OECD finds Israel has biggest poverty rate of developed world. Economists blame neo liberal reforms.
This week, the OECD will decide whether to include Israel as its 31st member state. The OECD is an organization of the developed nations of the world and in January it conducted its first economic review of Israel. The OECD's secretary general Angel Guria congratulated Israeli Prime Minster while presenting the review for his dedication to neo liberal reforms and noted that Israel would be welcome in the organization.
The review, which according to internal OECD documents used misleading statistics, found that if it were to be accepted, Israel would be the country with the biggest poverty rate in the organization. The Real News' Lia Tarachansky spoke to Israeli economists Shir Hever and Shlomo Swirski to understand how Israel came to develop such a poverty rate.
Shlomo Swirski is an economist and the founder of the Adva Center, a non-partisan policy analysis institute whose mandate is to examine Israeli society from the perspective of equality and social justice. He is also the author of Politics and Education in Israel and Politics and Education in Israel: Comparisons with the United States.
Shir Hever is an economist at the Alternative Information Center, a joint Palestinian-Israeli organization based in Jerusalem and Beit-Sahour, Palestine. Researching the economic aspect of the Israeli occupation of the Palestinian territories, some of his research topics include international aid to the Palestinians and Israel, the effects of the Israeli occupation of the Palestinian territories on the Israeli economy, and the boycott, divestment and sanctions campaigns against Israel. He is a frequent speaker on the topic of the economy of the Israeli occupation.
JERUSALEM ~ On Friday mornings, the line outside Bracha Kappach's modest home in the quiet Jerusalem neighborhood of Nachlaot stretches far down the block. People gather shortly after sunrise: unemployed men, elderly women without pensions, single mothers with many mouths to feed.
Kappach, a diminutive Yemenite woman in her 80s who has been helping poor Jerusalemites for more than 40 years and was awarded the Israel Prize for her efforts, stands in the entryway. She offers a warm smile as she presses bills into an outstretched hand; offers a frozen chicken and freshly baked challah to a raggedy-looking man; and a bag of used clothes to the older woman who struggles up the steps.
In recent months, Kappach says, it has become harder to stretch donated funds to help the estimated 1,400 families that rely on her for food and clothing assistance.
"Jerusalem is one of the hardest places in the country [for the poor]," Kappach says. "There are so many here that I just can't help. The state of poverty has gotten worse and worse. It's a very grave situation."
The reality of poverty in Israel is relatively new to the Israeli consciousness. Hundreds of thousands of Israelis face serious financial hardship-even as Israel has developed into a fledgling economic power, posting impressive gains in gross domestic product (GDP) and achieving dizzying growth on the Tel Aviv stock exchange.
Throughout the 1990s, the poverty rate in Israel climbed steadily. The number of poor Israeli families grew by 4.4 percent of the total population-the sharpest rise in the developed world. Public assistance increased to meet the need; from 1990 to 2001, welfare payments in Israel more than doubled, from about $5 billion annually to more than $10 billion. Nevertheless, the ranks of those living in poverty continued to swell and the socioeconomic gap in Israel between rich and poor rose sharply.
Between 1998 and 2005, child poverty rose 50 percent, to 35 percent of the child population, according to the National Insurance Institute (NII) and Israel's Central Bureau of Statistics. There was a sharp spike in poverty overall between 2002 and 2004, when Israel's then-finance minister, Benjamin Netanyahu, instituted drastic cuts in welfare services. This coincided with the peak years of the Intifada, when the economy flagged as Israel coped with that ongoing crisis.
Although poverty rates in the Jewish state leveled off in 2005, they still remain higher than in any other industrialized country except the United States. "We have had stabilization, but it's not good enough, because we have stabilized at a very high level of poverty," says Miri Endeweld, head of the economic research department at the NII, which manages Israel's welfare system. "When you get to a high level, of course you're going to stabilize. How high can you go?"
And it is not just that poverty has risen. In 2004, Israel also had the second-largest gap between rich and poor among industrialized countries; only Taiwan's was larger. Israel's income gap was twice as large as that of the United States. To wit: While luxury homes with two-car garages are built in the beach town of Caesarea, residents in the next town on the other side of Israel's coastal highway use food stamps at local supermarkets in Or Akiva.
