Economic boom for whom?

The story in Yehud, where average salary runs somewhat higher than national average, is instructive.

shopping illus 88 (photo credit:)
shopping illus 88
(photo credit: )
"Economic growth? Economic growth is for the people who live on the other side, not the people who live around here," say the drivers waiting for customers at the Yehud Taxi stand. By "the other side," they may mean Yehud's Monosson neighborhood, with its old wealth, or Yehud's Kiryat Savyonim neighborhood, with its newer wealth. Or they could be talking about the neighboring city of Savyon, with its outrageous wealth, old and new. The Yehud Taxi stand is in the middle of old, rundown Rehov Sa'adia Hatuka, which used to be the commercial center of this city of 28,000, just north of Ben-Gurion Airport. Last week, about the only customers out in the afternoon were a few old men drinking coffee outside a felafel shop. The blocks of stores here have been made nearly obsolete by the aging and the worsening economic condition of city center residents, along with the growing wealth of the city's outer neighborhoods. The current commercial hub of Yehud is shiny Savyonim Mall, built a dozen years ago. The taxi drivers crowd around us to complain that all the talk of economic growth is just a "bluff," since their own personal economies just keep contracting. "I work from five in the morning until seven at night, six days a week, and in a good month I take home NIS 4,500," says Dekel Ohana, 27, a driver who, for lack of rent money, lives at his in-laws' home with his pregnant wife. "On TV all you hear about is growth, growth, growth. So maybe I took in a tiny bit more last year, but my expenses have gone up a lot more - gas, of course, but everything else, too. Even the price of bread. "My wife also works. She makes NIS 2,000 a month as a receptionist in Petah Tikva, and the commute costs her NIS 1,700." Locals often speak of Yehud as two cities - one poor, one prosperous. Rehov Sa'adia Hatuka is the heart of lower-middle-class Yehud, the original, now central, section of the city, with its blocks and blocks of old, shabby tenements and little shops. Kiryat Savyonim, or western Yehud, is the new, richer part of the city with the mall, the gleaming high-rise apartment buildings amid tall, perfectly trimmed trees, the winding "Hollandic" streets of sleek, stand-offish two-story houses with carved-wood front doors and elaborate ironwork gates, the jeeps parked outside; and, unlike the poorer side of Yehud, the sidewalks that are all but empty of people. "You want to ask me about my income?" says a dyed-blonde woman of about 50 in tight, shiny black slacks, getting out of her black jeep. Smiling crisply, she tells us, "I'm not prepared to answer," and heads into her duplex. The houses in Kiryat Savyonim go for about $500,000, says Erez, who lives in one of them. Some of the older, larger houses covered with foliage and sitting in the middle of lush gardens in the Monosson section are worth around $1.5 million, he notes. Until the mid-1990s, Erez lived with his wife and children in Monosson's row of low-cost tenements, an anomalous block hidden from view by a stand of tall trees. Since then, he's moved way up in class. A father of three whose wife can afford to stay at home with the kids, Erez has prospered with the rise of the hi-tech industry. After 12 years with the local branch of an international firm, he's made manager and now earns about NIS 40,000 a month plus a bonus of about NIS 75,000 at the end of the year. (All salary figures are before taxes.) "I was good enough at my job to get promotions," he says, "but even if I hadn't, even if I'd stayed in the same position in the company, my salary still would have gone up respectably." The news in Israel is about growth, growth, growth. The January 1 front-page headline of Yediot Aharonot described 2007 as "The good year" - one that saw not only a steep drop in terror and traffic deaths, but also an economic growth rate of 5.3 percent, which means the population, as a whole, earned 5.3% more money than it did the year before. The economy has been growing at roughly this rate for the last 4 1/2 years, making it one of the fastest-growing economies in the world. The three main reasons for this prosperity were cited recently by the Bank of Israel: the effective taming of the intifada (everywhere but in the communities bordering the Gaza Strip); the upturn in the global economy, especially the hi-tech industry, which has a disproportionately large presence here; and the government's budget-cutting, tax-cutting economic policy. So is the new prosperity limited to the rich and upper-middle-class or does it benefit the average Joe and his poor cousin as well? The story in Yehud, where the average salary runs somewhat higher than the national average, is instructive. "YOU SEE the growth here mainly among the well-off - the high-level managers, the higher-ups in finance," says Adina Hacham, general manager of the Yehud Municipality. "The middle-class, the average people, are doing a little better - the salesmen, the contractors. The poor - the clerks, the menial laborers - don't feel any improvement." The good news from Yehud, as in the country overall, is that unemployment has gone down sharply during the