Social Affairs: Investing in social justice

Could former welfare minister Isaac Herzog's plan break the cycle of poverty growing numbers of Israelis face?

fmr minister of Welfare and Social Affairs Isaac Herzog 390 (photo credit: Marc Israel Sellem)
fmr minister of Welfare and Social Affairs Isaac Herzog 390
(photo credit: Marc Israel Sellem)
It’s a simple plan, one that has already been adopted in several Western nations to fight ever-increasing poverty levels among their populations: Actively encourage every parent to open a savings account for their child, pay in a minimal monthly amount and have the government match funds, so that each citizen can start their adult life more or less financially equal.
“Implementing a plan like this has been a longstanding dream of mine ever since I took over as minister,” former minister of Welfare and Social Affairs, Isaac Herzog, said in an interview with The Jerusalem Post. Herzog headed the ministry from 2007-2011 and highlighted the idea in a recent book, Working Plan: A Recipe for Social Welfare.
“I borrowed the idea from [former British prime minister Tony Blair] when I was minister,” admitted Herzog, adding that he even commissioned a team to look into how it could work in Israel, and together with the National Insurance Institute (NII), designed a pilot plan in 2009.
Immediately rejected by the Treasury – the overall cost to the government of such a plan could top NIS 2 billion within 20 years – Herzog vowed at the time that if he ever became an MK again, he would present legislation to implement the scheme.
While a savings plan for every Israeli child, replete with matching funds from the state, sounds more like a utopian dream than reality in a country on a clear capitalistic path, a year after resigning from the government, running and losing in his own party’s primaries, the Labor MK has made good on the promise to address some of the poverty he witnessed first-hand as Welfare minister.
Working together with social empowerment nonprofit Yedid, Herzog has already drafted legislation that, if passed, will make it compulsory for parents to pay each month a percentage of their state-issued child support benefits into a special closed account, accessible only once their child reaches the age of 21.
Planning to present the bill to the Knesset in May, Herzog and Yedid have already launched a full-scale campaign to raise public awareness to the idea, which they believe will eventually reduce Israel’s poverty levels significantly.
“I see it as the best solution to breaking inter-generational poverty in our society,” said Herzog. On the day of the interview the former minister is closely monitoring the Knesset plenum to see when legislation opposing government plans to increase the cost of gasoline to an all-time high of NIS 8 a liter comes up for a vote.
He agrees that if the weather this week had not been so lousy, anger over gas prices might have brought citizens back out onto the streets in mass protest, like last summer.
Despite greater public pressure and awareness to the need for social justice, Herzog and Yedid’s representatives concede that gaining public and political support for a savings plan where parents are forced to give up, even in the short-term, on part of their child benefit is a “hard sell.”
However, a survey commissioned last week by Yedid showed that more than half of Israel’s families – 57 percent – are not setting aside any funds for their children to use in the future.
Carried out by the Magar Mochot Institute, the survey also found that only a quarter of parents (28%) regularly save money for their children, and a further 12% save only when the opportunity arises. The survey also noted that among those that do save, NIS 355 is the monthly average; the maximum a family will save on a monthly basis is NIS 419.
In addition, the study questioned parents about their willingness to participate in a government plan that would force them to save long-term for their children by using part of their monthly child allowance; 66% felt this was a positive step for their children’s future.
According to Herzog’s calculations, which he outlined in his book, if such a plan is implemented, including matching funds from the government depending on each family’s income, each citizen could have savings of between NIS 25,000-50,000 by the time they are 21.
These funds, he maintains, would provide every person with a significant financial base either to pursue higher education, open a business or buy a home. Herzog added that the plan must also be accompanied with economic re-education to teach Israelis how to better save their money and emphasize the importance of investing financially for their future.
According to Dr. Roby Nathanson, Director General of Macro Center for Political Economics, Israel faces huge levels of poverty, almost twice as much as other countries in the Organization for Economic Cooperation and Development (OECD). Recent figures from the NII show that more than 433,000 families lived below the poverty line in 2010.
“Poverty, as I have researched for many years, is not only about money, it’s also cultural and passes from generation to generation,” said Nathanson, emphasizing: “we need to find the tools to that can break the cultural and generational link to poverty for those living below the poverty line.
He points out that many impoverished families do not think in the long-term about saving, but rather “consume what they earn” immediately.
“All they think about is making a living and for them, saving is not a priority,” observed Nathanson, who has also touted Herzog’s scheme. “I believe that this is one of the most efficient methods I have heard of to break the poverty cycle.”
He added: “In the short-term it will cost the government money, but in the long-term it will save us all money because there will be less poverty in society and the state will have to support less people with welfare benefits, income support and other measures.”
Despite Nathanson and Herzog’s firm belief that a national-savings plan for each child will, in the longterm, significantly reduce Israel’s poverty levels, the original plan that inspired this idea never actually materialized in Britain.
“What we are presenting is not exactly like the British model,” said Ran Melamed, Yedid’s deputy director of Social Policy and Communication. “We want to create a holistic program for all children, and one that will particularly boost those from low-income families.”
Melamed said that while some ideas were adopted from the British proposal, others were taken from similar national-savings programs running in New Zealand, Australia and other countries.
“It’s great that we are trying to adopt ideas to fight poverty from other countries, but at the same time, a lot of countries are following the things that we are doing here in Israel, and I believe they can learn from us,” said Melamed, pointing out that while such an idea might seem like an impossible reality, Yedid has seen some success in passing social-focused legislation that required a financial commitment from the government, including a hot-lunch program for children from under-privileged families.
And, he argued that the plan is not only aimed at giving impoverished families an economic boost, he also said it makes sense for more financially stable families to consider such a savings plan.
“Even if you come from a rich family, you can never predict what is waiting around the corner,” said Melamed, adding, “maybe your father will go bankrupt or your parents will divorce, this way, despite certain life circumstances, everyone in Israel will have a solid base to start their adult life with.”