Among the measures adopted to deal with the economic and social impact of Covid-19, the Israelian Government decided to allocate a one-time universal grant to all its resident citizens, of the amount of ILS750 (about USD220) per adult and ILS500 (about USD150) per child.
The final cost of the grants was estimated at the time to be ILS 6.5 billion (0.46 percent of 2019 GDP).
The grant’s central objective was to stimulate the domestic economy and help Israelian families. However, it was criticised mainly because, since it was attributed to everyone, it lacked a specific target and therefore also reached families that were not in need.
In addition to the grant, the government adopted other relief measures, such as safety net for unemployed, extended unemployment benefits until June 2021, and other fiscal, monetary, and administrative incentives to businesses.
The study “A Grant to Every Citizen: survey evidence of the impact of a direct government payment in Israel” (December 2020) analysed the use of the grant through a survey to better understand whether there was some form of redistribution from more wealthy families to families in need. The findings are the following:
- “42 percent of households reported using the grants to mostly pay down debt,
- 26 percent to mostly spend it,
- 15 percent intended to mostly save the grant,
- 14 percent reported to have either donated the money to a third party or given it to family or friends and,
- 3 percent claimed no effect”.
On this basis, the study states that “we speculate that they may suggest, first, that under some circumstances, individuals may be able to target payments to those who are truly needy more efficiently and quickly than the government. [...] “Our findings raise the possibility that, at least in a socially and politically aware society, universal or near-universal transfers may end up more targeted than they appear on paper. It may therefore, under certain social conditions, be possible for the government to disburse a universal grant quickly; and for society, acting as a secondary market, to allocate the grants to where they are most needed”.
As a way to redirect money, the online crowdfunding campaign called “Move it Forward” collected nearly ILS18.5 million from 21,600 donors—about ILS 850 per donation, on average.
It concludes mentioning “that the government’s stated goal of stimulating the economy was modestly achieved”.
The study is quite interesting as many governments around the world had to take a decision on the trade-off between targeting the income support or acting quickly. The finding of the study may be helpful for other governments willing to move on with the same measure.
However, from a business perspective, it is important to remind that to stimulate the economy, it is also important to maintain a high level of employment. For this to be secured, other actions are necessary such as the development of active labour market policies to match demand and offer, for instance.