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The Taub Center is releasing A Picture of the Nation for 2024, focusing on Israeli domestic issues, including the economy, the labor market, health, demographics, welfare, education, early childhood, and the environment and health. The publication is being published at a time when Israelis and friends many around the world are struggling with issues of security and the war that followed the atrocities of October 7, and therefore, naturally, it reflects the impact of these events on Israel in almost all areas.
The report includes updated information on the state of the society and economy in Israel and also presents a selection of findings from recent research published by the Taub Center on a variety of topics, such as the sharp rise in the number of unemployment benefit recipients in the early months of the war and the subsequent reversal, parental reports of behavioral regression in their children since the outbreak of the war, and data on the long-term care market in Israel. The report also presents comparisons between Israel and other OECD countries in terms of the cost of living, government-funded health expenditure rates, and other measures.
The report was written and edited by Professor Avi Weiss, President of the Taub Center and professor of economics at Bar-Ilan University.
Macro-Economic Trends
Up until the outbreak of the war – the last two governments had similar levels of expenditure: In December 2022, there was a sharp increase in the expenditure of the civilian ministries (a phenomenon also observed in previous years), which is due to the effort to fully utilize the year’s budget. With the outbreak of the war, adjusted civilian expenditure increased by NIS 5 billion in October relative to the same month in the previous year, and in November it grew by NIS 2 billion relative to the same month in the previous year. Surprisingly, the data for December, which are adjusted for the CPI and population size, were to a large extent similar to that in 2022 and 2023. However, since the beginning of 2024, there has been an upward trend in adjusted civilian expenditure relative to the previous two years.
There were no changes in defense expenditure up until the outbreak of the war. In the last quarter of 2023, defense expenditure increased by NIS 17 billion relative to the same quarter in 2022. In the first four months of 2024, this expenditure nearly doubled, reaching NIS 53 billion as compared to NIS 23 billion during the same period in 2023.
The approved defense budget for 2024 stands at approximately NIS 117 billion as compared to around NIS 64 billion approved prior to the war. Based on the defense establishment’s needs, defense expenditure in coming years is expected to be about NIS 20 billion per year higher than pre-war levels. According to the Bank of Israel, an annual increase of more than NIS 10 billion in the defense budget poses a risk to Israel’s fiscal stability.
The productivity gap between Israel and the OECD has narrowed to a large extent but has not yet closed: The narrowing of the gap is partly due to the decline in output per work hour in the OECD countries following the COVID-19 crisis, a phenomenon that did not characterize the Israeli economy. The narrowing of the gap was accelerated by the increased growth rate of output per work hour in Israel, which began in the middle of the last decade. Since the mid-2010s, output per work hour in high tech and information and communication services has increased by 45%, although even the traditional industries have seen a 30% improvement in this metric. The rise in the high tech industry’s share of GDP to about 18% in 2022 also contributed to the improvement in output per work hour.
In 2010, Israelis worked an average of 1,954 hours per year, which is 13% more than the average in the median OECD countries. In 2022, the average number of work hours in Israel was slightly lower (1,892 hours), but the gap with the median OECD countries increased to 16%.
The fluctuations in investment in hi tech mirrored global trends but were more extreme: At their peak, hi tech investment in Israel constituted about 8% of that in the US compared to around 4% during 2015–2018, even though Israel’s output is only 1.6% as large asthat as that of the US output. Relative to the world In global terms, high tech investment in Israel was about 3.5% at its peak, compared to around 1.5% between 2015 and 2018, while Israel’s output is only 0.3% of global output. In 2023 and the first quarter of 2024, the investment rate in Israel relative to the US and the world returned to pre-COVID-19 levels.
Israel is the most expensive country in the OECD: In 2022, price levels in Israel were 38% higher than the OECD average. Israel’s particularly high prices may be related to the significant weight of housing in Israel’s consumer basket.
Labor Markets
Employment increased among both men and women in the Arab and Haredi communities: Among women, employment rates reached their highest levels ever for the second consecutive year. Overall, the employment rate for men in the summer of 2022 was 82%, the same as in the summer of 2019, while for women, the rate increased from 75% to 77%.