In Jerusalem, the picturesque but ramshackle homes next to Kappach's are being snapped up by savvy real-estate agents intent on tearing them down and building $2-million luxury villas.
All the while, the procession of people at Kappach's door on Friday mornings continues to grow.
In Israel, economics has always taken a back seat to the country's primary preoccupation: security. Israeli political campaigns almost always center on the Arab-Israeli conflict.
Israel's wake-up call on social issues came in 2004, when the NII's annual report for 2003 showed that nearly a quarter of Israelis-more than 1.5 million people-were living in need.
Statistics showed indigence continued to be highest among Arabs and Haredim (fervently Orthodox Jews), both of whom have large families and low rates of workforce participation. [See sidebar.]
But government numbers also indicate that nearly a third of Israel's children-more than 700,000-were living below the poverty line. A quarter of the people living in poverty were elderly, many of them Holocaust survivors with nominal or no pensions and scant government assistance. One Israeli family in five was classified as poor.
The poverty line in Israel is defined as half the nation's median disposable income-that is, income after taxes. In 2005, the poverty line for a single person was about $445 per month; for a family of five, it was $1,337.
A minimum-wage earner in Israel brings in approximately $883 per month; taxes can reduce that number almost to the poverty line.
When the 2003 statistics were released, advocates for the poor claimed something was drastically amiss with Israeli economic policy. Many blamed Netanyahu for cutting welfare rolls; others argued that the government had not done enough to foster greater workforce participation.
Since then, it seems, every nonprofit organization, Knesset member, and interest group has placed the blame where it best fits their agenda.
Knesset member Eli Yishai, of the Orthodox Shas Party, whose constituents are mostly working-class Sephardic Jews, says poverty figures show the true costs of cutting welfare programs.
"Attacking government allowances is like disconnecting a patient from a respirator," Yishai says. "The government chose to destroy the poor instead of poverty."Fiscal conservatives argue for lowering the tax rate to stimulate economic growth; kibbutzniks point to the rise in poverty as a sign of just how far Israel has strayed from its socialist roots.
Right-wing ideologues say foreign workers should be banned and their jobs given to Israelis; liberals argue for raising the minimum wage.
Among nonprofit organizations that work with Israel's poor, the figures sparked an intense debate about how to get Diaspora Jews involved without portraying the Jewish state as a charity case.
"On the one hand, we wanted to energize people to contribute funds to alleviate poverty," says B'nai B'rith International World Center Director Alan Schneider. "But on the other hand, we did not want to portray Israel as a country awash in needy people looking for their next meal."
Either way, as nonprofit officials are quick to point out, it takes more than new soup kitchens, clothing distribution programs, and after-school programs to reduce the ranks of the poor.
"If the Israeli government does not succeed, we certainly can't," says one nonprofit leader, Arnon Mantver, director of the Israel office of the American Jewish Joint Distribution Committee (JDC), which runs and funds a wide variety of programs. "We can make a difference in small slices of the population. But many of these programs are meant to be temporary, to fill the vacuum until the State of Israel is able to find a more permanent solution."
As bad as the news was in 2004, it cast the national spotlight on Israel's poverty problem, which may help in the long run.
"Issues such as hunger, poverty, rights of the elderly, and a return to social policy are now high on Israel's public agenda," notes Larry Garber, executive director and CEO of the New Israel Fund (NIF), which supports social justice projects in Israel.
"In Israel's 2006 elections, a plurality of votes [were] cast for parties with strong social welfare platforms," Garber says. "NIF sees the changing tide of public opinion as an opportunity to take action, cultivate grassroots leadership, and work for increased investments in creating broader opportunities for the less-privileged segments of society."
In a country steeped in socialist mores, many Israelis believe the most effective way to reduce the ranks of the poor is to send more money their way-in the form of tax cuts, increased welfare payments, bigger pensions, and more social services, officials say.
But officials at Israel's Finance Ministry, which oversaw the welfare cuts that represented Israel's most significant departure from its socialist underpinnings, see things differently.
