The National Insurance Institute (NII) is the governmental agency in charge of implementing the National Insurance Law of 1954 and other social-welfare statutes. The purpose of these laws is to reduce economic disparities and ensure social security for every individual and family at all times. In its original phrasing, the law provided for only three types of insurance: old-age and survivors, maternity, and workers’ compensation. The largest category is old-age and survivors’ insurance, which pays a standard pension to men aged 65+ and women aged 60+. The survivors’ benefit is paid to widows, widowers, and orphans. Maternity insurance provides working mothers on maternity leave with a maternity allowance, and every woman who gives birth with a maternity grant. Workers’ compensation covers persons who are temporarily or permanently unable to work because of occupational accidents or illnesses.

Development of the National Insurance System

The NII has expanded its sphere of activity since the original legislation was passed. Child allowances were introduced in 1959 and expanded in 1965. That same year, seniors and survivors with no source of income other than the basic NII pension became eligible for an income maintenance program that assures them a minimum income. Since 1968, the NII has paid old-age pensions to persons not covered by the National Insurance Law, chiefly recent immigrants.

New types of insurance were added in the 1970s, the most important of which were unemployment compensation and general disability insurance. Unemployment compensation, in effect since the beginning of 1973, is paid for short periods of time to insured persons who are willing and able to work but who, for the time being, have not found work. Since 1974, disability allowances have been paid to compensate for loss of earning ability and to assure a minimum level of income. This type of insurance also includes a special-services grant to disabled people who depend on others for day-to-day functioning.

Another important social-welfare law, in effect since 1972, is the Alimony Law, which guarantees a minimum income to women divorced or separated from their husbands if their (ex-)husbands fail to remit alimony as stipulated by court order. An important reform instituted in 1975 combines the child-allowance system with income tax. The gist of the amendment was the elimination of tax credits based on number of children and the establishment of a standard and more progressive set of child allowances.

A 1981 amendment to the Disability Law grants assistance to families that provide direct care for a disabled family member. At present, the general-disability benefit is paid to eligible children from birth to age 18. Since 1982, the NII has been responsible for guaranteeing every resident a minimum income according to standard criteria, under the Income Maintenance Law.

Since April 1988, the NII has implemented the Long-Term Care Law, which expresses in legal terms the state’s commitment to assist the chronically ill. The state pays (among other things) for chronic-care services and in-home assistance for functionally disabled elderly persons who live in the community. In 1992, 6.7% of Israel’s elderly were eligible for in-home assistance under this law.

The developments described above have increased the NII’s scope of activity substantially. The share of NII benefits in GNP increased from 2.8% in 1970 to 7% in 1976-1977 and 8% in 1985. Old-age and survivors’ pensions account for 40% of total remittances. Another 20% is for child allowances, 26% for income maintenance, and 10% for general disability.


The National Insurance system provides almost all forms of social insurance that are offered in developed countries and redistributes the national income according to social criteria. Most of the income- maintenance policy dates from the 1970s, when a basic old-age pension was combined with a supplemental income-maintenance benefit, together assuring a basic standard of living. This policy guarantees subsistence to persons who become temporarily or permanently unable to earn a living. The question of universality (uniformity) versus selectivity in National Insurance payments was put to the test with respect to child allowances. Under the emergency economic-stabilization plan introduced on July 1, 1985, child allowances were eliminated for the first child of families with up to three children, except for low-income families, who were compensated for the cancellation of the allowance. In August 1990, payment for the second child in three-child families was eliminated, except again for low-income families. In March 1993, all child allowances were restored, irrespective of income, making the allowance system universal once again.

One of the issues that the NII has to confront is how to preserve the real value of the allowances despite inflation. Most of the methods invoked aim to preserve the real value of the allowances relative to the standard of living of the overall population. Indexation of the allowances to the national average wage is the principal tool used to achieve this goal. The allowances are adjusted at the beginning of each year and whenever wage-earners are given cost-of-living increases. Child allowances are linked to the Consumer Price Index; this preserves their purchasing power in the long term but does not allow them to increase at the same pace as the standard of living.

To cope with the immigration wave of the early 1990s, the NII created a database that generates lists of all immigrants eligible for child allowances and old-age pensions. The NII strives to recognize all immigrants as residents with equal entitlement immediately upon their arrival in Israel. In accordance with this policy, the onset of eligibility for income-maintenance allowances was advanced in 1992 to one year from immigration instead of two years. Immigrants are also eligible for disability allowances and special services after three to six months from the date of immigration. Eligible seniors receive a chronic-care allowance upon arrival.

In response to public pressure, the terms of eligibility for unemployment compensation were toughened in order to encourage the unemployed to accept jobs. The main legislative amendments concern the definition of the term "suitable work." As of April 1991, unemployed persons under age 35 are ineligible for unemployment compensation if they reject any job offered, even one that does not match their occupational credentials. Another amendment disqualifies unemployed people who turn down jobs up to 60 kilometers from their place of residence. The training period during which new immigrants are entitled to unemployment compensation was extended from three months to six, thereby equalizing the status of immigrants with nonimmigrants in this sphere. Yet another amendment reduces the rate of unemployment compensation (the percentage of the person’s average income while employed) for persons who earned more than the national average wage or retired at an earlier-than-standard age.

Despite budgetary constraints, the NII was able to introduce several important regulations in order to solve various socioeconomic and economic problems. Since 1991, for example, a benefit has been paid to insured women who are absent from their jobs for at least 30 consecutive days during pregnancy because of a pregnancy-related medical condition. In 1992, the Knesset passed the Single-Parent Family Law, which awards benefits to single parents under both the Income Maintenance Law and the National Insurance Law. The new definition of a single parent includes, and expands the benefits for, men and women who were never married or who are divorced or widowed. A new "study grant" is given to single parents who have children of primary-school age.