The Bottom Line / Stipends Are Not the Answer

In 1990, the National Insurance Institute paid NIS 20.8 billion in social stipends to Israelis. By 2001, that amount had more than doubled to NIS 45.7 billion. And what happened to the incidence of poverty? It increased. And what happened to the wage gap between rich and poor? That too, rose. In other words, charges by NII Director General Yigal Ben Shalom that government cuts in stipends explain the rise do not jive with historical data. Rather, increasing stipends perpetuates poverty, passing it on from generation to generation.

The NII is to publish today its 2003 poverty report revealing that the number of poor people last year grew by 100,000 compared to 2002 to 1.4 million citizens, including 660,000 under the age of 18.

Everyone blames the current government, particularly Finance Minister Benjamin Netanyahu. Ben Shalom says the blame is inherent in the "overarching cutbacks implemented by the government." The Histadrut Labor Federation says "the policies of the finance minister are destroying society." MK Haim Oron says the report "is a failing grade for the finance minister's policy." Shas says the report is a "ticking social timebomb."

However, is the present government really guilty of increasing poverty? In truth, the process dates back more than a generation. Until the 1967 Six Day War, there was no such thing as minimum income stipends or a minimum wage law here. Most citizens went to work every day, relying on themselves, not the government. Israel was known at the time for its low level of unemployment, rapid growth, and minimal wage gaps betwen rich and poor.

That is, until the beginning of the 1970s, when the government changed its policy in response to pressure from the "social" movements. Instead of encouraging eudcation and work, successive governments began developing and enlarging stipends, which grew over 30 years and transformed a portion of the population into dependents lingering at the dinner table of the government rather than proud, hard-working people. Silvan Shalom and Netanyahu tried to turn back the hands of time. They reduced stipends, cut back the number of foreign workers, and lowered taxes on labor. When both partners in a family work, there's no poverty. Period.

Reversing stipend dependency is extremely difficult, because in the short term it causes an increase in poverty indicators. Only when the economy moves into a growth phase some time down the road will unemployment decline, wages rise, and poverty shrink.

Netanyahu deserves criticism in two areas. Labor market reform is being carried out with an odd feebleness at an excruciatingly slow pace. He should increase funding for the Wisconsin Program, which is being handled lazily, and lead the way to negative income tax that would impel people to join the work force. Education and continuing education should be improved with more investment in professional training.

The second criticism concerns the political problem, whose solution is a pre-condition for growth. On this matter, MK Mohammed Barakeh says: "As long as the policy of occupation and war continues, the scope of poverty will only continue to expand."