An Overview of Social and Economic Trends and Issues in Israel

An Overview of Social and Economic Trends and Issues in Israel Updated November 6, 2006 Professor Jack Habib Myers-JDC-Brookdale Institute 1 H:\PR Materials\Lectures & Slides\Jack's Lectures\2006\Social and Economic Issues 6-11-06.ppt The Big Picture Prior to the Lebanese War  Israeli economy emerges from the deep crisis during the Intifada and there is significant economic growth in 2004-2006  Deepest social crises since the 50's: poverty, dependency, educational gaps and deviance  Changes in the structure of the economy, enhances the gaps  Deep cuts in social safety net and shift in economic and social strategy between 20002005  Minority groups most severely affected  Fierce debate on social and economic policies  Extensive reform in social services: do better not only more  New government commits to major effort to address social problems and initial steps taken in 2006, particularly on behalf of the elderly  Plans for major expansion of social welfare expenditures in 2007 budget 2 Cutbacks in Government Expenditures between 2000-2005 • • • • Unparalleled in intensity and rapidity To avoid high government deficits and loss of confidence in shekel Reflects major shift in economic strategy: to promote growth, Israel needs lower taxes and lower government expenditure Concern with rise in dependency: in 1990, 40,000 families on welfare; today 160,000 3 Cutbacks in Government Expenditures between 2000-2005: cont. • Shift in social strategy: balance between supporting the poor and supporting efforts to enable and encourage the poor to become independent Therefore, severe cutbacks in all forms of cash assistance other than for elderly and disabled However, across the board cut in ministries is impacting on all educational and social services for the poor Has led to major concern about the consequences for the extent of poverty and the well-being of the poor 4 • • • The Big Picture After the Lebanese War: The Emerging Agenda • The priority given to Israel • The priorities within Israel • Rehabilitation of the North, strengthening the North • Preparing for possible future emergencies • Helping to offset the consequences of the need to finance the cost of the emergency (and its implications such as in this case for defense expenditures): minimizing the financial burden on population groups or the impact on other social goals through budget cuts • Utilizing the emergency to identify the need for more basic changes in society and to realize these changes • Building on the strengths and opportunities revealed by the emergency • Restoring public confidence in the ability of the government to address needs, particularly during times of emergency 5 The Influences of the War • Significant one-time economic costs – Loss of 1% of GNP in 2006 – Direct one-time costs are some 15 billion NIS ($3.3 billion) • One-time costs financed primarily by increasing government deficit and by cutbacks in government expenditures in 2007 and 2008 • 2007 Budget presented to Knesset October 31, 2006 with major debate over priorities within coalition and with opposition parties • Basic long-term economic goals and strategy are maintained • Plans for major expansion of social welfare expenditures in 2007 are abandoned in proposed budget and further cutbacks in social security benefits are proposed • Plans to increase permanent defense budget due to enhanced assessment of security needs but amount not yet finalized or fully reflected in budget proposal 6 The Influences of the War: Cont. • Plans for major reform in social service systems and in strategies for service delivery (the "new public management") continue • Greater concern over the capacities of the government at the national and local levels to fulfill its roles • Greater awareness of the vulnerability of the civilian population in times of war • Greater recognition of the importance of the social infrastructure as a component of Israel's basic resiliency and ability to face emergencies • Sharpened debate over role of government vis-à-vis the voluntary sector and with respect to the nature of the partnership 7 Significant Reforms Dovrat National Task Force: Major Reform in the Education System (frozen) Mainstreaming Legislation in Special Education Higher Education Prime Minister's Committee for At-Risk and Disadvantaged Children and Youth (Schmid Committee) Balancing Out-of-Home and Community Based Care “Towards the Community” 8 Other Reforms Welfare to Work Earned Income Tax Credit and Support for Early Childhood Care Mental Health Services: Transfer from Ministry of Health to HMOs and inclusion in National Health Insurance Well-Baby Services (Tipot Halav): Transfer from Ministry of Health to HMOs and inclusion in National Health Insurance Privatization, Competitive Bidding and Performance based contracting in Social Services 9 Economic Trends, 2000-2006 Year Total GDP (real % change) GDP Per Capita (real % change) 2001 -0.9 -3.2 2002 -0.7 -2.7 2003 1.3 -0.5 2004 4.4 2.6 2005 5.2 3.3 2006* 4.3 2.5 2007 proj.