For decades, Israel's model for helping the poor was welfare. That's bad for government and not helpful enough to the poor, Finance Ministry officials say. The government ends up spending billions that could be invested in infrastructure to help people get jobs-such as job training programs or free day-care centers. Some say cash payments are a disincentive to work.
"We need a change in [the] paradigm," says Moshe Bar Siman Tov, deputy director of the employment and welfare division of the Finance Ministry's budget office. "We give high welfare payments, and this encourages people to stay outside the workforce. Therefore, we have to move people from welfare to work."
Israel has, on average, 4 percent less participation in the workforce than other developed countries ~ the lowest labor participation rate in the Western world, according to the Finance Ministry.
At the same time, welfare payments in the Jewish state are much higher than the average for developed countries. The Finance Ministry sees a causal relationship between the two.
The way to reduce poverty is not simply to throw money at poor people, Siman Tov says, but to "increase participation in the workforce and strengthen at-risk populations to give them equal opportunities for social mobility."
"The most important thing is employment-the labor market," he explains. "This is where all the reasons for poverty hide." The incidence of poverty among families without wage-earners is 68 percent, while in families with two wage-earners, it drops to 3 percent.
The question is how to motivate and enable welfare recipients to attain and hold onto sustainable jobs.
"The government can do two things," says Yossi Tamir, former NII director general and current director of the JDC's New Employment Initiative program. "If there are people who cannot work, like [the] elderly or handicapped, you can increase their welfare payments. But for people of working age, you have to enable these people to work."
That's easier said than done. Many people on welfare don't have the education for jobs that pay more than minimum wage ~ about $4.75 an hour; for those who do, jobs are not so easy to find.
"Forty percent of the poor are working poor," Endeweld of the NII points out. "Sixty percent of these people have full-time jobs. You can work full-time and still be poor."
The solution, Siman Tov says, is for the government to "change over from welfare expenses to expenses for services that increase the labor force."
That means that Israel ~ government and nonprofit officials say ~ must help low-wage earners train for higher-income jobs; enforce and strengthen labor laws to ensure employees are paid fairly; and develop jobs where poor Israelis abound and jobs are scarce, such as the Galilee in the north and the Negev in the south. On the larger level, Israel needs to stimulate job creation by attracting overseas businesses and removing regulatory obstacles to running a business.
Critics say Israel is focusing on macroeconomic solutions that have lifted GDP and helped well-off Israelis but done little to develop opportunities for people at the low end of the country's socioeconomic ladder.
"The leadership of the major parties has an ideological stance [that] is, 'Improve the macroeconomic picture and everything else will be okay.' I think that's not enough," says Barbara Swirski, executive director of Adva, an Israeli nonprofit that analyzes socioeconomic policy. "We need a little more direction."
With Israel's economy continuing to post strong gains, there is a plan for getting more people to attain and hold onto sustainable jobs.
In April, the head of the prime minister's National Economic Council issued a report outlining a plan for reducing the incidence of poverty among Israeli families by 1 percent per year for the next three years, and increasing the rate of employment among Israelis aged 25-65 by 1 percent per year in the same period.
In "The Socioeconomic Agenda of Israel: 2008-2010," Manuel Trachtenberg wrote the goal is "to reduce poverty while encouraging growth, while the key is to be found in encouraging employment with suitable wages and an economic horizon."
The Trachtenberg report embraces most of the Finance Ministry's philosophy on how to address poverty in Israel and underscores the urgency of the problem.
It said Israel should invest in labor skills of the unemployed; develop more job opportunities throughout the country, not just high-earning occupations in the Tel Aviv area; institute an earned-income tax credit called a "negative income tax;" and streamline the welfare system for indigent Israelis outside the labor market, such as the elderly, children, and the handicapped.
"The deep and widespread poverty constitutes not only a mark of disgrace for the State of Israel today, but also … a threat to the continued prosperity of the economy in the near future," Trachtenberg wrote.
The report was lauded for its frank assessment and ambitious goals.
"Trachtenberg's paper is one of the most interesting to come out of Jerusalem in years. After reading its 106 pages, one can afford a smidgen of optimism," Israeli columnist Guy Rolnik wrote in Israel's daily, Ha'aretz.
