The 'Good People' Looking Out for Israel's Poor

The War on Poverty Committee's recommendations are not serious and could increase unemployment and poverty.

Olivier Fitoussi

With MK Haim Katz (Likud), you can never tell whether he's just being populistic or whether he's completely ignorant about his chosen field. On Tuesday morning, he gave a radio interview about a recent report of the War on Poverty Committee, viciously attacking the government for not lifting a finger to reduce poverty in Israel; as if he were not a part of the government; as if he were not the chairman of the Knesset Labor, Welfare and Health Committee, which deals specifically with this issue.

They love him on radio. He speaks freely, without brakes, and presents himself as a good man who looks out for the disadvantaged. The truth is that he looks out for the most advantaged, for the biggest trade unions in Israel: Israel Aerospace Industries, Israel Military Industries, Israel Railways, Israel Electric Corporation and the Israel Port Authority. He makes sure to head off any reform favoring Israeli consumers over these rapacious monopolies, and even acts to put billions in the pockets of their employees on the bent backs of the rest of the country’s workers, who are forced to pay the bill in the form of high taxes.

After thoroughly pummeling the government, Katz announced to the interviewer in an authoritative tone: “50 percent of workers don’t even make minimum wage.” The interviewer, who was stunned by the number, answered, “Unbelievable.” His shock is understandable. The statistic is patently false. It's a baseless claim by someone who is supposed to know the facts.

In 2012, the median monthly salary in Israel was 6,541 shekels ($1,908), at a time when the minimum wage was 4,100 shekels a month. This is enough to know who we’re dealing with. It should also be noted that only a small portion of full-time workers earn less than minimum wage. In the public sector, which includes around 900,000 workers, no full-time employees earn less than minimum wage.

The War on Poverty Committee report showed us another group of good people: the 50 committee members who recommended dozens of measures, of every imaginable kind, to fight poverty. The annual cost of these measures comes to 7.5 billion shekels, the source of which the panel did not bother to mention. Perhaps from a hike in income tax on the middle class? Corporate taxes? Or perhaps by raising value-added tax?

Some of the committee’s recommendations make sense and are doable, particularly those having to do with encouraging employment. But the committee also recommended exactly the opposite: to increase welfare for people who don’t work, which is a surefire recipe for encouraging unemployment.

We’ve been here before, in the early aughts, when income-support benefits as well as child allowances were at their peak. The result was a negative incentive to work, and the entry of tens of thousands of families into the “poverty trap.” After all, when you receive a big allowance and additional benefits, such as public housing, a discount on municipal property taxes and free public transportation, on condition you do not work, you will prefer not to work and to remain close to the government trough, remaining poor and dependent.

And in fact, in 2013, unemployment reached a peak of 10.7%, and the labor force participation rate was just 54.5%. Since then, a revolution has taken place. Unemployment dropped to a low of 5.9% (in May of this year) and the workforce participation rate rose sharply, to 64.1%. The rate for the core labor force (ages 25-64) reached a peak of 80%, the highest of among Organisation for Economic Co-operation and Development member states.

These achievements are the obvious result of the policy introduced by then-Finance Minister Benjamin Netanyahu in 2003, which is still in effect: a reduction in income support and child benefits. This is exactly what the committee wants to erase. It wants to return to the dark days of high unemployment and low labor force participation — in other words, to bring back unemployment and poverty.

And they still think of themselves as good people.

Social Affairs Minister Haim Katz.
Emil Salman