How To Fight Poverty in Israel Without Costing Israelis a Shekel

By Momi Dahan

Published June 23, 2006, issue of June 23, 2006.
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While a majority of Israelis believe their government is not doing enough to fight poverty, 61% are not willing to pay higher taxes for this aim. It seems as if Israelis want to have their cake and eat it too — but this time, they are right.

Many of the necessary measures for reducing Israeli poverty do not require a significant tax increase, as I made clear in a presentation to the country’s leaders this week at the Israel Democracy Institute’s annual economic conference, commonly known as the Caesarea Forum. The recommendations offered at the forum sum up the extensive work of a team of academics and public figures with whom I conducted months of research on the reduction of poverty.

The two poorest sectors of the Israeli population are the Arab and the Haredi communities. While in both sectors lifestyle choice is a major cause of poverty — both sectors are characterized by very high birth rates and low workforce participation for one gender, men in the case of Haredim and women in the case of Arabs — government policy has been as important a cause and thus there is much the government can do to help.

The recommendations we presented at the Caesarea Forum include a call for an end to discrimination against Arabs in government allocations. For years, Arabs have not received their fair share in the education budget, in the building of infrastructure and in the creation of new workplaces. Changing this will go a long way toward lifting the Arab population out of poverty.

Meanwhile, many in the Haredi population have been kept out of the workforce by a law that makes it necessary for Haredi men not serving in the army to avoid work from the ages of 18 until 27. In order to avoid penalizing work, we called for this law to be limited to ages 18 to 25.

Another recommendation we made was to increase the enforcement of Israel’s labor laws. Many Israeli employers are in gross violation of labor laws. For example, studies claim that 50-70% of Israeli workers do not receive the wages due to them by law; a recent survey conducted by the Bank of Israel showed that more than 50% of Israeli employers owed their employees back wages.

This situation is mainly due to the sparse enforcement of labor laws. Israel currently has only 11 two-person teams of labor law inspectors assigned to protect millions of workers, and many of these have been co-opted to detain and arrest foreign workers. Increasing the enforcement of labor laws will greatly help the 40% of Israelis who live under the poverty line even though they are employed.

Meanwhile, active enforcement of the labor laws will lower the amount of foreign workers, who are often hired because they are expected to accept illegally low wages and thus depress the labor market. Our recommendations also included a call to limit the amount of foreign workers to 3% of the labor force.

A final recommendation was to increase investment in pre-school education. This recommendation seems already to have been accepted by the government; the reform plan announced this week by Education Minister Yuli Tamir, and accepted in principle by Prime Minister Ehud Olmert, focuses on boosting pre-school education by providing a long school day in kindergartens and providing free education to all from age 3.

A policy of improving pre-school education can be expected to work wonders. Partial implementation in 1999 of a law authorizing free and mandatory education to children aged 3 and 4 has already helped Arab women increase their participation in the workforce and boost the development of their children. Many studies have shown the importance of early childhood development to adult character and ability. An improvement in pre-school education will thus have far-reaching effects for years to come.

The necessary money for our recommendations will not be hard to find. The current government has announced that it plans to significantly decrease the defense budget. Along with the closing of loopholes in the tax code, this will provide more than enough for the implementation of our recommendations.

I assume that Olmert, Finance Minister Abraham Hirschson and the many other leading Israeli politicians who attended the Caesarea Forum would, just like the majority of Israelis, prefer to reduce poverty without increasing taxes. If so, I encourage them to seriously consider our recommendations.

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