** 3.8 2.0 Unemployment Rate (%) Deficit (% of GDP) Inflation Jan./Dec.) (%, 9.4 4.4 1.4 4.28 10.3 3.8 6.5 4.69 10.7 5.6 -1.9 4.39 10.4 4.3 1.3 4.34 9.0 2.3 2.4 4.61 8.7 1.5-2.0 3.3 4.35 8.4 2.9 NIS US$ Exch. Rate (Dec. Average) BOI Interest Rate (%, end of period) Source: CBS and Ministry of Finance 3.8 9.1 5.2 3.9 4.5 5.25 * Data on Inflation is based on First Annual Flash Estimates of the National Accounts for 2006 by CBS; data on unemployment rate is for August 2006; exchange rate is the September average; BOI interest rate is for November 2006. **Projections based on Ministry of Finance. 10 Structural Social Challenges of Israeli Society  Very high heterogeneity in social capital among Israel's population  Education  Family size  Women's participation in the labor force  Very high ratios of immigration  Very high percentage of immigrants are refugees 11 Structural Social Challenges of Israeli Society: Cont.  Significant cultural variation within the Jewish population  Religious, cultural and national differences between the Jewish and Arab population against the background of armed conflict with Israel's Arab neighbors  Very high correlation between cultural background and social capital  High percentage of defense expenditure in the national budget 12 Definition of Poverty Poverty line: 50% of median disposable income, adjusted to family size. In 2005, about 22,400 NIS ($5,000) per year for a single person and 57,000 NIS ($12,800) per year for a couple with 2 children. (Calculated based on the average exchange rate for the period January to December 2005: $1 = 4.49 NIS) Source: Myers-JDC-Brookdale Institute, "Poverty Update", September 2006, based on National Insurance Institute data 13 Goals in Addressing Poverty  Preventing the creation of poverty before taxes and transfer payments  Cash support or subsidization of services for the poor to ease financial burden and reduce gaps, through progressive taxation  Preventing negative implications of poverty for the functioning of families and the development of children, by subsidizing services for children and by providing special services  Preventing poverty in the future: reducing gaps in human capital among young adults entering the IDF and work force 14 Monthly Poverty Line by Family Size, 2005 Number of persons in household 1 2 Monthly poverty line (shekels) 1,866 2,986 3 4 5 6 7 8 9 3,957 4,778 5,599 6,346 7,092 7,764 8,361 15 Source: Myers-JDC-Brookdale Institute, "Poverty Update," September 2006, based on National Insurance Institute Data Increase in Poverty in 2005 Poverty rates in Israel increased in 2005, reaching a new peak. The newly released data deals with 2005 as a whole. 20.6% of households living below the poverty line (410,700 households) 24.7% of persons living below the poverty line (1,630,500 persons) 35.2% children living below the poverty line (768,800 children) Source: Myers-JDC-Brookdale Institute, "Poverty Update," September 2006, based on National Insurance Institute Data 16 Numbers and Rates of Poverty among Households, and Persons and Children Living in these Households 2004 Numbers below the poverty line Households Persons Children 2005 394,200 1,534,300 713,600 410,700 1,630,500 768,800 Percentage below the poverty line Households Persons 20.3 23.6 20.6 24.7 Children 33.2 35.2 17 Source: Myers-JDC-Brookdale Institute, "Poverty Update," September 2006, based on National Insurance Institute Data % of Households below the Poverty Line Within Different Family Types, 2005 Overall Elderly Non-employed of working age Employed Single parent 1-3 children 4+ children Immigrants Jews Non-Jews 0 10 20 30 40 50 20 15.9 52.1 60 70 18 20.1 58.1 12.2 32.5 20.6 24.4 65.8 Source: Myers-JDC-Brookdale Institute, "Poverty Update," September 2006, based on National Insurance Institute Data The Composition of Families in Poverty by Number of Children, 2005 Families with 4+ children 21.2 Families with 1-3 children 38.5 