The pension problem in a gender perspective

The financial disadvantages that women, and especially single mothers, face in retirement is well researched, as is the precarious financial situation of many older women in developed countries (Peeters and Wouter, Reference Peeters and Wouter2015; Tinios et al., Reference Tinios, Bettio and Betti2015), who have higher poverty rates than men (Bettio et al., Reference Bettio, Tinios and Betti2013; Bíró, Reference Bíró2013; Lloyd-Sherlock et al., Reference Lloyd-Sherlock, Corso and Minicuci2015). People are living in retirement for about 20–30 years, making it a significant part of their lives. Based on the ‘male breadwinner’ model, which became dominant after the Second World War in most European countries (Bonnet and Hourriez, Reference Bonnet and Hourriez2012; Tinios et al., Reference Tinios, Bettio and Betti2015), pension systems are designed so that male support of dependents continues even after his death, through survivor pensions (Bonnet and Hourriez, Reference Bonnet and Hourriez2012). This is true not only in Bismarckian systems (France, Germany, Italy), but also in northern Europe (Scandinavia and English-speaking countries).

So long as marriages were stable and the ‘male breadwinner’ model was dominant, women were covered financially by their husbands. However, in recent decades, women's participation in the workforce has increased sharply and divorce rates have risen significantly, which, in conjunction with the feminisation of poverty, makes the woman's place in the pension debate particularly acute. Women tend to be more economically vulnerable than men after divorce (Manting and Bouman, Reference Manting and Bouman2006; Raz-Yurovich, Reference Raz-Yurovich2013) and more financially vulnerable in retirement due to longer life expectancy and greater chances of chronic disease (DeVaney and Kim, Reference DeVaney and Kim2003; Suzman and Beard, Reference Suzman and Beard2016). More women than men are left alone at the age of retirement (Bíró, Reference Bíró2013; Lloyd-Sherlock et al., Reference Lloyd-Sherlock, Corso and Minicuci2015).

The gender gap in pensions is related to disparities between men and women with respect to career tracks: women tend to have poorer working conditions and a higher incidence of part-time work because they tend to hold the social role of primary caretaker of parents, children and other relatives (Bonnet and Hourriez, Reference Bonnet and Hourriez2012; Duvvury et al., Reference Duvvury, Léime, Callan, Price and Simpson2012; Lee and Tang, Reference Lee and Tang2015). On the whole, women do the housework without pay; they work fewer paid hours than men; and there is a gender gap in pay (Bonnet and Hourriez, Reference Bonnet and Hourriez2012; Ferrant et al., Reference Ferrant, Pesando and Nowacka2014; ISSP, 2012; Stier, Reference Stier, Muhlbauer and Kulik2010). This has expanded gender discrimination in the labour market into old age (Rögnvaldsdóttir and Pétursdóttir, Reference Rögnvaldsdóttir and Pétursdóttir2012). As a result, despite their participation in the labour market, women accumulate fewer retirement pensions and depend more than men on benefits provided by the state. Furthermore, low pay makes it very difficult for women to save up for retirement (Duvvury et al., Reference Duvvury, Léime, Callan, Price and Simpson2012) and makes them less likely to obtain sufficient retirement income (Rögnvaldsdóttir and Pétursdóttir, Reference Rögnvaldsdóttir and Pétursdóttir2012).

Welfare-to-work and pensions

A significant share of the scholarship criticising WTW programmes (Albelda, Reference Albelda2011; Bennet, Reference Bennet2017; Breitkreuz and Williamson, Reference Breitkreuz and Williamson2012; Korteweg, Reference Korteweg2003, Reference Korteweg2006; Pulkingham et al., Reference Pulkingham, Fuller and Kershaw2010; Wright, Reference Wright2012) focuses on their limited ability to generate stable working lives for those whose welfare support has been substantially restricted. Most of the critiques analyse the failure of such programmes to meet their stated goals, showing that participating mothers are offered part-time, low-wage jobs and given little additional help with childcare, occupational training and other issues, such as housing, education and health. Studies have also indicated that the working poverty of mothers is generated by repeated transitions in and out of paid employment (Albelda, Reference Albelda2011; Millar and Ridge, Reference Millar and Ridge2009). Employment opportunities available to them offer low pay and intensive or unconventional work hours, limiting their time to care for their children (Albelda, Reference Albelda2011).

