Employment, Income and Household Finances in Israel during the COVID-19 Pandemic


Social isolation and other dramatic steps taken by the Israeli government to slow the spread of COVID-19 in Israel have caused significant damage to the economy. At an aggregate level, the GDP fell at an annual rate of 7% in the first quarter of 2020 and of 29% in the second quarter. A broad measure of unemployment among workers aged 25-65 (including furloughed workers) peaked at 36% at the height of the restrictions in April and declined to 11% in July.[1]

The impact of this economic crisis on the financial situation of Israeli households has been intense and persistent. In a July household survey conducted by the Central Bureau of Statistics (CBS), 41% of households reported a deterioration in their economic situation and 55% expressed fear that they would be unable to meet their monthly expenses. Twenty-one percent indicated that they or a member of their family had reduced their food intake over the previous week (CBS, 2020a).

The difficulties facing Israeli households have come about despite significant steps by the Israeli government to mitigate the economic impact of the pandemic. The total government spending on COVID-19 responses planned for 2020 is approximately NIS 150 billion – NIS 100 billion in subsidies, unemployment benefits and public consumption, and NIS 50 billion in state-guaranteed funding and other financing and cash-flow measures. In addition, the Bank of Israel published guidelines allowing households and small businesses to freeze and reorganize payments on bank loans, and prevented banks from limiting access to bank accounts of insolvent individuals during the height of the initial restrictions until June 2020.

Several previous studies have documented the effects of the economic closures on employment and employment income (e.g. CBS, 2020b; Aviram-Nitzan & Zaken, 2020; Ahdut et al., 2020). Yet there is little information on how these income losses have affected household spending, standard of living, and the ability to cover monthly expenses. There is also little information about differences in these effects among different segments of the population. Even less is known about what resources households have used to manage during this period, the effect of the crisis on household finances, and the extent to which government assistance has helped mitigate the impact of income losses on the household financial well-being.

Research Questions

The severity of the crisis and the willingness of the government to provide significant economic support raises important questions that bear directly on government policy. First, as the economy slowly recovered from the lockdown in March and April, how well were Israeli households managing? More generally, what was the state of household finances going into the additional lockdown in September? Second, how have the various segments of the population been affected by the crisis? What kinds of households have lost their ability to cover expenses and maintain their quality of life? Finally, what does this imply for how government aid should be directed to help those most in need, especially as the government considers its response to the additional economic impact of the September lockdown? We attempt to address these questions in the present report and, in future reports, we will examine the effects of specific government policies and consider what additional financial resources households used to manage through the crisis.

[1]     The official unemployment rate from data from the Central Bureau of Statistics’ Labor Force Survey, which does not include furloughed workers, was 3% in April and 4.3% in July (CBS, 2020b).

The study was funded with the assistance of the Israeli government.

For MJB’s publications on the COVID-19 pandemic in English, press here.

For MJB’s publications on the COVID-19 pandemic in Hebrew, press here.