Israel’s Social Welfare System: An Overview
Author: John Gal, Shavit Madhala Policy Research

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

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

Welfare expenditure in Israel

 

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

Welfare expen as percent of GDP ENG

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

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

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

Implementing “social investment” policies

 

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

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

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

Social investment areas ENG

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

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

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

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

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

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

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