Land of Israel: Social Security and Welfare

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social policy

In the first three decades of statehood through the end of the 1970s Israel acquired the basic features of a modern welfare state. This meant that Israel succeeded in developing a broad network of social services that included comprehensive service systems in health, education, housing, social security, and the personal social care services. Combined with other social and economic policies the country was committed to maintaining and improving the standard of living of the population. All these policies brought about a far-reaching transformation of Israeli society.

Since the 1980s Israel's social policies have undergone a significant change. The change occurred in the nature of its welfare regime and also involved structural and political changes with reference to the government's role in ensuring the welfare of the population and maintaining welfare and social security services.

In terms of its welfare regime the major trend was to depart to a great extent from the European model with regard to welfare policy and social protection and move towards a more American model. The European model to which Israel adhered for many years is based on a high degree of social solidarity and mutual obligation among the different sectors of the population. It is also geared to prevent growing social inequality and the existence of wide social gaps. In contrast, the trend prevalent in Israel since the 1980s tended more towards the American model of a limited government role in providing social services and social protection to the entire population, leaving citizens more dependent on market forces and the uncertainty evolving from it.

The main trend that dominated Israeli social policy from the late 1980s was thus to reduce state involvement in the provision of welfare, to cut government spending on social welfare and social security, and to introduce changes in the existing social security and welfare programs that will have a long-term impact on the government's commitment to reducing social welfare spending.

This trend became more dominant in the years 2000–2004, when the government embraced a program of radical reform and restructuring of the welfare state. A combination of ideological, political, economic, and demographic factors played an important part in this policy shift and were mostly related to the changing patterns of the demographic balance of power in Israeli society. The main characteristic of the policies adopted was an extensive retrenchment in welfare and social security programs and a further reduction in collective responsibility for the well being of the population.

social security

The core of the Israeli welfare state is its social security system, which includes a wide range of national insurance schemes and a range of non-contributory income maintenance programs. The entire system is maintained by the National Insurance Institute, an autonomous state agency operating under the supervision of the Minister of Welfare.

The national insurance schemes developed since the 1950s became the major instrument ensuring the social security of large portions of the population. They include old age and survivors insurance, maternity, unemployment, work injury, and general disability insurance, a national health insurance program, and some additional minor social insurance-based schemes. Demographic changes, such as the growth of the elderly population, the size of the children's population, and the composition of the immigrant groups, have been a critical factor in the growth of the system.

Old Age and Survivors Insurance

Old age and survivors insurance is the largest national insurance scheme. Nearly 40 percent of all national insurance benefits are paid out by this scheme. All the residents of Israel (with a few exceptions) are covered by this scheme and have to pay premiums until retirement. The age of absolute entitlement to an old age pension is 70 for men and 67 for women. Until the recent retrenchment measures the absolute entitlement age for women was 65 only. Men from the age of 67 to 70 and women from the age of 64 are entitled to a pension conditional on an income test when their incomes are below a defined threshold.

Latterly, until the reforms, the old age national insurance pensions were of a uniform rate (with some increments) and set at a fixed percentage of the national average wage (16% of the average wage for a single person and 24% for a couple). The pensions were automatically updated every year in line with changes in the average wage. The linking of the pensions to the average wage had a considerable equalizing effect in the sense that they ensured higher earning replacement rates for pensioners with low pre-retirement incomes compared to low income replacement rates for those with high pre-retirement incomes.

The reform adopted severed the linkage of pensions to the average wage and their automatic annual updating. In the future pensions will be updated in line with the price index only. The pensions will thus lose their dynamic feature and will be gradually eroded, leaving the pensioner lagging behind the rest of the population in sharing national prosperity as reflected in the rise in wages.

Children's Allowances

The second biggest program in Israel's social security system, accounting for about 20 percent of all benefit payments, are the children's allowances. Towards the end of the 1990s the program was fully universal in its coverage, i.e., it provided benefits for every child in Israel younger than 18. It consisted of one uniform scheme fully integrated into the direct tax system. In practice the program was built on a credit point system and played a dual role: It served as a tax credit for families with incomes exceeding the tax threshold and was the equivalent of a "negative income tax" for families whose income was below the tax threshold level. The allowances were the dominant and almost only factor taking into account family size in the direct tax system. They were linked to the consumer price index and raised accordingly in January of every year. The value of a credit point in 2000 was equal to 2.5 percent of the average wage.

There were numerous changes and upheavals in the children's allowance payments since the first scheme of large-family allowances was instituted in 1959. The major structural reform introduced in 2003 was its alteration from a system of benefits by which the number of credit points was awarded on an ascending scale which increased steeply from the third child on, to a system of a single flat-rate allowance paid for all children irrespective of the number of children in the family. Children born after July 1, 2003, are entitled only to the new flat-rate allowance. To ease the transformation, which involves substantial losses of income to large families, the change will be phased in gradually over a longer period of time and will be in full operation in 2009.

The chief policy issue involved in the structural change of the children's allowance program arose from the problem of large families in two particular population groups: the ultra-Orthodox Jewish sector and the Arab population. The high fertility rates among these two population groups were seen to have a major effect on the increasing cost of public support for these families. The argument was that the increased benefit rates to large families encouraged the high fertility rates among them. Moreover, by providing them with additional income the allowances supported their voluntary withdrawal from participation in the labor force. The restructuring of the program was thus explained in terms of these wider social and demographic issues and their possible negative effect on the national economy.

