Israeli Economy: Significant Increase in Spending on Social Aspects Due to War

SadaNews - The "Taub Center" published its annual report "State of the Nation" for 2026 at the end of June, discussing the effects of the war on the economic and social conditions in Israel. The report covers various topics from multiple fields worked on by the center, including economy, labor market, artificial intelligence, demography, welfare, health, environment, education, and early childhood.

The most notable aspect of this report is that it presents the changes occurring over recent years in detail and depth and does not merely observe the overall transformations. Thus, it provides a comprehensive picture of the profound shifts in economic and social aspects.

In a series of reports, we will cover several of these topics to follow the transformations in 2026. In this first report, we address the changes in expenditures and budgets allocated to social aspects, which include social welfare, education, and health.

Increase in Social Expenditures... Most of it to Meet War-Related Needs

In 2024, approximately 400 billion shekels were allocated for government spending on social aspects. Social spending in that year saw a real increase of about 38 billion shekels compared to 2023. This social budget is the largest in Israel's history, and the increase is among the largest recorded in a single year.

The analysis by the "Taub Center" indicates that most of the increase in social spending in 2024 arose from the need to address the effects of the war on civilians and soldiers alike. When excluding the increase in war-related expenditures, the increase in the social spending budget amounted to only about 11 billion shekels, which was lower than the average increase in the five years preceding the COVID-19 crisis, which was about 16 billion shekels annually.

A study of social spending per capita, after excluding war-related expenditures, shows that it remained comparable to the previous year's level. Thus, the majority of the budget increase was due to needs imposed by the war's repercussions and did not signify a shift towards new social policies by the government.

Growth in Social Spending as a Percentage of GDP

The growth rate of social spending in 2024 was higher than the GDP growth rate in the same year, leading to a rise in social spending as a percentage of GDP to about 20%. Breaking down this spending by sectors, expenditures on social security accounted for 10% of the GDP, while spending on both education and health was about 4.5% of the GDP.

Social Spending in Israel Lower than Most OECD Countries

Compared to other social welfare countries, and even with countries not classified as advanced welfare states, social spending in Israel, as a percentage of GDP, remains low. In 2023, welfare states with the highest social spending allocated between 25% and 30% of their GDP to social issues, excluding education, while the average in OECD countries was about 20.8% of GDP.

In Israel, social spending did not exceed 16.3% of GDP. There are very few OECD countries that allocate fewer resources to social issues than Israel. Furthermore, even in countries not considered advanced welfare states, such as Slovenia, Poland, the Czech Republic, Latvia, Slovakia, Hungary, and Estonia, the percentage of social spending relative to GDP is higher than that in Israel.

Significant Increase in the Number of "Casualty Victims" and Compensation Paid to Them

The compensations offered to those whom Israel labels "victims of hostile operations," who have been assessed as having a degree of disability, alongside the compensations provided by the rehabilitation department in the Ministry of Defense for injured soldiers and families of the deceased, are long-term programs expected to burden the social security system for many years. Therefore, any change in these programs following the war carries significant and sensitive importance.

Data shows that changes in the 'Victims of Hostile Operations' compensation program, for which the National Insurance Institute bears responsibility, are quite notable, both in terms of the number of eligible individuals and the nature of their injuries. In 2022, their number was 5,706, and by the beginning of the second half of 2025, it exceeded 30,000, with most cases resulting from psychological injuries.

Additionally, there are tens of thousands of applications still under review by the medical committees of the National Insurance Institute for recognition of injuries.

This indicates a significant increase in resources allocated to the "Victims of Hostile Operations" assistance program, both currently and in the coming years. Overall, spending on this program rose from 631 million shekels in 2022 to 2.9 billion shekels in 2025, which is about 4.6 times.

Significant Increase in the Budget of the Ministry of Welfare and Social Security

The report indicates that half of the social aspect budgets are allocated to the Ministry of Social Welfare. An examination of changes in the Ministry's budget over the years reveals that, after a decade of moderate increases, a significant rise in this budget was recorded in 2024, from about 5.1 billion shekels in 2010 to about 11.7 billion shekels in 2024, marking an increase to roughly 2.3 times in real terms.

The majority of the increase in spending focused on out-of-home services for people with disabilities, with about 35% of the total increase resulting from heightened spending on these services. Spending on services provided to people with disabilities within the community was another significant source of increase, with an increase of about 40%.

In contrast, the increase in spending on the wages of social workers and on personal services outside the home was less than 10%. The increase in spending on services dedicated to the elderly was the smallest among all increases.

Shortage of Social Workers

Alongside the increase in budgets, significant difficulties have been observed in recent years in filling social worker positions in local authorities. As of March 2026, about 18% of these positions were vacant, translating to an absolute number of around 1,300 professionals missing.

Recruitment challenges worsen in local authorities facing greater social pressures. In areas where poverty rates are high, where more than 25% of families in the town live below the poverty line, the percentage of vacant positions exceeds that in authorities with lower poverty rates, where the percentage of families below the poverty line is 15% or less.

An examination of the data based on the characteristics of towns and demographic categories reveals significant disparities in the percentage of vacant positions. In Jewish local authorities, excluding ultra-Orthodox authorities, the average percentage of vacant positions in April 2026 was about 17%, while it was significantly higher in Arab authorities, particularly Bedouin authorities, at 21% and 26%, respectively.

The percentage of vacant positions fluctuates significantly over the years, but the general trend indicates a severe shortage of professionals, with this shortage exacerbating in Arab and Bedouin local authorities.

Moreover, the number of service recipients per social worker is higher in poorer authorities compared to those with medium or low poverty rates. This aspect has a significant impact, both on the level of care that can be provided to the service recipient and on the level of exhaustion for professionals.

 

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