years of growth. Nationwide, it went from a high of more than 11% in 2002 to a low of 6.6%, which was announced this week. Simply put, companies are hiring new employees because they're making more money. "Yehud is in the center of the country, so anybody here who wants to work can get a job," says Yitzhak Rosenberg, a 30-year veteran of the city's Social Services Department and now its head. Because of the increase in jobs, together with the government's tightened welfare restrictions, many Yehud residents have gotten off the dole and found work. However, the bulk of these jobs have been for minimum wage or thereabouts, often only part-time, with few or no benefits. A clear sign that most of these new jobs offer bottom-scale wages is the recent, sharp decrease in the average national salary - from NIS 7,800 a month in summer 2007 to NIS 7,400 in the fall. (The most telling statistic of income inequality is this: 70% of employees earn less than the average salary, only 30% earn above it.) Rosenberg says that while these new minimum-wage jobs as security guards, janitors, hotel room cleaners, restaurant cooks and such are certainly better than idleness for the jobholders' well-being, as well as for the economy, they may actually cause a drop in the jobholders' material standard of living. He explains: "When you're living on National Insurance Institute payments, you also get a reduction in property tax, health insurance, the TV license fee, bus fares and other expenses. But if you're working one of these minimum-wage jobs through these manpower agencies that have cropped up everywhere, you basically get no benefits." Meanwhile, government benefits such as child allowances, disability payments or income supplements, the last of these going to the "working poor," have been reduced during the years of economic growth. While there is now virtually no unemployment in Yehud, Rosenberg says, the number of working poor has risen. Also, the number of Yehud families getting monthly "care packages" from Bayit Cham, the local food charity, has "gone up, unfortunately," according to its head, Rabbi Shimon Weiner. Packages of food staples now go out to some 250 local families, but about 350 families actually need them, says Weiner, who notes, "we just don't have enough money to feed everyone." On one hand, then, the country is getting richer, but on the other hand, the gap between the rich and poor is growing. On one hand, more Israelis are working, but on the other, the proportion of working poor keeps getting larger. So who is really benefiting from the economic boom? FOR THE NATIONWIDE picture, I interviewed three economists: one from the left, Shlomo Swirsky, head of Tel Aviv's Adva Center - Information on Equality and Social Justice in Israel; one from the center-left, Yaakov Kop, head of Jerusalem's Taub Center for Social Policy Studies in Israel; and one from the conservative banking sector, Michel Strawczynski, deputy director of research for the Bank of Israel. All three agree that the growth hasn't spread equitably through the population. Even the Bank of Israel's Strawczynski notes, "It's clear that the growth causes inequality." The three differ mainly on the question of degree, with Swirsky and Kop seeing a far wider economic divide between the rich and poor than Strawczynski does. Asked which Israelis are enjoying an increase in income as high as or higher than the national average of 5%, Kop says that based on the data, "the top 20% of the working population are getting the average increase or more, the 10% of employees just below them are making about 3% more money, and the bottom half of the workers are getting only about 1% to 1.5% more." Most of the economic growth, he emphasizes, remains in the hands of business owners; a relatively small portion is being passed along to employees in salary raises. This is a relatively new trend. A generation ago, employees could assume that if their companies were profitable, they would get decent raises every year or two. While this is still the case for skilled employees in extremely profitable sectors such as hi-tech and finance, such regular, respectable salary raises are no longer automatic, by any means, for employees in the general run of profitable companies. Kop blames this partly on a generation of decline in the Histadrut's power to force raises out of government and industry. "It used to be that when government employees got raises, the factory workers would say, 'What about us?' There was a spillover effect. Now the atmosphere has changed, and there's a spillover from government to industry in the philosophy of not sharing the wealth." He also blames another phenomenon of the last generation for keeping wages down at the lower end of the salary ladder: the way labor-intensive business has come to rely on low-paid, easily exploitable foreign workers, who now number nearly 200,000. In the Monosson neighborhood last Saturday afternoon, a pair of Chinese workers were sitting on a curb, waiting to get hired for a few hours. A man emerged from an alley and held up one finger, saying, "Gina [garden]," and a laborer followed him to work at one of the private gardens that surround Monosson's 1970s-era villas. This is where the town's gentry live. Along a side street, a man was casually