The Social Welfare System in Transition: An Overview

Key findings:

In 2020, Israeli social expenditure grew by NIS 55 billion, mainly due to the need to address the Covid-19 pandemic. 69% of the increase resulted from greater social welfare spending (social security and social services), mostly spent on increased expenditures on unemployment benefits and the universal grants that were disbursed. There was no substantive change in social welfare (social services) expenditure, with growth of only 4.5%, lower than the 2019 increase. The distribution between the social spending components – social security, social welfare, healthcare, and education – remained similar to that of earlier years. Most of the resources allocated to social welfare in the pandemic relief plan were devoted to social protection programs for those who lost income due to the crisis, with only a small portion allocated to social investment programs aimed at developing human capital and adapting workers to the labor market.

Israeli governmental policy will benefit people with disabilities and senior citizens, but may make things worse for those living in poverty: The directions in which social security has been developing seem contradictory; on the one hand, the government plans to continue with measures that were underway before the crisis and that aim to improve the way in which the needs of senior citizens and people with disabilities are addressed. These measures include implementation of the agreement with the organizations for people with disabilities (an agreement to improve and expand the general disability allowances), and increasing the income supplement for senior citizens who have no other sources of income. On the other hand, planned policy for families with children could potentially worsen their status and raise the incidence of poverty among this population, due to stiffened eligibility criteria in the unemployment insurance program, and a failure to address limitations within the income support program.

The labor market’s return to proper functioning in the second half of 2021 made it necessary to adjust the unemployment insurance program to the new reality, and to strike a new balance between protecting the jobless and encouraging unemployment recipients to return to the labor market. The adjustments include unemployment benefit reductions for vocational training program participants, returning the qualification period to its pre-pandemic length, and cancelling the entitlement period extension for ages 45 and over. The measures that took effect in mid-2021 had an immediate impact, reducing the number of unemployment recipients to 156,000. The expansion of unemployment insurance coverage during the pandemic provided an alternative safety net to most of those hurt economically by the crisis; as a result, the number of income support recipients grew relatively little during this period. However, given the stiffening of eligibility criteria for unemployment insurance and the difficulty that many experienced in returning to the labor market, an increase in the demand for income support is anticipated. Another assistance program is the Work Grant program operated by the Israel Tax Authority. Although modifications have been made to the program over time that have enlarged the pool of those eligible for it and improved its accessibility, its less-than-generous offerings undermine its effectiveness as an anti-poverty measure, and it suffers from low uptake, with 30% of eligible recipients not utilizing the program.

At the same time, after extended public debate, it was decided to take a major step to strengthen the National Insurance Institute’s financial robustness, in the form of raising the retirement age for women (i.e., deferring the age of entitlement to the old age pension). This measure will be accompanied by steps to ease the economic harm suffered by women on the verge of retirement – such as lengthening the eligibility period for unemployment benefits, increasing the income supplement and making it possible to receive it at higher wage levels, offering an adjustment grant, and increasing the amount of the work grant for women ages 60 and over.

Despite the great importance of vocational training, especially at a time when many unemployed persons lack higher education, it was evidently very hard to advance such training and to utilize the funds that were allocated for it. As part of the pandemic relief plan, the government allocated NIS 1.4 billion for vocational training and for the Council for Higher Education, but only a third of that allocation was actually utilized. Moreover, expenditures on vocational training for older people in the Ministry of Economy and Industry’s Labor Branch’s ongoing budget declined substantially in 2020, while the number of participants in training programs funded or subsidized by the Ministry’s Training Division also dropped, with a total that year of only 7,000 participants. Investment was also curtailed in training programs to encourage employment among specific populations (Haredim, Arab Israelis, single parents).

Disadvantaged populations have trouble exercising their rights: When we look at the degree to which rights are exercised among eligible populations, we find 99% utilization of the child allowance and the old age pension, but low utilization rates for programs where the receipt of benefits is means-tested or requires navigation of complicated bureaucracy. Uptake rates stand at 75%-79% for the disability pension, 70% for the work grant, 48%-63% for income support, and only 32%-40% for unemployment insurance such that a large proportion of the populations that need social security benefits are not exercising their right to assistance. This non-utilization generally stems from lack of awareness, or from reluctance to deal with bureaucracy. It is clear, however, that factors related to the structure of the programs, such as income tests, complex entitlement criteria, accessibility barriers, and bureaucracy, have an impact as well. The National Insurance Institute and civil organizations have taken steps to increase the utilization of entitlements, but as yet it is hard to assess the degree to which these measures are succeeding.

No progress on implementation of the recommendations of the Committee for the War Against Poverty (the Elalouf Committee): Since the government adopted the recommendations of the Committee for the War Against Poverty (the Elalouf Committee) in 2014, the Taub Center has been tracking their implementation. In 2020 progress was made solely in the sphere of education, while there was no progress, and in fact reduced investment, in housing, employment, and economic areas. With regard to social welfare and social security, investment remained generally the same, amounting to a third of the addition recommended by the Committee. Moreover, the recommendation to enlarge the income support budget for working age people living in poverty has yet to be implemented, though a decision was made in summer 2021 to increase the income supplement for the elderly, which is expected to raise Israel’s social welfare expenditure next year.