It was a bad weekend for the knights of social welfare and poverty. For years, they claimed that the government's policy of "piggish capitalism" would cause an economic crisis, a halt to growth and a rise in unemployment. But, lo and behold, the opposite has occurred. Last week, we learned that the economy is continuing to grow at a rapid clip of 5.4 percent, while unemployment has fallen to its lowest point in 13 years, 6.3 percent.
It turns out that over the last five years, since Benjamin Netanyahu's economic program was launched in early 2003, 450,000 people (!) have joined the working world. These are people who now go to work every day, instead of depending on welfare, and that is the most important social reform of all.
If so, perhaps the time has come for those who call themselves "pro-social welfare" to begin changing their worldview and admit there is something to the free-market economy - to increasing competition, enacting reforms, privatizing, liberalizing imports, lowering taxes, reducing welfare allowances and reducing the government's weight in the economy.
What an innocent I am!
From the very first moment, the "pro-social welfare" types have opposed steps to free up the economy. They said the 2003 program would lead to a 15 percent unemployment rate, a recession and a deep crisis. And even when unemployment started falling (in 2004), they said it was just luck, only temporary, that it was only in high-tech and only in Tel Aviv, and that it was due to people who only found part-time jobs - so there was no reason to celebrate.
But as the data continued to come in, it turned out that growth, which did indeed begin in high tech, rapidly expanded to every sector of the economy. Today, it is also occurring in the north and south - not just in Tel Aviv. Moreover, salaries are rising, and the minimum wage has been increased.
Now, the time has also come to put an end to the fairy tale of "part-time work." Of the 2.76 million people currently working in Israel, only 123,000 (4.5 percent) would like to have a full-time job but have not yet found one, and are therefore forced to work part-time instead. And what about the other 95.5 percent, who have found as much employment as they want? The social welfare types never talk about them.
Therefore, they have now concocted a new story to dampen the joy: They say that lower unemployment is no achievement, because what matters is not the unemployment rate, but workers' wages, which are too low. So what they once viewed as the critical indicator (the unemployment rate) has suddenly become unimportant.
As for the low wages earned by some workers (those who have neither education nor a trade), it is worth asking the social welfare types how it is possible, with the wave of a magic wand, to turn these workers into highly paid techies or investment consultants.
One of the economy's chronic ills is the low labor force participation rate, caused by the low number of ultra-Orthodox men and Arab women who work. This rate currently stands at 56.6 percent, compared to an average of 65 percent labor force participation the in Western countries. In Scandinavia, the average workforce participation rate is 75 percent - a rate that Israel should aspire to match.
Even in this regard, there has been some improvement over the last five years. In 2003, workforce participation stood at 54.5 percent, and today, it is 56.6 percent. In other words, the drop in unemployment has occurred despite a rise in the number of people who are looking for work - and that is an excellent sign. Had workforce participation not increased, unemployment would be below 6.3 percent, and perhaps even below the record lows of the past.
None of this means that all our problems are behind us. The low pay earned by some workers is indeed a problem that must be dealt with. But there are no magic solutions. It is necessary to improve professional training, expand the Wisconsin welfare-to-work program and give young people a good education. There are no shortcuts.
Nor should we say that 6.3 percent unemployment constitutes "frictional unemployment," and, therefore, we should aim no lower. The Israeli economy is capable of better. It could reduce poverty and also reduce unemployment to 4.5 percent - the level in the United States and England.
However, this can only be achieved by continuing the policies of the last five years - namely, cutting the state budget, implementing reforms, lowering taxes, opening the economy to competition, privatizing, waging war on monopolies, reducing the number of foreign workers and encouraging women to work by subsidizing day care.
That is the true social-welfare policy - a policy that merges the free market with compassion. That is the road that leads to growth, economic stability, less poverty, lower unemployment and higher tax revenues. And that, in turn, will enable the state to take care of the truly needy, who are excluded from the working world - the elderly, the handicapped and the ill - by providing it with the money to do so. Only then will it be possible to reform the education system, raise the minimum wage and add hundreds of millions of shekels to the government-subsidized health care program.
That is what comes of the famous piggish capitalism.
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