minister in a flash.  Long-term planning is of no interest to them, and instead, they compete to see who will be the first to have the best gimmick.” He said that “elected officials operate according to what looks appealing in the media, and not for the public good.”
  • MK Orly Levi-Abekasis, Chair of the Knesset Committee on the Rights of the Child, argued that the government failed to identify long-term failures in the housing market, even though the data was clearly visible.  She said, “We cannot consider policy for the long-term if we do not first look at today’s reality in comparison to the past.”
  • Mr. Ron Huldai, Mayor of Tel Aviv-Jaffa, said: “In Israel, things happen when there is a crisis. Widening the Ayalon Highway, cleaning up the Yarkon, the municipal sewage system – all are plans that began due to crisis.” He criticized the central government, arguing that the ministers are not selected based on their success in the role, and thus have no incentive to improve outcomes.

The Israeli Context: Findings and Key Issues

The conference opened with presentations by three of the most senior economists in Israel – Prof. Omer Moav, Prof. Momi Dahan, and Prof. Dan Ben-David. This unique session did not focus on their world views, which differ greatly from one another.  Instead, the three economists presented a unified call to the country’s leadership to establish strategic, long-term plans that will determine the future of Israel, to outline the stages that are necessary to achieve these goals, and to propose how they intend to move Israel in this direction.  In addition, they called for actions to be based on facts, rather than on intuition or widespread public opinion that is often mistaken.

Prof. Dan Ben-David, Taub Center Executive Director, presented findings on long-term social and economic trajectories in the areas of economic growth, inequality, employment, education, and transportation infrastructure.  In the words of Prof. Ben-David, “the government must understand the extent of the continuing trends of the last 40 years and internalize that these are unsustainable. There is an urgent need for serious, professional solutions for these issues.”  Prof. Ben-David presented some of the worrying findings that emerge from his research, for example, that the rates of disposable income inequality in Israel are amongst the highest in the world.  A new finding by Ben-David that is especially concerning is that since international testing began, Israel’s ranking in terms of pupil achievement in core studies has steadily deteriorated.  Over the past 15 years, Israeli pupils consistently ranked at the bottom of the list of countries (Table 1).  In addition, since 1999, Israel has had the highest achievement gaps in the Western world between pupils of different groups, and as Ben-David notes, “it is no surprise that Israel’s large educational gaps later manifest themselves in some of the highest inequality rates in the West.”

Prof. Momi Dahan focused on the work of the government.  In his words, “Israelis invest more effort in the process of buying a kettle than we do in designing policy.  The future we desire is relatively obvious, but we’re not doing what we need to do to make it happen.”  Dahan went through a series of steps for creating policy, ranging from planning for the future to following up on the policy with research and evaluation.  He noted that policymakers today do not receive policy alternatives, which has a critical influence on the functioning of Israel’s democracy.  He gave the example of the “Zero Value Added Tax” (VAT) plan for housing, noting that it was proposed without any groundwork, such that even the costs and benefits are unknown.  In closing, Prof. Dahan said that policy should be made in a manner similar to consumer behavior: policy makers should examine several alternatives via assessing costs and needs.

Prof. Omer Moav also spoke about the importance of understanding the facts when making decisions.  “We all want a country with greater welfare and fewer gaps between groups,” he said, “but in the public discourse, there is confusion between means and ends, and there is no one checking that the means are moving us towards the ends.”  For example, he said, raising the minimum wage is, on the surface, a step that advances welfare.  In practice, however, it could lead to a rise in unemployment and in the cost of living.  Prof. Moav distinguished between those who “create value” and those who “live off the value of others.”  Among the latter, he pointed to farmers who have a monopoly on certain crops and who avoid potential competition by blocking imports. He also singled out worker’s committees as well as public sector tenure, which prevents advancement for the benefit of the public. Prof. Moav also criticized the voices calling for government regulation of rental prices: “Stav Shafir says that in order to ease the housing problem, we must regulate rent prices – but the impact of such a policy would be to reduce rent prices to below the equilibrium level. The fact is that everywhere that rent control has been implemented, it has led to a shortage of housing, poor construction and neglect of properties.”  In his words, “if we were to adopt the approach of protecting jobs, even at the expense of societal welfare, there would be no rise in the standard of living.  The rise in the standard of living is made possible through progress – and blocking progress is what harms welfare.”

Guest Speaker

Keynote speaker Prof. Steven Popper of the RAND Corporation provided an international perspective, including examples from other countries on the importance of long-term planning and the need to rely on facts in strategic decision-making. He opened with the question “How can we make the Israeli government think in a simple and focused way?”

Prof. Popper spoke about goal-setting as a first and critical step in strategy formation, and noted that establishing measurement and evaluation criteria for strategy is important.  He also discussed the importance of a planning process that is not dependent only on internal government knowledge, but which is also aided by external advisors and is flexible and adaptive.

Regarding Israel, Prof. Popper urged local policymakers to adopt an international approach to strategic planning, which can help them make decisions quickly on the basis of long-term goals, analysis and assessment. In his words, “The institutions of government created in an earlier era, when Israel was founded, are not necessarily well-suited to the challenges the country faces today.”  He also noted that adaptation and efficiency do not come from improvising in the short term.

Popper identified several challenges to strategic planning in Israel today, among them: a tendency to be reactive and not proactive; difficulties in coordination across government ministries; insufficient use of research; inadequate outcomes measurement and evaluation of policy; and policy formation for an extremely heterogeneous society. Despite the many challenges, Prof. Popper reminded the audience of recent positive developments due to the government’s efforts of October 2012, among which are the establishment of a strategic planning department in the Prime Minister’s office and attempts to increase demand for strategic planning within government bodies. “In the past, Israel saw itself as a unique phenomenon, but today the government and policymakers are hungry for international comparison and to understand Israel’s performance in the global context,” he concluded.

Planning in Practice

The participants in the policymakers’ session discussed the topic of strategic planning and long-term thinking in policy formation, relying on the findings that were presented at the conference as well as on their rich understanding of the field.

MK Silvan Shalom, Minister of National Infrastructure, Energy and Water, Minister of Development of the Negev and Galil, and Minister of Regional Cooperation, said: “Sometimes we make decisions that appear to be short-term, but often they are actually long-term decisions, because the projects themselves are for the long term.” He used the example of water, where Israel has a long-term plan and, thanks to desalinization efforts, the country does not suffer from a water shortage today despite the low rain fall of the past few years.  Minister Shalom linked long-term planning to the issue of energy – the building of power plants, desalinization plants, and the like – and the ability of the government to provide services for its citizens.  He said that “if we pay less for electricity, water and gas – that will truly fight against the high cost of living.  Effective planning can help lower the price of goods.”

MK Prof. Avishay Braverman, Chair of the Knesset Economic Affairs Committee, was critical of the way information is provided to the public: “People say – look, low unemployment, reasonable debt to GDP ratio, growth is good.  But the question is who benefits from this growth?  For years, they have lied to us by highlighting the average wage.  Only now have they remembered to examine the median wage, which shows that the situation is not so bright.”  He declared emphatically that “Israel is a corrupt society,” and he criticized elected officials who operate according to what looks appealing in the media, and not for the public good.  He claimed, for example, that “gas in Israel is a monopoly – the price is much higher than in other countries.”  Relating to long-term planning, Braverman said that “every minister works only for himself, every minister wants to be the Prime Minister in a flash.”  To address this situation, he suggested “less legislation and more norms. Knesset members pass legislation and they become famous, but they fail to consider the long term. We need people who aren’t just thinking about the next office they will run for.”

MK Orly Levi-Abekasis, Chair of the Knesset Committee on the Rights of the Child, sniped at her government colleague, Minister Silvan Shalom: “According to Minister Shalom, we can shut down the Taub Center because the situation is wonderful.  In the world that I live in, the reality is much different.”  In her talk, she addressed the importance of comparative data in policy planning, and said that “when I try to deal with a particular subject, such as public housing, and I want data, I request it from the Knesset research department.  But it turns out that there are tremendous gaps between the data from the Knesset research department and data from the Ministry of Finance or the State Comptroller’s office.”  She added that “the people in the Ministry of Finance don’t do their homework – it is absurd and bizarre.”  Regarding the issue of housing, Levi-Abekasis said, “We cannot consider policy for the long term if we do not first look at today’s reality in comparison to the past.  In a 2006 Taub Center study, there was discussion of failures in the mortgage market and recommended options for addressing them, so don’t tell me that we could not have predicted what happened.”

Jerusalem Mayor Nir Barkat described the vision for the city of Jerusalem that was outlined during his administration.  Barkat explained how he utilized strategic planning to strengthen the city in three core areas in which it has a relative advantage: culture and tourism, life sciences research, and development of remote service centers.  In Barkat’s words, “even before we get to budget discussions, there are plans.  Every division must present plans that have the power to impact, that can be measured and that are attainable.  On a quarterly basis, we convene and examine what succeeded and what didn’t – we then create an interim summary and make adjustments as needed.”

Mayor Ron Huldai, Mayor of Tel Aviv-Jaffa, stated that “in Israel, things happen when there is a crisis. Widening the Ayalon Highway, cleaning up the Yarkon, the municipal sewage system – all are plans that began due to crisis.”  He criticized the central government, arguing that the ministers are not selected based on their success in the role, and thus have no need to try to improve outcomes.  A key point in Huldai’s talk was the importance of decentralization of government. In his words, “all of the authority is in the hands of the State, while all the ability to implement is in the hands of the local authorities.  Therefore, it is very important to transfer authority over to the local government.”

Prof. Nathan Sussman, Director of Research at the Bank of Israel and a professor at Hebrew University, noted the importance of the banks’ credibility in the public eye in order to ensure their long-term stability.  He said that at the Bank of Israel “we follow and monitor the government budget from the perspective of five to six years into the future.” He also spoke of the important trends that are sure to have a significant impact in the coming decade: the aging of the population, sources of capital that will spur the economy over the next decade, changes in the savings patterns of the Israeli public and more.

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.
 

A new Taub Center study: which basic necessities low-income Israeli families forego?

  • Average monthly spending per person on food in Israel is about NIS 700, of which about NIS 660 is considered normative (i.e., the standard level of spending needed to fulfill household food needs).
  • An average Israeli in the lowest income decile needs NIS 192 more per month to reach the normative spending level, while a person in the second lowest income decile needs an extra NIS 99 per month.
  • Low-income families spend close to the normative amount on meat and chicken, bread and grains, and oil/fats, but cut back on eggs, dairy, and especially fresh fruits and vegetables.

