The economic potential of the third sector

The employment market in Israel is diverse and divided into different sectors. Naturally, part of the population is suitable for work in very profitable sectors such as high-tech or the capital market. Alongside these, there are sectors that do not constitute the same economic locomotive, but they still serve as a source of livelihood for hundreds of thousands of people, the most prominent of which in this category is the third sector.

Apart from the important social contribution of the third sector, which is invaluable, it is a sector that can serve as an engine of growth for tens of thousands of jobs, something that the Israeli economy needs these days like breathing air. To understand the magnitude of the potential inherent in the third sector, it is important to be familiar with the data. As part of my work as Head of Health for Civilian Leadership (the umbrella organization of the third sector), I was exposed to the immense potential that was never realized.

With about one million unemployed and a deficit of NIS 160 billion, it should be understood that the livelihood crisis will be solved only through creative thinking and proper analysis of the labor market. There is no reason in the world that a new business that has not yet earned a shekel can easily get credit, but an association that has been operating for 20 years and is operating exemplary does not even have such an option.

Edith Silman (Photo: Baruch Greenberg)

According to data from the Ministry of Justice (Association of Associations for 2018), out of all employees in the third sector (673,633 employees), 48% are employed in education and research associations, 21% in cultural, sports and leisure associations and 12% in welfare services associations.

The total income of all non-profit organizations in Israel is NIS 93.4 billion, of which NIS 31.7 billion in support and allowances from the state (34%); Sale of services to government agencies – NIS 6.1 billion (7%); Sale of services to non-governmental entities – NIS 34.9 billion (37%); Donations from Israel in the amount of NIS 12.3 billion (13%); And donations from abroad – NIS 8.4 billion (9%). The third sector in Israel is growing consistently and constitutes about 5.5% of GDP (about 670,000 employees). For comparison, the high-tech industry employs about 300,000 workers, which constitutes about 8.7% of GDP. Each year, an average of 1,367 new associations and 96 new businesses are registered. According to these data, creating a growth of 15% in the third sector will create about 105,000 new jobs.

At present, the volume of financing in the third sector is very low to non-existent. The credit market for non-profit organizations is small and limited and almost insignificant in relation to the large turnover. Thus, the solution is to create a financing envelope for the third sector, precisely tailored to the work mix and workers.

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The measures that will change the status of non-profit organizations in Israel will expand the field and create more jobs in the third sector and in the corona-hit Israeli economy:

1. Management of the Guidestar website – by the Ministry of Justice with a vision of business development, increasing competition for associations at the level of suppliers and professional manpower.
2. Establishment of a fund that will provide state-guaranteed loans for the establishment of active and new associations and for the development of resources.
3. Establishment of a government agency for nonprofits, pioneers and dedications for professional assistance and support for business development.
4. Arranging collateral for financing. Through the agreement, the associations will be able to provide collateral and receive financing for development, the possibility of mortgaging land in an allocation owned by a local authority to financing bodies for financing construction for associations.
5. Establishment of a dedicated fund from the capital market, which will focus on long-term loans for the development of associations, the purchase and construction of buildings and more.
6. Opening the capital market for investment in non-profit organizations – a move that will enable investment in non-profit organizations through pension funds and savings.

The author is a former MK and a public and social activist in the field of health