State of the Nation Report 2017
December 21, 2017
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The Taub Center’s State of the Nation Report 2017 has been published
The Taub Center’s annual report, published today, presents a picture of the socioeconomic situation in Israel as of 2017. The book compiles 10 new research studies on employment, macroeconomics, education, health and welfare. The report’s editor is Professor Avi Weiss, Executive Director of the Taub Center and professor of economics at Bar-Ilan University.
Selected findings from the State of the Nation Report 2017:
A Macroeconomic Picture of the Economy in 2017
Gilad Brand, Prof. Avi Weiss and Dr. Assaf Zimring
The past year was characterized by an increase in employment and real wages, and a decline in the unemployment rate, which is at a historic low. However, per capita growth in Israel is low relative to other countries, and labor productivity is not growing at all.
- The increase in employment rates alongside the rise in average real wages led to an impressive increase in consumption in recent years, as well as an increase in the standard of living. However, large parts of the labor market are still characterized by low productivity and low wages. In addition, price levels in Israel remain among the highest in the OECD.
- In the long term, the country is expected to face demographic challenges that will likely slow the rate of economic growth, including a decline in the share of the working-age population, alongside an increase in the share of population groups whose employment rates are relatively low and whose skills are not compatible with the modern labor market.
- Housing prices continue to rise at a faster rate than rental prices, and there continues to be a decline in the return on owning an apartment. Since interest rates stopped declining more than two years ago, it appears that the recent rise in housing prices mainly reflects expectations of households and investors that both apartment prices and average rents will continue to rise in the future.
Patterns of Haredi Integration into the Labor Market: An Inter- and Multi-Sector Analysis and Comparison
Dr. Eitan Regev
The chapter focuses on the unique patterns of Haredi integration into the labor market while examining differences across Haredi streams and places of residence. The study also explores the influence of demographic, socioeconomic, and educational factors on the state of employment and wages among young Israelis from all sectors.
- In recent years there has been an impressive rise in the employment rates of young Haredi women and men across all Haredi streams: between 2008 and 2013, the employment rates of Haredi women and men ages 23-30 rose by 9 percentage points, reaching 73% among women and 36% among men, the largest increase across all sectors. The most significant increase was found among men and women in the Hasidic stream.
- Haredim living in homogeneous Haredi cities (such as Betar Illit and Modi’in Illit), both in the periphery and in the center of the country, have significantly lower employment rates than Haredim living in mixed cities. Assuming that place of residence has an impact on employment possibilities and the desire to work, it is preferable, from an employment standpoint, to build Haredi neighborhoods in mixed cities rather than in homogeneous cities.
- The employment rate among Haredi students is similar to the rate among Haredim who already hold an academic degree. In 2013, approximately 76% of Haredi men with academic degrees (ages 25-35) and 67% of male Haredi students worked, compared with only 37% of Haredi men in the same age group who never pursued higher education. This indicates that the employment level of Haredi men is more influenced by the decision to start working (and learning) than by actually earning a degree. On the other hand, among Arab Israeli women, there is a large gap between the employment rates of those who already have an academic degree and those who are still students, indicating that, for this group, the probability of employment improves significantly with a degree.
- The impact of parental income on the chances of obtaining a bagrut (matriculation) certificate – which greatly increases the chances of acquiring an academic education – is four times higher among the Arab Israeli population than among Jews.
- Parents’ continent of origin has a substantial impact on their children’s projected income in all sectors. Examining the income and education level of parents (and the mother’s education level in particular) shows that, contrary to popular belief, non-Haredi Jewish women whose fathers were born in northern Africa are expected to earn more than women whose fathers were born in Israel. This finding may indicate that, if given equal educational opportunities, ethnic wage gaps could be reduced. By contrast, males whose mothers were born in Asia (Mizrachim) may be expected to earn less than those whose mothers were Israeli-born.
Philanthropy in Israel: An Updated Picture
Prof. Claude Berrebi and Hanan Yonah
This study examines the characteristics of modern Israeli philanthropists. It is the first study of Israeli philanthropy that is based on data from all donors who requested tax credits for charitable donations to recognized non-profit organizations in Israel. The chapter looks at the amount of money donated and the generosity of donors (measured in terms of donation as a percent of income), and explores the influence of donor characteristics on the likelihood to donate.
- Total donations reported to the Israel Tax Authority between 1999 and 2011 nearly quadrupled in real terms: from NIS 153 million to NIS 606 million a year.
