Despite Pension Time Bomb, Israel Stalling on Raising Women's Retirement Age

The Knesset is dragging out making the decision, all the while knowing that there will be a price to pay down the line

Culture Minister Miri Regev shakes Prime Minister Benjamin Netanyahu's hand at the Knesset, March 13, 2018.
Olivier Fitoussi

The Knesset is dragging its feet on raising women’s retirement age, despite the pension time bomb that is being created by the current situation.

The Israeli legislature refuses to raise the retirement age for women from 62 to 64. This is despite the fact that the change was passed in legislation back in 2003 and even though the retirement age for men has been 67 since then. Furthermore, the retirement age for women in nearly the whole developed world was raised a long time ago.

Israel is one of only six countries in the Organization for Economic Cooperation and Development, the club of the world’s developed economies, where women’s retirement age is so low, and it’s one of only three that has maintained a five-year disparity between men’s and women’s retirement ages.

The Knesset’s refusal to increase women’s retirement age comes despite repeated warnings that Israel will pay a heavy price in the future, when pension benefits will be cut due to actuarial deficits that the current situation creates for pension funds.

This has finally shaken the Knesset from its apathy and it is now looking at two solutions: One would fund the actuarial deficit that the inaction is causing. Another would finally raise the retirement age for women, but it is subject to conditions, including state subsidies for increased unemployment benefits for older women and retaining a lower retirement age for women in professions with high burnout rates.

However, there is no reliable data on the cost involved in keeping the lower retirement age for such professions. As a practical matter, the only data that do exist – collected jointly by the National Insurance Institute and the Israel Democracy Institute – looked at the link between socioeconomic status and life expectancy. The study, conducted by Profs. Eytan Sheshinski and Daniel Gottlieb in 2016, found clear evidence that in Israel, those who are wealthy live longer lives.

German studies have found a six-year disparity in lifespan between the rich and poor, while in the United States, research has shown even wider disparities of up to 15 years. The Israeli study didn’t quantify the difference in terms of age, but rather in death rates, looking at the percentage of people who died within 15 years of retirement.

At low income levels, the mortality rates were found to be higher but the disparities were relatively small, and were apparent only among men and only those who were born in 1930 and earning less than 175,000 shekels ($49,200) a year or those born in 1935 and earning less than 125,000 shekels a year.

On an international level, it isn’t clear if the higher mortality rates among those on the lower socioeconomic rungs are caused by poverty – meaning the absence of good medical care – or whether it’s the result of poor education levels that create a lack of awareness or commitment to leading a healthy lifestyle.

However, in Israel, where there is universal health care through the public medical system, lack of access to medical care does not appear to provide an explanation. And there is the added paradox of the country’s ultra-Orthodox population, which on average is the poorest in Israel but has a higher than average life expectancy. On the other hand, among Israeli Arabs, who are also on the whole poorer than the average Israeli, life expectancy is the lowest of any population group.

Ultra-Orthodox Jewish men (L) walk past artist Solomon Souza, 22, as he spray-paints a portrait on the metal shutter of a closed storefront in Mahane Yehuda, one of Jerusalem's most popular outdoor markets February 24, 2016. Picture taken February 24, 2016.
Reuters

In any event, the connection between professions susceptible to higher burnout, poverty and lower life expectancy has never been studied. If there is any suspected link between the three, it would actually be among men in jobs with high physical risk – and not women.

Nevertheless, the Knesset insists on not raising the retirement age for women on the claim that women suffer substantial burnout during their working years. But apparently there is no need to confuse the Knesset with the facts.

And here are some other facts: Haaretz asked Amitim, the country’s largest pension group, for pension data and disparities between men and women. In 2017, about 2,500 Amitim pension account holders retired. The average pension payment for men that year was about 9,000 shekels, while it was about 6,000 shekels for women – a major disparity, but one that reflects the larger average salaries that Israeli men have at the time of their retirement as compared to women.

In terms of the average level of pension payments for men and women compared to their average salaries just before retiring, the standard of living of men and women are on average not disparately affected.

According to Amitim, the men on average received 61% of their salaries in their monthly pension payments, while women received 63%. When benefits that retirees get in old age benefits from the state-run National Insurance Institute are factored in, the percentage of income that women receive compared to what they were earning before retirement is even a little better.

This means that relative to their standard of living before retirement, women are at least as well off as men – or even a bit better off – because any decline in their income due to retirement is smaller. Admittedly these figures deal with averages, and Amitim may not be entirely representative of workers in the weakest professions, but the pension standing of women on the whole is not bad, and it is certainly no worse than that of men.

So Knesset members might take note when it comes to raising the pension age for women, if taking facts into account interests them.