A study conducted by the research department of Bank of Israel and by the Finance Ministry's State Revenue Administration reveals the conditions of entitlement for the income support benefit is the main obstacle in getting those receiving the benefit to enter the workforce.
Since the income support law became effective in early 1982, the number of those receiving it has grown by 1,200%, 21 times the rate of population growth. At the end of 2000 131,000 families, or 9% of all working age families, were receiving the benefit, as opposed to 3% at the end of the 1980s.
The research reveals two thirds of those getting the benefit report they are unemployed. Many of them are not reporting income from unrecorded employment, or are lying about their employment status. Various estimates are their income off the market totals 44% of their reported income.
Two factors of the conditions of entitlement lead to decreased participation rate of those receiving the benefit in the workforce. One is a relatively high benefit compared with what they would be getting in the workforce; the other is the benefit is so greatly reduced once they enter the workforce, the effective tax on it occasionally hits 100%.