Within this context, the transition in Israeli welfare policy – from encouraging the ‘working mum’ who is expected to put her caring obligations before her employment (Izraeli, Reference Izraeli, Lewis, Izraeli and Hootsmans1992) to focusing on the ‘self-sufficient’ mum who is required to work regardless of her domestic obligations – has had substantial implications for low-income single mothers. Potentially changing the view of women from mothers to workers and shifting toward gender sameness (but not necessarily gender equality), the policy has remained organised around a dual-earner model (Daly, Reference Daly2011), with negative implications for those lacking support (partners or policy solutions) to address this change in role focus.

The work history of poor mothers and its implications for their pensions

One of the premises in the field of the ‘working poor’ is that oppressed social categories, including women, are more vulnerable to labour-market experiences that lead to a ‘working poor’ quality of life (e.g. Kalleberg, Reference Kalleberg2011; Zeytinoglu and Muteshi, Reference Zeytinoglu and Muteshi2000). Moreover, many women are employed in physically demanding or taxing jobs (e.g. domestic, industrial and farm labour) that lead to an earlier departure from the paid labour force. This usually entails leaving the labour market permanently (Flippen and Tienda, Reference Flippen and Tienda2000; Jacobs et al., Reference Jacobs, Laporte, Van Houtven and Coyte2014), and it has significant explanatory power regarding poverty among the elderly. As Gonyea and Hooyman (Reference Gonyea and Hooyman2005) have shown, even a lifetime of employment does not guarantee a financially secure retirement, especially for the working poor. Ensuring future economic sustainability is increasingly important for the highly vulnerable group of single mothers (Peeters and Wouter, Reference Peeters and Wouter2015).

Single motherhood welfare and pension policy in Israel

Israel belongs to the Mediterranean welfare state regime, which has had limited success in alleviating poverty and overcoming social and economic gaps (Gal, Reference Gal2010). This situation is exacerbated by changes in welfare policy that impact the present and future financial situations of mothers.

Israel has traditionally had a pro-natal welfare policy and has one of the highest birth rates among OECD countries, with an average of 3.08 children per woman, compared to 1.68 in the OECD (OECD, 2017). Ajzenstadt and Gal (Reference Ajzenstadt and Gal2001) argue that Israel's welfare policy has been marked by a concern for national-demographic goals and has been less focused on mothers as individuals who require social rights.

Since the 1990s, a neoliberal economic policy has gained impetus, aimed at reducing the welfare state and marked by significant allowance cuts, the privatisation of social services and the privatisation of employment pensions. Two changes relevant to single mothers have occurred: the welfare reform of 2003, which affected family allowances at working age; and a profound reform of pensions, which began in the 1990s and continued into the twenty-first century.

The welfare reform of 2003 introduced cuts in income support and child support (income assurance) allowances (by approximately one third), as well as in child benefits (by approximately one half). Consequently, these allowances became less accessible, especially to many low-income workers, who also lost entitlement to a supplementary allowance to their low wages as a result of cuts in the ‘disregard’ (Herbst and Kaplan, Reference Herbst and Kaplan2016) – a benefit that allows low-wage employees to both work and receive an allowance (Gal and Doron, Reference Gal and Doron2000). Cuts in the amount of the disregard affected the earning power of low-income workers, making it less lucrative to work, as many were no longer entitled to receive an allowance supplementing their wages. Indeed, there was a sharp drop of 53 per cent in the number of single-parent families receiving income support allowances between 2003 and 2016 (when this study was completed; on allowances in 2016, see Appendix, Table 1). The number of recipients of child support (income assurance) allowance also declined sharply during those years by 36 per cent. In 2016, 24.5 per cent of children in Israel (compared to 13.6 per cent in the OECD) and 26 per cent of single-parent families were living in poverty after taking allowances into account; moreover, in 14 per cent of poor families both spouses were working (Endeweld et al., Reference Endeweld, Gottlieb, Heller and Karady2017).

