The Israeli population is younger than that of other developed countries, although a substantial increase in the share of older Israelis is expected in the coming years. In 2030, it is expected that Israel will have 233 people over 65 years of age per 1000 people in the working age population, a growth of over 45 percent in the relative share of the elderly population versus 2010. Growing life expectancy has led to mounting pressure on social security, health and pension systems in Israel. In response, it is important that older Israelis are able to continue participating in the labor market as long as they are physically and mentally capable of doing so.
In a study exploring changing employment patterns among Israel’s older adults between 2001 and 2011, Taub Center Deputy Director Prof. Ayal Kimhi and Taub Center researcher Kyrill Shraberman find that within the prime working age population of 35-54, the employment rate of Israeli men is substantially below that of the OECD, although this gap has narrowed since the first half of the previous decade. The employment rate among females of the same age in Israel was lower than that of the OECD until the mid-2000s, but has increased more rapidly since and is now higher than the OECD rate.
Rates of employment among those aged 55-74 have been steadily increasing in recent years in both Israel and the OECD, generally with more rapid increases seen in Israel. As shown in the first figure, employment rates for Israeli men and women aged 55-64 increased and were similar to those of the OECD during the first half of the 2000s. However, in the mid-2000s the rates for Israel began to break away from those of the OECD, growing more quickly and leading to a gap of over 6 percentage points in Israel’s favor.
Employment rates among both Jewish immigrant men (those who immigrated to Israel since 1990) and Jewish non-immigrant men in this age group were similar in 2011, at around 75 percent. Jewish immigrant men made particularly impressive strides in employment, having begun the decade with employment rates that were 15 percentage points below those of Jewish non-immigrant men. Arab Israeli men also had notable increases in employment rates beginning in 2007, although they still trailed Jewish non-immigrant and immigrant men by about 25 percentage points in 2011.
The employment rate trends among women aged 55-64 were similar to that of men, although at lower rates: about 60 percent employment for both Jewish immigrants and non-immigrants in 2011. While employment rates of Arab Israeli women doubled in the decade leading to 2011, they remain very low at around 12 percent in 2011.
As shown in the second figure, employment trends among men in the 65-74 year old group in Israel and the OECD are similar to those of men in the 55-64 age group. That is, Israeli employment rates are similar to those of OECD countries until 2004, then increase more rapidly – leading to a more than 5 percentage point gap in Israel’s favor in 2011. Nonetheless, there is a large difference in the employment rate itself between these two age groups. Among the 65-74 male population, the rate is over 40 percentage points lower than that of the younger group, although it is growing more rapidly. For women in the 65-74 age group, Israel has lagged behind the OECD average during the entire 2001-2011 period, although the gap has shrunk to just one percentage point in 2011 as a result of faster employment growth among Israeli women.
Employment rates among all three groups of Israeli men ages 65-74 grew in the previous decade. However, Jewish non-immigrant men widened the gap between their employment rates and those of Arab Israeli men – particularly during the first half of the decade, and maintained about a ten percentage point gap in their favor relative to immigrant men throughout this period. A similar pattern emerges among women in this age group. Employment rates of Jewish non-immigrant women rose from under 8 percent in 2001 to 14 percent in 2011, leaving them several percentage points higher than those of immigrant woman and much ahead of those of Arab Israeli women, fewer than 2 percent of whom were employed.
Finally, Kimhi and Shraberman explore employment trends among those ages 75 and older. In contrast to the trends seen among men between 55-74 years of age and women between 55-64 years of age, employment rates in the OECD were consistently higher than Israeli rates throughout the decade. While employment rates for Jewish non-immigrant men ranged from 6 to 8 percent during the decade, those for Arab Israeli and Jewish immigrant men ranged from about 1 to 4 percent, with a slight upward trend in the rates for new immigrants in the latter half of the decade. With less than 2 percent of all Israeli women employed in this age group in 2011, there were minimal differences in the employment rates of non-immigrant Jews, immigrant Jews and Arab Israeli women over the past decade.
Increasing employment rates among older adults is leading to greater labor income for this population group – and in turn, reducing poverty rates in terms of market income (income before government transfers and taxes). As Ben-David and Bleikh show in the State of the Nation Report, 2013, market income poverty rates among the elderly declined relatively steadily over the past decade, although they still remain high at 51 percent in 2011.
Today, a number of factors are promoting continued labor market participation among older adults, including better health and jobs that are less physically demanding due to the change in occupational mix. In parallel, rising life expectancy, low capital market returns and uncertainty regarding the level of support from social security systems is leading older people to opt for continued employment. Kimhi and Shraberman suggest that Israeli policymakers can support these employment trends by promoting flexible work conditions and the use of tax credits to enable continued employment past the official retirement age.