- Households headed by women tend to be more generous in their contributions, in terms of donating a higher percentage of household income.
- Philanthropists who immigrated to Israel donate more money than Israeli-born philanthropists, and are also more generous. New immigrants are more generous than veteran immigrants and donate larger sums on average, whereas immigrant philanthropists who have lived in Israel for 21 years or more tend to have similar contribution patterns to Israel-born donors. A possible explanation for this is that immigrants bring with them a different giving culture, but this gradually converges over time to the level that is customary in the local culture.
- There is a significant underrepresentation of Arab Israelis in officially reported philanthropy in Israel – despite the fact that they make up about 20% of the total population in Israel, only 1% of reported philanthropists are Arab Israelis.
- Philanthropists employed in manufacturing, high-tech, banking, and finance are the largest donors and are the most generous relative to philanthropists from other industries. On the other hand, only a small minority of employees in the high-tech sector are donors, and it is possible that norms of donating have not yet been established in this young industry, as they have in the traditional industry sectors.
- The study finds that the most generous localities in Israel include some of the more wealthy localities such as Kfar Shmaryahu and Savyon, as well as localities of low socioeconomic ranking such as Modi’in Illit, Hatzor HaGlilit and Tiberias. Jerusalem and Tel Aviv are not among the top ten localities with the most generous residents.
Developments in Israeli Social Welfare Policy
Prof. John Gal and Shavit Madhala
Welfare policy in Israel has remained fairly stable over the last decade. Despite measures taken by the government to address social distress, the level of expenditure allocated for this purpose remains low relative to other welfare states. Therefore, it is unlikely that there will be a significant decrease in the extent of inequality and poverty.
- Social expenditure on welfare, health and education amounted to NIS 205 billion in 2016 – 57% of total government expenditure (excluding debt and interest payments). Expenditure on welfare, specifically, makes up about half of total social expenditure, and about one-third of total government expenditure. Despite stability in the share of welfare expenditure out of total government expenditure, the welfare budget rose by more than NIS 7 billion in real terms (an annual increase of 8%).
- The Ministry of Construction and Housing budget doubled in 2016 (relative to 2015), reaching close to NIS 4 billion. The increased budget was reflected in a considerable expansion of the public housing system: about 780 new apartments were purchased and an additional NIS 150 million was allocated for purchasing or building new public housing units.
- In 2017, expenditure on implementing the recommendations of the Elalouf Committee for the War Against Poverty is expected to amount to 30% of the recommended expenditure, similar to 2016, and compared to 6% in 2015. Implementation of the Savings Plan for Every Child program appeared in the Committee’s recommendations but was not priced out and included in the total recommended expenditure. When factoring in the cost of this program, total spending on implementation in 2017 increases to approximately 90% of the total recommended expenditure. At the same time, the government is gradually advancing the implementation of other Committee recommendations, mainly in the area of healthcare and in addressing the needs of poor workers.
- A public and political struggle for disability benefits led to the government decision to change policy in this area. The amount distributed through benefits will be raised beginning in 2018 and the sum allocated to the policy’s implementation through 2021 is NIS 4.2 billion.
Social Service Budgeting in Israeli Local Authorities
Prof. John Gal, Shavit Madhala, and Haim Bleikh
Welfare services in the local authorities are budgeted according to the “matching” method: for every shekel invested by the local authority, the Ministry of Labor and Social Welfare allocates three shekels. Thus, in practice, 75% of the welfare budget is financed by the Ministry of Labor and Social Welfare and 25% by the local authority. Israel’s Supreme Court is currently examining a petition against this funding method that claims it is unequitable. The chapter examines budgetary patterns and indicates that there is indeed considerable inequality in budgeting between strong and weak local authorities, but most of this gap is explained by differences in expenditure on out-of-home care frameworks, which are particularly expensive. The gaps seem to be related to the resource constraints of the weaker communities, the absence of out-of-home care frameworks tailored to the Arab Israeli population, and localities’ preferences for addressing their residents’ needs.
- The average expenditure on welfare (including the allocation from the Ministry of Labor and Social Welfare at the end of the year and self-generated supplements allocated by the localities) in strong localities without balanced-budget and government development grants (Forum-15 localities) is NIS 9,095 per client, while in Arab Israeli localities the expenditure is only NIS 3,387 per client.
