larry derfner 88.
(photo credit: )
The plan announced by Finance Minister Avraham Hirchson this week is the most encouraging economic news I've heard since I don't know when.
The idea of requiring all employers to give their employees pensions; of instituting a negative income tax for low-wage earners; and of dramatically escalating the enforcement of labor laws, especially the minimum wage law, add up to a real departure. This is the first time I can remember that an Israeli government has introduced a major economic plan that genuinely comes to grips with this country's worst domestic crisis: poverty and the gap between the haves and have-nots.
There have been other recent finance ministers, notably Binyamin Netanyahu, who claimed that their "reforms" would help the poor, but the truth was the opposite. The gutting of welfare payments and child allowances, undertaken by Netanyahu with a vengeance, probably got a few slackers off their bums and into the workforce, but on balance it devastated the poor, including the working poor and the "truly needy" such as children and old people. Whoever doubts this can ask any actual poor person, or anybody who works with actual poor people, instead of just taking the word of the media's favorite bankers, "growth-oriented" economists, stockbrokers and CEOs.
HIRCHSON'S package - which still has to go through the cabinet and Knesset - recognizes that the sink-or-swim economic approach of this decade not only hasn't reduced poverty, it's made poverty worse: More people have become poor, and more poor people have become hungry. The plan recognizes that poverty continued to get worse even during the last four years of economic growth, when the Israeli population on the whole prospered.
The plan identifies the new face of Israeli poverty - the working poor. It also identifies the working poor's main enemy: exploitative, often criminally exploitative, employers, and forces these greedy bastards to cough up the money they owe their workers.
And while Hirchson's program is largely a rejection of economic conservatism, it also incorporates a lesson that modern economic liberals, or social democrats, have had to learn: that work, not welfare, is the answer to poverty for everyone, outside of children and old people, who is capable of working.
THE GOVERNMENT'S new approach is neither to be a "nanny state" that pays people not to work, nor to practice "social Darwinism" by staying out of the economy and letting the little fish get eaten by the bigger ones. Instead, the government would intervene on behalf of people who are working for low wages by requiring their employers to pay them more, and by augmenting their wages further with government funds, or a "negative income tax."
This negative income tax is supposed to be financed by a raise in the unfairly low income taxes paid by people who use company cars. Sounds fair to me.
The solidest part of the plan is the part that seems to have gotten the least attention: a vast increase of the number of inspectors who investigate claims of labor law violations, mainly failure to pay the legal minimum wage of roughly NIS 18 an hour, and who haul criminal employers into court, where they're liable to pay stiff fines. (One day, God willing, the labor courts will start sending these predators to jail.)
It's the worst economic injustice in this country. The Bank of Israel estimates that 10 percent to 15% of Israeli workers - 250,000 to 375,000 employees - get paid below the legal minimum wage, because so many employers are predators and there have never been nearly enough inspectors to scare them into obeying the law. Hopefully, that will change now.
A LOT of things, however, could go wrong with Hirchson's plan. There is wide opposition to the income-tax hike on company car users, which is the financing mechanism for the whole deal. Above all, the benefit of a negative income tax and a mandatory workplace pension for low-wage employees could be hollowed out by piggish employers who could cut their wages even more and let the government make up the difference, or keep workers on as free-lancers or part-timers to avoid having to pay them pensions, or pull another one of the countless tricks used by countless employers to screw their employees, especially the lower-skilled, lower-paid, easily replaceable ones who have no bargaining power.
In Israel, such employees - those who would be affected by the new economic plan, those who earn NIS 3,500 to NIS 5,000 a month, those who are known as the working poor - make up a majority, just over half, of the workforce.
The problem of poverty on the job exists not just in Israel, of course; it's an international epidemic that's resulted from a new world economy in which dizzying competition, Third World wage standards and the stock market keep employers constantly searching for ways to cut labor expenses; in which private-sector labor unions are all but obsolete; in which "blue collar" jobs hardly exist anymore outside the Third World, and the ones that do exist pay slave wages; and in which the worship of wealth has become so fanatical that employers, no matter how wealthy, are able to fire or cut the wages of their workers, no matter how poor, without a twinge of guilt.
This is the free market today for non-professionals in Israel and everywhere else. After years of smugness and denial, the government has recognized that millions of working Israelis don't have a chance in this so-called free market, and is taking serious steps to make the playing field somewhat less radically skewed in their employers' favor.
It's a start.