Unemployment due to economic causes is approaching its pre-war level: On the eve of the war, the unemployment rate was particularly low at 3.4%. This rate is calculated out of the labor force, which on the eve of the war constituted about 64% of Israel’s population aged 15 and above over. The rates of workers on furlough, as well as the rates of those who had left the work force, were also very low. With the outbreak of the war, the unemployment rate remained stable, but the rate of those on furlough due to economic reasons rose to 6.3%. However, this rate is declining rapidly, and by April 2024, it was only slightly higher than the regular peace-time rate.
In November 2024, there was an increase of about 40,000 individuals who lost their jobs in the last two years and left the work force. This increase contributed to a 1.5 percentage point drop in the labor force participation rate, which happened at the same time.
Job satisfaction is at a high level among the working population and is even increasing: Job satisfaction among workers increased across all worker groups up until 2019: men and women, self-employed and employees, workers in both the private and public sectors, and workers with and without an academic degree. There was a further increase in job satisfaction in 2020, the year that the pandemic began.
There were major changes in undergraduate fields of study: The percentage of students in mathematics, statistics, computer science, engineering, and architecture increased significantly: by 29% among Jews and Others and by 23% among Arabs. Conversely, the percentage of students in the social sciences, humanities, education and arts decreased by 15% among Jews and Others and by 21% among Arabs.
In some fields of study, trends varied by sector. The proportion of students in the medical and related health professions among Arab students dropped by 30%, while the proportion of Jews and Other students in these fields increased by 54%. The decline in most health professions among Arabs is a combination of an overall increase in the number of Arab students and a rise in those studying abroad. The proportion of Arab students who chose to study business administration and management sciences doubled during this period, while the proportion of Jews and Other students who chose these fields remained unchanged.
Welfare
There was a sharp increase in the number of unemployment benefit recipients as a result of the war: The number of unemployment benefit recipients was relatively low before the war, although it was on a slight upward trend. In October 2023, it more than doubled, and from December onward it has been on a downward trend.
Unlike during the COVID-19 period when the government encouraged residents to stay at home, efforts were made to encourage people to go to work during the war, in order to allow the economy to return to full employment as quickly as possible.
There was a dramatic increase in the number of individuals who received care under the Victims of Terrorism Law: The permanent status of these individuals and the level of benefits they will receive will be determined at a later stage. The National Insurance Institute also provides a housing grant to people who voluntarily evacuated their homes to accommodations not funded by the state and a grant to evacuees who returned to their homes.
There was a decline in the number of evacuees in hotels, mainly among residents of the South: In the first months of the war, the number of evacuees to hotels was about 70,000‒80,000. Over time, the number has declined, primarily among residents from the South.
In a review published in November on the evacuees and the implications of long-term evacuation, we showed that long-term evacuation affects a wide range number of areas, ranging from mental health to employment and family relationships.
Difficulty in filling positions for social workers in the social service departments: In June 2023, there were 747 unfilled positions for social workers in the social services departments of the local authorities. This was most acute in less well-off local authorities. The data show that in the local authorities with the lowest socioeconomic status (cluster 1), which often have the most severe social problems, the rate of vacancies is even higher than the national average. As a result of the sharp increase in social service needs of residents since the outbreak of the war, the Ministry of Social Welfare and Social Affairs has increased the number of social worker positions in the social services service departments of the local authorities.
There has been an increase in expenditure on social services, including for the absorption of immigrants from Ukraine and Russia: In addition to the budget increases for the Ministry of Aliyah and Absorption during the years between 2022 and 2023, part of which was allocated for the integration of immigrants from Ukraine and Russia, there were also increases in the activities of the Ministry of Social Welfare and Social Affairs and in employment programs. The expenditure of the Ministry of Housing, which had declined significantly over the years, also increased during the past year. The Ministry of Social Welfare and Social Affairs and the Ministry of Housing account for less than two percent of total government expenditure, while the other social welfare ministries receive less than one percent.