Every year, as the Jewish New Year approaches, the issue of food insecurity rises to the top of the public agenda.  According to figures from the National Insurance Institute, about 320,000 households in Israel – nearly a million people – suffer from food insecurity.  A new study by Prof. Dov Chernichovsky and Eitan Regev, to be published in the Taub Center’s upcoming State of the Nation Report 2014, examines the average per person spending on food and establishes a normative level of food spending in Israel (i.e., the standard level of spending needed to fulfill household food needs).  The researchers also examined the types of food that low income households forego.

Chernichovsky and Regev found that an average Israeli spends about NIS 700 per month on food, which represents 17% of household income and 21% of household expenditures.  Fruit and vegetables account for the largest share (18%) of the household food budget, followed by meat and chicken at 16% (Figure 1).

E Food Insecurity Fig 1

The Taub Center study also examined how changes in income or household size affect food spending.  There are certain staples for which spending is minimally influenced by changes in income, but is greatly influenced by the number of people in the household.  In other words, even as income drops, expenses for such items remain relatively steady, and even a household with fewer resources would have difficulty foregoing these items. The items determined to be most essential for Israeli households are meat and chicken, bread and grains, and oil/fats. Items considered “somewhat necessary” include dairy items and eggs, fish, and fruits and vegetables. Thus, as income declines, households are more likely to forego purchasing “somewhat necessary” products (e.g., dairy, fish and vegetables), and to maintain spending on meat and chicken, bread products, and oil.

Chernichovsky and Regev concluded that out of an average monthly per person food expenditure of nearly NIS 700, about NIS 660 is considered “normative spending.” This classification is based on the broad income range for which food spending remains relatively stable and fixed (the green bars in Figure 2).  The study found that in the lowest and second lowest income deciles, monthly per person spending on food is lower than the normative amount by NIS 192 and NIS 99, respectively.

E Food Insecurity Fig 2

The Taub Center study also determined the “normative expenditure” for different food groups (Table 1).  Groups with the highest normative spending include fruits and vegetables (NIS 137), meat and chicken (NIS 110), and dairy and eggs (NIS 101).  The study found that households in the lowest income decile have difficulty affording meat and chicken, and their spending on these items is 25% lower than the normative expenditure.  Moreover, the second income decile spends 22% less and the lowest income decile spends 29% less than the normative expenditure level on dairy and eggs.  The foregone amount of spending on fruits and vegetables was even larger.  The second lowest income decile has a shortfall of NIS 25 (18% of the normative expenditure) while the lowest income decile has a shortfall of NIS 48 (35% of the normative expenditure) in terms of fruit and vegetable consumption.  The picture that emerges suggests a substantial shortage of these food groups for the lower deciles.

E Food Insecurity Table 1

Chernichovsky concludes: “The patterns of food spending by Israeli households are not surprising: the burden of food expenditures is greater as per person income declines. Nevertheless, there are surprising and important findings on the type of food items that poor families forego. For example, it is concerning that spending on fruits and vegetables and to some extent, also on dairy products, follows the same pattern as spending for luxury items. As such, a decline in income is likely to result in not only a lack of food, but also a reduction in nutritional quality.” Regev adds: “Policymakers must formulate policies to relieve the distress of households whose ability to purchase food necessities falls below what is considered the norm.”

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communications 054-464-2333.

 

As the school year begins: The Taub Center publishes a new study on Israel’s education budget

A new Taub Center study by Nachum Blass and Yulia Cogan on the education budget in Israel examined two central issues: (1) a comparison of the current education budget to education budgets in previous years as well as to education budgets in other countries; and (2) the budget’s structure and transparency – or lack thereof. The study found that the Education Ministry’s final, end-of-year, budget grew (that is, money that was actually spent) by 45 percent in real terms (i.e., after accounting for inflation) between 2000 and 2012. Even after adjusting for the number of pupils, which increased by 24% from 2000 to 2012, there is an increase in per pupil expenditure, which grew particularly quickly between 2009 and 2012 (Figure 1). The reason for this rapid growth is the implementation of the comprehensive wage bargaining agreements with the teachers’ unions as well as the accelerated implementation of the Compulsory Education Law for children aged 3-4, two processes that demanded greater spending. E Education Budget Fig 1 The comparison of the education expenditure per pupil in Israel with that of the OECD countries shows that OECD countries invest more in education at every age group – and until 2008, the gap was growing with Israel falling further behind. Since 2008, however, the first year of implementation of the new “Ofek Hadash” wage agreement with Israel’s primary school teachers, education spending has increased dramatically (Figure 1), while the OECD expenditure has frozen or even decreased. The subsequent “Oz Le’Tmurah” wage agreement with secondary school teachers will be reflected in the 2012-2015 budgets, while the plans for completing the implementation of the Compulsory Education Law for children aged 3-4 will be primarily reflected in the 2013-2014 budgets. Consequently, Israel’s expenditure per pupil is expected to continue rising in the next few years – both in real terms as well as relative to the OECD. As Nachum Blass notes: “During the period in question, the data simply does not support the conventional wisdom that education budgets have been cut.” Lack of transparency in the education budget The government budget, and in particular the education budget, reflects government priorities in allocating available resources. In the words of Blass and Cogan, “the budgetary discussions are supposedly open and transparent to the public, but in fact, the budget is more like a maze, even for professionals.” The study examined three levels of the budget: the original budget, the amended budget (which reflects changes to the budget during the year), and the final budget (which reflects the actual expenditures made over the course of the year). Taub Center researchers Blass and Cogan found large differences between these budgets. For example, changes in the 2012 Ministry budget included additions totaling NIS 10.5 billion as well as reductions totaling NIS 6.1 billion – i.e., total changes reaching NIS 16.6 billion, or nearly half of the budget. In Blass’s words, “the value of budgetary planning declines considerably when half of the budget is changed during the course of the year. It is important to stress that this is a multi-year average, and so these deviations from the original budget are not random but serve to reflect a budgetary policy that is clear to those in charge of the education system’s budget but is obscured (at least at the time of full debate on the original budget) from the public.” Examples of the lack of transparency in selected areas Blass and Cogan conducted a micro level analysis of budget lines, and found that, even at this level, it was very difficult to trace the spending and to determine whether actual expenditures aligned with the items specified by the Ministry of Education. For example, it was found that the budget allocated for district departments was hardly spent from 2005 to 2012 and apparently served as a sort of “hidden reserve fund,” enabling transfers to Yeshiva institutions to exceed the original budget by 35 percent (Table 1). E Education Budget Table 1 At the budget line level, which allows for finer resolution, the same phenomena are seen. Weak populations. The goal of the Ministry of Education’s Shahar Division is to advance weaker populations and to narrow educational gaps. In the years examined, NIS 183 million was originally budgeted, though the amended budget rose to NIS 412 million, on average, for this program. The actual spending, as indicated in the final budget, stood at NIS 341 million on average. In other words, the amended budget was more than double the original budget while the final budget exceeded the original budget by 86 percent. Blass explains: “This is a pattern that repeats itself annually in certain budget line items. In the original budget – the one that is up for public discussion – a program may be budgeted much lower than the true budgetary intention. During the course of the year, significant amounts of money are then added, away from the public eye, yielding an final budget that is considerably greater than the one put forth in the original budget.” Another example of the lack of budgetary transparency is the budget item entitled “lowering the number of pupils per class.” From 2009 to 2011, the original budget allocated some NIS 218 million for this purpose, but the implementation and final budget was zero. It seems that this section essentially became a reserve budget, like others that remained unutilized until transferred and used elsewhere. Improving achievements. After the publication of improvement in achievements on the 2011 international TIMSS exams, there was a public debate about whether these achievements were the result of preparation for these specific exams or whether there was a real systemic improvement in the system. The Ministry of Education claimed that the better scores were the result of massive investment in extra teaching hours in lower secondary schools. The Taub Center researchers found, however, that although there is a “program for improving achievements” budget line for some NIS 370 million, it appears only in 2010 (the year preceding the exams) and does not appear again in 2011 or in 2012. Moreover, it appears only in the original budget, and does not appear in the amended or final budgets. Can one conclude that this budget was not utilized? Not necessarily. Blass and Cogan suspect that this budget was transferred to and used by the “general learning hours” budget line instead. Compulsory Education Law through 12th grade. In July 2007, the Knesset passed a law requiring compulsory education through 12th grade. Until 2011, however, it was not included in the education budget, at which time NIS 17 million was allocated towards it in the original budget. In the amended budget, the amount was already reduced to about NIS 1 million, while the actual spending was zero. As Blass notes: “The fact that the Ministry of Education dragged its feet for four years in budgeting the law, and in the end budgeted it with a minimal amount of money that was ultimately not utilized, speaks for itself.” Transfers to Yeshiva institutions. A particularly interesting phenomenon in these budget lines is the contradiction between the cuts in the original budget in 2005-2008 and the sharp increase in 2009. It appears that following the change of government in 2009, two actions were taken: the original budget was brought in line with the amended budget, and, at the same time, the amended budget was increased by 27 percent. In the words of the Taub Center researchers: “When the budget changes were examined, it is clear that the purported cuts between 2005 and 2008 were fictitious – since in fact both the amended and final budgets grew continuously from 2005 to 2007 and remained unchanged in 2008.” The changes were made during the course of the year, although it was clear that they were already anticipated as the original budget was being planned. Blass and Cogan note that due to negative public opinion regarding the budget to Haredi education, it was apparently easier to implement changes in the budget through the Finance Committee rather than to present them transparently in the original budget for the approval of the entire Knesset. Likewise, it was found that budget lines supporting kollels and great yeshivas stopped appearing in the budget beginning in 2008, replaced by a new budget line (support for Yeshiva institutions), at a higher amount than the two previous lines together (except for 2008). An analysis of the actual spending against the cuts in the original budget shows that, in practice, there were no budget cuts in these lines. Non-Utilization of the Budget On the one hand, the Ministry of Education is being asked to cut its budget, while on the other hand, it does not utilize the entire budget at its disposal, forgoing more than a billion shekels on average annually. This non-utilization of funds is not a one-time occurrence for a single, specific year. This phenomenon repeated itself during each of the years examined. The Ministry of Education provides various explanations for not utilizing its funds completely, although Blass and Cogan believe that with efficient management and with greater openness and transparency, it would be possible to overcome these difficulties, or at least to contain their damage. In this way, some of the transfers could be avoided – such as in the 2011 budget, where NIS 141 million was transferred from the Ministry of Education’s budget to the general reserve and from there to the Ministry of Defense for the purpose of enlisting Haredim in the army – something that is completely outside the realm of education spending. The conclusion from this Taub Center study is unambiguous: the education budget is not transparent to the public, as is evident from the substantial and systemic differences between the original budget, the amended budget, and the resulting final budget. Most of the public debate revolves around the original budget, but this budget differs, at times greatly, from the spending that actually occurs. The systematic nature of this phenomenon suggests that the original budget, in certain cases, is intentionally misleading from the outset. Likewise, the amended budget differs from the final budget and the process of budgetary modifications is very difficult or nearly impossible for the public to follow. Due to the number of changes in the budget (more than 8,000 just in 2011), the Finance Committee cannot seriously discuss each and every change. Therefore, what generally happens is that the Committee receives a list of requests for change – sometimes for large sums – and approves them without any significant discussion. The scope of requests totals an average of 20 to 25 percent of the original budget (that is, between NIS 8 and 10 billion). In order to improve the situation, Blass and Cogan recommend: simplifying the budget by reducing the number of budget sections and lines, for example, by eliminating extraneous lines which are budgeted at zero; changing the presentation of budget data to facilitate verification that budget plans matches reality; expanding the explanations to the budget; and improving the process whereby the Knesset approves budgetary changes. The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communications 054-464-2333.

