asher meir 88.
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At the beginning of the week, the National Insurance Institute (Bituach Leumi) published its annual survey report summarizing the year 2006. One of the chapters is devoted to poverty and inequality in Israel, a favorite topic of this economic ethics column.
The main finding of the report is that employment in 2006 increased markedly, and with it the well-being of families in the lower deciles. As a result, the poverty rate stabilized - in fact, decreased slightly - but poverty in Israel, and especially child poverty, remains among the highest in all developed countries.
One noteworthy feature of the survey is that it includes a transparent discussion of the way poverty is measured and of the particular merits and demerits of measuring poverty as does Israel (and most countries) - by relative income.
A poor family in Israel is defined as one whose adjusted income per family is less than half the medial. The report also discusses use of an alternative measure, where poverty is defined by an income insufficient to acquire a particular "consumption basket." The use of this measure in Israel was pioneered by chapter co-author Miri Endbeld.
The bottom line is that poverty trends are similar no matter what measure is used. Whether we use the 50% of median income rule (Israel), 60% rule (Europe), market basket (Canada) or even the direct measure of expenditures which, I favor - no matter which measure of family equivalence is used, the relationship between countries and between years remains nearly unchanged. A study by Tom Caplan at the Central Bureau of Statistics showed much the same result.
The real problem with applying the standard poverty measures to Israel is that they measure deficiencies in economic well-being, whereas the families being studied often (not always) view their own well-being quite differently.
In a speech at this year's economic convention, Dr. Mumi Dahan of the Hebrew University gave a very succinct expression to this issue: Take two householders of the same income, he suggested. One decides he would like to have a large garden, the other decides he would like a large family. Each person is using his income for what he desires and thus improves his well-being, but the impact on measured poverty is vastly different. The official poverty statistics will almost certainly conclude that the first is not poor, and in all likelihood will conclude that the second, and all his household members, are poor.
This observation has evident implications for poverty policy. If we conclude that large families are the main source of poverty and thus create disincentives to having large families, then we have reduced measured economic poverty but we have made people worse off, since having children is the most important thing in their value scale. If we conclude that people are living in poverty and are thus in need of government subsidy, we are subsidizing people who are not suffering from any particular kind of deprivation, but are merely exploiting the resources and opportunities provided by society in a way that suits their values.
Dr. Daniel Gottlieb of the Bank of Israel has pointed out that while this analysis makes sense for the parents, no one asked the children if they agree. But observation suggests that, in fact, most children of these families internalize the values of the parents and affirm the relative importance of family size compared to economic standard of living. The same applies, of course, in other countries; just this week the Wall Street Journal hosted a discussion forum on this exact topic, entitled "Can you have too many children?" A typical comment from a pro big-family reader was: "I wouldn't trade one of my siblings for anything."
All this doesn't mean that having large numbers of children with low economic standards of living is not a problem worthy of public attention. On the contrary, it is an important source of concern. It just means that we have to define the problem properly. Israel's unique child poverty situation is not primarily due to an economy that fails to provide adequate employment opportunities to motivated citizens; it is primarily due to large sectors of the population who make different tradeoffs than others between large families and economic standards of well-being. Any steps taken to alleviate the situation will have to take this background into account.
An interesting and little-noted point is that Dahan's observation applies not only to comparisons within Israel, but also to comparisons between Israel and other countries. Even secular Jewish Israelis, who have the lowest birth rates within Israel, have much larger families than their European counterparts. Israel, as a whole, is a country which gives a much higher relative importance to family over economic advancement compared to our peers. The result is that comparative economic growth statistics tend to underestimate the true extent of improved well-being in our country, which is expressed not only in more income but also in more youngsters - as was discussed in detail in a previous column, entitled "More people per person" (The Jerusalem Post, January 1, 2006).
The author is research director at the Business Ethics Center of Jerusalem (www.besr.org), an independent institute in the Jerusalem College of Technology.
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