Yes, a Quick Fix for Poverty

When economist Yaakov Sheinin wants to examine an issue, he knows how to paint it in such bold colors that every media outlet rushes to make a headline out of it.

When economist Yaakov Sheinin wants to examine an issue, he knows how to paint it in such bold colors that every media outlet rushes to make a headline out of it. That was what happened at the Herzliya Conference this week when Sheinin presented a plan to reduce poverty.

According to the plan, half the poverty in Israel (!) can be eliminated within five years. Quick and smooth. This means that 800,000 people (!) can be brought above the poverty line. Truly Herculean. Instead of Israel's being in humiliating last place among the 30 developed countries in the world (the Organization for Economic Cooperation and Development, or OECD, countries), with a 20.6 percent poverty rate, it will rise to a good place in the middle, with only a 10 percent poverty rate.

But that's nothing, because Sheinin is also suggesting a quick solution that could be implemented today, if NIS 1.4 billion is invested annually in individual assistance to poor adults older than 55. This will decrease poverty immediately, to only 14 percent. Who wouldn't grab such an opportunity with both hands?

The experienced reader will expect a devastating criticism of the program at this point, as per the custom of this writer. But no. This is a comprehensive and interesting plan. It is not a magic wand that will eliminate the poverty problem (because it ignores several fundamental difficulties), but it raises new angles, and therein lies its importance.

Part of the new data the program uses relates to the poverty rate in Israel. It has become clear that because of the intentionally strict poverty evaluation methods used by the National Insurance Institute, the reported poverty rate in Israel is exaggerated. Sheinin examined the statistics and discovered that if one takes into account straight income such as home ownership - among poor Arabs, an astounding 84 percent own their own homes - and if the OECD states' evaluation method is adopted regarding the "standard" number of people per family, then the poverty rate falls to 16.5 percent, which is a lot better than 20.6 percent.

In explaining his program, Sheinin noted that poverty in Israel is a result of its being an immigrant state that absorbs the poor and the elderly, and is not a result of government policy. Indeed, none of this is the result of organized government policy; it is the result of local neglect and capitulation to various interest groups. Nonetheless, there are ultimately decisions made that create a policy in practice, and it is worth examining that policy from a historic perspective.

The tale must begin with the watershed year of the Israeli economy: 1973. Until then, the economy was growing quite rapidly, at 5 percent to 6 percent per year per person. The dominant worldview was A.D. Gordon's "religion of labor" philosophy. Everyone worked. Receiving unemployment benefits was shameful. The gaps between the poor and the rich were small. And then the Yom Kippur War broke out, confidence in the leadership dissipated, and the state changed, including in the socioeconomic realm.

In 1975 the Ben-Shahar reforms were implemented, bringing child allotments into the picture. Until then, citizens were required to work in order to receive tax credits according to the number of children they had, which enabled them to pay less income tax. But since Ben-Shahar, the child allotments have been paid regardless of the parents' employment, and so there is little incentive to work.

The ultra-Orthodox parties realized immediately the treasure latent in this concept and pressed for an increase in the allotments - starting from the fourth and fifth child, of course. And so, in 2002, the situation was that the allotment for the first child was NIS 171 a month, while the allotment for the fifth child and subsequent children was NIS 855, which encouraged large families and increased poverty.

In 1982, the Knesset passed the Income Assurance Law. It was said then that it would affect 10,000 households, which people said isn't too bad. But the number grew from year to year, until it reached 155,000 households in 2003, because the government made sure to increase the payments, the discounts, the grants and the benefits for those who are not working, while imposing more and more taxes on those who do work - additional encouragement for not working.

The third blow came in the 1990s, when the government acted with criminal irresponsibility to open Israel's doors to foreign workers. In 1999 there were a record 300,000 foreign workers here, essentially moving 300,000 Israelis, both Jews and Arabs, from the workforce to the welfare rolls.

To all this, one can add the neglect of education in the periphery and the unwillingness to force the ultra-Orthodox to teach core subjects like math and English, since without education and knowledge, there is no chance of finding profitable work. And thus poverty increased once more.

Benjamin Netanyahu succeeded in stopping this dangerous process of moving from work to welfare in 2003. Now the second stage has arrived, in which the revolution must go deeper. Every plan for fighting poverty must deal primarily with encouraging people to work. The data show that when both members of a couple work, poverty almost disappears, and self-respect returns. A.D. Gordon understood that 100 years ago.