A new Taub Center policy brief highlights unique characteristics and challenges of families in Israel, and recommends solutions

Some of the brief’s highlights include:

  • Israel has the highest birth rates in the developed world (3.0 children per woman vs. the OECD average of 1.7) with a variety of government policies encouraging fertility.
  • The country provides a relatively supportive environment for working mothers that yield relatively high employment rates among Israeli women ages 25–44 with and without children.
  • One of the biggest challenges facing Israeli families is poverty, as one in five Israeli households and one in three Israeli children live below the poverty line. The problem is particularly pronounced for Arab-Israelis and Haredim – with differences in the challenges experienced by each of these groups.

The special edition 2014 UN publication Family Futures, featuring the Taub Center article, was published to commemorate the 20th Anniversary of the International Year of the Family (initially celebrated in 1994).  Other authors include heads of state, national government ministers, academics and civil society representatives. The Taub Center was the sole invited contributor from Israel.

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communication 054-464-2333. 

In a new Taub Center study, Prof. Shlomo Yitzhaki claims that moving to nationalized pension savings plans would benefit both citizens and the state

In Yitzhaki’s words: “The state has justifiably recognized that in order to prevent senior citizens from becoming a burden on society, people must have pension insurance. However, the state has erred in leaving citizens to manage their savings on their own.” Yitzhaki argues that much of the population is unable to monitor events in the capital markets and to understand the complexities of financial investment; therefore, such responsibilities should not be left to them. The solution, according to Yitzhaki, lies in transitioning to a nationalized pension system, which would lead to a more effective mechanism for contribution and oversight of pension fund money, reduction in management fees, and more generous benefits.

In the Taub Center policy paper, Yitzhaki details the advantages of nationalized pensions over the current private pension system:

Greater efficiency in pension contributions and supervision.   The pension contribution system is currently in the hands of private companies that manage the funds. In contrast, regulation and oversight, which includes ensuring that employers and workers actually contribute the minimum amount to pensions as set by law, is in the hands of the state. This separation of responsibilities makes it challenging for the state to regulate private companies. According to Yitzhaki, this problem would likely be solved if the state itself deducted pension contributions from the employee’s salary, as it does for health insurance. Since the payment system is already in place for the National Insurance Institute (NII), inclusion of the pension contribution in this deduction would simply entail an increase in the total sum deducted by the NII.

Lowering pension fund fees. In 2013, the Knesset Finance Committee decided to cap fund fees charged by two types of pension funds (provident and insurance funds) as of January 2014, with permitted fees of up to 1.05% of the total assets (i.e., the accrued savings plus return) and up to 4% of the contribution amount. “This law is intended to benefit savers,” says Yitzhaki, “although the average person still has limited understanding of pension fees due to the complicated calculations, especially because the legal cap on fees differs by savings fund type.” Yitzhaki examined the share of the returns that go towards management fees over time,for provident or insurance funds that charged the maximum fee in 2014 (Figure 1). The basic assumption, based on actuarial calculations, is that the average return stands at 4% per year. As shown in the figure, the management fees are 1% higher than the returns in the first year, meaning that the saver pays more in fees than he gains in profit even before he begins to realize any return on his savings. In subsequent years, the calculation changes as savings and returns accumulate and so, for example, in the second year, 50% of the return is lost to management fees, while in the fifth year, some 40% is lost. Even in the long-term, nearly 30% of the return goes towards management fees.

E Pension Plans Figure

In addition to the challenging calculations, Yitzhaki points to a number of other disadvantages of management fees in private pension funds. Firstly, in his opinion, the current method of fee collection is regressive and reduces social justice because an individual’s bargaining power with regard to fees grows as his salary increases. Secondly, fees are transferred from the investing public to fund managers and owners, instead of into the hands of the state to serve the public at large. Thirdly, the current fees are inflated relative to what is acceptable elsewhere (e.g., in the U.S., fees are limited to 0.5% of total savings).

More generous pension benefits for savers. Private pension funds must remain balanced at all times (i.e., without a deficit) since rumors of a deficit could cause large numbers of savers to withdraw their money and lead the fund to collapse. In contrast, there can be no mass exodus from a nationalized pension system, because there is no alternative. Furthermore, nationalized pensions in Israel could take advantage of this flexibility to provide more generous benefits than private pensions, since they would be based on Israel’s high population growth rate (a rate of 1.5% per year that is expected to remain unchanged in the future). This growth rate in the labor force translates into growth in pension contributions. National insurance, which does not require actuarial balancing, can rely on the expected growth in contributions to provide current pensioners with a return that is at least 1% higher than the current 4% return for private pensions.

Recommendations for improving the pension system

In the Taub Center study, Yitzhaki recommends several key changes including placing fund management in government hands while leaving the money itself in the private market, allocating a portion of the investment funds in profitable public works, and making changes to benefit senior citizen investors. According to his recommendation, the nationalized pensions would be capped at a specific ceiling, for example, the average market wage, and any contributions based on an amount beyond this maximum would be managed as they are today. Yitzhaki’s plan calls for a governmental committee composed of experts that would serve as the administrator for the pension savings, while in turn transferring management to a pension fund chosen by tender.  According to Yitzhaki, this  process would disperse the investments and limit the shock that moving to a national pension system could create. In addition, he suggests cancelling the required pension deduction for workers who have already reached pension age, who are today required to continue pension deductions including payment of management fees. In order to prevent this illogical situation, he advises adopting the National Insurance Institute system whereby senior citizens (over age 70) who continue to work no longer pay deductions.

Yitzhaki concludes the paper: “Privatizing pension insurance is another example of privatization that does not make economic sense. Pension privatization has a component that no one would object to – ensuring the future of the elderly among us so that they do not become a burden on society. Essentially, though, the system is transferring money from savers to the heads and owners of funds, under the approval of the Ministry of Finance.” The Taub Center policy paper shows that transitioning to a nationalized pension system is likely to lower costs, increase returns and improve the overall welfare of the investing public.

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communications 054 464 2333.

A new Taub Center policy paper: despite its declared policy, the Israeli government has been neglecting the housing sector

The paper will be presented at a meeting of the Economics Committee (chaired by MK Prof. Avishay Braverman), as a part of the Knesset’s Housing Day, which was initiated by the Housing Caucus (chaired by MK Itzik Shmuli, MK Ilan Gilon, MK Orly Levy-Abekasis, MK Dov Khenin and MK Miri Regev). A new Taub Center study by Dr. Gilat Benchetrit describes how the government has withdrawn support for housing over the past decade, despite repeated warnings of a serious housing crisis.  The various support tools historically employed by the state, including public housing and subsidized mortgages, are of little use today.  Benchetrit notes that rent assistance is the sole mode of support that currently remains available to financially distressed Israeli families, and even it is becoming less relevant.  Thus, despite the Ministry of Construction and Housing’s declared vision of “decent housing, at a reasonable price and in a suitable neighborhood, for every family” in practice, government policies have intensified the housing crisis, as demonstrated by the following:

Shrinking of public housing availability.  Inthe 1950s and 1960s, hundreds of thousands of public housing units were built. The majority of these units were sold following the Public Housing Law (1998), which permitted tenants to purchase the purchase these units at a greatly reduced price.  Even after this law was repealed, the housing campaigns continued.  Although a provision in the law stipulated that income from housing sales be dedicated towards replenishing the supply of public housing, this provision was not implemented.As such, between 1998 and 2011, the public housing supply dwindled by 37,500 units and only a thousand new units were built.  Despite tightened qualification requirements, thousands of eligible families remain without housing.  In 2010, some 8,000 requests for housing were submitted to the Ministry of Construction and Housing, and in July 2011, there were approximately 2,340 eligible households on the waiting list for public housing.  According to the Ministry of Absorption, about 175,000 households have requested public housing since 2011 and of these, approximately 39,500 were deemed eligible.  Benchetrit concluded that “in the absence of a basic stock of public housing, it is simply impossible to provide decent housing solutions to low-income single-parent families, to people with disabilities or to the elderly, who for the most part represent the populations eligible for assistance.”

Deterioration in subsidized mortgages.  The state has historically offered subsidized mortgages; however, over the past decade, these mortgages have become an ineffective tool with a negligible impact on the housing market.  The Taub Center study found that the number of people who benefited from subsidized mortgages was about 55,000 in 1996, 30,000 in 2003 and only 2,200 in 2011. Benchetrit attributes this dramatic decline to two causes.  Firstly, the eligibility criteria for subsidized mortgages were significantly tightened in 1998 – for example, the minimum age for eligibility was raised – and in subsequent years, qualification requirements have become even stricter.  Secondly, the terms of subsidized mortgages became less and less attractive.  The standard, partial linkage of subsidized interest rates to the price index (at 80% of the increase in the price index) was increased to full linkage, and mortgage interest rates were not updated according to the rates prevailing in the free market.  In the early 2000s, the market interest rate for long-term loans was greater than 6%, in comparison to only 4% for subsidized loans.  However, free market interest rates declined over the years, while the interest rates for subsidized loans remained the same; thus, since 2009, interest rates offered by banks are more attractive than those of subsidized mortgages.  Under these terms, many have preferred to obtain free market loans and only those with limited bank credit have been obliged to make do with a government mortgage.

