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"There are some people," Finance Minister Silvan Shalom said this week, "who speak about the need for the application of a tight fiscal policy, yet sit in their offices without ever having met an elderly person, a handicapped individual, a single-parent family or a homeless person."

A common argument raised in connection with this issue is that the gaps between the rich and poor in Israel are among the widest in the world. This claim is true, but only to a certain extent. True, if only the distribution of gross revenues in Israel were studied, the findings would definitely indicate that the divides between the rich and poor are indeed among the widest in the Western world. However, if the examination focused only on the distribution of net revenues (that is, after the deduction of taxes, paid primarily by the rich, and after the inclusion of the National Insurance Institute payments, transferred primarily to the poor), it would emerge that Israel is at the median point in relation to the countries of Europe. Although the situation in Israel might not be very egalitarian, it is certainly not malicious.

Does this mean that Israel does not have a problem or that the government has, in effect, solved the problem of social inequality here?

Of course not. The gross revenue gaps are widening from one year to the next and are generating profound frustration and dangerous social friction between those who earn a minimum salary (NIS 3,300 a month) and those who, like the bankers for example, earn hundreds of thousands of shekels per month. This is an impossible gap that must be corrected - through the reduction of salaries in the very high income brackets and an increase in salaries for those who are at the very bottom of the salary ladder.

The second distortion in Israeli society is created when the government tries to help the "elderly person... handicapped individual... single-parent family or... homeless person." The government's assistance is provided by means of the imposition of very heavy taxes on the rich and the middle class. This onerous tax burden discourages people from working or investing; it hurts economic growth; and even encourages people to emigrate.

The government transfers the revenue from these taxes to those who are in the lowest income brackets. Each year, it transfers NIS 40 billion by means of NII allowances and thus enables the weaker members of Israeli society to hold their head above water. However, this is a bad solution that only aggravates social problems.

The budget for social service support and allowances has dramatically increased in Israel over the past two decades, yet the social inequalities in net terms have not shrunk; poverty has not been reduced; and social frustrations are only increasing. In the early 1980s, for example, 10,000 Israeli families received a minimum income guarantee allowance. Today, that allowance is granted to 140,000 families and this figure is expected to top 150,000 next year. There are another 110,000 families whose incomes comprise unemployment insurance payments. Thus, there are a total of 250,000 families in Israel whose members do not work.

Here is another important statistic: The rate of participation in the work force in Israel is 54.3 percent, much lower than the standard rate in Europe (64 percent). This is the fundamental problem of Israeli society - namely, the fact that many Israelis get by without working for a living. This is also where the solution is to be found: People must be encouraged to work; Israel's citizens should not be given free fish. Instead, they should be given free fishing rods and free lessons on how to catch fish.

Israel's two most poverty-stricken populations, in which the percentage of working individuals is the lowest, are the ultra-Orthodox Jews and the Arabs. Thus, the solution must contain the following components:

l The provision of suitable schooling for ultra-Orthodox Jews and Arabs, so that they can earn a living in the modern world.

l A sharp decrease in the number of ultra-Orthodox Jewish males studying in a yeshiva or a kollel (a yeshiva for married men), so that only very gifted individuals will pursue Torah studies at public expense, while the rest will work for a living.

l Measures to prevent any increase in the number of foreign workers, who keep unskilled laborers at the lowest rungs of the salary ladder out of the work force.

l The provision of vocational training for unemployed persons and the recipients of guaranteed minimum income allowances, in accordance with the format of the Wisconsin State Plan for Administration of the Block Grant to States for Temporary Assistance for Needy Families (TANF), and with the delivery of assistance throughout the entire training process.

l The reduction of the allowances and the many social benefits that enable Israelis to get by without having to work for a living. The funds that would thus be made available should be used to encourage persons who have decided to work in the following manner: These individuals would receive a salary from their employer as well as an allowance from the state.

Israel must create a situation in which all those who work for a living will receive a decent salary and be in a better position than those whose income is provided by the public. This kind of situation makes good sense from both the economic and social standpoints.