Text size

Yet another front line is developing between the Bank of Israel and the Finance Ministry, this time over the duration of unemployment benefits. The Bank of Israel is poised to recommend that the state extend the duration of aid, a proposal which the Finance Ministry is expected to vehemently oppose.

The recommendation is the brainchild of the central bank's research department, headed by Karnit Flug. The department hasn't finished its checks and calculations about unemployment benefits yet, but at various forums Flug has voiced her view that the stipends should be paid out for longer, and insofar as can be ascertained, the central bank is about to issue a study with that recommendation.

The proposal is to be based on the assessment that easing the uncertainty the unemployed face would encourage them to spend money. That in turn would stimulate private consumption, which is dropping sharply because of the recession.

In short, the central bank sees the unemployed playing a role in easing the recession.

Also, compared with practices in the West, Israel is among the stingiest in terms of the duration of assistance.

At most, unemployment benefits can last 175 days, but in practice most don't get help beyond 100 days. Most European countries give benefits for a year and some extend assistance to three years.

Israel is also relatively stingy about the amount of assistance, usually paying less than 50% of the last wage. And to top off the list, Israel is among the most severe on eligibility. The upshot is that only about a quarter of the actual jobless receive unemployment benefits.

On the other hand, unemployment insurance in Israel is among the lowest in the west - only 0.25% of the monthly salary, compared with as much as 8% in some countries, but generally no less than 3%.

The Finance Ministry's position is that in contrast to conventional wisdom, the duration of benefits has not been sharply reduced. It claims Israel never paid unemployment benefits for more than six months, proving that the structure of Israel's labor market doesn't require longer periods of time. The short period spurs people between jobs to get going and find work, treasury officials believe.