The Bottom Line / The Bluff Goes on and on

In November 1993, the Schocken Group's newspaper Hadashot was shut down and its 340 employees were fired. But 50 were hired by Ha'aretz.

In November 1993, the Schocken Group's newspaper Hadashot was shut down and its 340 employees were fired. But 50 were hired by Ha'aretz. In early 1994, one of the newspaper's executives asked me, "What's all this talk about subsidizing employers? I hear the government is giving a thousand shekels for every new employee, and we just took on 50 new people."

"But those are people you fired from Hadashot," I pointed out.

"So what," he answered. "Nobody asks if we closed another plant - the point is the number of Ha'aretz workers grew." According to the law, the employer was eligible for a subsidy. And if a sloppy government is handing out money that way, why not take it?

In the early 1990s, the state was absorbing some 200,000 immigrants a year and emergency programs were necessary. Nowadays, there's no argument that the employer subsidies then were a complete failure. The economists of both the treasury and the National Insurance Institute agree that many defrauded the government, taking NIS 2.3 billion from the taxpayers and putting it in the pockets of the industrialists and employers, without any permanent employment being created by the subsidy.

NII research showed that workers for whom employers received subsidies didn't stay on the job and didn't become part of the company's permanent staff. It turns out that about half the reports about the number of employees were "faulty" - a polite way of saying "lies." To this day, the NII is still prosecuting some cases against employers who defrauded the agency.

According to an NII survey of employers, about half said they would have taken new employees even without the incentives because that was a period of tremendous growth - and who doesn't remember how the Israeli economy began to grow as a result of the peace agreement with the Palestinians signed in September 1993. That agreement ended the Arab boycott, opened up new markets for Israel in the Third World, and attracted billions of dollars for investment in the country. It was that growth that brought down the unemployment figures, not a ridiculous subsidy for employers.

So now, once again, many employers are waiting for the festivities to begin. They learned the lesson the first time around - how to defraud the government. If Silvan Shalom were at least to take the time to talk with Avigdor Yitzhaki, now director general at the Prime Minister's Office and in the `90s an accountant, he'd hear how Yitzhaki partied big-time with his clients - at the expense of the state budget - and everything was legal.

To understand the extent of the absurdity, it's important to remember that some 200,000 people a year change jobs, and there's a natural annual growth of some 45,000 in the number of people who work. So there are tremendous opportunities for the employers to demand the subsidy even though the growth process is totally natural and happens anyway. But Shalom wants something popular, something that will increase employment, even if only temporary, and even if it's at the expense of necessary infrastructure.

When his director general, Ohad Marani tells him that the subsidy plan is terrible, Shalom answers, "It doesn't matter what you think, I'm going for it."

Shalom has one loyal ally for his populist move: Dalia Itzik, the Industry Minister, who supports employer subsidies, the way she supports all subsidies, administrative protections, trade barriers, and maximum government involvement in the economy. But does Shalom really want to compete with Itzik?

Overflowing with ambition to reduce the number of unemployed, even if it's artificial and for the short term, he canceled the one limitation that was in the law, which said that employers would be eligible for the subsidy if there's a minimum 3 percent increase in the number of workers at the plant. Without that limit, any pizzeria owner who increases his worker roster from 5 to 6 - for example, because of longer work hours - can get NIS 1,100 a month for each extra worker.

What's suspicious in the entire affair is that a year ago Oded Tyrah, president of the Manufacturers' Association, proposed an identical program to Shalom's. Tyrah called his plan "raising the social flag," which just goes to show that he has a very dry sense of humor, because the results of the plan will be that the middle class, already groaning under the strain of the heavy tax burden, will have to pay a few more billion shekels to the industrialists, so they'll be able to take home salaries of NIS 300,000 a month, instead of NIS 200,000 and thereby have enough strength to raise the "social flag."