- A gap that disadvantages the weaker authorities emerges already with the initial allocation by the Ministry of Labor and Social Welfare: NIS 3,170 is allocated to the localities of low socioeconomic standing, as opposed to NIS 5,400 to the other authorities.
- Most of the gap between localities in per-client budget allocations can be explained by types of care frameworks: the weaker authorities use fewer out-of-home frameworks, which are the most expensive. Another factor that increases the gap is the ability of the strong authorities to allocate many more resources to welfare issues, beyond those required to receive funding from the Ministry of Labor and Social Welfare through the matching method.
Israel’s Education System in Recent Years: An Overview
Nachum Blass and Prof. Yossi Shavit
The greatest challenge facing Israel’s education system is reducing the severe inequality among students from different backgrounds. While some progress has been made in recent years, the road to equality is still long.
- Expenditure per pupil increased throughout the education system, but mainly for the stronger socioeconomic classes (the upper quintiles). Less than 30% of the additional resources in the system were allocated to students in the two lowest quintiles.
- In terms of teaching hours per pupil, schools in Jewish primary education in the lowest quintile experienced only minor changes in budget (an increase of about 2%), while in the lower quintiles of Arab Israeli primary schools there was an increase of 3-5% on average. However, the number of hours per pupil in Arab Israeli education in all quintiles is still much lower than the number of hours per pupil in the Jewish sector.
- Results of efforts to reduce the number of students per class were primarily evident in the Arab education stream, where classes had previously been very large. A very small change in class size occurred in the Jewish sector, mostly concentrated in the well-off quintiles.
Social Ostracism Among Pupils
Prof. Yossi Shavit and Eran Hakim
The chapter examines the phenomenon of ostracism and bullying in schools and focuses on the relationship between the likelihood of experiencing ostracism and sector, class, gender and grade level. It also reviews changes in patterns of ostracism over time.
- About 6% of all students in Israeli schools reported being ostracized in 2015. In over 60% of classes there is at least one child who suffers from ostracism.
- There are large gaps between the educational streams in the share of pupils who report ostracism: about 11% in Arab education as compared with 3.4% in Hebrew education. There are also gaps within the Arab education system: 15% of pupils in the Bedouin education system reported ostracism, 10% in the Arab system, and 7% in the Druze system.
- Jewish girls reported that they were victims of ostracism at slightly higher rates than Jewish boys: about 5.2% compared to 4.7%. In the Arab Israeli sector the opposite is true: about 17% of boys reported being victims of ostracism, compared to 13% of girls.
- Pupils with lower socioeconomic backgrounds suffer from ostracism at higher rates than pupils from higher socioeconomic backgrounds (as reflected in parents’ levels of education): among pupils whose parents have 11 or fewer years of schooling, 16% of Arab Israeli pupils and 6% of Jewish pupils reported ostracism, compared to 11% among Arab Israelis and 4% among Jews whose parents have 16 or more years of schooling.
- Between 2007 and 2015 there was a significant decline in the share of pupils experiencing ostracism: from 18% to 11% in Arab education and from 5% to 3.4% in Jewish education. The decline is most significant among those suffering from the highest levels of ostracism – primary school pupils and pupils in the Arab education system. Therefore, the causes of the decline should be examined in order to apply them to additional classrooms in Israel’s education system.
Education and Employment Among Young Arab Israelis
In recent years there have been major changes in education and employment trends in the Arab Israeli society. The chapter examines these trends by sub-group within the sector and by gender, and finds that there have been substantial improvements in post-secondary and higher education – though there are large gaps between the various sub-groups.
- It seems that a major factor contributing to educational gaps between Jews and Arab Israelis is the lower socioeconomic status of the Arab Israeli population. When controlling for socioeconomic backgrounds, the matriculation (bagrut) rates among all sub-groups of Arab Israeli women are higher than(or equal to) those among Jewish women, while among men there are still gaps favoring Jewish men – and these gaps have increased over the past decade.
- A high percentage of Arab Israelis qualifying for a matriculation certificate studied in a scientific-engineering track. The differences between Jewish and Arab Israelis are particularly prominent among women: 39% of Jewish women who qualified for a matriculation certificate in 2013 studied in scientific-engineering tracks, as compared with 71% of Bedouin women and 84% of Christian women.