riding his horse. IN HER OFFICE in the Yehud Municipality just off Rehov Sa'adia Hatuka, Hacham reads a letter from a city employee asking that the municipality guarantee a bank loan for about NIS 40,000. She is shaking her head. "We already guaranteed her a loan of about NIS 50,000 that she still owes the bank," says Hacham. "This woman makes about NIS 4,000 a month before taxes. I can imagine her situation. She's probably a single mother, her wages don't cover her expenses, her overdraft is growing, and now she wants to borrow money to cover it. It's clear she won't be able to be repay this loan. She's in debt and she's sinking deeper. I can't do it." Hacham says she would be violating her public trust if she committed the municipality to guarantee such a clearly bad-risk loan. "I've gotten several of these letters from city employees in the same situation," she adds, blaming the low wages that Yehud municipal employees typically receive. "A city clerk gets NIS 5,000, maybe NIS 6,000 with seniority. A water engineer with years of experience gets NIS 6,000 to NIS 7,000. How can I hire an engineer at a salary like that?" One of her secretaries, Rahel, 52, says that after several years on the job, she's earning NIS 4,500 to NIS 5,000 a month. If there have been any raises in recent years, she hasn't noticed. Her husband sells irrigation equipment, and his income hasn't risen, either. "The way it feels to me, our standard of living has gone down," she says. Strawczynski of the Bank of Israel agrees that working people on the low end of the scale have seen effectively no change during the 4 1/2 years of growth. Moreover, he agrees that the bulk of the new jobs are minimum-wage and part-time, noting that the single fastest-growing category of employment, in hotels and restaurants, brings in an average salary that's actually less than the minimum wage, which stands at roughly NIS 3,800 a month. But in the middle rungs of the salary ladder, he sees more improvement than Kop and Swirsky do. The lower-middle class of employees, says Strawczynski, have been getting raises - not 5% a year, but about half that. The most surprising of his findings, one that's clearly at odds with the impression among most Israelis, is that while the highest-paid employees - the top 20% - are getting the largest pay raises, even they, on average, aren't getting 5% a year, but a little less. This might be in line with what Erez, the hi-tech manager from Kiryat Savyonim, says is his sense of how economic growth is being divided among the rich and upper-middle-class. "I think it thins out exponentially. The people in the top percentile [1%] are getting incredible salary increases, then there's a long drop to the raises that the people in the second percentile are getting, and so on," he says. I ask Strawczynski if another explanation might be that the real rewards of the boom are remaining in the pockets of the owners. He indicates that this is so, noting that companies' profits - the money that owners keep after they pay such expenses as salaries - have shot up in recent years. Yet he suggests that the main reason why salaries have lagged behind growth is several years of high unemployment: Owners, just emerging from the intifada-era recession, weren't rushing to hire people, so employees couldn't press for higher salaries. Now, however, after a long period of growth, business people have more confidence in the future and are snapping up new employees, competing for them, so employees are finally in a strong position to get better wages. As a result, Strawczynski believes economic growth, for the first time since it began in mid-2003, is starting to trickle down to a meaningful extent. But even without the trickle-down, Strawczynski maintains that the economic boom has benefited not only the rich but the poor as well, because so many once-unemployed people have gotten jobs. "In relative terms, there is more inequality now between the economically strong population and the weak, but in absolute terms, the situation of the weak population has improved," he insists. IN THEIR house off Rehov Sa'adia Hatuka, one of the houses abandoned by Arabs in the War of Independence, Yitzhak, a taxi driver, and his wife, Etti, give examples of how wealth trickles down in Yehud. "Some of the women here work for the people who live in Kiryat Savyonim, cleaning their houses, taking care of their kids," says Etti. A local restaurant caters to Shari Arison, the richest woman in the country. "We drive the meals she orders to her private plane," says Yitzhak. He and his wife don't seem envious or resentful, they seem pleased. Their son, Ido, 33, is proof that at least somebody in this country besides the CEOs is getting a good raise. A project supervisor at Yehud's largest employer, Israel Aerospace Industries, Ido now makes about NIS 8,500 a month after eight years on the job. "I started at not much more than minimum wage, and I've been getting raises of, I'd say, about 10% just about every year," he says. He also gets a company car and the full range of benefits. Ido notes, however, that salary raises depend on individual performance; many of his co-workers don't get them. For the most part, working people in Yehud commute. There isn't a large industrial zone here like there is in