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 in large families with low work income. 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 allowance per child decreases after the fourth child.

Despite covering only a fraction of the actual costs of 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, critics argue that universal allowances may be less efficient than targeted aid focused on low-income families, such as work grants or subsidized childcare, to better encourage employment and income growth.

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 benefits might reduce work incentives. Research on birth rates indicates that increased allowances had a modest overall effect on fertility, with some increases among Arab and ultra-Orthodox Jewish women but no significant impact among secular Jewish and Druze women.

The government faces the challenge of balancing adequate support for families with children while maintaining incentives for parents to work and increase their earnings. The current approach combines a basic allowance for all children, long-term savings accounts, and targeted assistance for lower-income families, aiming to ensure that working more always results in higher net income for families.

Ultimately, raising children is both a household expense and a long-term social investment, and the key economic question is how to provide support without fostering dependency on government transfers.