Large disparities exist between local authorities in terms of spending on welfare services: Local authorities in the highest socioeconomic cluster spend more than twice as much per service user than do local authorities in the lowest socioeconomic cluster. The disparities are even more pronounced when divided by population group: in Bedouin local authorities, the expenditure per service user is only NIS 5,103 as compared to NIS 13,148 in the financially strongest local authorities.
Spotlight on Long-Term Care
Israel is among the leaders in the rate of elderly long-term care (LTC) benefit recipients: In recent years, there has been a dramatic increase in the number of elderly individuals defined as needing LTC and who are receiving LTC benefits from the National Insurance Institute. Between 2012 and 2022, the number of recipients doubled, while the number of recipients of the old-age pension (who become eligible at the age of retirement) increased by only 40%. There is no information explaining this dramatic increase, nor is it known whether it was accompanied by a more rapid rate of deterioration in functioning. The number of recipients of LTC benefits by way of the health funds’ LTC insurance plans increased even more dramatically during this period — by two and a half times.
Israel has one of highest proportions in the OECD of individuals aged 65+ who receive LTC. Israel’s ranking is due to the high rate of LTC recipients being cared for in the community. In terms of the rate of patients hospitalized in nursing homes, Israel has one of the lowest rankings.
Health
Israel ranks in the bottom third of OECD countries in per capita health expenditure: In 2022, per capita health expenditure in Israel, in terms of purchasing power parity, was $3,596 one of the lowest levels among OECD countries.
The rate of government health expenditure out of GDP is among the lowest in the OECD: In 2022, Israel’s national health expenditure at current prices was NIS 132.6 billion, which constituted 7.3% of GDP and is far below the OECD average. This places Israel in the bottom third of OECD countries.
Israel’s proportion of doctors physicians who studied abroad is the highest among OECD countries: The healthcare work force is significantly influenced by graduates from foreign medical schools. Nearly 60% of doctors physicians in Israel received their education medical training abroad, a significantly higher percentage than in other OECD countries.
In the last decade, the list of foreign medical schools recognized in Israel has been reduced. At the same time, the total number of medical licenses granted has been on the rise. Thus, 2,024 new licenses were granted in 2021, which is almost triple the number in 2010. However, given the growth and aging of Israel’s population, these numbers are insufficient, and additional solutions are called for.
There has been a drastic decrease in first-time opioid prescriptions since the regulations were changed: Following a significant increase in opioid use in Israel, as reported in a study by the Taub Center, the Ministry of Health and the health funds began implementing some of the recommendations made by a committee established by the Ministry of Health and based on discussions within the health funds. Since the requirement for approval by a specialist was added as a condition for initiating treatment with fentanyl (the strongest opioid), there has been a sharp decline in the first-time prescriptions of the drug issued to members of the Clalit Health Services.
Education
There was a significant increase in the proportion of special education students receiving the larger individual service basket: The per student budget for those in special education in separate schools ranges from NIS 42,000 to NIS 113,000 per year, while in integrated schools it ranges from NIS 20,000 to NIS 65,000 for students receiving an individual basket, and less for those receiving only an institutional basket.
Special education budgets have grown faster than regular education budgets: The special education budget increased sharply – from about NIS 11 billion in 2017 to NIS 16 billion in 2022, an increase of almost 47%, as compared to a 24% increase in the regular education budget. The number of students eligible for special education services also grew at a much faster rate than the overall increase in the number of students, although at a slower pace than the growth in the budget.
Spotlight on Class Size
The decrease in class size in primary schools has continued over the past decade, but not in middle and high schools: The changes in class size since the turn of the century was different across grade levels. In primary schools there has been a continuous decrease since the start of the century. There are no longer any classes with 36 or more students, and only 3% of classes have 32–36 students (compared to 4% and 33% in 2000, respectively). In 64% of the classes, there are fewer than 28 students. Most of the decrease in middle schools occurred in the mid-2000s, and today, only 7% of classes have 36 or more students (compared to 41% at the beginning of the century) and 25% have 31–36 students (compared to 30% at the beginning of the 2000s). In high schools, the percentage of large classes has decreased only slightly in the last two decades – from 7% to 5% in the case of classes with 36 students or more and from 22% to 21% in the case of classes with 32–36 students.
