Press Release: State of the Nation 2020

Under embargo until 30.12 (Wednesday) at 6:00AM

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Prior to the coronavirus crisis, Israel’s economy was strong. However, the pandemic has had a drastic effect not just on the healthcare system but on all facets of life – the closures, the contraction in economic activity, the growth in the budget deficit, the unprecedented number of workers placed on unpaid leave or fired, the number of requests for unemployment benefits, the requests for assistance received by the welfare services, and the serious impact on the education system, which had to adjust to the new conditions and grapple with the challenges faced by pupils whose education was seriously disrupted.

At the same time, the response to the crisis may offer a number of opportunities if the government wisely leverages them. Examples include a change in the format of learning and exams in the education system and the expansion of possibilities for working from home. The Herbert M. Singer Series State of the Nation Report 2020 presents new data and an in-depth analysis of the economy, the labor market, welfare, healthcare and education during the past year.

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

 

The Impact of the coronavirus on the economy of Israel

Professor Benjamin Bental and Dr. Labib Shami

The coronavirus crisis has had a major impact on trends in the Israeli economy. The researchers at the Taub Center have examined the immediate effects of the crisis on economic growth, unemployment, the deficit and the national debt in Israel.

During the first three quarters of 2020, GDP dropped by 3 percent relative to the same period in 2019. According to the forecast of the Bank of Israel, the decline in GDP during 2020 will be 4.5–5 percent. Given an annual rate of population growth of 1.9 percent, this implies a drop in GDP per capita of up to 6.9 percent, which will set Israel back about six years. According to the Bank of Israel’s optimistic forecast, GDP is expected to grow by 6.5 percent in 2021, which implies that even at the end of 2021 GDP will be lower by about 5 percent than what was expected without the crisis, and GDP per capita will be at its 2017 level.

The drop in GDP is related to the decline in consumption, which unsurprisingly occurred mainly during the lockdowns. The restrictions on movement had a major effect on the public’s consumption habits and a large proportion of the public shifted to online purchasing by credit card. An examination of average daily total credit card expenditure shows a drop in activity of 21 percent with the imposition of the restrictions on economic activity in March and a recovery in activity to almost pre-crisis levels or higher when the restrictions imposed during the first wave were lifted. In the second wave, in September, there was a more moderate decline of about 10 percent.

In a breakdown by sector, the restrictions on movement during the first lockdown reduced expenditure in gas stations by about 49 percent; during the second lockdown—which was less stringent—the reduction was 21 percent; and upon the lifting of restrictions imposed during the second wave, the level of activity returned almost to its pre-crisis level. The restaurant industry was affected even more dramatically: during the first lockdown there was a drop to one-third of the normal level of activity while during the second lockdown there was a decline of 34 percent. In the hotel and leisure industries, the level of activity dropped to one-quarter of its normal level during the first lockdown, but after the lockdown there was a dramatic recovery in these industries, and activity in the hotel industry even surpassed its level before the crisis, probably as a substitute for travel abroad.

The second lockdown reduced activity in the hotel industry to about one-third and leisure activity to one-half the pre-closure level. In grocery store chains, total credit card expenditure rose by more than one-third during the first lockdown.

With the imposition of the first lockdown in March, almost one million Israelis were placed on unpaid leave. In March, the number of recipients of unemployment insurance benefits was ten times higher than in February, and in April it reached a peak of 22 percent of the workforce (about 900,000 individuals). The end of the lockdown lowered the rate of unemployment insurance recipients by half; however, during the second lockdown it again rose and 240,000 additional workers began receiving unemployment insurance benefits.

The crisis led to a major drop in tax revenues and an increase in the deficit. In 2019, the deficit in the government budget reached 3.7 percent of GDP, which was significantly higher than the target for the year (2.9 percent). At the end of the third quarter of 2020, the cumulative deficit had already reached 12 percent of cumulative GDP for the year, which is quite close to the Bank of Israel’s forecast of 13 percent for the year. The increase in the deficit was due almost entirely to the increase in activity of the non-defense ministries as a result of the coronavirus crisis, while defense expenditure remained similar to the previous year.

In any case, the government will have to increase the national debt in order to cope with the crisis. In contrast to the deficit, which was high even before the crisis, Israel’s debt-to-GDP ratio was about 60 percent. However, the increase in the deficit and the drop in GDP will result in a debt-to-GDP ratio of 76 percent in 2021 according to the Bank of Israel’s optimistic forecast and 83 percent according to its pessimistic forecast.

“This means that after the crisis, the government will have to quickly reduce the deficit and encourage growth in order for the debt-to-GDP ratio to return to its pre-crisis level,” said Professor Benjamin Bental, who is head of the Economic Policy Program at the Taub Center. He added: “Currently, the situation of our national debt is much better than that of many other developed countries and our interest rate environment is very favorable. At this stage, the Israeli economy enjoys a high level of confidence from the global capital market, as can be seen in the premium paid on the government of Israel’s debt and its high credit rating. Nonetheless, it should be noted that improper management and poor utilization of funds is liable to quickly change this situation.”

The government’s economic program to deal with the crisis in 2020 totaled about NIS 139 billion at the end of November, which constitutes about 10 percent of the GDP in 2019. According to data from the Accountant General in the Finance Ministry About NIS 16 billion was allocated to the Ministry of Health and the activity of the other ministries in conjunction with the Ministry of Health in dealing with the crisis; of that, about 93 percent had been utilized by the end of November, which is in line with the period of time since the beginning of the program.