A second profound change was related to pension reform. The sources of income upon retirement in Israel form a three-pillar structure: (1) an old-age pension from National Insurance; (2) an employment pension based on the individual's earnings; and (3) personal savings (Lurie, Reference Lurie2017). This paper focuses on changes related to the first two. The following provides a brief chronology of the pension reform with respect to these two pillars.

The old-age pension from National Insurance (first pillar) was first enacted in the 1950s. It was available to women from age 60 and men from age 65, based on income tests; and to women from age 65 and men from age 70 without income tests. Enactment of the Retirement Age Law in 2004 and revision of the National Insurance Law (Consolidated Version) 1995 led to a gradual rise in the age of women's eligibility for old-age pensions. The minimum age of entitlement with income tests was now 62 for women and 67 for men, and age 70 for both genders without income tests. Further, minimum age for women dependent on income tests would continue to increase until (in 2020) it equalled the age of entitlement for men (both of which would increase to 70).

With regard to employment pensions (the second pillar), from the 1950s, public sector workers and working members of the Histadrut labour union (the largest and oldest labour organisation in Israel) enjoyed broad benefits of civil service pensions anchored in collective agreements, based on the defined benefit (DB)Footnote ¹ model. Pension contributions were made by the employer (the state), rather than split between employer and employee. All other employers and employees were not required to make mandatory pension contributions.

As in many developed countries (Benish et al., Reference Benish, Haber and Eliahou2017; Frericks, Reference Frericks2013; Lurie, Reference Lurie2017), increased life expectancy and economic crises in Israel led to actuarial deficits in pension funds, which have in turn generated trends to reduce pension costs. Peleg (Reference Peleg2006) claims that the Israeli Ministry of Finance attacked the failed management of these funds, mainly by the Histadrut, with the aim of weakening the power of the union and its workers. In fact, pension privatisation is part of neoliberal logic. At any rate, this resulted in several changes in employment pensions, beginning in the 1990s. First, admission of newcomers to civil service pension funds was blocked. Second, pension funds were first nationalised and then sold to private insurance companies – as in Chile, which replaced its entire public pension system with privately managed pensions, but in contrast to most European countries, where funds are run by non-profit employee and employer organisations (Achdut and Spivak, Reference Achdut and Spivak2010; Peleg, Reference Peleg2006). Third, new pension funds moved from defined benefit (DB) to defined contribution (DC) plans,Footnote ² similar to events in Germany, the UK, the US and the Netherlands (Bridgen and Meyer, Reference Bridgen and Meyer2014).

Finally, in an attempt to protect wage earners who were not insured under any pension arrangement (about one-third of the civilian labour force; CBS, 2009), enforcement of a collective agreement addendum in 2008 obliged employers and employees to start paying pension contributions (for contribution rates and details of this arrangement, see Table 2 in the Appendix). This is in keeping with most OECD countries, which have instituted mandatory pension savings (OECD, 2012, 2014).

The abovementioned reforms in Israel have led to entrenched gender and income inequalities. First, the move from a DB plan to a DC plan imposed risks and costs on savers, including investment risk, individual mortality risk, cohort mortality risk, salary risk and job tenure risk (Lurie, Reference Lurie2017). Second, privatisation of the funds significantly increased management fees, with the weakest workers now paying the highest fees (Bank of Israel, 2015), and led to the investment of pension funds in the stock exchange, so that the basic yield, which used to be guaranteed by the state via designated bonds, was considerably reduced (Achdut and Spivak, Reference Achdut and Spivak2010). Third, prior to the reform, the working poor could receive an old-age pension supplemented by an income support allowance for the elderly poor, but now they are required to make employee pension contributions from their meagre wages (Brander, Reference Brander2011). Fourth, tax credits for pension savings provide little relief for the poor, as low-income employees who do not reach the tax threshold (41.4 per cent of working men and 66.4 per cent of working women; Brander, Reference Brander2011; Ministry of Finance, 2015) cannot take advantage of these benefits. Finally, pension annuities are now calculated according to life expectancy, which decreases monthly benefits for retired women (Achdut and Spivak, Reference Achdut and Spivak2010; on other countries, see Frericks, Reference Frericks2013; Renga et al., Reference Renga, Molnar-Hidassy and Tisheva2010).

