Multibillion-shekel increase in disability payments said to be unaccounted for

It remains unclear where the money will come from, as the Israeli government embarks on expanding a social welfare program without raising taxes or reallocating funds.

October 2, 2017 00:37
3 minute read.
Disabled activists sit in at the Knesset plenum discussing goverment allowances for the disabled

Disabled activists sit in at the Knesset plenum discussing goverment allowances for the disabled, September 18, 2017.. (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)


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An agreement reached on Friday between Israel’s Histadrut labor union, disability rights activists and the government will raise monthly payments to Israelis with disabilities from NIS 2,800 to between NIS 3,700 to NIS 4,500 by 2021, but it does not include any plan on how to fund the program.

The agreement is reported to cost NIS 4.2 billion a year between January 2018 and 2021 and was negotiated on the eve of Yom Kippur. Israelis with more severe disabilities will receive a higher benefit and the disability payments will now indexed to fluctuations in the average Israeli wage.

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An estimated 880,000 Israelis have disabilities, with only around 235,000 recognized by the National Insurance Institute as having a disability of 100%, according to Dr. Irit Keynan of the College for Academic Studies.

It remains unclear where the money will come from, as the Israeli government embarks on expanding a social welfare program without raising taxes or reallocating funds.

“It’s a matter of national priorities. It’s unconscionable that people with disabilities who cannot work should be living below the poverty line. I think we as a country should help people who are unfortunate. The question is, do we have the money?” asked Prof. Dan Ben-David of Tel Aviv University and the Shoresh Institute.

In terms of the disability agreement, ministry officials claim not to have been not consulted professionally and were not present at negotiations between Histadrut Chairman Avi Nissenkorn, coalition chairman David Bitan and National Economic Council chairman Avi Simhon, representing the Prime Minister’s Office. One anonymous finance official called the agreement the “Yom Kippur of the welfare system,” in reference to the holiday’s depressing and calamitous nature, TheMarker reported.

Given the lack of Finance Ministry involvement in negotiating the deal, the ministry does not know the plan’s details and cannot provide a fully-accurate budgetary cost. It is likely that the original price of NIS 4.2 billion annually is also an underestimate.

Ben-David supports the increase and adds that hypothetically, the funds would come from cutting off welfare payments to ultra-Orthodox Israelis and forcing them to participate in the workforce.

Another way to pay for the increase – which is politically untenable – is to go after Israel’s pervasive black market.

“Anyone who has lived here for more than a month who needed a serviceman or handyman is familiar with the term – with a receipt or without a receipt. And then there are many people who collect benefits who say they don’t work but they work. It’s a national syndrome of hiding the money,” said Ben-David. Almost one-third of the Israeli economy – hundreds of billions of shekels – is under-the-table, as opposed to the black market shaving off single digits of the GDP in the United States.

Conservative economists might argue that an increase in welfare payments can reduce the incentive to work. But given that the constituency here is disabled Israelis – many of whom physically cannot work – it is unlikely that the raise will result in lower labor market participation.

“We’re not talking about people who are healthy. We’re talking about the disabled. And think about rent and food and medication, they have a huge incentive to work if they can. Forty-five hundred shekels is not going to get food on the table,” said Ben-David, adding that in terms of a stimulus, every additional shekel that disabled Israelis get will immediately be put back into the local economy, as they don’t have the money to park the funds in savings.

With the agreement, Israelis with disabilities will be able to work and earn up to NIS 4,000 without facing a cut in monthly benefits, an increase from today where if a disabled person makes more than NIS 2,800, he or she will lose government benefits, the Histadrut agreement said. By January 2019, this ceiling will go up to NIS 4,300, and depending on the results, it can further go up to NIS 5,300.

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