Families without children 40.3 Source: Myers-JDC-Brookdale Institute, "Poverty Update," September 2006, based on National Insurance Institute Data 19 Dependency Increases Significantly in the 1990s: The Number Receiving Income Maintenance Benefits (Welfare), 1985-2005, in Thousands 180 160 Thousands of Receipients 142 128 114 101 89 75 151 155 145 140 140 120 100 80 60 40 20 0 1985 1990 1995 1997 1998 25 32 1999 2000 Year 2001 2002 2003 2004 2005 Source: Myers-JDC-Brookdale Institute analysis of data from National Insurance Institute 20 Employment rates among Jewish men age 22-64 have declined dramatically for the less educated and the employment gap has increased between 1995-2005 Employment Rate 85 80 75 70 65 60 55 50 45 0-8 13+ Myers-JDC-Brookdale Institute Special Analysis of Labor Force Surveys 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 Year 21 Employment rates among Arab men age 22-64 have declined dramatically for the less educated and the employment gap has increased between 1995-2005 90 Employment Rate 80 70 60 50 40 13+ 0-8 13+ 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 Year 0-8 Source: Myers-JDC-Brookdale Institute Special Analysis of Labor Force Surveys 22 Among Jewish women age 22-64, employment rates between 1995-2005 have declined among the less educated. For the educated, they have remained stable. 85 Employment Rate 75 65 55 45 35 25 0-8 13+ Source: Myers-JDC-Brookdale Institute Special Analysis of Labor Force Surveys 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 Year 23 Employment Rates between 2003 and 2004 among Immigrant Men and Women aged 22-64, by Country of Origin (%) Men 2003 FSU Ethiopia 76.1 51.3 62.2 50.1 2004 77.6 56.5 50.1 54.9 2003 67.7 34.7 54.7 55.2 Women 2004 70.1 35.0 49.2 59.8 English-speaking Countries Central and Western Europe South and Central America 70.3 71.9 64.1 72.9 55.6 65.7 58.1 66.4 24 Total Jews Myers-JDC-Brookdale Institute, "Patterns of Integration into Employment of New Immigrants Aged 22-64," 2006 Employment Rates at Ages 22-64 by Immigrant Group and Length of Time in Israel, 2003 (%) Years in Israel 0-7 FSU 8-13 75 45 63 Total 71 42 59 Ranking 1 6 3 65 24 55 Ethiopia English-speaking (excl. UK) Western and Central Europe 54 52 57 49 54 76 52 53 63 5 4 2 Francophone Central and South America General Jewish population - - 69 25 Myers-JDC-Brookdale Institute, "Patterns of Integration into Employment of New Immigrants Aged 22-64," 2006 Estimates of Children at Risk 15% (320,000) at risk  More among: Single-parent families Large families Arabs Immigrants from Ethiopia and FSU Low SES neighborhoods Source: Myers-JDC-Brookdale Institute 26 Some Major “Traditional” Indicators of Risk Among Children and Youth  8% Known neglect and abuse  2.4%  0.7% (52,000) physical neglect (15,582) physical abuse  4% Known family violence and dysfunction  School dropout and disengagement  11%-30%  30% of the 6-11th graders are disengaged of Arabs and 10% of Jews do not complete 12th grade 27 Source: Myers-JDC-Brookdale Institute Marginal Behaviors: Violence, Alcohol Abuse, Drug Abuse (youth ages 11-16) 25 20 20 15 one two or more 9 5 0 Jews Source: Myers-JDC-Brookdale Institute 22 10 6 Arabs 28 Criminal Files Opened for Ethiopian Youth in Israel, 1996-2004 1996 2000 2004 Percent Increase 571% Number 139 470 933 Percent of total files opened for youth 1.2% 3.3% 4.1% Source: Myers-JDC-Brookdale Institute Presentation to Operation Promise UJC Committee: "Ethiopian Jews and the Promised Land," January 2006, based on Children in Israel – Statistical Yearbook data 29 Percent Increase in Criminal Youth Files in Israel, 1996-2004 % Increase Total youth Immigrant youth Ethiopian youth 51 219 571 Source: Myers-JDC-Brookdale Institute Presentation to Operation Promise UJC Committee: "Ethiopian Jews and the Promised Land," January 2006, based on Children in Israel – Statistical Yearbook data 30 Matriculation Rates of Arab 12th grade students, by Socio-Economic Status of Community, 2004 Took Matric. Exam 100 90 80 70 60 52.1 43.7 51.2 40.9 34.2 24.6 85.3 64.4 54.9 92.5 93.4 91.1 Eligible for Certificate Met Univ. Requirements % 50 40 30 20 10 0 1-2 3-4 5-6 7-8 Socio-Economic Status of Community of Residence Source: Statistical Abstract of Israel, 2006 31 Matriculation Rates of Jewish 12th grade students, by Socio-Economic Status of Community, 2004 Took Matric. Exam 100 90 80 70 60 % 50 40 30 20 10 0 1-2* 3-4 5-6 7-8 9-10 23.4 11.3 8.2 35.5 47.2 45.2 56.9 57.8 71.8 87.4 Eligible for Certificate