Economic Crisis in Israel Shows How Crucial Income Support Payments Are

The amount of people receiving such payments grew by 15% in three months, but officials and experts say they’re not enough and criteria are too stringent

Or Kashti
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A woman outside a branch of the National Insurance Institute in Jerusalem in June 2020.
A woman outside a branch of the National Insurance Institute in Jerusalem in June 2020.Credit: Ohad Zwigenberg
Or Kashti

Some 82,000 people were receiving income support payments, Israel’s last-ditch social safety net, in May. That figure reflects an increase of 15 percent in three months.

In June, 6,500 new requests for the stipend were submitted.

The payments aren’t high, averaging 2,150 shekels ($630) a month. And thanks to 15 years of cuts in the size of the stipend and restrictions on eligibility, the National Insurance Institute says the number of people receiving the payments has shrunk even as the number of people living in poverty has risen.

According to new research, 40 to 50 percent of the people who are eligible for the stipend give up on it due to the red tape and the small payments.

People who work in the welfare system and academic experts are convinced that the quickest and fairest way to help the poor isn’t through the various economic plans the government has rolled out, but by dramatically changing the income support mechanism. Such proposals have been discussed for years, but repeatedly rejected. Finance Ministry officials and other decision-makers have in past strongly opposed what they described as giving money to the poor. The coronavirus crisis may undermine such objections.

Income support payments are given to individuals or families who either lack any source of income or whose income is very low. They are adjusted for age and family status. For people ages 25 to 54, the stipend is 1,761 shekels a month for a single person, 2,421 for a couple and 2,949 for a family with two children (older or younger people get slightly different amounts). The average Israeli salary was 10,481 shekels per month last year.

“Such low amounts don’t allow people to live in dignity,” said Orna Varkovitzki, the NII’s deputy director general for benefits. “It’s impossible to live on a stipend like that.”

Prof. John Gal of the Hebrew University of Jerusalem and the Taub Center for Social Policy Studies in Israel said the coronavirus crisis merely underscores the importance of this stipend. For various reasons, he explained, many people who have lost their jobs aren’t eligible for unemployment compensation. Thus for them, income support payments are a lifeline.

Restaurant owners and workers demonstrate against the Israeli government's coronavirus response, Haifa, July 21, 2020.
Restaurant owners and workers demonstrate against the Israeli government's coronavirus response, Haifa, July 21, 2020.Credit: Rami Shllush

“There’s an urgent need to increase the size of the stipend and make it easier to get it,” Varkovitzki said. NII Director General Meir Shpigler agreed.

Data published in the NII’s official publications show how Israel’s social safety net has frayed over the last two decades. The number of working-age couples with children living under the poverty line has risen from around 275,000 at the start of the 2000s to 335,000 last year. But the number of people receiving income support payments has been sliced in half during that period, from 150,000 to 72,000.

This decline is due mainly to stricter eligibility requirements imposed in the early 2000s. One of these is a requirement to report regularly to the Government Employment Service and accept any job offered. In addition, people with cars aren’t eligible unless the vehicle is valued at less than about 40,000 shekels. Moreover, the threshold of employment income that causes peple to lose part of their income support payment is very low – 528 shekels for an individual and 739 shekels for a couple with two children.

“These are ludicrous amounts,” Varkovitzki said. “We want a much fairer model that benefits people who lack income sources and also gives them a reasonable incentive to get a job without fearing that their stipend will be cut.”

Since the start of the 2000s, the proportion of impoverished families receiving income support payments has fallen from 55 percent to 23 percent. There are several explanations for this trend. One is greater participation in the work force combined with the launch of a negative income tax. However, the exhausting red tape and the meager amount it produces are also factors.

Research conducted by the NII based on data from several years ago shows that the proportion of people who don’t receive the stipend even though they meet the eligibility requirements ranges from 38 to 52 percent, depending on age. Several sources said that the institute has tried since then to make it easier to get income support.

Treasury officials and their supporters like to say that the number of people who don’t obtain their benefits is marginal, and moreover, that this is inevitable in such a large system. Yet, it’s sometimes deliberate policy. So is the fact that the size of the stipend has remained virtually unchanged for 15 years.

Income support payments and unemployment compensation are both tools that can help people hurt by the coronavirus crisis. It’s quite possible that they aren’t perfect, given the cuts that have been made in the social safety net for people who can’t work, whether temporarily or permanently, due to disability, illness, old age or a lack of jobs. But they’re readily available. And it would take only a day or two of intensive work by the Knesset’s Labor, Welfare and Health Committee to improve them.

“We don’t need to reinvent the wheel,” a source in the welfare system said, referring to the coronavirus grants announced by the government earlier this month. “Instead of wasting valuable time, it would be better to improve our existing tools.”

“If there’s agreement that the size of the stipend is too low, then we need to fix it,” he added. “The same goes for the eligibility requirements, which aren’t suited to large portions of the middle class that are now having to deal with a prolonged crisis.”

With the size of benefits remaining nearly unchanged over the past decade and a half, despite a rise in the standard of living, Prof. Gal and others support linkage of benefits, for example to the poverty line or the average wage, to preserve the relative value of the income support payment.

Gal made a joint proposal with senior National Insurance Institute officials about six years ago that the official panel on combatting poverty support increasing the allowance (for qualifying families) to 67 percent of maximum income that would leave people below the poverty line, but the idea was shelved under Finance Ministry pressure. “There is a question of principle at stake here,” he said. “What is minimal level of existence the state is obligated to provide people who can’t find work because of the crisis?”

When it comes to the grants program that Prime Minister Benjamin Netanyahu and Finance Minister Yisrael Katz announced this month, one source said: “There is concern that Finance Ministry and Prime Minister’s Office officials prefer to offer innovative assistance programs every morning that prompt long and exhausting arguments over the terms of their implementation.”

“In the process,” the source added, “they manage to distract attention from the old and familiar tools that simply need to be improved upon.”

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