About NIS 52 billion was allocated to the expansion of the social security net, of which only 77 percent was utilized due to low utilization of the budget designated for vocational training programs and funding for the early withdrawal of grants to discharged soldiers, and the non-utilization of the budget for food stamps for weaker populations and other grants for soldiers. About NIS 66 billion was allocated to business continuity programs, which include assistance to businesses, but only 67 percent of these funds had been utilized by the end of November. Particularly notable are the underutilization of business assistance lines, such as assisting industry branches in the crisis, and the fact that the budget for worker retention has not been utilized at all.

NIS 4.6 billion was allocated to a program for the acceleration and development of the economy; while only 40 percent has been utilized as of the end of November, it is hoped that this allocation will be used going forward as it was designated in order to meet long-term goals. “The overall rate of utilization of the economic program for 2020 for the months March to November is 73 percent, which is behind schedule. The underutilization in certain programs is liable to harm the economy’s potential for recovery. In the allocation for healthcare and civilian expenditures—in which utilization is on schedule—there were overruns in expenditure on specific needs of the medical system at the beginning of the pandemic, some of which may turn out to be inefficient,” said Dr. Labib Shami.
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The Bank of Israel has initiated a series of measures to reduce economic turmoil and relieve the pressure in the capital markets. Among other things, it has allocated $15 billion for swap transactions in order provide the banks with liquidity in foreign currency and NIS 50 billion for the purchase of government bonds in order to stabilize the market and reduce long-term interest rates. At the beginning of April, the Bank of Israel reduced the interest rate by 15 basis points to 0.1 percent and instituted a program of loans to the commercial banks in the amount of NIS 5 billion, which was earmarked for small businesses. Similarly, it has taken regulatory measures to provide for the banks’ capital needs in order to free up additional sources of credit for all sectors of the economy.

In comparison to other countries, the total size of Israel’s support programs that primarily involve direct fiscal stimulus is quite similar to those of other OECD countries and is even larger in some cases. In contrast, the size of programs for the deferral of tax payments, and to an even greater extent, those providing guarantees for the business sector, is significantly smaller in Israel than in other countries. This fact is weakening the resilience of the business sector and is liable to hinder the recovery from the crisis.

The Israeli labor market under the coronavirus

Noam Zontag, Professor Gil Epstein and Professor Avi Weiss

The Israeli labor market has suffered a major upheaval as a result of the coronavirus crisis and the social distancing measures that have accompanied it. In April, which represented the peak of the first wave, about 31 percent of workers were temporarily absent from work for reasons related to the crisis (those who were put on unpaid leave, took vacation because of the crisis, or were temporarily out of work due to the crisis but, for various reasons, were not entitled to unemployment benefits given to those on unpaid leave), in addition to about 3 percent who were unemployed prior to the crisis. With the easing of restrictions during the period from mid-May to September, many workers returned to their jobs, but the rate of unemployment rose to 4.5 percent and many industries remained in a situation of distress. In the second wave, the percentage temporarily absent from work rose again, but to a lesser extent than in the first wave.

Another effect of the crisis in the labor market was the decline in average number of work hours during the first lockdown, which was the result of the closing of schools and the decline in economic activity and social interaction. Average work hours during April were lower by about 14 percent than in February and by about 9 percent relative to April 2019. In contrast, during the second lockdown, and particularly in October, average work hours of individuals still working was higher than in 2019.

According to the researchers at the Taub Center, the decline in employment was not uniform and the effect varied significantly across groups. With respect to gender, at the beginning of the crisis the proportion of women whose employment had been adversely affected was higher than that of men (about 38 percent of women were unemployed or temporarily absent from work as opposed to about 30 percent of men), perhaps because many of the employees in the support occupations in education (who were put on leave) are women or because many women remained at home with their children during the closure of the education system.

Starting from the month of June, the trend reversed and the number of unemployed and individuals temporarily absent from work was somewhat higher among men; however, with the imposition of the second lockdown in September, unemployment again rose at a higher rate among women and in October it was 3 percentage points higher than among men. A breakdown according to level of education shows that the people most harmed by the crisis, particularly during the period of the lockdowns, were individuals with low levels of education. A breakdown according to age shows that the primary people affected were young workers and old workers over retirement age, both during the lockdowns and between them. It may be that older adults were more adversely affected since they belong to risk groups and there is a concern that many of them will not return to the labor market, which may reduce the size of the workforce in Israel.

The researchers at the Taub Center also found that the employment crisis more adversely affected workers in the ultra-Orthodox sector, and primarily ultra-Orthodox men among whom unemployment and absence from work for reasons related to the crisis reached 48 percent in April (as opposed to 28 percent among non-ultra-Orthodox Jewish men) and remained high even when restrictions were eased and during the second lockdown. Among workers in the Arab sector, the rates of unemployment were high at the beginning of the crisis but later declined, and since June they have been lower than those of the non-ultra-Orthodox Jewish population during some months, both among men and among women.

While many workers were temporarily absent from their jobs during the lockdowns, a smaller group of workers remained without work even during the easing of restrictions. In June 2020, the main impact was in the business sector, where the percentage of people not employed out of those employed a year earlier (in June 2019) reached 14 percent (as opposed to 5 percent not employed in June 2019 out of those employed in June 2018). A sharp increase in those no longer working was also observed among the self-employed, which reached 11 percent of the self-employed who had been employed in the previous year (as opposed to 2 percent one year earlier). This increase was high among both full-time workers and part-time workers.