Cuts in rental subsidies.  The system of government subsidies towards private market rent was established in the early 1970s and expanded significantly during the 1990s.  Today, it is the government housing tool that affects the largest number of households, despite its ineffectiveness.  Nevertheless, even if this policy is examined as an effort at housing assistance in Israel, it is evident that it, too, has been considerably eroded in recent years.  Within less than a decade, the budget for rental assistance grants was slashed by 27%, from 1.8 billion shekels in 2003 to 1.3 billion shekels in 2011.  In the wake of this cut, the number of households receiving rental assistance declined from 195,000 in 2001 to 138,000 in 2011.  Moreover, given the trend toward rising rental prices, the amount of assistance provided is minimal.  The study found that the average amount of support per eligible household was 800 shekels in 2011 – just 25% of the average monthly Israeli rent of 3,170 shekels at the time.  Benchetrit adds: “The state’s shift to housing assistance via the private rental market has made it harder to safeguard the rights of those eligible for assistance, inasmuch as free market renters (in contrast to public housing tenants) have no protection under the law and they are dependent on landlords, who may raise their rent or request that they move out at the end of their lease.”

Housing market trends contradict the government’s planning vision Israel’s National Master Plan for Construction, Development and Conservation (NMP 35) sets forth the government’s overall planning vision.  It states the need to develop the Galilee and the Negev, and a desire to promote dense urban construction so as to ensure the conservation of open space.  However, in the Taub Center study, Benchetrit found that vision and reality do not overlap, and in some cases, actual practices even contradict the vision:

Less construction, more low-rise buildings.  The average floor size of new Israeli residential units was 153 square meters in 2000, in contrast to 182 square meters in 2008. According to Benchetrit: “New Israeli construction during these years, including public construction, consisted of dwellings that were more spacious and accordingly – more expensive.”  The Taub Center study compared housing starts data (i.e., the number of housing units on which construction was initiated) for 1995 and 2007, and found that the number of housing starts for 2007 was less than half that of 1995 (30,788 versus 72,876 respectively).  Moreover, high-rise construction (buildings with 3 stories or more) was reduced in favor of more low-rise construction.  High-rise buildings accounted for 48,500 housing starts in 1995, versus just a third of that figure in 2007.  Benchetrit notes: “Low-rise building is, for the most part, expensive and serves the affluent; therefore, the dramatic decline in the construction of apartment buildings is a far cry from a policy of affordable housing.”

Less construction on public land.  About 93% of Israel’s land area within the Green Line is designated as public land.  As such, one may assume that the majority of housing starts would occur on public land.  Surprisingly, between 2008 and 2011, 51 percent of housing starts were on privately-owned land, versus just 47 percent on state-owned land.  “Changes in land regulation could bring about much lower housing prices,” states Benchetrit.

Strengthening of the geographic center at the expense of the periphery.  Analyzing the distribution of Israel’s Jewish population by region between 1995 and 2011 reveals that 48% of the housing growth took place in the center of the country, in contrast to the development vision set forth in the National Master Plan.

Outcomes of a policy of reducing housing assistance in the last decade

Sharp rise in housing prices.  Low supply and high demand has led to a dramatic rise in the housing price index since 2007.  The study found that both the housing price index (based on sales transactions) and the rental price index (based on rental contracts), have skyrocketed since 2007.  The housing price index rose at an even greater rate than the rental price index – a 52% real cumulative increase (that is, controlling for inflation) from 2007 to 2013 (Figure 1).  The disparity between the change in housing prices and that of rental prices indicates the development of a housing market bubble. E Housing Fig 1 Sharp decline in home ownership rates.  Between 1995 and 2008 there was a decrease in home ownership rates: from 73% of households in 1995 to 66.4% in 2008.  In 2008, the proportion of households that rented their home amounted to 27% of the housing market.

Widening social gaps.  The Taub Center study found a large gap in home ownership rates between the various income deciles (Figure 2): owner-occupier rates in the lowest decile were 35% versus 86.5% for the highest decile.  This disparity means that the country’s weakest socioeconomic groups have greater exposure to the risks and instabilities of the private rental market. E Housing Fig 2 Risk to mortgage holders.  Literature studies suggest that the acceptable level of spending on housing expenses is between 25% and 30% of household income, in order to ensure sufficient resources for the consumption of other vital goods and services.  In Israel, however, average mortgage payment rates amount to 35% of borrowers’ income.  Moreover, 24% of borrowers spend at least 40% of their monthly income on mortgage payments, while 12% of borrowers are obliged to allocate at least 50% of their monthly income to mortgage payments.  This is a very heavy housing burden that puts borrowers in a risky situation and raises the possibility of homelessness.

Benchetrit concludes: “Housing, like healthcare and education, greatly affects the degree of equality in society.  The government’s policy of limiting its involvement in the housing market takes a toll in various ways: it hinders the planning vision of NMP 35; intensifies polarization between the geographic center of the country and the periphery; lowers the supply of housing, leading to a rise in prices; and, in particular, increases the frustration and bitterness amongst broad swathes of the population, as manifested in the social protests of 2011.”

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communication 054-464-2333.

New Taub Center study on the bagrut exams in Israel

With the beginning of the bagrut (matriculation) exam season, the Taub Center for Social Policy Studies in Israel has released Bagrut Exams: Issues and Recommendations for Reform – a policy paper by Nachum Blass, a senior education researcher at the Center.  The research shows that in the past few years there has been a recognizable trend towards improvement in various aspects of the bagrut exams, and contrary to frequent claims, there is no proof that a decline in the level of the exams is the cause of this change.

The primary piece of data on this issue is that the rate of individuals successfully completing the bagrut exams out of those taking the exams is steadily increasing.  According to the study, the rate of students who receive the bagrut certification has risen from 46 percent in 2006 to 50 percent in 2012.  This rise is especially significant in light of the growing size of population groups that do not take the exam [Haredim (ultra-Orthodox Jews) and residents of East Jerusalem, whose combined percent in the relevant student population has risen from 12 percent to 18.5 percent] as well as the growth in the special needs population, which has a low rate of exam-takers.

The Taub Center research found that between 2006 and 2012, the percent of those receiving the bagrut certification has risen significantly in most population groups: non-Haredi Jews (from 57 percent in 2006 to 67 percent in 2012), Arab Israelis (excluding East Jerusalem, from 35 percent to 42 percent), and Druze (from 44 percent to 55 percent).  Nevertheless, in two population groups, there was no change: Haredim (8 percent received bagrut certification in both 2006 and 2012) and Bedouin (28 percent in 2006 and 29 percent in 2012).

In Blass’ words, the rise in the rate of bagrut qualification is apparently not due to a decline in the level of the exams: “Although there have been changes in the past to the exams, and amongst them a reduction in the amount of material required (units of study) as well as the addition of both second and third testing opportunities for students to improve their scores, these changes are not indicative of a change in the quality of the tests themselves.  There is no research evidence that the central parameters on which the pupils are tested – the level and depth of understanding of the materials, analytical skill and ability to effectively express oneself  – have been compromised, or that the questions are any easier or more difficult than those of the past.”

The Taub Center study found that Israeli pupils do not study fewer hours than in the past, but rather, more.  As can be seen in Figure 1, between 1995 and 2010 the percent of pupils studying the minimum number of units required for a bagrut (21 study units) declined from 38 percent to 29 percent, while the percent of pupils who chose to study for an extended bagrut (31 units of study or more) rose from 17 percent to 29 percent.

E Bagrut Exams Fig 1

Another measure that is indicative of the level of those qualifying for a bagrut certificate is the average score on the psychometric exam, which is similar to the SAT exam in the United States.  Since the psychometric exams are calibrated, comparisons over time can be made and a decline in scores can be taken as evidence of a lower quality system.  The data show, however, that the quality of individuals accepted to most academic institutions has actually risen (for example, the average psychometric score for acceptance to universities increased by 15 points between 2002 and 2012, from 603 points to 618).   Only in the academic colleges without governmental funding, where the number of students has risen steadily in the past decade, have the scores of accepted students significantly declined (from 553 to 532 points).

Technology studies from the perspective of the bagrut exams

Another common claim is that the scope of science education in Israel is limited.  In the Taub Center study, the number of hours of science and technology study in middle school (ages 12-14) was compared to the averages of Western countries and found to be among the highest (Figure 2).

E Bagrut Exams Fig 2

In addition, Blass found that between 1995 and 2010, the share of those taking bagrut exams in mathematics, physics and biology, as well as those passing and excelling in these exams rose.  In fact, these increases were far greater than the rise in the number of those studying these subjects in the relevant population (except for the case of chemistry), such that rather than speaking about a crisis in the teaching of the sciences, it would be more appropriate to note significant achievements.

A proposal for reforms in the bagrut exams

Various parties have a range of critiques of the bagrut exams in their current formulation, including claims that they make the educational process superficial, are not representative of the fields of study and the necessary skills required for graduates in their future lives, are expensive to administer and result in a great waste of school days.

Over the years, in an attempt to address these concerns, there have been many recommendations for reform of the bagrut exams, although most have not tried to fundamentally change the structure of the bagrut exams at the core.  In contrast, Taub Center researcher Nachum Blass proposes in this study a wide-ranging reform wherein the bagrut exams would be comprised of three components:

  • Tools – this will include the subjects that are considered essential tools for integration into adult society: mother tongue, a foreign language, civics, computer skills, and possibly also mathematics.  The exams in this component will be computerized and conducted in national testing centers.  Each examinee will be allowed to take the test multiple times and the highest score will be used in the calculation of the final bagrut certificate.
  • Knowledge – this includes the other subjects, compulsory as well as elective.  The grade in this component will be determined by the school, calculated on the basis of the pupil’s average score over the last three years and based on the evaluation methods as determined by each educational institution: final exams, exams and projects, independent study, etc.
  • Values – this includes an evaluation by the educational staff of the pupil’s performance on a number of non-academic behavioral and values components, such as volunteerism, effort and diligence.

