meir sheetrit 88 298.
(photo credit: Courtesy Photo)
Tipped to be the next minister of finance, should Kadima win the upcoming elections, Meir Sheetrit stresses decreasing inequality and growth as mainstays of the party's economic plans. In an exclusive interview with The Jerusalem Post, this is what he had to say about the Kadima's economic policy:
"Our economic policy is based on generating growth and in decreasing the inequalities in the Israeli society. The divide between those who have very little and those who have much has been growing steadily in the past 30 years and it has to stop. History shows that a society with huge differentials between the haves and have nots carries within it the germs of its own destruction."
JP: Do you intend to squeeze the rich to give to the poor, a Robin Hood approach? Through fiscal measures, for example.
MS: That is not what I meant. We live in an open global society. If we were to overtax the rich they would take their money, their business and their skills somewhere else. We do not intend to raise taxes - quite the opposite, we would like to lower taxes, if possible.
I have no problem with companies or individuals who make money, provided it is done legally. What I want, and what Kadima proposes, is to eradicate poverty as much as possible, primarily by pushing the unemployed into jobs and helping only those who are really in need, such as the handicapped and the elderly.
We have a problem with our work force and with our income tax base.
The work force as a percentage of the population in Israel is among the lowest in the world. Unemployment is over 10% of the work force. In Israel, only 65% of males between the ages of 24 and 65 are engaged in productive work as against 87% in OECD countries and 88% in the US. We have high unemployment and at the same time we have the highest foreign labor force in the western world, after Switzerland which has 16.1%. Here, 11.3% of the labor force is made up of foreign workers as compared to 6.1% in France and 3.9% in the UK.
Furthermore, our income tax base is completely distorted. 13% pay 93% of the taxes.
Your last figure perhaps explains the problem: Salaries in Israel are very low, why work if welfare payments are higher?
I agree with you completely and since our policy is based on generating growth by enlarging the work force our policy is based on negative income tax payments.
According to figures published by the National Insurance Institute, a large percentage of those classified as poor were employed. This is an intolerable situation. We will create a system whereby those who are employed and earn a salary which is below their needs based on a key that takes into account the number of dependents, will get a certain amount of money from the public purse so as to bring their income to an acceptable level. In contrast to the prevailing system, only those earning a salary will be eligible. This way, we can expand the work force dramatically because every one participating in the work force will get a decent income irrespective of his pay packet
In the longer term, we have to upgrade our whole educational system so as to increase the number of those who will be able to get high paying jobs such as in the hi-tech industry. In 2005, only 55% of those who left school got a bagrut, a General Certificate of Education. If the educational system were better, I believe that the number of bagrut holders would increase. And don't forget that such a certificate is the key to higher education and to well paying jobs.
Your economic policy seems very simplistic.
Why? a good economic policy should generate growth and afford the highest standard of living to the population as a whole.
I have shown you that a large part of the potential working population is idle. The quickest way to increase economic activity is by making use of the idle work force and increasing its output. We can do this by rewarding those who work for a living and punishing those who do not. Despite the positive influence of hi-tech on economic activity, economically speaking Israel's position has declined substantially in the last 10 years.
Look at the figures: In 1995 Israel's per capita GDP was $14,000 this was higher than the Greek and Spanish and nearly equal to the Irish - 168% of the Greek per capita GDP, 113% of the Spanish, 93% of the Irish, and lower than other European countries, 74% of the British, and 66% of the Dutch.
Ten years on, our per capita GDP had slipped to 85% of the Greek, 64% of the Spanish, 35.6% of the Irish, 48% of the British and 45% of the Dutch. Our economic performance during the last 10 years has been dismal.
To expand the work force one needs to create jobs.
That is the beauty of our economic policy - the task of creating jobs is that of the private sector. When we adopt a policy of negative income tax, we do not increase the costs of the private sector by increasing the minimum salary we let them operate freely in a free economy. Our task in government is to create the right atmosphere so that the private sector can do its bit. We will try to help by taking steps to increase exports and establishing small businesses - the last is a very efficient way to create jobs. And we will do more by upgrading the educational system to produce a highly trained work force.