The wage paradox during the coronavirus pandemic – an exceptionally high increase in wages at the height of the crisis

Between February 2019 and February 2020, wages rose by about 3 percent. With the imposition of the first lockdown, there was a drop in the average real wage, but in April it increased by an exceptionally high rate. The reason is that the calculation of the average wage reflects workers who were actually working and therefore it is also affected by changes in the mix of workers employed. Accordingly, the fact that many workers who were on unpaid leave in April were relatively low wage earners affected the average wage of employees who actively worked during that month.

After April, the real wage was again characterized by a downward trend; however, in August the level of the real wage was still high relative to the months prior to the crisis, particularly in the business sector. This exceptional increase in wages has significant budget implications. For example, the minimum wage and the wages of certain senior employees are linked to the average wage. In order to deal with the consequences of this artificial rise in the average wage, the Ministry of Finance has recommended that wage updates be temporarily frozen.
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The crisis is expected to have additional consequences for the labor market. One of the main ones is the adoption of working from home. A survey of businesses carried out by the CBS showed that 16.5 percent of employers who had allowed some of their workers to work from home were interested in continuing to do so after the crisis. According to researchers at the Taub Center, this will reduce the importance of the physical distance between one’s home and office and will make high-quality employment more accessible in the periphery and for those with disabilities. Working from home also reduces traffic congestion and provides flexibility in work hours, which in turn allows for a better balance between work and family. At the same time, a negative consequence of working from home, namely a drop in productivity, has been observed in some types of businesses.

Different employers and industries have dealt with the crisis in a variety of ways, such as utilizing work from home, adjusting wages, and in some cases implementing efficiency improvements unrelated to the pandemic. In small businesses (5 to 10 employees), over one-fifth of workers were laid off, and about one-quarter of workers were laid off in the food and beverage industry. Meanwhile, in industries that can switch more easily to working from home, such as hi-tech and finance, a much smaller percentage of workers were fired or temporarily absent from work. Despite the variation across industries, high rates of dismissals were observed throughout the economy, apparently due to the drop in demand, the lack of certainty and the difficulty in raising capital. The second lockdown hurt employment less than the first.

Between February and March 2020, there was a large decline in the rate of job vacancies in the economy, from 2.2 percent to 1 percent, although it was not accompanied immediately by an increase in the rate of unemployment. The rise in the rate of unemployment began in March and continued until August, in parallel to the increase in the rate of vacancies. This may be an indication of a mismatch between workers and workplaces or, in other words, a gap between the skills of jobseekers and the skills required by the vacant jobs. This gap may be the result of, among other things, the gap between the skills of workers who were laid off in industries that were particularly affected by the crisis and the skills required in industries that were less affected and are looking for workers.

“The policy to deal with the employment crisis needs to be differential, based to the needs of each of the groups that has been adversely affected,” noted Professor Avi Weiss, the President of the Taub Center. “With this, the crisis has also provided opportunities. For example, low-earning workers who have been fired can improve their skills and their earning power – we have already seen an increase of 20 percent in the number of people registered for higher education this year – and the government can exploit the period of the crisis to expand vocational training, which will increase the rate and quality of employment. In addition, expanding the use of technology, with an emphasis on technology that facilitates working from home, is increasing the accessibility of high-quality employment.”

The social welfare system and the coronavirus crisis

Professor John Gal and Shavit Madhala

The coronavirus crisis has led to an increase in poverty and inequality, which were already high prior to the crisis. In order to mitigate the distress created by the crisis, the welfare budget was increased by 47 percent in 2020 (to about NIS 183 billion), most of which was allocated to unemployment insurance, assistance to the self-employed and those with disabilities, and the expansion of wage subsidies.

The resources added this year were channeled to guaranteeing the safety net for individuals in the present and only a small proportion has been directed to measures that are meant to help citizens develop their abilities and social capital, such as the expansion of vocational training. The budget for these last measures has hardly been utilized, despite the promises made. Thus, of about NIS 4.7 billion that was allocated, only NIS 1.5 billion has been utilized.

The main responsibility for providing a safety net is that of the National Insurance Institute (NII), which has had to cope with a flood of applications for unemployment insurance benefits. Israel’s unemployment insurance program, which was not very accessible or generous, was adapted to the new reality. The measures undertaken included an extension of the period of eligibility until the end of June 2021 (instead of 50–175 days), a shortening of the period of qualification to six months (instead of 12) and the approval of overlapping benefits.

In November, a grant of NIS 2,000 was also approved for recipients of unemployment insurance benefits, as was a grant to unemployed individuals who reentered the labor market at a lower wage than they had earned prior to the crisis. The number of recipients of unemployment insurance benefits grew 13-fold, from about 70,000 prior to the crisis to about 900,000 in April 2020. Accordingly, the total cost of unemployment insurance benefits during the first half of 2020 rose to about NIS 9 billion and benefits paid in May alone were larger than the total for all of 2019. In contrast to the dramatic jump in the number of unemployment insurance recipients, the number of recipients of income support did not rise significantly as a result of the crisis, increasing by only about 17 percent since the beginning of 2020 (from about 72,000 to about 84,000). In addition, the NII provided recipients of a disability allowance with a grant equal to the addition included in the agreement with the organizations representing people with disabilities.
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“It was the young who were particularly affected by the crisis, due to their weak position in the labor market and their tendency to work in industries that have been the most adversely affected,” explained the researcher Shavit Madhala. In April, about half a million individuals up to the age of 34 registered as jobseekers, out of a total of about 1.15 million jobseekers (in other words, 44 percent of the total while their proportion of the workforce is only about 38 percent). Many of them were eligible for unemployment benefits thanks to changes made in conditions for eligibility as a result of the crisis. Apart from the effect on the employment of the young, many young workers who were able to continue working had their wages reduced.