neighboring Or Yehuda. The few hi-tech companies in town, the largest being Hewlett Packard, employ mainly out-of-towners. The focus of activity for local residents, and the major draw for outsiders, is the Savyonim Mall. Last Friday around noon, the mall was alive with shoppers. In the ground-floor jewelry store, all three clerks were kept busy. Idit, the manager, has worked in the store since it opened with the mall 12 years ago. During the intifada, when so many were afraid to go to crowded places, the shop did badly. "But in the last two years, business has been very good," she says. Noting that the store's line of jewelry is "above average in standard," and that its clientele comes mainly from Yehud, Idit says that not only are more people buying jewelry these days, they're picking out more expensive jewelry. "Before, people would spend NIS 70 to NIS 150 on a present. Now they're spending more like NIS 500." When I ask about her salary, telling her the average national monthly wage is about NIS 7,500, Idit, in her 30s, says she makes "in that range." I say the nation's economic growth rate last year was about 5%, and she says her last raise was "more or less that amount." Laughing, she declares, "I'm happy," like that must make her an oddball among regular working people. Swirsky of the Adva Center wouldn't be surprised to hear of happy middle-class people in Yehud, because Yehud is in the center of the country, which is where the money is to be made, where the economic growth is concentrated. Noting that the office we're sitting in is just south of the "city," or financial district, of Tel Aviv, he says, "Around here, the middle-class contractors, the shopkeepers, the felafel stand owners are doing great. We're right near the headquarters of the banks - there are new fast food places opening all the time to feed their workforce. Downstairs there's a watchmaker who's doing beautifully. He tells me he goes in to the bank buildings to talk to the bank employees' unions, they make a deal and the employees buy their watches from him. "If you go north to North Tel Aviv and Herzliya, you'll hear even bigger success stories. But if you go south to Rehov Allenby, then past it to Jaffa and Bat Yam, it's a different story. And if you go even further south, to Beersheba, to Yeroham, or all the way to the northern periphery, to Galilee, it's a completely different story." There have been multiyear periods of economic growth in the past, he says, but never has the wealth been spread so inequitably as now. In 1997, at the end of the boom years of the mid-1990s, 21.4% of the working population was earning the minimum wage - compared to 32.7% in 2005, the most recent statistic available. The situation improved a little - the proportion of minimum-wage workers was even larger just before 2005 - but a large bulge of those working for poverty-level wages has become a defining feature of the economy, says Swirsky. A FEW BLOCKS beyond the entrance to central Yehud, inside the neighborhood's largest grocery store, the owner refuses to believe me when I tell him the average salary among city residents is a little higher than the nationwide average. "I can tell you precisely why I don't believe it - because of the NIS 800,000 in bad checks I've gotten in this store in the six years since I bought it. Because of the NIS 350,000 I'm carrying in unpaid debts." The minimarket serves the neighborhood's lower-middle-class clientele, and the owner says sales went down last year by about 10%. Still, he's doing a lot better than the competition a couple of blocks away. "Their prices are lower than mine but they don't give credit, so I still sell three times more than they do," he says. The market doesn't just sell food, it sells everything - socks, toaster ovens, pacifiers, plasticware, glassware - "anything I can make a profit on," he says. He explains how to tell the difference between a "healthy" grocery store and an "unhealthy" one: "If your cash customers come in mainly between the first and 10th of the month, when working people get paid, you've got a healthy business. If you get most of your cash customers on the 28th to the 30th of the month - when the welfare checks go out - you've got an unhealthy business." He adds, although he doesn't need to, that his minimarket, the largest in central Yehud, does an unhealthy business. The store employs about a dozen clerks - "most of them for minimum wage or slightly higher." He adds, although he doesn't need to, that they don't get much if anything in the way of raises. As for the average salary in the city, he says, "You see, Yehud is split in half..." The same thing is said of Israel, except that Israel isn't split in half, it's split very unevenly, between the one-third or so of the population that's making it financially, and the two-thirds or so that aren't. By all accounts, the economic boom has accentuated this split, at least so far. The hope is that the low-wage jobs the boom has generated will start paying better, and that a lot of people now in those jobs will find better paying ones later. Meanwhile, even with all the news about economic growth, and even though it's been another "good year" for the country as a whole, for the large majority of Israelis, the past year has been yet another rough one.