Adopting this proposal would promote the value of the bagrut certificate as a motivator (pupils will have to devote their full energy to three years of study and not purely preparation for the exams), and leave intact the role of the exams as a selection tool for institutions of higher learning.  At the same time, this new program could save hundreds of millions of shekels that are budgeted for the process of writing and reviewing the exams and paid to teachers to prepare for the tests, and would serve to strengthen the  educational and values-oriented aspects of the school’s activities.

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communication 054-464-2333.

The Taub Center presents a new study of Dr. Zoya Nisanov on the middle class in Israel

Since the 2011 summer protests, the middle class has become one of the most talked about issues in Israel.  A new study published by the Taub Center and written by Dr. Zoya Nisanov of the Economics Faculty at Bar-Ilan University analyzes the middle class, to which the majority of Israelis belong, from a variety of angles, presenting new findings on the composition of this class, the income levels of its members, and trends within this group.  The research will be presented for the first time at the conference of the Israel Economic Association.

Nisanov uses a model that divides the population into income groups according to the best fit of the distribution of incomes.  The main finding is that in Israel there are four economic classes – upper, upper middle, lower middle, and lower.  Therefore, it is more accurate to relate to the middle class in Israel not as a single, homogeneous group, but rather as two separate groups differentiated not just by their income levels but also by their socio-demographic characteristics.  According to the study by the Taub Center, the lower middle class includes households with a monthly income of between NIS 1,950 and NIS 5,000 adjusted per capita, weighted according to 50 to 130 percent of the adjusted per capita median income – a group whose size is 40 percent of the overall population.  The upper middle class households have a monthly income of greater than NIS 5,100 but less than NIS 12,540 adjusted per capita (up to 320 percent of the median income).  This group is some 29 percent of the overall population.

As can be seen in Figure 1, between 2002 and 2011 the gaps between incomes in the two groups widened.  The lower middle class became poorer relative to the upper middle class.

E Middle Class Fig 1

In Nisanov’s words, “The long-term goal should be a unification of these two groups into a single large and strong middle class.  In order to achieve this, the gaps between the lower middle and upper middle class must be narrowed.  On the basis of the results from the study, the conclusion is that increasing the number of years of study and improving professional training amongst the lower middle class is likely to contribute to narrowing the gap between the two classes.”

The composition of the middle class: More young people and residents of the center of the country; fewer immigrants, Haredim and Arab Israelis

Through a series of segmentations according to various socio-demographic characteristics, the Taub Center study examined the composition of the various classes, including the composition of the middle class in Israel.  The findings revealed that despite all of the attempts to achieve more equality among the different societal groups, there are still large gaps that make it more likely for certain population groups to belong to higher socioeconomic classes.

According to Nisanov’s study, the most important factor explaining gaps between groups is the number of wage-earners in the household.  Amongst the two lower social classes, the rate of households with less than two wage-earners was very high (some 95 percent in the lower class and some 59 percent in the lower middle class), while some 25 percent of upper middle class households and some 15 percent of upper class households had less than two wage-earners.  These findings can explain, at least in part, the lower likelihood that Haredim, Arab Israelis and immigrants will belong to the middle class, since in these households the number of wage-earners is particularly low.  Only some 31 percent of Arab Israeli households, for instance, have more than one wage-earner.

Nisanov examined the influence of various socio-demographic variables on the likelihood of a household belonging to each of the classes and found that being a Haredi household raised by 42 percent the chances of a household belonging to the lowest social class.  Being an Arab Israeli household increased the chances of belonging to this social class by 18 percent, while it lowered the  likelihood of belonging to the upper middle class by 15 percent.  Another important variable that plays a role in keeping Haredim and Arab Israelis from belonging to the higher social classes is the number of children in these households.  The study found that every additional child under the age of 18 increases the likelihood of the household belonging to a lower class.

Nisanov also found that the older population is being left behind in the area of income.  The lower middle class was comprised of more older-adults (aged 55 and over), while the upper middle class had more heads of households aged 35-54.  The upper middle class is the youngest social class (45 on average), and the age of the head of household is lower on average by nearly three years than the average in the lower middle class.  The lowest class is also the oldest group.  This leads to the conclusion that the probability of belonging to the group with the highest income rises until a certain age, and then declines.

As expected, place of residence has an influence on class status, with residents of the central region being most likely to be amongst the higher classes relative to households living in the south or north of the country (Figure 2).

E Middle Class Fig 2

The differences in class according to the gender of the head of household (Figure 3) reflect the fact that households headed by women generally have only a single wage-earner   (e.g., widows, single parents, or Haredi women),  and thus are mostly in the lower classes.  For example, it was found that in one-third of poor households headed by women, the women are widows.  The influence of this characteristic is considerable also when the data was segmented by family status: married couples have a higher chance of belonging to higher income groups.

E Middle Class Fig 3

Figure 4 presents the division of income groups by continent of birth.  It was found that amongst those born in Asia/Africa, the chances of belonging to the lower class was greater, while amongst their children who were born in Israel, their chances of being in a higher class grew.  Specifically, it was found that heads of households born in Africa had a higher chance of belonging to low income groups than those born on other continents, while those born in Europe had a higher chance of belonging to higher income groups.

E Middle Class Fig 4

In light of these findings, Nisanov suggests a course of action for the government: “The deliberate policy to strengthen the middle class must encourage participation in the labor force and offer employment opportunities, particularly amongst Haredi men and Arab Israeli women.  At the same time, there is a need to provide appropriate training and enforce minimum wage laws in order to prevent a widening of the gaps between the upper middle and lower middle classes, as well as a lowering of the average standard of living within the middle class as a whole.”

Do transfer allowances narrow gaps?  It depends who you are

In the Taub Center study, Nisanov examines the influence of child allowances and old-age allowances on the income distribution of households.  According to her findings, there is no proof for the conjecture that child allowances contribute to a lessening of the polarization between rich and poor, at least not since the cuts of 2003.  In Nisanov’s words: “This combines with an overall decrease in the effectiveness of taxation as a tool for narrowing gaps in Israel, as well as a decrease in the effectiveness of the policies directed toward this goal in general.”  On the other hand, old-age allowances have been shown to be a more effective tool in narrowing income gaps.

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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.

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communication 054-464-2333.

New Taub Center publication: A Picture of the Nation 2014

This is the second year that the Taub Center for Social Policy Studies in Israel is publishing its Picture of the Nation – an original, unique and user-friendly book of figures – that includes one figure per page accompanied by a brief explanation.  The booklet provides a bird’s-eye perspective of Israel’s society and economy in several key areas: primary and secondary education, higher education, labor productivity, poverty and income inequality, the elderly, women in the labor market, Haredi employment, and health.  The booklet, written by the Center’s executive director, Prof. Dan Ben-David, is based primarily on Taub Center research and highlights areas where Israel excels and those in which a change of direction is needed.

Some of the new findings appearing for the first time in this year’s booklet:

  • There are large gaps between the achievements of Hebrew speakers and Arabic speakers in the Meitzav exams.  In the eighth grade, gaps in Meitsav test scores between Hebrewspeakers and Arabic speakersreached 13.8% in English, 9.4% in mathematics and 8.7% in science and technology.  Gaps amongst fifth graders were lower, though still relatively high – 4.6% in English, 8.5% in mathematics and 6.8% in science and technology.  (Page 3)
  • International exams also show a large divide between Jewish and Arab Israelis.  Achievements in basic educational subjects of Jewish children (excluding Haredi children) were 4.8% higher than the overall average in Israel.  The achievements of Arab Israeli children were 16.8% lower than the overall Israel average, and also below the achievements of children in developing countries like Jordan, Tunisia and Malaysia.  (Page 4)
  • Educational achievement gaps between Israeli children on the international tests are the greatest in the developed world and have been consistently so since 1999.  Israelis ranked first among developed countries in terms of gaps between pupils on every international test since 1999.  (Page 5)
  • Public expenditure per pupil on primary education, relative to GDP per capita, declined since 2002 and remained lower than the OECD average.  The gap between the OECD and Israel in terms of public expenditure on secondary schools has increased.  While the average public expenditure on primary and secondary education in the OECD is trending upward, in Israel the expenditure in these areas has been in decline for the last decade. (Pages 10-11)
  • Public expenditure on higher education in Israel lags further and further behind the OECD.  A comparison between public expenditure per student, relative to the standard of living, indicates that the gap between the OECD and Israel is widening. (Page 18)
  • The tax burden has fallen in the past years.  The ratio of government tax revenues to GDP, or what is commonly referred to as the tax burden, was relatively high compared to the OECD average.  In 2007, the tax policy changed and the burden was lightened to slightly below the OECD average.  (Page 47)
  • The primary sources of government tax revenues are different in Israel than in the OECD.  In Israel there is a greater reliance on indirect taxes (like VAT and import tax) than on direct taxes (like income tax).  The indirect taxes that Israelis pay comprise 36.7% of the government’s tax revenues, while the average revenue from indirect taxes in the OECD countries stands at only 23.6% of the total tax revenues.  In contrast, Israeli income taxes provide 30.1% of the government’s total tax revenues, while the OECD average is 36.6%.  (Page 48)
  • Half of Israelis do not pay any income tax.  Some 49.7% of individuals in Israel did not pay any income tax in 2011; in 2012, the rate was even higher at 52.3%.  The top two income deciles are the source of nearly 90% of the government’s total tax revenues while the top decile alone is responsible for 72.9% of these revenues.  The highest marginal tax rate in Israel in 2012 was 48%, placing Israel in seventh place out of the 34 OECD countries – and this rose to 50% in 2013.  (Page 49)

For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communications 054-464-2333.

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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 Taub Center is pleased to share with you our latest Taub Center Policy Brief, “Hot issues in Israel’s healthcare system.”

These issues include the provision of private healthcare services in public hospitals, the growth in private insurance coverage and the government’s dual role as regulator and hospital owner.  The Brief also contains information on healthcare financing, hospital operations, insurance coverage and the medical workforce.

As always, we welcome any feedback that you may have on this topic and look forward to providing you information on additional socioeconomic issues in Israel.  If you would like hard copy versions of this brief, please contact us at info@taubcenter.org.il.