In order to address the particularly adverse effect of the crisis on the self-employed, freelancers and small business owners who are not covered by the unemployment insurance program, the Ministry of Finance allocated about NIS 12.7 billion to create a safety net for them, and by October about 74 percent of that amount had been distributed. The Ministry of Finance also increased the work grant for low wage earners by 62 percent from April through December at a cost of NIS 320 million.

The Ministry of Labor, Social Affairs and Social Services, which is responsible for populations most affected by the crisis and for preparing the new unemployed to rejoin the labor market and upgrading their skills, focused its efforts during the early months of the crisis on initial assistance to the crisis’ victims and to adapting the systems to the new reality. In parallel to the increased rate of unemployment, there was an increase in the number of requests for assistance received by the social welfare services and in the number of requests from families that were not previously known to them, apparently due to the economic distress created by the lack of employment.

An examination of the number of active files in the social welfare system points to an increase of about 9 percent in the number of cases of violence in the family, from about 15,000 at the end of 2019 to about 16,500 in October of this year. Additional increases in the number of active files were seen in areas related to employment and income, as well as in the realms of health, parent-child relations, youth and loneliness. In contrast, the only area in which there has been a significant decline in the number of active files is the elderly, from about 134,000 cases to about 126,000. This decline is apparently due to the fact that the elderly are not able to leave their homes as easily because of the pandemic, even though they are in need of assistance.

The main burden has fallen on the shoulders of the social workers, whose strike in July led to an agreement that promised them a coronavirus grant of NIS 9,000–11,000 each, additional salary expenditure totaling NIS 200 million in the summer of 2021 and the negotiation of a new wage agreement. In order to assist the non-profit organizations, the government set up an assistance fund in the amount of NIS 5.2 billion which was used to provide a grant of NIS 400,000 to non-profit organizations in need of assistance that met certain criteria. Additional assistance in the amount of NIS 53 million will be distributed to non-profit organizations involved in social welfare and assisting disadvantaged populations.

It is estimated that until May 2020, the government’s assistance systems helped reduce the increase in the incidence of poverty and inequality, which had been substantial, by about one-half, and that all told the incidence of poverty will increase by about 8–14 percent and inequality will increase by about 1.5–4 percent. The main victims of the crisis are working families (who lost their jobs or whose salaries were reduced), single-parent families and young families. A survey carried out by the CBS found that the economic deterioration occurred primarily among the working-age population and among about 50 percent of the Arab sector. About 21 percent of the participants stated that they had cut back on the amount of food they consume or the number of meals they serve for economic reasons as a result of the crisis.

“The crisis has forced the State’s systems to invest significant financial resources and indeed we have seen a dramatic increase in welfare expenditure. It is difficult to know how the crisis will influence the welfare of Israel’s citizens over time; but there is no doubt that this outcome is dependent to a great extent on the government’s willingness to continue the assistance programs intended to ease the distress of the unemployed and to help them reenter the labor market and find worthwhile employment,” said Professor John Gal, head of the Welfare Policy Program at the Taub Center.

The response to the coronavirus from the viewpoint of the healthcare system

Professor Dov Chernichovsky, Professor Benjamin Bental, Rachel Arazi and Elon Seela

Israel’s population is relatively young and this has provided it with an advantage in responding to the coronavirus; however, the healthcare system entered the crisis with a scarcity of resources and an unclear division of responsibility between the Ministry of Health and the other bodies that are responsible for responding to a crisis like the coronavirus pandemic. Even if the additional beds and manpower allocated to dealing with the crisis become permanent, the effect will be negligible due to the lack of adequate allocations in the past, the rapid growth in Israel’s population and its aging, and the situation of the health system, mainly the public system, in terms of manpower slots, beds and the neglect of community-based healthcare.

Israel is in a relatively good position among the developed countries in terms of Covid-19 mortality per million inhabitants thanks to several factors. Israel has a relatively young and healthy population, with only 10 percent of the population aged 65 and older, a proportion that is about one-half of that in other developed countries. Additional reasons include: universal health insurance; only one main port of entry into the country, making it easy to close off; a high level of readiness for emergency security situations, so that it is easy to muster resources and technologies; and a high level of solidarity. However, there was a change in the public’s compliance with the restrictions between the lockdowns and a decrease in compliance with the rules.

The national, or universal, health insurance scheme is based on an intergenerational transfer of resources. The main beneficiaries of this system are individuals under the age of 21 and those over the age of 57 while the age group in between—21 to 57-year-olds who constitute the majority of the working-age group—subsidize the other two. About 85 percent of the expenditure on responding to the pandemic is for the benefit of the 60+ age group, which is double the level during normal times. The main working population and the young non-working population hardly “benefit” from the mitigation of the pandemic by means of lockdowns and other restrictions, even though they make the main economic sacrifice, now and in the future.

To wit, the income of the employed and the self-employed comprise about 60 percent of GDP and the additional investment made in the healthcare system alone to this point as a result of the pandemic (NIS 17 billion) is equal to about 1.2 percent of the GDP in 2019. This reflects an additional cost that is equivalent to a tax of about 2 percent on the income of those employed that is imposed on the working-age population in order to finance the direct response to the pandemic. This situation creates a larger deviation from the age-based cost-benefit structure in the National Health Insurance Law that generally exists, which is liable to create intergenerational social tensions and may put intergenerational solidarity and the public’s willingness to adhere to lockdown regulations to the test.

