Israel's Finance Minister Should Try Unpaid Leave

Nehemia Shtrasler
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Finance Minister Yisrael Katz, who compared himself to the ancient ruler King Herod.
Finance Minister Yisrael Katz, who compared himself to the ancient ruler King Herod.Credit: Ohad Zwigenberg
Nehemia Shtrasler

The economy is reopening, kids are going back to school. Everything is moving, everything is changing. But Herod remains Herod. He’s not budging.

He knows everything better than everyone. He’ll continue refusing to listen to any of the professionals in his office and continue handing out billions to the general public without no accounting and no conscience.

According to both the “economic safety net” law approved by the Knesset in July 2020 and economic common sense, Finance Minister Yisrael Katz should already be cutting the unemployment benefits paid to people on unpaid leave. The unemployment rate fell to 9.8 percent in March, which is below the 10 percent cutoff stipulated in the law.

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But Herod announced that he’ll continue to pay full unemployment benefits through the end of June to all of the hundreds of thousands of people on unpaid leave. To do so, he’ll have to change the law, but there’s no Knesset majority for this.

Herod doesn’t care that many factory and restaurant owners are crying out bitterly that they can’t find workers as long as he’s paying unlimited unemployment benefits. They’re complaining that they’ve been forced to run their businesses at half speed. Many haven’t even reopened their businesses due to the lack of manpower.

The problem stems from the unpaid leave solution. It was born a year ago as a short-term solution to a coronavirus lockdown that was imposed without warning, but has remained with us to this day.

When the bill was being debated in the Knesset, an argument broke out between the Finance Ministry’s budget department and Herod. The department wanted to limit unpaid leave, to avoid creating an incentive for people to shun work. But Herod, of the Likud party, objected. He knew the next election would take place in early 2021, and he wanted to hand out goodies to people so they would thank him at the polls.

After a lengthy debate, minimal limits were finally set in the law: The moment the unemployment rate fell to 10 percent, unpaid leave benefits would be cut to 75 percent of their original level, and when unemployment fell to 7.5 percent, the benefits would stop entirely.

But now, even that isn’t being implemented. Unemployment has fallen below 10 percent, but Herod refuses to cut unpaid leave benefits. This does serious damage to the economy, output and employment.

Katz is thereby contributing to entrenching a culture of unemployment, primarily among low earners. After all, every month that passes without working makes it harder to return to normalcy. He is thereby also encouraging under-the-table work, which harms the state’s tax revenues and the workers themselves.

But Herod has dug in his heels. Not only is he unwilling to touch unpaid leave, but he’s promising additional gifts – incentives for those who nevertheless deign to go back to work and grants for employers who hire them. Whipped cream and a cherry on top.

He always proposes policy tools that involve giving. They’re always the type that transfer money from the state’s empty coffers to the public. And they’re always implemented without any criteria of effectiveness or any cost-benefit analysis.

Therefore, we urgently need a new finance minister, one who will explain that the moment the economy reopens, it’s necessary to stop unpaid leave benefits (except for workers in the tourism industry, which remains closed). And anyone who puts in for unemployment benefits will have to meet the usual criteria of showing up periodically at the government’s Employment Service, accepting any job offered and agreeing to undergo professional retraining.

The moment the new finance minister ends unpaid leave, unemployment will fall and thousands of businesses looking for workers will resume operations. Nevertheless, the state will have to continue paying unemployment benefits to people who truly can’t find work – primarily, people over 50.

There’s no chance that Herod will mend his ways. If a new government hasn’t been formed by June and it’s clear that we’re heading into a fifth election, not only will he not end unpaid leave, but he’ll continue paying unemployment benefits to everyone even in July, August and September, until after the election. And the damage will be enormous. The economy and employment don’t interest him. Only politics does.

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