Reforms versus Organized Labor

AFTER CUTTING INTO the living flesh of the jobless, the physically challenged, children and the elderly, and after trampling organized labor, the Israeli government in 2007 wakes up to discover...

AFTER CUTTING INTO the living flesh of the jobless, the physically challenged, children and the elderly, and after trampling organized labor, the Israeli government in 2007 wakes up to discover that there is poverty in the land. One fourth of the population is below the poverty line: it has less than half the median disposable income (less than $1070 monthly for a family of four). By this definition, 35% of the country’s children are in poor families (a record among developed nations). Many of the adult poor are working people (60% of the working poor have
full-time jobs). A quarter of the elderly are poor.1

In order to appear to deal with this gloomy situation, on February 4 the government approved a program put forth by Finance Minister Avraham Hirchson. He calls it, “Steps to reduce social gaps and increase the rate of participation in the labor market.” The plan presents four socio-economic reforms:

1. A negative income tax favoring the poorer employees.

2. A compulsory pension to ensure that the elderly do not fall into poverty after leaving the labor market.

3. An increase in the tax on vehicles provided by employers to some employees. (This is to help fund the program.)

4. Subsidies for childcare centers, so that more women can be free to work.

The government has also approved an additional budget for enforcing labor laws. The reforms await Knesset confirmation.

A subsidy for the employers

Despite the appearance of social consciousness, the new reforms deliberately circumvent mechanisms of social justice that are already in place. For example, the government opposes any significant increase in the minimum wage, which, at $860 monthly (3585 NIS), is far below the poverty line. It likewise opposes increases in income maintenance or other benefits. Most significantly, it opposes any gain in strength by the unions.

The chief economic pundit for the Hebrew daily Yediot Aharonot, Sever Plotzker, has leveled sharp critical barbs at the reforms. They give forth, he wrote on February 2, “an aroma that both intoxicates and misleads.” The negative-tax scheme, for example, would require all salaried employees to file annual income reports (not presently required in Israel). If the government wants to increase wages, writes Plotzker, it has at its disposal a mechanism of national insurance that can do this without the complications of making people file. “The law of guaranteed income maintenance amounts to an original [Israeli] implementation, the first such in the world, of the negative-tax concept.” This Israeli law, writes Plotzker, “came in for a good deal of admiration in public discussions among western countries, including America, when they were looking at possible ways of applying a ‘negative income tax.’ What happened next is well known: the allotments for guaranteed income maintenance were decimated by Israeli governments, until they became a mere pittance for the absolutely helpless, excluding most of the working poor.”

Plotzker here refers to the fact that the Israeli system of paying income maintenance through its national insurance system was unique, a model to be copied. Moreover, the worker did not have to put in a certain number of hours in order to qualify. Now the government has cut income maintenance to a sum that can maintain no one, but the reform that’s supposed to take its place applies only to people who work at least half time.

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