With respect to the preservation of life, the number of deaths rose from 320 to 1,552 between the lockdowns (between July and September). On the assumption that continuing the lockdown would have resulted in another 320 deaths, then the lifting of the lockdown cost an equivalent to 9,270 life years and about NIS 3.1 billion (based on a standard accepted economic value of NIS 340,000 per life year as reflected by the decisions of the Health Basket Committee). However, the increase in GDP during the third quarter of 2020 relative to the second was much larger than the value of the life years lost as a result of opening the economy: in exchange for every life year that was lost the economy “gained” NIS 2.9 million, an amount that is eight times that of the aforementioned value of a life year. Hence, by partially shutting down Israel is “paying” for saving lives by fighting the virus substantially more than it pays for saving lives via healthcare expenditures in regular times.

The researchers at the Taub Center examined the model of the healthcare system’s response to national crisis situations and the implementation of this model during the coronavirus pandemic. “The National Health Insurance Law (1994) does not relate explicitly to the provision of medical services in the community and in times of emergency. In contrast, the People’s Health Ordinance (1940) and its various amendments do relate to this issue. There is a lack of consistency between different pieces of the legislation and it is difficult to determine who has responsibility and to what extent,” explains Professor Chernichovsky. “During the crisis, areas of responsibility and interfaces between the Ministry of Health on the one hand and the other ministries and government bodies on the other were not well-defined. Thus, for example, according to the law, the health funds are primarily responsible for initial treatment. In contrast, by the ordinance, once a pandemic is declared, the responsibility shifts to the Ministry of Defense and it is to work in coordination with the local authorities, without any mention of the health funds. Regardless, due to the overconcentration of authority in the Ministry of Health, the health funds have essentially been excluded from the process, even though they have a large-scale laboratory infrastructure and even though 96 percent of coronavirus patients are currently treated in the community.” With respect to actual implementation, according to the legislation and the existing regulations, the responsibility for responding to the situation is that of the National Emergency Authority within the Ministry of Defense. However, the event is actually being managed by the National Security Council, under the supervision of the Prime Minister’s Office and the coronavirus “project manager,” who are not mentioned in the legislation or in the regulations.

National expenditure on healthcare was low even prior to the crisis: in 2019, it stood at about 7.5 percent of GDP, which is lower than the OECD average of 8.8 percent. Only about 65 percent of expenditure on healthcare is publicly financed (as opposed to 74 percent on average in the OECD) and the rest is private. Since 2010, the expenditure on healthcare in real terms has risen by only about 1.5 percent, which is reflected in a shortage in funding and the fragile situation of the public medical system. In 2018, the number of beds in the general hospitals was 2.2 per 1,000 inhabitants (as opposed to 3.6 on average in the OECD), which is equivalent to 2.5 per 1,000 inhabitants after adjusting for the younger age profile of the population. This low level leads to a high average hospital bed occupancy rate of 93 percent (as opposed to 75 percent in the OECD on average). All of these factors combined, including the weak community care system, contributed to the doubts that existed prior to the crisis regarding the ability of the hospitalization system to successfully complete its mission.

With the onset of the coronavirus pandemic, the healthcare system was allocated an additional NIS 17 billion according to data provided by the Health Ministry, although only NIS 4 billion was invested directly in the system while the rest was designated for investment in respirators, drugs and personal protective equipment. About NIS 2.7 billion of the amount was invested in manpower, infrastructure and technology – an addition of about 3,200 beds (16 percent), of which about 1,000 are standard beds and the rest temporary (in converted parking lots and other protected spaces). Even if the 1,000 standard beds that were added as an emergency measure are made permanent, the addition will not be significant in the face of annual population growth of 1.9 percent, and will raise the number of beds per 1,000 inhabitants to only 2.23. The system was also reinforced with about 500 new positions for physicians (an addition of 1.7 percent), which, if they are permanent, will raise the number of physicians per 1,000 inhabitants only marginally – from 3.22 in 2018 to 3.28. In other words, despite the pressure on the system, and even on the assumption that the additions that were allocated to deal with the crisis are not cancelled once the crisis is over, these investments will not be sufficient going forward given the rate of population increase and its aging in Israel, and will not make a dent in the gap between Israel and other countries. Moreover, most of the resources were invested in the hospitals and diagnostic centers, and significant resources were not directed toward care in the community.

Physicians in Israel: trends in characteristics and training

Professor Aviad Tur-Sinai, Noam Zontag, Professor Orna Blondheim, Professor Alex Weinreb, and Professor Dov Chernichovsky

The total supply of physicians is determined by the number of individuals with a medical license and their rate of participation in the workforce. Given the fact that a specialist’s training can take 15 or more years and given the effects of immigration and retirement, changes in the total number of physicians are relatively gradual. The Taub Center researchers examined the potential labor supply of physicians in Israel (all those licensed to practice medicine who earned an income) during the last two decades according to their demographic and other characteristics.

In 2018, about 1,700 new physicians were certified, which is about three times the number certified in 2007. The number of specialists certified was about 800 and that is expected to rise in coming years. With respect to gender, the proportion of women among recipients of new medical licenses has ranged from 42 to 45 percent during the last decade. Given the aging of the population, there has been a decline of 8 percent in the age-adjusted number of active physicians per capita from 2000 to 2016, despite the 31 percent increase in the number of physicians during that period, and an increase of 15 percent in the age-adjusted number of active specialists per capita. In other words, the drop in the number of physicians per capita has been accompanied by a qualitative increase in the age-adjusted number of specialists per capita. This decline in the number of physicians per capita is particularly large relative to the OECD, although the absolute number of physicians per capita in Israel remains relatively high in international terms.

