The Social Welfare System and the Coronavirus Crisis: An Overview
Author: John Gal, Shavit Madhala Policy Research

After two years of stability with no major initiatives in social welfare policy in Israel, the year of the coronavirus crisis has led to a dramatic change in the response to social problems in Israel. As in the case of other welfare states, Israel has focused primarily on providing social protection in response to the crisis, particularly expanding the coverage of the social security safety net and unemployment insurance. Social investment programs with the goal of providing opportunities for suitable employment, such as the expansion of vocational training and employment support, were promised but have not been implemented on a significant scale.

Social welfare policy during the coronavirus

As part of the welfare state’s response to the social distress caused by the coronavirus crisis, the expenditure on social security and on social welfare grew by about NIS 58 billion in 2020 to reach NIS 183 billion.

  • Of the NIS 58 billion increase, NIS 7 billion represents a natural increase in the budget, 900 million reflects a rise in the level of cash benefits to people with disabilities, and NIS 50 billion reflects budget additions to deal with the coronavirus crisis.
  • Overall, there was a 47% increase in welfare expenditure between 2019 and 2020, compared to a 6% increase in the previous year.
  • Only NIS 1.5 billion of the NIS 4.7 billion allocated for social investment has been implemented.

The National Insurance Institute’s safety net

  • In response to the crisis, unemployment insurance was adapted through measures such as extending the maximum eligibility period through June 2021 (rather than 50-175 days), shortening the qualification period from 12 to 6 months, and approving dual benefit payments.
  • There was an 11-fold increase in the number of unemployment insurance recipients — from a monthly average of about 70,000 in recent years to about 900,000 in April 2020.
  • The total cost of unemployment insurance payments to eligible individuals during the first half of 2020 reached NIS 9.2 billion, such that the expenditure in May 2020 alone exceeded the expenditure during the entire year of 2019.
  • The number of income support recipients did not grow substantially in the wake of the crisis, and rose by only about 17% during the first few months of the year — from about 72,000 prior to the crisis to about 84,000 in April.
  • The NII implemented two rounds of universal one-time grants to a large share of the population, a rare practice in international comparison.

Response from the ministries

  • The Ministry of Finance allocated NIS 12.7 billion for a bi-monthly cash grant for the self-employed and, as of October, about 74% of that had been paid out.
  • The Ministry of Finance work grant (negative income tax) was increased by 62% for April-December 2020, at a cost of about NIS 320 million.
  • The Ministry of Labor, Social Affairs and Social Services reported increases in active welfare cases in the areas of domestic violence, work/income, social exclusion and medical issues, with a notable decline in active cases only in the area of old age. However, the decline in active cases in the latter is likely due to the difficulty of getting the elderly population to welfare offices during the corona period.
  • Following a strike by social workers, the Ministry of Labor, Social Affairs and Social Services reached an agreement to provide a coronavirus grant of NIS 9,000-11,000 per social worker. The Ministry has also allocated NIS 5.2 billion to provide one-time grants to non-profit organizations requiring support.

The effects of the coronavirus on society

The crisis is expected to increase distress and poverty, and to have particularly notable implications for Arab Israelis, the working age population and, particularly, young adults.

  • The incidence of poverty is expected to grow by 8%-14% in 2020 and inequality, as measured by the Gini coefficient, is expected to grow by 1.5%-4%.
  • A CBS survey shows that nearly half of Arab Israelis and about 45% of the working age population (ages 21-64) reported their economic situation is worse or much worse than their situation before the crisis.
  • 44% of the workers who were fired or furloughed in April, which saw a peak in unemployment, were young adults up to the age of 34, while their share of the labor force is only 38%.
  • Almost one-half of unemployment insurance recipients during the crisis were under the age of 35.
  • Many of the young people still working experienced a drop in their wages. Of all age groups, the group where the highest share of earners experienced a drop in their wages was among 18-24-year-olds (53%).
  • At the same time, the share of new job seekers up to age 34 increased between March and October, and the share of young adults among workers returning to the labor market rose from 41% in March to 54% in August.

Monitoring the Recommendations of the Elalouf Committee

The Taub Center has continued to follow the implementation of the recommendations of the Committee for the War Against Poverty in Israel (the Elalouf Committee), since they were published in 2014.

  • The additional expenditure on the areas included in the Committee’s final recommendations stood at about NIS 3.9 billion in 2019, about 53% of the annual expenditure recommended by the committee (NIS 7.4 billion).
  • There does not appear to be any significant increase in expenditure for implementing the recommendations in the past 2 years.
  • Including the expenditure for the Saving for Every Child program, included in the recommendations but not in the budgeting, increases expenditure on implementing the recommendations to NIS 7.5 billion in 2019.