Israel mistakenly pays unemployment benefits to hundreds of thousands with jobs

The government’s National Insurance Institute paid out jobless benefits to some 382,000 people who did not qualify for them because the NII didn’t have access to up-to-date data on their employment status. Moreover, faulty data from the National Employment Service which the NII relied on caused policy makers to believe the jobless rate was higher than it was, and make policies to address the problem.

On average, the 382,000 people were each paid 2,400 shekels (about $740) for a total, after adjustments, of 923 million shekels. The mistake is so serious that the state comptroller is looking into the issue of labor-market data, TheMarker has learned.

The NII has sent out notices to some of those who received benefits incorrectly, but, out of sensitivity to the financial distress many are feeling during the pandemic, it has so far refrained from taking unilateral steps, such as deducting amounts from other benefits.

The unemployment-benefit error is just one instance of how the coronavirus crisis has exposed severe shortcomings in government management. Most Israelis encounter these failures when they have to file and refile forms and applications to multiple government bodies, but many of the failures are inside the government itself: the lack of coordination, waste and duplication.

By law, the NII pays unemployment benefits based on data provided by the National Employment Service. Until the onset of the pandemic, unemployed people were required to report to an Employment Service office once a month to confirm they were still jobless. In addition, they had to apply to the NII to receive benefits.

Coronavirus social-distancing rules, as well as a surge in the number of people getting jobless benefits, meant the rules were changed so that unemployed people could report to the employment service online. Early in the pandemic, the service didn’t take any initiative to keep up contact with people registered as unemployed but assumed they would notify it online when they had found work. In the meantime, it continued to send the NII their names for payment.

Both sides blame the other for the failure. The Finance Ministry, which traditionally finds itself on opposing ends of budget issues with the NII, this time is taking the NII’s side. “The employment service provided incorrect data,” said one treasury official. Another added, “It’s a catastrophe. The data had no connection to reality.”

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For example, in August, the employment service reported that there were almost 900,000 people unemployed or on unpaid leave, even though business activity in Israel had almost returned to normal. The faulty data not only caused the NII to pay out benefits but caused policymakers to extend jobless benefits to June 2021 out of fear of a labor market crisis.

The NII only discovered the data problem when officials began to realize that the names and numbers the employment service was providing didn’t square with filings it was getting from employers making payments to the NII. As a result, the NII was able to stop paying an estimated 5 billion shekels of benefits.