The Taub Center for Social Policy Studies in Israel is an independent, non-partisan, socioeconomic research institute based in Jerusalem. The interdisciplinary researchers – including prominent academics and leading experts – provide the country’s policy makers and the general public with a professional, evidence-based, “big picture” perspective and policy options in the economic and social spheres.

 

Contact details:

Gal Ben Dor
Taub Center for Social Policy Studies in Israel
Email: gal@taubcenter.org.il
Mobile: +972(0)50-5931577
Office: +972(0)2-5671818

Israel’s tight welfare policy and high dependence on private pensions leads to elderly poverty rates that are the highest in the developed world

  • In Israel, elderly poverty rates based on market income (before transfer payments and taxes) are the lowest in the West, thanks to more widespread private pension ownership than is common in other developed countries.
  • However, Israel provides fewer benefits for the elderly and limited income support.
  • Consequently, disposable income poverty rates (after transfer payments and taxes) among Israel’s elderly are the highest in the developed world.
  • Many of the elderly – particularly females, Arab Israelis, and those who immigrated to Israel from the former Soviet Union at an older age – have little private pension savings, if any, making public assistance even more essential for them.

The new Taub Center Policy Brief comes on the heels of recent research at the Center which found that among developed countries Israel’s elderly poverty rates in market incomes are the lowest, while poverty rates in disposable income are the highest.  Liora Bowers, Director of Policy at the Taub Center, examined the reasons for this anomaly, finding that it is related to Israel’s policy regarding private pensions, which historically were more common in Israel than elsewhere and have been mandatory for workers since 2008.  Alongside this, the state provides the elderly with relatively limited financial assistance.  For example, an Israeli male entering the labor force in 2011 and earning the average wage will receive 56 percent of his average lifetime wage from his private pension upon his retirement – a relatively high rate compared to the other countries examined.  At the same time, the same Israeli will receive only 22 percent of his average lifetime wage from old-age allowances, versus the 50 percent average rate across the OECD. In addition, Bowers has found that only 24 percent of the elderly in Israel receive public assistance in the form of income support.  Owning a vehicle (certain types), land or savings make one ineligible.  “These criteria are considered very stringent by Western standards and may disproportionately hurt elderly Arab Israelis, who are more likely to live in agricultural villages and have greater dependency on both car and land ownership,” explains Bowers. The Taub Center Policy Brief also highlights that today’s mandatory pension contributions rate of 17.5 percent (considered relatively high in the West) reduces the take-home pay of low-income earners, creating an economic burden for young, poor families.  For example, there are low-income workers who, upon retirement, may receive private pensions and public allowances totaling up to 140 percent of their average earnings.  In some cases, these workers might have been better off if they had lower pension contributions and greater take-home earnings at younger ages – for housing and education – in exchange for lower income upon retirement.  Furthermore, if mandatory high pension contributions are accompanied by a future reduction in government spending on income support, many low-income earners today may be worse-off than under a voluntary pension contributions system.  Bowers concludes: “Israel’s polices place great responsibility for one’s economic future on the individual and his savings, and is geared towards minimal public assistance.  This makes it challenging for low-income families to support themselves in the present.” EPR2014 Elderly Poverty Brief Fig 1 The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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. For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communication 054-464-2333.

Press Release: State of the Nation Report: Society, Economy and Policy 2013

A selection of findings from the “State of the Nation 2013″:

A Macroeconomic Perspective of Israel
Poverty and Inequality Over Time: In Israel and the OECD
(Prof. Dan Ben-David, Executive Director, Taub Center and Haim Bleikh, Taub Center researcher)

  • Income gaps within the middle class in Israel are the highest among all Western countries: the income of the 75th percentile in Israel is 2.8 times greater than the income of the 25th percentile.
  • The share of Israel’s wealthiest (the top 1 percent) in the country’s total market income (that is, before taxes and transfer payments) is high, 6.3 percent of all the income in Israel) – though it is not particularly high when compared to the incomes shares of the top one percent in other developed countries.  The share of Israel’s top one percent out of the country’s total disposable income (that is, after taxes and transfer payments), 5.3 percent, is slightly above the median for other developed countries.
  • The effectiveness of Israel’s welfare and tax system in reducing poverty is particularly low compared to that of other developed countries, including even the United States.
  • Market income poverty rates in Israel are high, even after exclusion of Haredim and Arab Israelis from the sample (29 percent).
  • Poverty among children in Israel, after transfer payments and taxes, is the highest in the developed world; one-third of all children in Israel live below the poverty line.

Israel’s Economy: a Macro Perspective
(Prof. Eran Yashiv, Chair, Taub Center Economics Policy Program)

  • Israel’s labor market is characterized by two important trends over the past decade: (a) labor market participation rates have been rising steadily, from 58 percent in 2003 to 64 percent in 2012; (b) unemployment rates have steadily declined from over 13 percent to less than 7 percent during the same period.
  • Unemployment rates in Israel are amongst the lowest in the Western world.

Labor Productivity in Israel
(Prof. Dan Ben-David, Executive Director, Taub Center)

  • In all employment sectors except for agriculture – that is in the building, manufacturing, wholesale and retail trade, hotels and restaurants, transportation, financial intermediation and real estate sectors – labor productivity in Israel is the lowest among developed countries with data for recent years.
  • Where capital investments are higher, labor productivity is greater – both across countries and also across business sectors within Israel.  Furthermore, the research shows that there is a positive and direct relationship between productivity and wages.

Employment and Income
Education and Employment in the Haredi Sector
(Eitan Regev, Taub Center researcher)

  • The employment rate among Haredi men with an academic education is 71 percent, compared to only 34 percent among Haredi men without an academic education.  This large difference between Haredim with and without an academic education is also evident in terms of wages: the average income of Haredi men with an academic education is NIS 13,565, compared to NIS 7,580 among Haredim without an academic degree.
  • In the past few decades, there has been a sharp rise in the share of Haredim who do not have more than a primary education: from some 30 percent of the male population a decade ago to almost half of all Haredi men today.
  • Fewer and fewer Haredim study in high schools as more Haredim study in yeshivas.  For example, just 56 percent of Haredi men 75 years old and up ever studied in institutions of higher Torah, as opposed to 90 percent of the 25 to 34 year olds.  The significance of this trend is that younger Haredim have fewer skills for competing in the modern labor market even relative to their parents’ generation.  This trend is opposite that of the Western world, where each generation is more educated than the previous one.
  • Among some 80 percent of Haredi married couples, neither spouse has an academic degree.  In only 5 percent of households do both partners have an academic degree; incomes in such households are about 2.5 times higher than in those in which neither partner has an academic degree.
  • An examination of the patterns of study versus work among the Haredim indicates that the transition in the last three decades from active involvement in the labor market to entrenchment in the world of Torah study is not simply the result of ideology, but also largely stems from a lack of skills and appropriate tools to integrate in the labor market, along with dwindling available options.

Women in the Labor Force: The Impact of Education on Employment Patterns and Wages
(Prof. Haya Stier, Chair, Taub Center Social Welfare Policy Program and Efrat Herzberg)

  • The level of education of women in the labor market has risen: close to half of women in the labor force 2011 had an academic education, compared to only 22 percent in 1980.  Furthermore, 39 percent of women in the labor force had less than a secondary school education three decades ago, as compared to 9 percent in 2011.  As a result of the rise in education levels among women, there has been a significant rise in the rate of women’s participation in the labor force over the past three decades.  Nevertheless, there are large differences in participation rates among Jewish and Arab Israeli women: today some 59 percent of all Jewish women in Israel work, as opposed to only 24 percent of Arab Israeli women.
  • Female labor force participation is lower at lower levels of education.  The participation rate for women with an academic level education has been relatively stable for the past three decades (at roughly  75 percent) , while there has been a decline of almost one-third in the labor force participation rate among women with less than a secondary education, from 28 percent in 1980 to only 20 percent in 2011.
  • Average wages for women have risen substantially across all education levels.  For women with an academic education, there has been a particularly large wage increase, from NIS 2,583 in 1980 to NIS 8,844 in 2011 (in 2011 prices).  Consequently, the income gap between women with an academic education and those with the lowest education levels (less than secondary education) rose from 81 percent in 1980 to 118 percent in 2011.
  • In general, the labor force participation rate of women with children under the age of 4 has risen over the years, although as women’s education level decreases, so, too does their participation rate in the labor force when they have young children: in 2011 there was a 16 percentage point gap between non-working and working mothers of young children with less than a secondary school education, as compared to only a 1 percentage point gap among women with an academic education.

Educational Opportunity, Employment, and Income: 1995-2008
(Eyal Bar-Haim; Carmel Blank, Policy Fellow, Taub Center Education Policy Program; Prof. Yossi Shavit, Chair, Taub Center Education Policy Program)

  • The number of university graduates with a bachelor’s degree has risen only slightly in the past two decades: from some 58,000 graduates two decades ago to about 65,000 graduates in 2011.  In contrast, there has been a substantial and continuous increase in the number of bachelor degree graduates from the non-research colleges: from 20,000 graduates two decades ago to almost 120,000 graduates in 2011.
  • While the chances of earning a bagrut certificate and bachelor’s degree have risen for the overall population since 1995 the likelihood that one will complete high school and earn a bachelor’s degree increases with the occupational prestige of one’s father,.
  • The relationship between the occupational prestige of one’s father and the likelihood of someone earning a master’s degree has risen since 1995 only for those children whose father’s occupational prestige is of a medium or high level.

Education
“It Disturbs the Whole Class”: Disciplinary Infractions in the Classroom and Their Relation to Pupil Achievement
(Carmel Blank, Policy Fellow, Taub Center Education Policy Program and Yossi Shavit, Chair, Taub Center Education Policy Program)

 

  • The lower the education level of parents, the less discipline in their children’s classroom (i.e. when parents’ education levels are below average, disciplinary infractions in their childrens’ classes are three times greater than the average).
  • Roughly two-thirds of the difference in the level of disciplinary infractions between classes is related to characteristics of the specific class (such as number of pupils in the class) rather than to school characteristics (such as the number of pupils in the school, which is fixed for all classes). Therefore, disciplinary infractions of a given class are dependent primarily on that particular classes characteristics than they are on the school’s characteristics.
  • In schools that strictly enforce discipline, only 17 percent of classes are unruly, while more lenient schools have double the number of classes with disciplinary problems (33 percent).
  • In classes where the teacher is perceived as unfair, there are twice as many disciplinary infractions than in classes where the teacher is perceived as fair (33 percent versus 17 percent, respectively.)