An increase in the number of older physicians alongside a drop in their work hours is liable to create an added burden on young physicians and lead to a potential decrease in effective labor supply, especially in the public system

During the period 2000–2016, there was a rise in the average age of active physicians in Israel. The size of the 61–67 age group grew by 174 percent and the group after retirement age grew by 271 percent, such that the proportion of active physicians after the age of retirement among total physicians grew from 4 to 12 percent. The reasons for this increase are apparently related to the raising of the retirement age and the fact that retirement occurs as a gradual process of reducing work hours until complete retirement. At the same time, there has been a drop in the number of physicians in the 41–50 age group and an increase in the number of young physicians (up to the age of 40).

The age and gender profile of physicians has an effect on their total work hours: the weekly number of work hours of male physicians aged 25–64 is 48–53 hours, as compared to 41–47 hours for female physicians in that age group; male physicians over the age of 65 work an average of 33 weekly hours as compared to about 24 weekly hours for female physicians. The proportion of women among physicians aged 60 or older who are below retirement age is small, so there may be some growth in the proportion of active female physicians, which will affect the number of work hours per physician due to the difference in average work hours between male and female physicians. The increase in the proportion of older physicians within the total number of physicians and the resulting decline in the average number of work hours per physician is liable to create pressure to increase the number of work hours of young specialists and interns. Since the experience and skill level of young specialists is lower than that of the older ones, the trend is toward a potential decline in the effective supply of work hours from specialists, at least in the public system.

In a breakdown by sector, it appears that the proportion of physicians from the Arab sector who are entering the system has risen and now accounts for 30 percent of the new physicians in Israel; all told the proportion of active Arab physicians reached about 15 percent in 2016. This means that the proportion of active Arab physicians within the total number of physicians is approaching their proportion in the population (21 percent).

In an examination by country of origin and place of study, the Taub Center researchers analyze the 133 percent increase in the number of recipients of medical licenses since 2007. The main part of the increase can be attributed to physicians who studied abroad: between 2007 and 2016 their number rose by 366 percent as opposed to an increase of 80 percent among graduates of Israeli medical schools. An examination of the mix of new license recipients shows that the proportion of graduates who studied in an Israeli medical school during the period studied rose to 44 percent while the proportion of immigrants who studied abroad dropped to 24 percent and the proportion of native Israelis who studied abroad increased to 32 percent.
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Many of the medical students studied abroad, and among graduates in Israel there is a majority of women and an increase in the proportion of Arab Israeli physicians

The number of medical students in Israel is on an upward trend – from 1,098 in 1990 to 2,016 currently, of whom almost 60 percent are women. The proportion of Arabs is about 15 percent, which represents an increase of 400 percent since 1990. At the same time, the proportion of graduates who studied medicine in Israel has fallen from 74 percent between 2000 and 2006 to 51 percent between 2012 and 2016, as opposed to an increase in the proportion of graduates who studied in Romania, Italy and Jordan during those periods. About one-tenth of the recipients of medical licenses in Israel between 2012 and 2016 were trained in Hungary and 7 percent of all new physicians during this period, most of them men, were trained in Jordan. The State Comptroller Report for 2018 found a gap in the success rate on the medical licensing exams in favor of Israeli graduates.

“It is possible that the gap in the rates of internship between graduates who studied in Israel and those who studied abroad is the result of, among other things, strict admission standards in Israeli medical schools, and hence the preference for Israeli graduates in allocating internships. This may reduce the internship possibilities open to those who studied abroad. In addition, it should be remembered that the hospitals are affiliated with the medical schools in Israel and perhaps there are also personal connections that help Israeli interns get accepted to internship programs. One way or another, it is important for Israel to take advantage of the existing potential of physicians by increasing the number of positions for physicians and interns, in order to improve the supply of physicians in the system,” commented researcher Noam Zontag.

The main increase in the number of new specialists occurred among those finishing an internship in psychiatry (96 percent), occupational medicine, which is related to employee health (44 percent), plastic surgery (40 percent) and ophthalmology (37 percent). The number of new interns has declined in public health (31 percent) and geriatrics (29 percent), a situation that deserves attention in view of the increase in life expectancy and the expected doubling of the elderly population in coming decades.

“Israel is in a good position relative to other developed countries with regard to the potential supply of physicians. A relatively large proportion received their licenses abroad. Furthermore, the number of older physicians who are working part-time or working past retirement age has risen. At the same time, the population has grown and aged faster than the age-adjusted number of physicians per capita, such that in practice we are observing a drop in the number of active physicians, particularly interns, per capita and in their number of work hours,” concludes Professor Dov Chernichovsky, head of the Health Policy Program at the Taub Center. “The Ministry of Health has tightened the criteria for receiving a license and has shortened the list of medical schools abroad that are recognized in Israel, in an effort to maintain the quality of medicine in Israel. Nonetheless, it has adopted the correct policy in allowing Israelis who studied abroad to integrate in increasing numbers within medicine in Israel. However, it must meet the challenge of providing internship positions and positions for those who complete internships, together with appropriate assistance to graduates from abroad, with the goal of fully realizing their potential.”

Opportunities and risks to the education system in the time of the coronavirus

Nachum Blass

Although the education system is still in the midst of a crisis, thought already needs to be devoted to future implications of this crisis. One of the most important implications will apparently be the increased role of remote teaching and learning. According to Nachum Blass, the head of the Education Policy Program at the Taub Center, “The new educational reality is a kind of unplanned, though important, socio-pedagogical experiment that will affect the extent to which remote teaching will continue to be part of the education system even in normal times, and measures should be taken to intensify its advantages and minimize its disadvantages.”

