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.



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%).



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.



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).



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.



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.



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.



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.



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.



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.



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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