Trends in the Development of the Education System: Pupils and Teachers
(Nachum Blass, Taub Center Senior Researcher)

 

  • Over the past decade, there has been a pronounced decrease in the share of pupils in primary education (grades 1-6) that are in the state education system (from 48 percent in 2000 to 40 percent in 2013).  The share of pupils in the state-religious education system has also declined, from 14.7 percent to 14.0 percent.  At the same time, there has been a substantial increase in Haredi pupils (from 13.4 percent of the total in 2000 to 18.6 percent in 2013), and a rise in the population of Arab Israeli pupils (including Druze and Bedouin) from 24.2 percent of the total in 2000 to 27.1 percent today.
  • In the past three years, there has been a slowdown in the rate of change across most of the population groups.  In the state system and the state-religious system, there was a slight increase in registration for grades 1-6.  In the two fastest-growing populations, the Haredim and Bedouin, there was a decline in the rate of change over the last three years.

Social Services and Expenditures
Material Hardship in Israel
(Prof. Haya Stier, Chair, Taub Center Social Welfare Policy Program and Dr. Alisa Lewin)

 

  • Some 34 percent of Israel’s population has reached a level of material hardship; wherein, due to their financial situation, they forewent heating or cooling their residences.  Likewise, 20 percent reduced their food consumption and 13 percent went forewent electricity or telephones because of their costs.  Of those in need of medical services, almost 40 percent forewent dental care due to financial considerations, 16 percent went without some form of medical care, and 15 percent went without some prescription medication.
  • Material hardship is not just amongst the lowest income quartile in Israel, but is also a problem for the middle class – and at relatively a high rate.  Within the second income quartile, more than 50 percent forewent heating or cooling their residences, 30 percent forewent some food, some 16 percent forewent electricity or a telephone, and more than 50 percent forewent dental care.  Even among those in the third quartile (that is, those with an income greater than the median), some 30 percent forewent heating or cooling their residence, 14 percent forewent food, and some 35 percent forewent dental care due to financial considerations.
  • Haredim in need of financial support receive more assistance from their parents, friends, and relatives, while Arab Israelis in need of support more often turn to their children.  This seems to indicate that Haredim are the “new poor,” while Arab Israelis are suffering generational poverty.

Health
Trends in Israel’s Healthcare System
(Prof. Dov Chernichovsky, Chair, Taub Center Health Policy Program and Eitan Regev, Taub Center researcher)

  • In Israel, the number of physicians per capita is among the highest in the Western world (largely due to the immigration of physicians from the former Soviet Union), but the annual number of medical school graduates per capita is less than half of the average of other Western countries.  Moreover, while the number of medical school graduates is continuously growing in other Western countries, these numbers have been declining in Israel over the past decade – indicating a relatively low number of future Israeli physicians in lieu of major policy changes.
  • Nursing school graduation rates per capita stand at only one-third of the average in the West, and this number is also in decline.
  • The number of hospital beds in Israel is two-thirds the average found in the West, and is also steadily declining.

The Law for Rehabilitation in the Community of Persons with Mental Disabilities: An Interim Appraisal
 (Prof. Uri Aviram, Policy Fellow, Taub Center Health Policy Program)

  • Mental health services have expanded in the last decade following the rehabilitation reform implemented at the beginning of that period.  Nevertheless, only about one-fifth of the population in need of mental health rehabilitation services receives the care they need.
  • The average expenditure on mental health rehabilitation has declined in the past five years and is insufficient to meet the needs of the system.
  • The rehabilitation reform of the past decade has led to a 50 percent decling in the number of psychiatric hospitalization beds and a 43 percent decline in the average number of annual mental health hospitalizations.  The average length of hospitalization has also declined substantially, the share of long-term hospitalizations out of all hospitalizations has also declined dramatically, and the average time between hospitalizations has lengthened considerably.
  • Over the years there has been a deliberate policy of cutting costs and manpower in the mental health services – to such an extent that between 1999 and 2009, while the number of Ministry of Health employees increased, the number mental health services employees decreased by some 10 percent. The Ministry of Finance frequently seeks ways to decrease the mental health budget, although the research indicates that hospitalization rates would never have declined without the rehabilitation services – and Israel would have had to add at least one billion shekels in additional funds per year to the budget.

The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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 provides policy recommendations in the key socioeconomic issues confronting the State.

For details, or to arrange an interview, please contact Gal Ben Dor, The Taub Center’s Director of Marketing and Communication 054-464-2333.

 

 

Taub Center study finds that poverty rates among Israeli elderly are the lowest in the developed world – but are also the highest

  • 50% of Israel’s elderly are below the poverty line according to their market income – that is, before taxes and welfare.  This is the lowest market income poverty rate in the developed world.
  • 21% of Israel’s elderly are below the poverty line according to their disposable income – that is, after taxes and welfare.  This is the highest disposable income poverty rate in the developed world.
  • Israel’s welfare and pension policies are designed to promote self-sufficiency in older age, but are the least effective in the developed world at reducing poverty among the elderly.
  • the share of 65+ year-olds in Israel’s population is the lowest in the OECD

Taub Center Executive Director, Prof. Dan Ben-David: “The case of poverty among the elderly – those aged 65 and over, who are at or above what is generally still considered retirement age in most countries – provides what is perhaps the most striking illustration of the ineffectiveness of Israeli tax and welfare programs in reducing poverty.  The problem of market income poverty among the elderly is considerably less in Israel than in the rest of the developed world, but once each country’s social welfare safety net takes effect – then the situation simply reverses, with disposable income poverty among Israel’s elderly rising to the top of the developed world.” As researchers Ben-David and Bleikh point out, “A surprising finding is that the share of elderly people living in poverty according to their market incomes is actually lower in Israel than it is in 20 of the 21 other countries – and it has been declining over the past two decades.  The inclusion or exclusion of Haredim and Arab Israelis does not affect the market income poverty rate nor its rate of decline.”  In fact, while 50.2 percent of Israel’s elderly would have lived under the poverty line had they been dependent only on market income (Figure 1), over three-quarters of the elderly would have lived under the poverty line in 15 of the other 21 countries.  In other words, a smaller share of Israel’s population is elderly, and a smaller share – considerably smaller compared to most countries – of Israel’s elderly would have lived under the poverty line if left to their own devices. E Elderly Poverty Fig 1 Despite the relatively large elderly populations in the other countries, the assistance provided to the elderly is substantially more effective in reducing poverty elsewhere than it is in Israel (Figure 2).  The differences between Israel and the other countries regarding poverty reduction among the elderly are substantial.  Ben-David and Bleikh find that welfare and tax policies nearly eliminate poverty among the elderly in 12 of the 22 countries, with 95 percent and greater reductions in the rate of poverty from market incomes to disposable incomes. E Elderly Poverty Fig 2 All but two of the 22 countries – the United States and Israel – are able to reduce poverty rates among the elderly by at least 80 percent.  By comparison, the United States reduces poverty among the elderly by 68 percent.  Israel – with the smallest elderly poverty issue in terms of the extent of market income poverty rates and the relatively small size of the country’s elderly population – only reduces its elderly poverty rates by 59 percent.  Consequently, the share of elderly Israelis remaining under the poverty line after taxes and welfare is 21 percent, the highest in all of the countries examined. There are a number of reasons for the large discrepancies between Israel’s relative levels of market income poverty versus disposable income poverty among the elderly.  Taub Center researcher Liora Bowers points out that Israel has traditionally had one of the highest rates of private pensions among OECD countries – about 50 percent of Israel’s elderly had a private pension in 2011 – which has contributed to the relatively low rates of market income poverty among them.  In addition, Bowers finds that Israel’s average pension “replacement rates” (combining both private and government benefits – generally referred to as public pensions) are slightly above the OECD average, meaning that earning the mean wage throughout their career will yield a retired Israeli 78 percent of their pre-retirement wage, compared to an average of 69 percent in the OECD. On the other hand, benfits provide 22 percent of an average worker’s earnings in Israel, compared to an average of 50 percent in the OECD.  As Bowers notes, “Elderly Israelis have to be more self-sufficient, as public transfers in the OECD contribute 61 percent of an elderly person’s income – even more in Western Europe – and less than 50 percent in Israel.” Professor Dan Ben-David: “Domestic politics play a double role in yielding these outcomes.  First, the share of elderly in the entire poor population is substantially higher in the other developed countries than it is in Israel.  So when the other countries implement welfare programs designed at reducing national poverty rates in disposable incomes, it is not surprising that they tend to focus more on reducing poverty among the elderly because that is where they see a greater bang for their buck.” A second aspect of the political dimension is that the demographics of the elderly are simply working against them in Israel.  The large elderly populations abroad wield a sizeable share of the voting population, so it is probably no coincidence that they are able to channel this political power towards benefits that almost eliminate poverty among the elderly in some countries.  As Ben-David and Bleikh note, Israel’s elderly had a brief period of greater political influence between the rise and fall of a “pensioner’s party.”  But as the data indicate, the plight of Israel’s elderly is considerably worse in terms of disposable income than in any of the other developed countries in the sample – this, despite the fact that they are actually better off prior to the implementation of the welfare and tax programs in each of the countries. Prof. Dan Ben-David summarizes: “Israel’s redistributive social safety net of welfare and taxes is not nearly as effective as the social safety nets in other developed countries in reducing poverty and inequality in disposable incomes.  This is a major problem in general, and its severity is particularly striking in the case of the elderly.  Israel’s market income poverty rate among the 65 and over population is actually one of the lowest in the developed world, and declining (although still very high compared to the general population).  However, the disposable income poverty rate for this age group is by far the highest among developed countries.  Most of these individuals are beyond the age where working is an option, so they are totally dependent on the system to keep them above the poverty line – and in Israel, this system has failed them more than in any other country.” The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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. For details, or to arrange an interview, please contact Gal Ben Dor, Director of Marketing and Communication 054-464-2333.

