The series on poverty policy continues to generate much interest, and certainly we haven't run out of things to write. This week we'll compare Israel to Western Europe, an area with a roughly comparable degree of economic development.
A recent paper by Belgian economist Andre Sapir sheds light on an interesting classification of welfare systems by their characteristics and performance. A good welfare system will help the poor (creating equity, that is, equality) without harming employment (efficiency); Sapir ranks the four main systems according to these exact criteria.
The contenders are Continental Europe, such as France and Germany; Nordic countries, such as Denmark and Sweden; Anglo-Saxon countries, such as Britain and Ireland; and Mediterranean countries, such as Greece, Italy and Spain.
Any country with a poverty rate less than 15 percent is considered high equity; higher is considered "low equity." An employment rate greater than 66% is considered high efficiency; less than this is considered low efficiency.
Sapir summarizes the performance of the systems as follows: Nordic high efficiency and high equity; Anglo-Saxon high efficiency but low equity; Continental Europe low efficiency (thus not sustainable) but high equity; and Mediterranean low efficiency and low equity.
Where does Israel fall in this table? At the very bottom. Israel's poverty rate is higher, and its employment rate lower, than virtually any comparably developed country.
What are the reasons for this? To make a long story short, Sapir believes that equity is mainly a function of education, whereas efficiency is mainly harmed by employment protection. Many Continental and Mediterranean countries try to protect jobs by making it hard to fire people; the predictable result is that employers are reluctant to hire. (Another result is that people who do work don't work as well.) The Nordic and Anglo-Saxon systems don't try to prevent people from getting fired; instead, they try to provide them with a "soft landing" through unemployment benefits.
My distinguished colleague Pinchas Landau has suggested that comparing averages is misleading because there is no "average" Israeli. In fact, there are two distinct Israels. According to Sapir's typology, one is Nordic and one Mediterranean. In North Tel Aviv and the surrounding well-off metropolitan area, we find a highly homogeneous, motivated and educated group with high education levels and high incomes. Within this group, the employment rate is sky-high and income equality is at a reasonable level.
Among Arabs, haredim and in some of the peripheral areas, we find groups in which secular education and material advancement are not particularly highly esteemed. These are just not populations in which teenagers are asking themselves when, and how, they're going to make their first million. Within these groups, the employment rate scrapes the bottom and incomes are quite low. It is not improbable that members who do have ability and ambition are viewed suspiciously by prospective employers or business partners.
If this assessment is correct, the main problem of poverty policy is not to protect workers from the fickle vicissitudes of the global business cycle. Rather, it is to enable certain identifiable populations to enter the mainstream of the economy. The underlying problem is not economic but social and ultimately educational. The educational challenge is two-sided: to accustom members of these communities to view themselves as part of the mainstream, while also accustoming members of the mainstream to take members of these groups seriously and welcome them into educational institutions and workplaces on an equal basis.
Both the Sapir and the Landau approaches have a common core: The long-term solution to Israel's poor socio-economic performance is to make sure that children from all sectors of society are provided with basic professional and social skills that will enable them to compete in the global economy and at the same time find acceptance in the Israeli workplace.
I personally believe that any Arab or haredi worker who breaks into a mainstream workplace without effacing his or her origins can have the impact of a Jackie Robinson, the legendary Dodgers infielder who broke the color barrier in American Major League Baseball. Perhaps in a few years it will be as difficult to imagine an Israeli workplace without members of these groups as it would be today to imagine Major League Baseball without black players.
The writer is research director at the Business Ethics Center of Jerusalem (www.besr.org), an independent institute located in the Jerusalem College of Technology. He is also a rabbi.
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