From the point of view of the students, remote learning constitutes a reasonable tool only for pupils from strong socioeconomic backgrounds. The reasons for this are clear: they have the benefit of a sufficient number of computers at home, a fast Internet connection and quiet surroundings in which to study. Among the weaker populations, on the other hand, the situation is very different. In the Arab sector, 23 percent of the pupils have no access to a computer or the Internet and in the ultra-Orthodox sector the proportion is 41 percent; the parallel figure among non-ultra-Orthodox Jews is only 2 percent. The ability of parents with a lower socioeconomic status to help their children is also more limited. Finally, it is more difficult to meet the needs of preschoolers, pupils with special needs and youth-at-risk using online teaching.

From the point of view of teachers, remote teaching can lead to empowerment and autonomy, as indicated by the survey carried out by the Taub Center and the Israel Teachers Union following the first lockdown. Online teaching also creates an opportunity for personal contact with pupils and has reduced the need to deal with disciplinary problems, while also facilitating more teamwork. On the other hand, remote teaching has spurred major difficulties in maintaining a high level of interest among pupils. Remote teaching can serve as a tool to strengthen the position of teachers and may be an opportunity to change teacher training and teaching methods. The teacher will have to become a moderator who assists his pupils in the acquisition of knowledge and skills and in dealing with their growth processes. Teacher training institutions will need to provide teachers with the tools and knowledge that will enable them to provide guidance to youth who are technologically savvy and have no trouble finding information and even learning remotely, but sometimes have difficulty in social encounters with their peers and those older than them.
Education 2

From the school’s point of view, the formal education system will need to operate in a different manner. Instead of traditional frontal instruction with several dozen pupils who are a “captive audience” in a defined time and place, there will be a combination of learning in school and learning outside of school. There are a number of potential advantages to using remote learning:

  • Strengthening of the social role – Remote teaching provides a pedagogical solution for the acquisition of academic knowledge and skills, but at the same time the school takes on greater importance as a place for interpersonal encounter and the acquisition of social and emotional skills. This requires a change in teachers’ working methods and the allocation of tasks in the school, in the organization of timetables and even in the physical structure of the school.
  • Maintaining social cohesion – The role of the school as a place of encounter between children from various socioeconomic situations will become more important to the extent that remote teaching is expanded, and this will potentially exacerbate socioeconomic gaps between pupils. One of the more challenging tasks of remote learning from the education system’s point of view is to retain families with a higher socioeconomic status and to prevent them from transferring their children to private schools or homeschooling.
  • Cooperation with informal educational frameworks – A major change in the schools is liable to restrict the activity of informal institutions, such as, for example, youth movements. This is because some of the roles they fulfill could be fulfilled by schools in the future if run in after-school hours. There is a need to develop ways to coordinate between the two.
  • Contact with parents – Parents will become active partners with teachers in their children’s learning process. This will likely help teachers understand the conditions of the pupils at home, on the one hand, but it may result in the pupils’ failures being blamed on the home, on the other hand.
  • Partnerships with bodies external to the education system – Public bodies, non-profit organizations and corporations have helped the education system quickly shift to remote teaching, and continued cooperation will help the system gradually absorb remote teaching within its routine.

From the perspective of the Ministry of Education, the current crisis and the strengthening of remote teaching have increased its guiding role. “The main failure of the Ministry of Education has been the lack of preparedness for prolonged activity during a period of crisis – periods that Israel has experienced in the past and will likely experience again in the future. The Ministry of Education has had the tools to accomplish this for many years, and they have been put to use when schools in the South were closed. Furthermore, senior officials in the ministry recognize the educational potential of these tools. Nonetheless, very little has been done to train teachers in remote teaching, and this failure has been particularly evident during the lockdown,” explained Blass. Therefore, Blass recommends a series of steps to prepare the system in the case of another full or partial lockdown, including the following:

  • Reaching a consensus with the teachers’ organizations regarding the extent of remote teaching within teachers’ work hours.
  • Shifting the dates of vacations in the summer and during the year according to the date on which the system is forced to close the schools, whether fully or partially.
  • The preparation of a budget reserve for operating programs such as summer schools and summer camps while complying with the health directives.
  • Transparency in the decision-making and advisory processes and carrying them out together with educators.

”The coronavirus crisis has also created a perhaps unique opportunity for dramatic change in the education system,” commented researcher Nachum Blass. He recommends a number of steps that should be considered:

  • Reinforcement of efforts to reduce scholastic gaps: In addition to the educational affirmative action that allocates additional teaching hours to pupils from weak socioeconomic backgrounds, resources need to be allocated towards the improvement of the technological infrastructure and to provide every pupil with a computer and fast Internet, regional learning centers need to be established, and there is a need for an increased number of positions for truancy officers and an expansion of their powers in order to prevent drop-outs. Priority should be given to additional benefits for teachers in schools that serve pupils from weak socioeconomic backgrounds and reinforcing the assistance provided to weak students, as well as the informal education activities offered to them.
  • A fundamental change in the matriculation exams: As a result of the coronavirus crisis, many countries have cancelled year-end exams and replaced them with internal exams given by the schools. The Ministry of Education has suggested reducing the number of matriculation exams and the material required for them and holding internal exams in additional subjects. This is an important proposal that can be used to validate replacing matriculation exams with graduation certificates given by the school. The situation can be taken advantage of in order to replace the matriculation exams with a high school completion certificate, to deepen learning, to increase the autonomy of the teaching staff and to upgrade teaching methods and the teaching material to meet the criteria of the educational establishment and the needs of the 21st
  • Creation of a National Education Council: This would be an independent body that critically examines the goals, principles and rules that guide the education system, that will monitor trends, and that will formulate proposals and work plans. It is desirable that such a body will operate as part of the Prime Minister’s Office.

