New research at the Bank of Israel: The effect of the Reparations Agreement with Germany on the schooling and wages of Holocaust survivors’ children
· The research found that the compensation led to an increase of 1.4 to 8.2 percentage points in the probability of acquiring tertiary education, depending on the number of household recipients and the amount of compensation received.
· The personal compensation to Holocaust survivors can explain only a small part of the general gaps in schooling in Israel according to parents’ origin, particularly when considering the low share of children of Holocaust survivors among all those of America or European origin.
Some Holocaust survivors have received compensation since the 1950s of various amounts from Germany (“rents”) or from Israel, while some survivors began receiving compensation only later, particularly after the establishment of the “Article 2 Fund” in the middle of the 1990s, the legislation of the “Holocaust Survivors’ Benefits Law” in 2007, and the Dorner Committee report.
A research paper written by Dr. Shay Tsur of the Bank of Israel Research Department, using anonymized data of the Central Bureau of Statistics and the Holocaust Survivors’ Rights Authority, focuses on one of the most important and curious aspects of compensation to Holocaust survivors—the ramifications of the reparations on the schooling of survivors’ children. Comparing households that received compensation, but with the abovementioned different timing, the research found that reparations paid to parents beginning from the 1950s and 1960s, meaning when their children were still young enough, led to an increase in schooling of the second generation, particularly for women. This is compared to children who were already adults when their parents began to receive the reparations, mainly from the 1990s and onward.
In Israel there are 3 main groups of Holocaust survivors who receive compensation. The first group consists of survivors who immigrated to Israel from Germany or belonged to the “Germanic language and culture group” (according to the German law) and who were entitled, for the most part since 1956, to a monthly payment equal to about 30 percent of the average wage over the years. This group also received a large one-time payment at the beginning of the payment as a retroactive compensation. As of 1972 (2 years after Germany closed the option of submitting a claim), 100,000 survivors received regular compensation from Germany.
The second group consists of survivors who immigrated to Israel prior to October 1953 from countries other than Germany and did not manage or did not wish to prove that they belonged to the “Germanic language and culture group”. Survivors in this group were, starting from 1957, entitled to a lower monthly payment from Israel, equal to about 10 percent of the average wage in the economy. Survivors in those first 2 groups made up, as of the beginning of the 1970s, about 5 percent of Israel’s population.
The third group includes tens of thousands of survivors who were not entitled to any compensation until 1996. These individuals were not of German origin, nor did they belong to the “Germanic language and culture group”. They either arrived in Israel after October 1953 or were not able to overcome the hurdles of the Israeli or German bureaucracies during the 1950s and 1960s.
The research found a positive effect of the compensation on the human capital of the children, and it is significantly more notable among girls. Calculations based on the estimation obtained from a multivariable regression (a statistical method that neutralizes differences deriving from other factors) indicate that relatively low compensation to both parents (which was received from Israel since the 1950s) increased the number of years of study for girls by 0.7 school years, and relatively high compensation (received from Germany since the 1950s) to both parents, by 0.42 years. The research also found that the compensation led to an increase of 1.4 to 8.2 percentage points in the probability of acquiring post-secondary or higher schooling, and to an increase of up to 13.5 percent in their wage, depending on the number of household recipients and the amount of compensation received.
Gaps in schooling and income between groups in Israel derive from a range of reasons, most of which are not related to Tsur’s research, and it is important to examine the results of his research compared to general gaps: based on research carried out in 2015 by Nurit Dovrin from the Central Bureau of Statistics, for Israelis who were 25–44 years old in 2015, with both parents born in America or in Europe, there is a 20 percentage point larger probability of acquiring post-secondary schooling than Israelis whose parents were born in Asia or Africa, and the gaps among older people are even wider. Even though in Tsur’s research, compensation to Holocaust survivors led to an increase of 1.4 to 8.2 percentage points in the probability of women born to Holocaust survivors to acquire higher education, it explains only a small part of the general gaps in schooling in Israel according to parents’ origin, particularly when considering the low share of children of Holocaust survivors among all those of America or European origin.
The research examines a range of other sources that could have led to gaps in schooling that were found among households that received compensation at various timings, and rules out the possibility that they bias the results. In order to carry out a comparison with reliable results, the research only compares children for whom both parents are Holocaust survivors, also conducts separate tests by countries of origin, and discusses extensively the system of submitting requests and the refusal of some survivors to receive reparations from Germany. The research also discusses a possible reason that the results obtained were significant primarily among women: for men there were more immediate employment opportunities. These reduced their incentive to continue to study and to pass on employment and at times on support of the family.