Unemployment Insurance

Unemployment insurance was established only after a prolonged debate in 1973. Despite the important task of the scheme in providing an alternative income to the involuntarily unemployed there was strong opposition to its introduction, which came, perhaps paradoxically, from the Israeli labor movement. With the growth of unemployment in the 1990s various amendments were introduced to the scheme to make it more difficult to receive unemployment benefits. The aim of these policies was to strengthen labor market discipline among the working population and to increase the flexibility of the job market. As a result there was a significant reduction of the scheme's capability to provide adequate protection for the unemployed.

Long-Term Care Program

The long-term care program started to operate in 1988. The program covers all residents included in the old age insurance program. The long-term care services are limited to the elderly population. They are provided to elderly persons who are dependent to a great extent or entirely on the help of others to perform essential daily tasks. Entitlement to long-term care under the program is conditional on dependency and income tests. The program has grown rapidly, both in the number of beneficiaries and in expenditure, since it began.

The package of services provided includes personal care at the home of the elderly person or in a day care center, housekeeping help, supply of absorbent materials, laundry services, and the installation of distress alarms. The services are provided by non-profit as well as commercial service organizations licensed for this purpose.

The non-contributory income maintenance programs include the safety-net income support scheme, benefits to the victims of hostile actions, and a range of other minor benefit programs.

Safety-Net Income Support

The safety-net income support scheme has been in operation since 1982. The scheme replaced the earlier system of assistance to the needy through the social welfare bureaus of the local authorities and transferred this responsibility to the national government. The program is by its very nature highly selective and caters to the neediest population groups. The granting of benefits is conditional on strict means and employment tests. Under these conditions the program was designed to guarantee everyone who meets the eligibility criteria a legally defined minimum level of income applied uniformly in every location in the country.

The program has grown greatly since its inception. Although the benefits provided were far less generous than in most European countries, the program nonetheless became, in the years 2002–3, the target of a strong political anti-welfare backlash. It was argued that its benefits were too generous and therefore creating serious disincentives to work. Eventually, in line with the government's retrenchment policies, welfare reform measures were introduced in 2003 that significantly reduced the level of benefits. Under the reform single persons and couples under the age of 25 are no longer entitled to income support. Women with young children aged two years and up are required to report for work as opposed to the previous age of seven and up. In addition, most rebates granted to income-support recipients, such as reduction of medical prescription costs or tv license payments, were canceled. About 70 percent of those receiving income support were affected by these changes.

The Personal Social Services

From the establishment of the state until 1977 the Ministry of Welfare was in charge of operating the personal social services. In 1977 a new Ministry of Social Affairs was established which amalgamated the former ministries of Labor and Welfare. The merger of the two ministries did not produce over the years the expected beneficial results and in 2003 the old Ministry of Welfare was recreated while the Labor part was ceded to the Ministry of Industry and Trade.

The personal social service system includes a wide range of care services that cater to the needs of weak population groups with difficulties in their personal and social functioning. These groups include the disabled; the physically, mentally, and emotionally handicapped; the elderly; young people in distress; battered women and neglected children at risk. This service system is maintained for the most part by the welfare bureaus of the local authorities and their care services are generally provided under the auspices of the social work profession and by professional social workers.

Although the foundations of the system were established as early as the 1930s, its legal base remains somewhat unsatisfactory. The Welfare Service Law of 1958, which defines its operating principles, is mostly outdated and has not kept up with the changes in the field. The main deficiencies are related to the lack of a binding definition of the rights of a needy person to receive services, there are no details as to the package of services that the authorities are required to provide, and there is no clear obligation of the central and local government to fund the services. In times when retrenchment was the dominant theme in the social policies of Israel, the personal social service system was particularly vulnerable and thus seriously hurt by cutbacks in resources for its maintenance.

Voluntary Agencies

The voluntary sector, i.e., private non-profit organizations, plays an important role in Israeli social welfare. The sector is composed of a great many agencies, some of them associated under national women's umbrella organizations like wizo and Na'amat while others operate independently on the local community level. They provide a wide range of social care services catering to the needs of particularly vulnerable population groups and thus complement the welfare services provided by the state. Their activities are especially important in the field of child welfare, care of neglected and abused children, services to the growing elderly population, and to new immigrant groups, such as the recently arrived Ethiopians.

The role of the voluntary sector gains additional significance in times of government retrenchment in the field of welfare and in the event of cutbacks in social expenditure. The failure of the authorities to meet the increased demand for social services has forced the voluntary sector to shoulder more of the welfare burden. This has become especially evident in the growing number of food banks operated by the voluntary sector on the local community level and the operation of soup kitchens providing meals to the needy.


A. Doron and R.M. Kramer, The Welfare State in IsraelThe Evolution of Social Security Policy and Practice (1991); A. Doron, "Social Welfare Policy in Israel: Developments in the 1980s and 1990s," in: Israel Affairs, 7:4 (Summer 2001).

[Abraham Doron (2nd ed.)]

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Land of Israel: Social Security and Welfare

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