Early Childhood Daycare Subsidies in Israel in Different Sectors

A study of daycare subsidies in Israel and recommendations for improved criteria that would encourage participation in the labor market among the ultra-Orthodox.

Photo by GISTEL Cezary Wojtkowski / iStockbyGettyImages

Read the Full Research in Hebrew (PDF)

Background

The State of Israel assists parents in financing daycare for those who send their children, ages 0-3 (not including 3-year-olds), to state-supervised daycare (as opposed to private daycare, where most children who attend daycare go). Such subsidies aim to encourage the integration of parents in the labor market. The condition for receiving a subsidy is that both parents work or study. The amount of the subsidy is usually determined according to two main criteria - the income level of the parents and the number of people in the household (the parents and the number of children up to the age of 18).

The issue of daycare subsidies for Haredi (ultra-Orthodox) Israelis has been a significant matter of debate in recent months, following the Israeli Supreme Court ruling that Haredi men must be drafted to the IDF. Haredim who do not serve in the IDF are no longer eligible for these daycare subsides. The following outlines the key findings of the study.

• Criteria for receiving subsidies:

1. Both parents working or studying
2. Assessment of per-capita income (total household income divided by number of people in the household)

• Around 226,000 households in Israel with children ages 0-3 meet the working/studying criterion; of these, around 140,000 also meet the income criterion, and are eligible for a subsidy in practice.
• In 2022, the number of households that had children in state-supervised daycare centers stood at 89,250, and the total number of children attending these centers stood at 103,981.

Main Findings

1. Eligibility rates by sector:

• Haredim: 70%
• Non-Haredi Jews: 28%
• Arabs: 26%

2. Average monthly subsidy amounts:

• Haredi families: NIS 2,300
• Arab families: NIS 1,600
• Non-Haredi Jewish families: NIS 1,500

3. Distribution of the overall subsidy budget, which has an annual cost of NIS 1.2 billion:

• Haredim: 55%
• Non-Haredi Jews: 39%
• Arabs: 6%

4. Employment status characteristics (as per eligibility assessment):

Eligible households in which both adults work:

• Non-Haredi Jews: 79%
• Arabs: 83%
• Haredim: 20%

In 74% of eligible Haredi households, the mother works and the father studies in a kollel (an institution for full-time Torah study for married Haredi men).

 

Consequences of Legal Changes to Daycare Subsidies if all Families with Eligible Children Sent them to Supervised Care

1. Cessation of subsidies to households of men obligated by the military draft and not in military service (in accordance with the Supreme Court ruling):

• Fall in subsidy eligibility among Haredim from 70% to 59%
• Actual budget savings of NIS 100 million per year

2. End of the recognition of kollel studies as meeting the eligibility criteria for subsidies:

• Fall in subsidy eligibility among Haredim from 70% to 30%
• Budget savings of NIS 100 million per year

3. A current bill that is being proposed to focus solely on mother’s employment status would:

• Increase in subsidy eligibility among Haredim to 74% (also thereby preventing the "fall" to 59%)
• Budget increase of NIS 200 million year

Main Recommendations

The subsidy structure is especially beneficial to the Haredi sector, mainly due to the recognition of studying in kollel as meeting the eligibility criterion, despite the fact that it does not advance the goal of the law—participation in the workforce. The researchers recommend re-examining the criteria so that they provide more support for parents who wish to participate in the labor market (similar to the situation for non-Haredi and Jewish households that receive the subsidy).

More specifically:

Distortions in the current subsidy structure: The structure is more beneficial, to a significant extent, to Haredi households, due to a combination of three factors: recognition of kollel studies as meeting the eligibility criteria (even though they do not promote employment); low incomes (mainly due to there being a single earner in the household); and families with large numbers of children.

The result: 70% of Haredi families are eligible for a high level of subsidy (NIS 2,300 on average), compared with only around 27% in the other sectors.

Contradicting the purpose of the law: The main goal of the subsidy system is to encourage parents to participate in the labor market. In practice, the system rewards non-participation in the labor market in the Haredi sector:

• In only 20% of Haredi households do both adults work, compared with 79% of non-Haredi Jewish households and 83% of Arab households.
• The recognition of kollel studies as equivalent to vocational training or academic studies defeats the purpose of the law.

Inequality in access to state-supervised daycare centers:

• There is a significant gap between eligibility and access in practice.
• In the Arab sector, only 18% of eligible households actually have children in state-supervised centers, compared with 38% among Haredim and 52% among non-Haredi Jews.
• The lack of state-supervised daycare centers disproportionately affects the Arab population.

Proposals for change:

• Re-examine the structure of the eligibility criteria so that they truly support participation in the labor market.
• Reduce the impact of the number of people in the family as a central criterion for setting the size of the subsidy received.
• End the recognition of kollel studies as meeting the eligibility criteria, as they do not advance the goal of the subsidies.
• Increase the number of state-supervised daycare centers, especially in the Arab sector, to reduce the gap between eligibility and access.

All the above points indicate the need for a comprehensive reform to the subsidy system, maintaining its original goal of encouraging participation in the labor market.