The education system in Israel in the time of the coronavirus: Three alternative frameworks

Nachum Blass

The Ministry of Education’s workplan for operating the system since the onset of the crisis has included the reinforcement of the infrastructure for remote learning (NIS 1.2 billion), hybrid learning (NIS 2.6 billion), protective equipment and hygiene (NIS 300 million) and solutions for special populations (NIS 200 million). In an article published by the Taub Center, Nachum Blass, Principal Researcher and head of the Education Policy Program, reviewed the Ministry of Education’s hybrid model and the “Second Shift” plan proposed by many educators, and he proposes a different model that primarily involves a change in class size and a reduction in hours of learning.

The plan proposed by Blass – reducing the maximal class size

Since the onset of the pandemic, many classes have been split into capsules numbering 20 pupils, and most of the classes are learning for fewer hours. These constraints can be transformed into advantages and into a permanent configuration for a reasonable cost and without harming scholastic achievement. There are four main factors determining the expenditure on education: class size, number of teaching hours per class, teachers’ salaries and teachers’ work hours. In Israel, there are large classes, a high number of teaching hours per class, a low hourly wage for teachers and a large number of teaching hours.

The conventional wisdom is that there is no possibility of changing this configuration; however, Nachum Blass of the Taub Center presents a different approach, which primarily reduces class size and teaching hours per pupil, without changing teachers’ salaries and their number of work hours. Taking these steps will allow for change with only a small increase in expenditure.
Frameworks 1

According to CBS data, elementary education classes are allocated about 60 teacher hours per week (of which over 40 are frontal) while in secondary education it is 80 teacher hours (of which close to 50 are frontal). The number of pupils per full-time teacher is 15 in elementary education (which is similar to the OECD average) and about 11 in secondary education (which is lower than the OECD average). The total teacher work hours per class is greater than the frontal teacher hours since some of the hours are devoted to other tasks. The approach in Israel reflects a preference for large classes with a large number of teacher hours, as opposed to the OECD approach, which prefers small classes and a lower average number of teaching hours.

Most of the teachers work a 75-percent position, so an elementary school with 10 classes will have 21 teachers while a secondary school will have 27 teachers (as opposed to 16 and 20, respectively, if the teachers were working full-time). The data show that the number of teachers currently working in the education system makes it possible to significantly increase the number of classes, on the condition that this increase is accompanied by a reduction in the number of frontal teaching hours per class. The question of whether a reduction in the number of teaching hours will bring about a decline in scholastic achievement requires further study. Nonetheless, a partial answer can be given based on the fact that pupils in Israel learn more hours than those in the OECD, but do not attain higher scholastic achievements. In order to implement the proposed plan, it is possible—and perhaps even necessary—to change the pedagogical organization of schools while maintaining teachers’ existing work hours. Maintaining academic achievements will require adapting teaching methods to the new reality.

With respect to the number of classrooms required due to smaller class size, there will be a need to add 36,000 classrooms to meet the threshold of 20 pupils per class, and 10,000 to meet the threshold of 28 pupils per class. There are a number of possible ways to meet this challenge, including ones that do not involve a physical change in the school’s structure, such as the exploitation of existing spaces (science rooms, libraries, auxiliary classrooms, and “safe” spaces), utilization of schools that have been downsized over the years and have empty classrooms, schools that have been closed (372 since 2010) and a shift to “subject rooms” instead of “homerooms”, and changes that require a physical change in the school building, such as the closing off of hallways and other spaces and the division of large classrooms into smaller ones.

Other possibilities include the use of rooms outside the schools, such as in community centers, museums, and synagogues. In areas where the children are bused to school, the busing can be carried out in two rounds and the start of the school day can be staggered accordingly. In addition, the local authorities can regulate the number of pupils in each school so as to save classrooms. There are other possible—though more radical—changes, such as shifting to a five-day school week while adding an hour to each school day; a change in the school calendar such that the school operates all year round; or learning for three weeks per month in school and devoting one week to activities such as science and art, field trips, etc.

These proposals provide a solution for the operation of the schools using only teachers who were trained for that task and operating over the entire week. Although they involve some inconvenience, they are preferable to only partial learning and use of unqualified teachers. However, it is also worthwhile to extend the school day by means of informal education activities (led by teachers, counselors, volunteers and older pupils). This part of the day will not be compulsory but will be offered to pupils who wish to be part of such a framework. “Overall, there are several solutions for the shortage of buildings. Although they require reorganization and flexibility, we have already seen in the past—during the massive wave of immigration from the former Soviet Union—that the system has the capability to administer the required steps,” says Blass.

Clearly, this model is not relevant in the event of a full lockdown but, should there be a lockdown of this kind, there are several measures that can be adopted in preparation already at this point: strengthening the function of the truancy officers, the guidance counsellors, and the social workers who monitor vulnerable populations; creating a network of volunteers among educators who will provide assistance to pupils; recruiting older pupils who will help pupils in the lower classes; and financing remote informal education activities.

Blass adds a word of caution: “The solution of reducing teaching hours per class as a way of helping to reduce class size is likely to be attractive to anyone wishing to cut the education budget. There will undoubtedly be individuals who will think that the number of hours can be cut without reducing class size, thus saving billions for the public purse. The response to this is that such a cut will not harm the education system only if it is done in parallel to a reduction in class size and other steps, such as the implementation of informal education frameworks after school hours.”

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.

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