Met Univ. Requirements 91.1 95.3 73.9 65.7 70.8 Socio-Economic Status of Community of Residence * Most Jewish towns of this socio-economic status are ultra-orthodox, which explains the low levels of matriculation rates as compared to Arab towns of the same socio-economic status. Source: Statistical Abstract of Israel, 2006 32 Decline in Eligibility and Increase in Gaps in 2005: % of Ethiopians Eligible for Matriculation Compared to all Jewish Youth by Level*, Out of the Entire Age (17) Group Level 1 Level 2 Ratio Eth./all Jews EthiopianIsraelis All Jewish Israelis Year 2002 2003 2004 2005 EthiopianIsraelis All Jewish Israelis Ratio Eth./all Jews 32 35 37 30 56 57 59 55 0.57 0.61 0.63 0.55 13 16 18 16 49 49 50 48 0.27 0.33 0.36 0.33 * Level 1: General eligibility; Level 2: Eligibility at a level that meets university requirements Source: Myers-JDC-Brookdale Institute, "Ethiopian Integration – Education and Employment: New Findings in Brief", October 2006, based on Ministry of Education and CBS data 33 Educational Outcomes at Age 17 for Ethiopian and All Jewish Youth - 2005 Ethiopian Youth Total Completes matriculation that meets university requirements Completes matriculation without meeting university requirements Total Jewish Youth* 100 48 7 100 16 14 Completes 12 years of school without matriculation Does not complete 12 years of school 58 12 40 5 * Excluding the Haredi population Source: Myers-JDC-Brookdale Institute, "Ethiopian Integration – Education and Employment: New Findings in Brief", October 2006, based on Ministry of Education and CBS data 34 Ethiopians Age 18-64 by Years of Education, 2005, in % Years of Education Male Female Total Ethiopians 49.6 6.6 31.0 Total Jews 5.3 10.6 32.4 0-8 9-11 12 43.8 6.7 36.9 55.2 6.5 25.3 13+ Total 12.5 100 13.1 100 12.8 100 51.7 100 Source: Myers-JDC-Brookdale Institute, "Ethiopian Integration – Education and Employment: New Findings in Brief", October 2006, based on Ministry of Education and CBS data 35 Employment Rates of Ethiopian Israelis 18-64 declined among men and rose among women between 1995/96 and 2004/2005 1995/6 Men Women 99/2000 51 32 2004/05 44 39 54 24 Source: Myers-JDC-Brookdale Institute, "Ethiopian Integration – Education and Employment: New Findings in Brief", October 2006, based on Ministry of Education and CBS data 36 Improvement in the Years of Education of Arab Women Ages 18-64, 1995 and 2005 (in %) 0-8 9-11 12 13-15 16+ Total 1995 46.6 18.3 23.0 9.6 2.6 100 2005 32.0 17.0 28.2 13.7 9.0 100 Source: Myers-JDC-Brookdale Institute special analysis of data from the Central Bureau of Statistics' Labor Force Survey, 2005. 37 Large Gaps in Years of Education of Jewish and Arab Women, Ages 18-64, 2005 (in %) 0-8 9-11 12 13+ Total Jews 5.1 9.3 32.3 53.4 100 Arabs 32.0 17.0 28.2 22.7 100 Source: Myers-JDC-Brookdale Institute special analysis of data from the Central Bureau of Statistics' Labor Force Survey, 2005 38 Decline in the % of Jewish and Arab Girls Ages 14-17 not Attending School*, 1980-2005 60% 50% 41% 40% 30% 20% 10% 0% 1980 * Under the Supervision of the Ministry of Education, the Ministry of Labor, or the Ministry of Religious Affairs 56% 14% 8% 4% 1% 1990 2005 Jewish girls Arab girls 39 Source: Central Bureau of Statistics, 2006 Employment Rates of Jewish and Arab Women Ages 22-64, 1995 and 2005 Arab Women Jewish Women 1995 17.2 62.3 2005 19.5 68.4 Source: Myers-JDC-Brookdale Institute special analysis of data from the Central Bureau of Statistics' Labor Force Survey, 2005. 40 Employment Rates of Jewish and Arab Women, Ages 22-64, by Years of Education, 1995 and 2005 0-8 Arab Women 16+ Jewish Women 30.1 Arab Women Jewish Women 79.8 1995 6.4 70.7 2005 5.4 33.4 65.4 81.3 Source: Myers-JDC-Brookdale Institute special analysis of data from the Central Bureau of Statistics' Labor Force Survey, 2005. 41 Employment Rates of Jewish and Arab Men, Ages 22-64, by Years of Education, 1995 and 2005 0-8 Arab Men 1995 68.4 Jewish Men 62.0 Arab Men 80.9 16+ Jewish Men 80.0 2005 46.8 49.0 82.0 79.6 Source: Myers-JDC-Brookdale Institute special analysis of data from the Central Bureau of Statistics' Labor Force Survey, 2005. 42 The Program of the Myers-JDC-Brookdale Institute The Institute plays an important role in critical national efforts: 1. Helping the system learn from international experience 2. Providing key analyses of the issues and trends that are needed to make better decisions 3. Monitoring the implementation and the impact of major policy initiatives addressing poverty 43