Israel Provides Child Allowances to 1.3 Million Families, Impacting Work and Birth Rates

In Israel, approximately 1.3 million families receive child allowances for about 3.2 million children, with the government also depositing 58 shekels monthly into a long-term savings fund for each child. The child allowance system is designed to share the cost of raising children broadly, without income testing, but the total monthly payments can reach significant sums, especially for large families. For example, in 2026, a family with one child receives 173 shekels monthly, while a family with ten children can receive up to 1,868 shekels, though the per-child amount decreases after the fourth child.

Despite covering only a fraction of the actual costs of raising children, which include food, clothing, education, and housing, the allowances represent a substantial public expenditure running into billions of shekels annually. About 28% of Israeli children live below the poverty line, highlighting the social need for such support. However, economists debate the structure of these payments, noting that universal allowances avoid income testing complexities but may reduce incentives for work, especially in larger families with lower incomes.

Historical data from the early 2000s, when Israel sharply cut child allowances, showed an increase in labor market participation among parents of large families, suggesting that higher allowances might discourage work to some extent. Research also indicates that while child allowances have a limited overall effect on birth rates, they do increase fertility among specific groups, such as Arab and ultra-Orthodox women, particularly those with lower incomes or already large families.

The government faces the challenge of balancing adequate support for families with incentives to increase household income through employment. Proposals include maintaining a basic universal allowance, combined with targeted assistance like work grants, subsidized childcare, and educational services for low-income families. This approach aims to ensure that families always benefit financially from working more, while also investing in children’s futures through savings accounts.

Ultimately, child allowances are both a household expense and a long-term social investment. The key economic question is how to provide support without creating dependency, ensuring that assistance helps families thrive without discouraging work or family growth.