"Despite its ambitious goal-extracting a quarter-million people from poverty in three years ~ Trachtenberg's plan offers a degree of modesty, professionalism, originality, and also, it's free of table-thumping jingoism. One can't usually say that about Jerusalemite economic programs," he wrote.
Along with the normal obstacles one might expect of a new economic plan, Israel still has to deal with its security situation.
Israel spends, on average, three times as much as NATO countries and more than twice as the United States on security, government statistics show. Between those costs and paying interest on Israel's high national deficit, there's not much room in the budget for anti-poverty programs.
"The government has to make an effort," Swirski laments. "It keeps saying it's going to do that, but then a war comes along and they say, 'Not this year.'" Perhaps just as important at this particular moment in Israeli history, the government appears to lack political legs for any major policy initiatives.
Barely two months after Trachtenberg's economic report was released, Israel's finance minister Avraham Hirschson resigned amid a corruption investigation. With job-approval ratings in the single digits, Prime Minister Ehud Olmert is expected to come under renewed pressure to resign following the release of the Winograd Committee's final report on the 2006 Lebanon war, due out in October.
So, however ambitious the government's economic declaration, the reality is that Trachtenberg's plan has yet to be addressed by the Knesset. Tamir, however, says there is room for optimism.
For one thing, Israel's economy is strong, and that's having a trickle-down effect on job creation, Tamir says. There also is widespread consensus on the most essential elements of Trachtenberg's plan, such as the need to develop industry far from Israel's populous metropolitan centers.
In 2006, the government reversed some of the welfare cuts it instituted for the more vulnerable segments of the population, such as the elderly, who cannot join the labor force, and, in the same year, poverty levels dropped for the first time in several years.
Among the elderly, who have had a strengthened voice in the Knesset since the newly founded Pensioner's Party captured seven Knesset seats in the last election, the poverty rate dropped to 22 percent from 24 percent.
Perhaps how much progress Israel will make in the fight against poverty will depend not just on government, but on how willing Israelis are to keep the issue on the public agenda.
"I don't think it's [pie] in the sky," Tamir says. "I think it's possible."
At Kappach's home in Jerusalem, the government's plans don't seem to add up to much. She still stockpiles flour, sugar, and cooking oil to hand out on Friday mornings, but Kappach's own sources of support are drying up.
The last year has been especially difficult, Kappach says. After last summer's war in Lebanon, many of Kappach's regular donors redirected their money to Israel's north rather than to her charity, and she's short on cash.
"We haven't paid off our debts from last year," she said. "It frustrates me that I give less. They come, and I send them away. What can I do? "
Kappach's organization, Keren Segulat Naomi, has been forced to borrow money from a bank, sinking her into debt and reducing the number of people she is able to help.
Yet even as her organization's debts grow, Kappach says she'll carry on. There's simply no other way. "We continue to give, and whatever will be, will be," she says.
When Israel reduced its welfare rolls in 2003, the cuts hit the town of Modi'in Illit very hard.
A fast-growing suburb between Jerusalem and Tel Aviv, on the West Bank just over the Green Line demarcating Israel's pre-1967 border, Modi'in Illit is populated mostly by Haredim, or ultra-Orthodox Israelis. Many have large families and small incomes, and have been on welfare.
Yocheved, 33, a mother of five whose husband is a yeshiva scholar, was lucky to have a job as an office manager at the local municipality, but her minimum-wage salary was hardly enough to support her family.
"There were no jobs in Modi'in Illit back then [in 2003]," recalls Yocheved, who asked that her last name not be used. "That's exactly when the government started kicking all sorts of people off welfare, and people needed money."
Then salvation came in the form of an outsourcing company called CityBook Services, which began hiring haredi women by the dozens in 2003 and providing them with a livable wage in an Orthodox-friendly work environment.
"Eighty percent of the people we have here had never worked in an organized way. Those who did, worked in education or as a secretary," says Eli Kazhdan, the company's CEO. "They wouldn't work in a regular place because the environment is not conducive to their religious lifestyle."
At CityBook, the women work almost exclusively in the company of other women, and they have a family-friendly work schedule that enables them to be home by late afternoon.
