Buying power with child allowances

Since cuts in child allowances were first instituted in 2002, Israel has saved no less than NIS 19 million, based on 2007 costs. This figure stems from a Haaretz inquiry based on National Insurance Institute data. The cuts have thus led to average savings of more than NIS 3 billion a year, compared with the days of the so-called Halpert law in 2001.

The cuts were due to a series of distortions introduced over the years into the structure of child allowances. The allowance for the fifth child and up reached NIS 856 in 2001, five times the sum paid for the first and second children.

This resulted in discrimination against secular and traditional families. According to NII data, large families are relatively rare even in poverty-stricken, traditional communities. These families are common among the ultra-Orthodox and Bedouin. The structure of the allowances enabled ultra-Orthodox yeshiva students to support themselves, albeit with difficulty, by their studies and encouraged them to stay outside the labor market. And so the child allowances became a conduit channeling funds from the taxpayers to the non-taxpayers.

Today the allowance structure is more egalitarian. The allowance for the fourth child and up is NIS 337, about double (instead of five times) the allowance for the first child. If in 2001 a family with eight children received an allowance of NIS 4,800, today it gets between NIS 1,400 and NIS 2,200. The process of equalizing allowances, however, has not been completed because the ultra-Orthodox party Shas entered the coalition in 2006.

But the process has not halted completely. All children born since June 2003 receive an egalitarian allowance of NIS 152 shekels, regardless of their birth order in the family. As a result, the allowances are being equalized with each new child. Today only 7.5 percent of children receive a doubled, discriminatory allowance of NIS 337.

The positive consequences of the allowance revolution cannot be overemphasized. In the ultra-Orthodox community, there are significant beginnings of professional training and the pursuit of paid employment outside the home. Moreover, once, those who had seven or eight children knew that the taxpayer would support them; those who do so today know that they will have to bear the financial burden themselves.

Shas, however, now aims to undo what has already been done. Chairman Eli Yishai has made his party's entry into any coalition conditional on a dramatic increase of allowances. According to Haaretz calculations, the price tag attached to this demand is NIS 2.3 billion. But even if Yishai "settles" for NIS 1 billion or even NIS 500 million, this will once again increase the discrimination inherent in the allowances. In political terms, Shas is essentially saying: Either give our voters money before the elections, or we will campaign on a platform of "handing money out to the voters."

Shas' condition is especially significant now that Kadima is preparing for its primary, when it is clear that the new party head will find it hard, if not impossible, to form a government without Shas. The Kadima candidates must pledge openly not to buy their rule with the child-allowance funds. If they are not willing to make such a public commitment, their voters should know it ahead of time.

The heads of other potential coalition partners, especially Labor, should make clear in advance that they will not participate in a coalition that brings back the older allowances. The subject is too important for Israeli society to become, once again, the political version of a prostitute's fee.