Israel Considers Major Social Benefit Reforms Post-Election
Translated & summarized from Cursorinfo by baba
Israeli economic ministries are planning major reforms to social welfare payments, including potential benefit cuts for draft evaders and tax hikes, to be developed after the upcoming elections. These changes are driven by concerning economic forecasts and the financial strain on the National Insurance Institute, with potential annual damages reaching 250 billion shekels by 2050. Key issues include low employment among the ultra-Orthodox and the financial stability of social security funds, which may require significant government intervention or benefit adjustments.
The story in 6 lines · by baba
- Israel is considering major reforms to social welfare payments and retirement age after upcoming elections.
- Proposed measures include benefit cuts for those evading military service and potential tax increases.
- Economic forecasts predict up to 250 billion shekels in annual damage by 2050 if current trends continue.
- Low employment among the ultra-Orthodox and their low military conscription rate are major economic concerns.
- The National Insurance Institute faces a significant deficit, with its reserve fund potentially depleted by 2035.
- Potential reforms could involve raising VAT, income taxes, or reducing spending on social services.
Israeli economic ministries are reportedly discussing significant reforms to social welfare payments, potentially impacting benefits, retirement age, and eligibility for state aid. Among the proposed measures are sanctions against individuals who evade mandatory military service, which could lead to the reduction or cessation of certain benefits. These proposals are expected to be developed after the upcoming Knesset elections, driven by concerns over the Israeli economy and the financial stability of the National Insurance Institute (Bituah Leumi).
Alarming economic forecasts suggest that if current trends persist, Israel could face annual economic damage of up to 250 billion shekels by 2050. Key risk factors identified include low employment rates among certain population groups, educational system challenges, and the low conscription rate of ultra-Orthodox men into the IDF. The Ministry of Finance is considering measures to cover future expenses, potentially including a VAT increase from 18% to 22%, higher income taxes, and cuts to healthcare, education, and social services.
The employment situation of the ultra-Orthodox community is a particular concern. Projections indicate that if employment levels among this group do not improve, annual GDP losses could reach approximately 160 billion shekels by 2050. Additionally, the economic cost of low ultra-Orthodox military conscription is estimated to exceed 10 billion shekels annually, placing a greater burden on reservists who must leave their jobs for extended periods.
The National Insurance Institute faces significant financial challenges, with an actuarial deficit estimated at 810 billion shekels and a projected current deficit of 10 billion shekels. Its reserve fund, intended to cover shortfalls in current income, may be depleted by 2035, a decade earlier than previously anticipated. Factors contributing to this include an aging population, increased life expectancy, pandemic and war-related expenses, and expanded state social obligations, such as a rise in long-term care costs from 7 billion shekels in 2018 to 21 billion in 2025.
While the depletion of the reserve fund would not automatically halt pension and benefit payments, it could necessitate increased government funding, higher insurance contributions, or adjustments to benefit amounts and conditions. Previously discussed initiatives also included raising the retirement age for men from 67 to 70, though this remains a potential option rather than a decided policy.
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