A new Taub Center study that will be presented at a special meeting of the Knesset Economic Affairs Committee reveals findings on patterns of employment and income for the older population in Israel

  • Employment rates for those aged 55-74 have increased in the past decade
  • Per capita income in households of those aged 65 and over rose significantly in the same period
  • Despite this, income gaps between Jews and Arab Israelis grew amongst the elderly population

Demographic projections indicate a sharp rise in the elderly population in the State of Israel in the coming years, and it is unclear to what extent the social security and pension systems are prepared for this change. The implications of these trends and changes amongst this population are also unclear.  A new study by Taub Center researchers Prof. Ayal Kimhi and Kyrill Shraberman, which will be published in the upcoming Taub Center State of the Nation Report 2013, examines these changing employment patterns, as well as the economic situation of the elderly population between the years 2000 and 2011.  Research findings will be presented at a special meeting of the Knesset Economic Affairs Committee headed by MK Prof. Avishay Braverman, which will be held on October 29, 2013. In the words of Prof. Ayal Kimhi, “According to recent demographic projections, the increase in longevity is likely to bring a continuous increase in the proportion of elderly in Israel.  Until 2010, the elderly dependency ratio (the number of those aged 65 and over relative to those aged 15-64) was relatively stable, and remained at a level of less than 160 elderly per 1,000 working age adults.  From 2011, this ratio began to rise, and it is expected to continue to rise steadily and reach some 233 elderly per 1,000 working age adults by the year 2030.” In light of this data the Taub Center study examined whether there is a change in the ability of the elderly to sustain a reasonable standard of living for longer periods than what might have originally been planned for. The research found that while the per capita income in households headed by working age adults (up to age 64) in Israel did not grow in real terms (that is, after accounting for inflation) in the past decade, the per capita income of households headed by older people grew significantly (Figure 1). E Elderly Employment Fig 1 Prof. Kimhi explains this change: “Labor income contributed significantly to the per capita income increase, however elderly households benefited also from an increase in capital income and pensions.”  All of this is true for the Jewish population only, as can be seen in Figure 2.  The elderly Arab-Israeli population, whose per capita income was about half of that of the Jewish population at the beginning of the decade, remained behind and the gaps continued to widen. E Elderly Employment Fig 2 Taub Center researchers determined that the growth in income was first and foremost a result of the growth in the rate of employment of the older population.  Amongst men and women in the 55-64 year-old age group (Figure 3A), the rate of employment in Israel was on the rise and was similar to the rates in the OECD countries in the first half of the previous decade.  Since the middle of the previous decade, the rate of employment in Israel has risen faster than in the OECD countries and a gap of more than 6 percentage points to Israel’s advantage was created – for men and women alike. Amongst those aged 65-74 (Figure 3B), the employment rates among men in Israel were similar to those among men in the OECD countries until 2004.  Beginning in the middle of the decade, employment rates rose more quickly in Israel so that by the end of the decade there was a gap of some 5 percentage points in Israel’s favor.  This trend is similar to what was observed amongst the 55-64 year-olds, although employment rates of 65-74 year-olds were more than 50 percent lower than those of 55-64 year-olds.  The difference is that the rise in employment rates of 55-64 year-olds has slowed down in the past few years while the rise in employment rates of 65-74 year-olds has accelerated. E Elderly Employment Fig 3A and B With regard to women aged 65-74, a different picture emerges.  While their employment rate rose from about 7 percent in 2001 to more than 12 percent in 2011, their employment rates remained lower than the average of the OECD countries – although the gap narrowed beginning in 2008 to 1 percentage point in 2011. In addition, the Taub Center researchers found that one of the main factors that helps employment for the elderly is education.  Figure 4 shows a significant gap between employment rates of those with 9-12 years of schooling and those with 8 years or less of schooling for men and women aged 65-74.  Employment rates are even higher for those with 13 years of schooling or more although to a lesser degree.  Between 2001 and 2011, there was an increase in the employment rates for all education groups.  Amongst women, the employment rate for those with less than 8 years of schooling grew only slightly while the rate for those with 9-12 years of schooling more than doubled between 2001 and 2011.E Elderly Employment Fig 4 Prof. Ayal Kimhi explains: “The demographic changes that bring about a continuous increase in the number of elderly in the population raises concerns regarding society’s ability to ensure them a decent standard of living.  Nevertheless, these same demographic changes, and especially the fact that the health of this group is relatively good compared to past cohorts, allows them to remain in the labor force and to sustain themselves for longer periods.  Another factor that allows the elderly to remain in the work force after the official retirement age is that the job mix in the modern labor market is changing and physically demanding jobs are decreasing in importance.” One of the factors that contributes considerably to the rise in employment of the elderly and the increase in their income is their higher levels of education.  Since in the coming decades an additional rise in education level of this population is expected, it is likely that the trends of greater employment and income will continue.  It should not be concluded from this that the authorities do not have to take these demographic changes seriously.  To this Prof. Kimhi says: “We should continue to encourage flexible employment conditions and tax breaks so as to allow the elderly to continue working even after official retirement age should they be interested in doing so.  At the same time, solutions should be found for those population groups that are left behind – especially the Arab Israeli population and those with low levels of education.  If it has been common to speak of three layers of income sources after retirement – social security, pension funds, and private savings – a fourth layer of growing importance, labor income, should be added.  For those groups who are lacking the skills to benefit from this fourth level and who cannot enjoy labor income, the state must strengthen the bodies responsible for the well-being of the elderly – that is the social security system and pension funds.” The Taub Center for Social Policy Studies in Israel, headed by Professor Dan Ben-David, 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 provides policy recommendations in the key socioeconomic issues confronting the State. For details, or to arrange an interview, please contact Gal Ben Dor, The Taub Center’s Director of Marketing and Communication 054-464-2333.

A new Taub Center study reveals a further deterioration in the state of Israel’s higher education

  • The country’s top universities have fewer senior faculty positions today than they did four decades ago.
  • Since 1973, the number of students per professor has more than doubled.
  • The universities have moved away from employment of higher costing academic researchers and have increasingly outsourced the teaching to non-research, external lecturers.
  • Israel’s academic brain drain to the United States is unparalleled, with 29 Israeli scholars in the U.S. for every 100 remaining at home in 2008 (the most recent data available), an increase from the 25 per 100 in the U.S. just four years earlier. This is several orders of magnitude more than the 1.1 Japanese or the 3.4 French scholars for each 100 remaining in their respective home countries. 

With the beginning of the academic year around the corner, the Taub Center is releasing a study on the state of higher education in Israel.  It will be published in the Center’s forthcoming State of the Nation Report 2013. As the author of the study, Taub Center Executive Director, Prof Dan Ben-David notes: “Israel established some of the world’s leading research universities during its first two and a half decades of existence despite being inundated during this period with refugees arriving with no more than the clothes on their backs, food rationing in the 1950s, repeated all-out wars and internal budgetary limitations.  By the beginning of the 1970s, Israel had seven major research universities.  The number of senior faculty members per capita shot up and reached levels similar to those in the United States (Figure 1).” E Higher Education Fig 1 “Since the 1970s, the country is much wealthier and has significantly greater ability to develop its university system, but Israel dramatically changed course.  Over the next four decades, the country’s universities steadily receded from the nation’s national priorities – as is clearly evident from the data.” Figure 2 shows the increases in population and in the demand for higher education between 1973 and 2010, and the government’s reaction in terms of financing academic positions in the country’s public universities.

E Higher Education Fig 2

Figure 3 show that Israel’s population increased by 133 percent, the student population in its research universities expanded by 157 percent and the number of students in Israel’s entire higher education system (including colleges) rose by 428 percent. The Taub Center study found that the number of senior faculty in the research universities rose by just 9 percent while the overall change in senior academic faculty in all of the colleges and universities rose by only 40 percent.  The size of the academic faculty in Israel’s two flagship universities has actually declined over the past three and a half decades.  There were 17 percent fewer faculty positions in 2010 at the Hebrew University than there were in 1973 – and 26 percent fewer positions at Tel Aviv University.  The Technion has lost over a quarter (26 percent) of the faculty positions that it had nearly four decades earlier. Between 1977 and 2010 (Figure 3), the number of students per senior faculty member more than doubled, from 12.6 students per professor to 26.1, but as Prof. Dan Ben-David notes, “the situation is considerably worse than reflected in these numbers when it comes to the issue of relaying state-of-the-art findings to the next generation of researchers – who are today’s graduate students.”  The number of PhD students to professors rose from less than one student per faculty member to over two students per professor and the number of MA students to professors rose four-fold, from two to eight. To fill the teaching void, the research universities essentially outsourced.

E Higher Education Fig 3

The Taub Center study finds that the universities brought in external lecturers in rapidly increasing numbers to replace the tenured and tenure-track research faculty (Figure 4).  In 1986, the external teachers represented 13 percent of the senior research faculty.  By 2010, this ratio had risen to 46 percent – i.e. almost half of the university lecturers today are not on the research faculty. As Prof. Ben-David notes: “This low cost solution to the public’s declining interest in funding research universities has had two important negative ramifications.  The first is the declining quality of instruction that students are receiving from individuals not actively engaged in cutting-edge research.  The second is that many of these individuals may have intended to proceed along the research route, but the increasing lack of tenure and tenure-track positions in Israel’s research universities – relative to available graduates – has caused many to either drop out of the research path or to find research positions abroad.”

E Higher Education Fig 4

The Taub Center study shows that the country experiencing the greatest brain drain of its scholars to the United States – by several orders of magnitude – is Israel (Figure 5). In 2003-2004, there were 25 Israeli scholars in the United States for every 100 members of the academic faculties in all of Israel’s universities and colleges.  This compares to 1-4 scholars in the U.S. for all other countries except Canada, with 12.

E Higher Education Fig 5

By 2007-2008, the latest data available, Prof. Ben-David finds that the brain drain had fallen from most countries to the U.S. – while Israeli academic brain drain to the United States had risen to 29 scholars out of every 100 in Israel. Professor Dan Ben-David summarizes: “Education is probably a country’s most important infrastructure, and Israel is still blessed with some of the world’s top academic institutions.  These are key to lifting up the country’s extremely problematic primary and secondary education systems, and they are essential for raising Israel’s very low productivity levels that are so crucial for competing in a modern global economy.  Over the past four decades, a much wealthier Israel with much greater budgetary capacity than in the 1950s and 1960s has steadily neglected its world-class academic institutions – and it has been increasingly jeopardizing its future that is so dependent on Israel remaining at the cutting edge.  It is not too late to change direction, but that means that Israel needs to rethink its national priorities and return them to the path of its first decades – the path that eventually enabled the country to become the “start-up nation” that Israel needs to remain if it is to survive in its very hostile neighborhood.”

The Taub Center for Social Policy Studies in