Labour market changes in Israel have also made employment pensions less reliable. The structure of the contemporary labour market includes a broad class of workers (mainly mothers) in sustained employment instability, with ‘precarious’ jobs reflected in lowered wages; involuntary temporary, part-time and/or seasonal employment; and deteriorating working conditions, without adequate social benefits (Benjamin, Reference Benjamin2016). Indeed, a study of OECD countries showed that the provision of pensions from low wages may significantly impair the quality of life of vulnerable groups in the labour market because present consumption is more significant than future needs (Olivera and Ponomarenko, Reference Olivera and Ponomarenko2017).

Moreover, the long-term benefits of employment pension savings in Israel are similar to the income support supplement to the National Insurance old-age pension. The maximum pension annuity expected for a woman joining the labour market at age 37 and working at minimum wage is 40 per cent of her earnings at age of pension (about 1800 NIS or $500),Footnote ³ while the income support supplement adds 1400 NIS ($400) to the old-age pension (see Tables 3 and 4 in the Appendix). As continuous full-time employment is virtually impossible for low-paid single mothers, the employment pension annuity may be considerably lower. In other words, even after saving for 30 years, which constitutes a significant deduction from their very low wages, women end up with a pension not far removed from what they would receive had they not worked. As the income supplement is state-financed, encouragement of these women to work and pay pension contributions saves the state in expenses.

These legislative changes ignore the affirmative action previously given to women for their ‘second shift’ as mothers, which means they work as both unpaid caregivers and paid employees, reinforcing the transition from the ‘working mum’ path to ‘self-sufficiency.’ As Pfau-Effinger (Reference Pfau-Effinger2005) pointed out, legal regulations and policies are embedded in a social context.

As elsewhere in liberal welfare states (e.g. the US and the UK), policy reform in Israel has been accompanied by a policy of ‘activation’ (Herbst, Reference Herbst2013). The 2003 reform outlined a policy of integrating mothers into the job market by enacting several WTW programmes. Mandatory activation programmes operated between 2005 and 2010 based on the Wisconsin model. In addition, non-mandatory activation programmes, which do not condition welfare allowances on acceptance of employment opportunities, have been operated by various tendered service deliverers. In this study, I examine one of these non-mandatory WTW programmes: Woman of Valor.

Welfare-to-work: Woman of Valor

The Woman of Valor programme comes under the auspices of the Ministry of Welfare and is de facto operated by NGOs. Offering preparatory workshops and brief training, the programme's aim is to deepen and improve the labour-market position of mothers from vulnerable groups by helping the unemployed find jobs and by helping the employed improve their existing work conditions (hours, salary, job security) and gain access to better job opportunities (Yaron-Ambia, Reference Yaron-Ambia2011). As part of their training, the mothers hear lectures on the importance of paid work, including the significance of pension savings, emphasising the connection between current employment and future pension. The non-mandatory nature of the programme means that welfare allowance is not revoked from participants who reject jobs offered to them (Herbst and Benjamin, Reference Herbst and Benjamin2016). However, like WTW programmes in other countries (Breitkreuz and Williamson, Reference Breitkreuz and Williamson2012; Korteweg, Reference Korteweg2006; Pulkingham et al., Reference Pulkingham, Fuller and Kershaw2010), Woman of Valor is part of a neoliberal project that places the responsibility for one's financial fate on the individual.

Initially developed for Jewish mothers who had immigrated from Ethiopia, the programme was expanded to include other groups of mothers with historically low labour-market participation, such as Jewish women originally from the former Soviet Union (from the Asian regions of Caucasus and Bukhara) and women residing in the periphery, the majority of whom are Mizrachi Jews and Israeli Palestinians.

The programme has evolved as a culturally sensitive activation project operating on a community level. Woman of Valor groups are formed in communities with high rates of families from a specific ethnic background. Almost all trainers share the same ethnic background as participants.