- The share of those pursuing higher education has increased greatly among Arab Israeli women, particularly among Bedouin and Druze women – an increase of nearly 50% between 2008 and 2013. Among men the improvement was much smaller, although the data do not include Arab Israeli men pursuing an academic degree abroad.
- Arab Israeli women (especially Muslims and Bedouins) still pursue occupations in the education field at very high rates – a field that facilitates working within their localities. This trend may lead to employment difficulties: 59% of those who applied to teach in the Arab school system did not receive placements in the 2013-2014 school year. If there is not a significant drop in the share of female students studying for a teaching certificate, this percentage is likely to increase as the percentage of female Arab Israeli graduates increases.
- As in the past, many Arab Israeli men pursue academic studies in health-related fields (both in Israel and abroad), but there has also been an increase in the share pursuing engineering and computer science degrees – which may open the door to new fields of employment.
- Wage gaps between Jews and Arab Israelis are low among graduates with degrees in the fields of health and education, but are large among those who studied engineering, computer science, business administration and management. In the fields of engineering and computer science, high wage gaps stem largely from differences in the sectors in which the graduates of these fields are employed: Jewish academics tend to be employed in more profitable industries (for example, 28% of Jewish graduates are employed in programming, compared with 16% of Arab Israeli graduates).
Current Developments in the Healthcare System
Prof. Dov Chernichovsky
The chapter deals with the most pressing issues in Israel’s healthcare system, including the balance between public and private funding, management of the health funds and commercial insurance companies, and preparations for Israel’s aging population.
- The government’s share in financing health services is 15 percentage points lower than the OECD average. Consequently, private expenditure on health has increased in Israel: from 4.5% of total household expenditures in 2000 to 5.7% in 2015. The primary reason for the rise in private expenditure is the purchase of private insurance plans.
- Demand for medical treatments has increased, mainly due to the aging of Israel’s population. At the same time, the supply of medical personnel has declined, mostly within the publicly-funded system. As a result, prices for medical care have risen. These trends, along with growing dependence on privately-funded care, lead to growing gaps in access to health services between households of different income levels and between the different geographic regions in Israel.
- In light of the aging population and public interest in issues related to long-term care, the government has taken several steps to improve medical services for the elderly, including raising the maximum allowance for elderly long-term care to NIS 5,000, discontinuing financial means tests for children of long-term care recipients (used to determine the subsidy level for such care), and arranging the immediate transfer of those insured through group insurance via their workplace to health fund insurance. However, despite these efforts, the long-term care system in Israel is inferior to that in other developed countries, and Israel needs a strategy to regulate the issue – both in terms of broader insurance coverage and in terms of care for the elderly.
- The increasingly common trend of health funds (which are non-profit institutions) and commercial insurance companies acquiring private medical facilities raises questions about induced demand for privately-financed medical procedures and unnecessary spending, freedom of choice in the system, and the public-private mix in Israel’s health system.
The Health of the Arab Israeli Population
Prof. Dov Chernichovsky, Dr. Bishara Bisharat, Liora Bowers, Aviv Brill and Chen Sharony
The chapter deals with the state of health of the Arab Israeli population compared to the Jewish population in a number of areas, including the risk factors characteristic of the Arab Israeli population and access to medical services.
- The life expectancy of the Arab population in Israel (79 years) is the highest in the Arab-Muslim world, but it is low compared to the Jewish population (82.7 years) and the OECD average (81.6 years).
- There are substantial gaps between Jewish and Arab Israelis in infant mortality: Among Jews, the mortality rate was 2.7 per 1,000 births, compared to 3.4 among Druze, 3.0 among Christians, and 7.5 among Muslims. Infant mortality specifically, and longevity in general, are related to the socioeconomic situation of the population. In these measures too, Arabs in Israel are better off than are those in other Arab-Muslim countries.
- The leading causes of death for Arab Israelis differ from those of Jews. Particularly prominent among Arab Israelis are birth defects, road and work accidents, and relatively high rates of chronic disease. Some of the differences can be explained by social characteristics of the Arab Israeli population such as marrying relatives, which increases the chances of birth defects, and high rates of smoking (44% of Arab Israeli men smoke, compared with 22% of Jewish men).
- In districts with a high concentration of Arab Israelis – in Haifa, Jerusalem, and especially in the North of the country – there is a shortage of doctors and medical equipment. In addition, the average distance between Arab Israeli localities and a hospital is approximately 22 kilometers, compared to 14 kilometers for Jewish localities.
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