Israel’s Wages and Labor agreements Commission Efraim Malkin staunchly opposes the proposal by National Economic Council chair Avi Simhon to cancel compulsory pension contributions for under-40s. Such a move would add NIS 500 on average to employees’ monthly paychecks but would cut the average monthly post-retirement pensions by NIS 2,000.
The National Economic Council says, the that the pension in Israel, which includes a National Insurance old-age allowance of over NIS 2,500 is relatively high compared to wages. Senior officials at the Ministry of Finance are also pushing to reduce contribution rates, though Malkin expresses reservations.
Malkin tells "Globes," "I believe that when the legislator established the mandatory pension scheme, they had private-sector employees in mind. Workers in environments where employers are often less diligent about upholding employee rights, making protective labor laws particularly effective there. I am not certain this mandate is appropriate in every case today. Perhaps high-tech workers do not need a mandatory contribution requirement, that is one thing. However, for employees earning minimum wage or close to it, the benefits of mandatory contributions are substantial. Regardless of recent studies on the subject, any analysis must take the issue of old-age allowances into account."
He adds, "I say this with great caution, but given the state of the National Insurance Institute, I believe a large portion of workers will not actually receive the full NIS 2,000 old-age allowance," he explains. "It is highly probable that one of the measures taken to restore the Institute's financial health will be the erosion of benefit payments. Since cutting disability or child allowances would be difficult, I foresee a likely scenario where the real value of the old-age allowance erodes for some people."
And what about the tax benefits for advanced study funds) - a benefit they keep trying to eliminate in every budget?
"Most of those who benefit from this perk belong to relatively affluent income deciles. In this context, if you want to take a social-minded approach, you might say on one hand that it isn't justified. Yet on the other hand, these are deciles that face very, very high effective tax rates. Perhaps in the past, this was a major issue, but today it isn't. Furthermore, one must remember that the (annual) tax-exemption ceiling is nominal - meaning it isn't adjusted for inflation - and stands at around NIS 15,000.
"So, while one could once say that the beneficiaries were exclusively from the top deciles, today it’s not a huge deal. It is far less significant than it was a decade ago. Consequently, the benefit is eroding *de facto*. Is it right to abolish the benefit? Yes. Is it a game-changer? No. That said, for labor unions, it is a symbolic issue that comes with significant costs."
Another topic Malkin addresses in the interview with "Globes" is the government decision on the location of government offices in Jerusalem - a decision he says he will recommend the next government overturn. "We certainly believe the next government should re-examine it. Today, commuting from Beersheva to Jerusalem is bordering on impossible. Even with remote work options, it makes life difficult and shrinks the available labor pool. Ultimately, this decision also creates a homogeneous public service, whereas we need diversity and a reduction of the gaps between the periphery and the center. For these reasons, I will recommend revoking this decision."
Published by Globes, Israel business news - en.globes.co.il - on September 27, 2026.
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