The women at CityBook work on back-office real estate services, writing up title insurance policies and abstracts or summaries of complex commercial leases for CityBook's parent company, Madison Commercial Real Estate Services, which is based in Lakewood, N.J.
That company's founder, Joseph I. Rosenbaum, "came to Israel and decided he wanted to create some jobs for the haredi sector, not knowing whether it would be a mitzvah or a business," Kazhdan recalls. "CityBook started with eight people, and now we're up to 180 in a very successful business."
The jobs have been a much-needed salve for a community steeped in poverty.
No analysis of poverty in Israel can ignore the specific populations hit hardest. The two largest groups, Arabs and haredim, comprise a quarter of all Israelis, but together they constitute nearly two-thirds of those under the poverty line.
These populations share some distinct characteristics. Families tend to be quite large, most have just one wage-earner, and many of them lack the educational background necessary for high-wage jobs.
Most Israeli Arabs live in rural villages far from industries that support high-wage careers, don't have college degrees, and often run into hiring discrimination when they do qualify for jobs. Inevitably, many end up in construction or agriculture, struggling to make ends meet in occupations with no benefits or job security. Women rarely work outside the home.
Haredim by choice suffer from low workforce participation. Haredim view military service as a dangerous environment where religious children are exposed to secular influences and temptations. To qualify for exemption from Israel's compulsory military service, men must be enrolled in religious study programs until the age of 28.
As a result, many men remain at yeshivas well past their 20s ~ scholars are highly prized in the haredi community, particularly by parents looking for matches for their daughters ~ and long after they begin having children. If the scholars enter the workforce at all, their lack of vocational training or college degrees make it difficult for them to earn enough money to support their large families.
"It's a community where people feel economic pressure, but it's from choice; it's not something that is forced on people," says Yocheved. "That's the kind of life they choose. They want to have a house in which there is a life of Torah and not materialism."
For most haredim, it's not a matter of materialism, but of making enough money to get by. Yocheved acknowledges this is the case in her own community. "They need the bread and milk."
For those who can't find jobs that pay enough, the haredi community has developed comprehensive, privately run welfare services to fill the gaps between government assistance and families' needs. At one Jerusalem outfit, Rabbi Meir Baal Haness Charities, yeshiva students from their early 20s to their late 60s line up to receive cash stipends, free clothing, food assistance, and even bedclothes.
Other poverty-stricken communities in Israel are not lucky enough to have such support. Many are new immigrants, some still getting their bearings in their new home, and others are elderly, living alone and in penury.
Some of the most indigent are Holocaust survivors, according to survivor advocacy groups. Ethiopian Israelis, though a tiny proportion of Israel's population, are among the nation's poorest.
Somehow these HOLOCAUST SURVIVORS do not receive the monies sent to them from Germany and other countries paying for their abuse in WW2. It just does not seem to get past the government level for issue!Israeli officials charged with dealing with Israel's poverty problem acknowledge that, while welfare-to-work programs may be the solution for some populations, they don't work for others.
"The trick is to weave the appropriate solutions for the right population," says Moshe Bar Siman Tov, deputy director of the employment and welfare division of the Finance Ministry's budget office.
The plan of the prime minister's National Economic Council (NEC) recommends increasing assistance to populations unable to work, such as the elderly, while removing legal hurdles to successfully pushing other groups, like haredim and Arabs, to get off welfare and into sustainable jobs.
NO one hires Arabs. Many Rabbis claim to hire an Arab is against Torah and/or Talmud values. If they still had their land, they would not be poverty struck in cities either.
Among the recommendations in Manuel Trachtenberg's NEC report, "The Socioeconomic Agenda of Israel: 2008-2010," is instituting a civil service program for haredim that would exempt them from military service and enable them to enter the workforce at age 20 or 21.
For Arabs, the plan recommends bolstering their participation in the workforce by providing them with better and more educational opportunities, strengthening anti-discrimination labor laws, and investing in industry in places where Arab populations are heavily concentrated, like the Galilee and the Negev.
"We're moving in the right direction," says Professor Yossi Tamir, former director general of the National Insurance Institute. "But these are slow processes."