Early Childhood
Parents report behavioral regression in their children since the outbreak of the war: In a survey conducted by Taub Center researchers among 1,200 parents, about one-third of parents reported that their young children are experiencing more or much more emotional difficulty since the beginning of the war. Some 43% of the parents reported that their child is startled more easily or much more easily by sudden noises since the beginning of war, 36% reported that their child has more or much more difficulty separating from them, and 34% reported that their child has more or much more difficulty falling asleep or staying asleep since the beginning of the war. However, it should be noted that most parents reported no significant change in their children’s behavior. The research shows that there is a connection between the reported increase in the children’s level of difficulty and behavioral regression during the war and their parents’ self-reported emotional state. Thus, the children’s reported emotional difficulty increased with the parents’ self-reported level of depression, anxiety, and stress.
Growth rates of the early childhood population among Haredim and Arabs are expected to decline: The annual growth rate of the early childhood population in Israel is expected to remain around 1.4% in 2032, with significant differences between population groups. Currently, the annual growth rates of Haredim and Arabs are higher than those of Jews and Others, but they are expected to decline over the next decade. By 2030, the annual growth rate of Jews and Others may surpass that of Arabs.
The share of the Jews and Others within the total early childhood population in Israel, which currently represents a majority of children up to the age of 6, may drop to below 50% by the end of the decade.
Environment and Health
Greenhouse gas emissions show no signs of decreasing: The volume of emissions in 2022 was higher than in 2000 but the same as in 2015, following a slight decline during that interval and an increase of 3.75% in 2022. This increase was due to the fact that the rate of increase in electricity production from traditional sources was greater in 2022 than that in production from renewable sources. The relative proportions of gas emissions have changed little during this period.
An examination of emissions for 2022 compared to 2021 shows that the amount of carbon dioxide emissions increased by about 3.5%, methane emissions increased by about 3%, and the amount of refrigerant gas emissions increased by about 7%.
Israel’s rate of household waste landfill is among the highest in high-income countries: Unlike other OECD countries, where recycling rates for waste average around 60% (40% landfill), the recycling rate in Israel was only about 20% in 2021. In 2022, five landfills were already scheduled to close, and within a few years there will be no more approved areas for landfill. The vision of the Ministry of Environmental Protection for a sustainable waste management system by 2050 appears to be unachievable.
Demography
Slight distortions in the sex ratio at birth among Israel’s Arab population: The sex ratio at birth (SRB) spans a very narrow range in all societies: for every 100 live births of girls, there are 102.7–106.7 births of boys. In the last two decades, this ratio has slightly increased among religious minority groups in Israel. Unsurprisingly, and given the timing of fertility declines, this was first observed among the Druze and Christian populations. Among Muslims, there has also been an increase in the SRB since 2017 (somewhat prior to the beginning of the fertility decline), reaching about 107 between 2019 and 2021. These are very slight deviations, but they may exacerbate gender imbalance in Arab society and the problems associated with it.
The number of murders among the Arab population tripled from 2019 to 2023: Since 2018, the murder rate among the Arab population has been increasing rapidly. After a slight but promising decrease in 2022, the number of murders more than doubled in 2023. Of the 299 murders that year, 78% were within the Arab sector, even though they constitute only 21% of the population. There was also a change in the seasonal patterns of murders, such that there was no decline in the months of January to March as in previous years. In fact, the only significant decline was in October 2023, immediately following the Hamas attack and the start of the war.
The gap between Jews and Arabs in exposure to the risk of murder is widening: Until 2015, the ratio of the gross murder rate (number of murders per thousand people 1,000 population) among Arabs to that among Jews was similar to the rate calculated for young men only (number of murders per thousand men aged 20–34) and stood at 1:4. In other words, the murder rate per capita among the Arab population was fourfold four times that among the Jewish population. During the period 2020–22 Between 2020 and 2022, the ratio increased to about 1:10 for the general population and 1:8 for the young male population. In 2023, these rates climbed to 1:13 and 1:10, respectively.
The ratio of the murder rate among the Arab population to that among the Jewish population in Israel is about 60% higher than the comparable ratio between the Black population and the White population in the US, which is about 1:8.
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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