Trainers are recruited by a national trainer and by the Department of Social Welfare in the local authority. Job requirements include leadership and management abilities, good interpersonal skills, experience with teamwork, experience working with partners (e.g. employers, community centres, local authorities), the ability to adopt a culturally sensitive approach, and work experience in the field of employment.

Findings

I found two types of response to the WTW programme content and imperatives. The first was single mothers who believe they will have a better financial future thanks to the programme's encouragement of employment and thanks to the financial knowledge they have gained in the programme and through work experience. This group also includes trainers who believe in the programme's ability to guide mothers to better employment in the present and future financial security through their pensions. The second group is single mothers who were forced into working poverty but do not believe that employment betters their present or future; what they see is an exploitative reality which they choose to survive. The trainers who fall in this group also find themselves helpless in the face of such exploitation, which provides no financial security in the present or future.

Building the ‘moral’ mother who plans her future

The first group of single mothers believes that paid work is better than unemployment, even if the salary is very low. These mothers have clearly internalised the neoliberal message of working at any cost, as well as the WTW message that to work is equivalent to being moral. Miri, for instance, believes she has to be a self-sufficient mother who ensures herself an employment pension:

Miri explains that each citizen has to worry about their own future and no one should rely on the state's old-age allowance. Everybody needs to make pension contributions if they want to be able to subsist. This echoes Korteweg's (Reference Korteweg2003) claim that WTW programmes attempt to transform welfare-reliant women into self-sufficient individuals and is reflected in the words of one of the interviewed trainers:

The WTW trainer speaks of gradual progress in wages, but she knows there is a chance the mothers in the programme will remain among the working poor.

Similarly, the trainer below explains the importance of work for investment in a pension plan for the future:

This Palestinian trainer encourages the mothers in her group to work, but she ignores the fact that, where they all live, it is difficult to find paid work because factories near their villages have closed, reducing employment options, especially for Israeli-Palestinian mothers (Mizrahi-Simon, Reference Mizrahi-Simon2016; OECD, 2010). Expressing a neoliberal rationale and the imperative of self-sufficiency, she emphasises the responsibility of the individual and disregards the enormous structural barriers that stand in the way of these single mothers. Thus, her narrative is reminiscent of the coercive discourse that Korteweg (Reference Korteweg2003) found among WTW trainers.

Understanding pension policy as worthless

The second group of single mothers chooses to work even though such employment barely allows them to eke out an existence. They work from lack of choice, but they also believe the state must change its policy in order to transform the economic situation. These women do not embrace the narrative that work creates a better economic future.

Dikla describes her difficulty subsisting in the present, as she is divorced with young children and the state does not provide subsidised care solutions for them. She does not envision a future of hope because her current salary does not allow her to save enough for retirement:

Bina not only claims that her future pension will be insufficient, but she also feels that policymakers are deceiving citizens. She does not believe that the present pension policy guarantees her a safer economic future:

In this regard, a discourse of ambivalence emerges from the trainers. Orit speaks of the imperative to send participants to work in the present, but is very skeptical of the ability of these women to subsist in the future and to arrange for an adequate pension:

Throughout her interview, Orit spoke in a tone of despair, often expressing difficulty with the policy of sending Ethiopian mothers to work at any cost, usually in labour-intensive cleaning jobs at minimum wage, making it virtually impossible to make ends meet. Her discourse suggests she is unsure there is any point in the training she gives or the work she helps the mothers find.

Alona, another trainer, says that while the participants in her group are aware of the need to save for a pension and have insights about the structure of pension savings today, this will not necessarily lead them to a secure economic future. In fact, she learned from the mothers in her group that she herself does not have sufficient pension provisions:

Alona explains that it is not only mothers participating in the programme who have no hope for a good pension, but also the trainers themselves. She strongly voices opposition to existing economic policy, which undermines her own existence in both the present and the future. She thus refuses to embrace the neoliberal rationale or accept it as true; instead, she states the truth as she sees it. Indeed, all the trainers who reject the ‘custom-made’ employment solutions of neoliberalism insist that their non-conventional voices be heard and offer alternative thoughts.