A Bank of Israel report for 2005 reveals that in 2004 Israel
ranked at the bottom of a survey of social security
entitlements in developed nations. In old-age benefits Israel
ranked 19th of 23 countries and in child allowances it was
second to last, with only Spain falling further behind.
According to a report in Ha'aretz Israel spends only
0.5 percent of the GDP on child allowances compared to an
average of 1.3 percent among Organization for Economic
Cooperation and Development (OECD) members.
Israel's dismal ranking in old-age benefits is based on a
calculation that weighs pension expenditures in relation to
the GDP, and the number of people entitled to the pension. In
2004 only Norway, Australia, the Czech Republic and Ireland
were less generous toward their elderly citizens.
The report notes that old-age pensions in Israel include a
fundamental entitlement of 16 percent of average wages and 26
percent for a couple, as well as a selective added component
for recipients whose income, including the pension, falls
below a set amount. The Bank of Israel says that a selective
pension system benefits individuals with lower income without
significantly increasing public spending, but notes expanding
their use at the expense of universal pensions (which are
based on a fixed sum or the number of years worked) can
create negative incentives for employment.
The Bank of Israel report says that, in Israel, child
allowances are given according to the number of children in a
family rather than household income. A comparison of
allowance levels shows that in selective systems allowances
are significantly higher than universal systems and this gap
widens with the number of children in the family.
