Fighting poverty

There are too many working poor; In 2013, 5.7 percent of families living under the poverty line were families in which both parents work.

An elderly woman. [illustrative] (photo credit: REUTERS)
An elderly woman. [illustrative]
(photo credit: REUTERS)
The good news – according to the National Insurance Institute’s annual poverty report released Tuesday – is that fewer Israelis are poor. The bad news is that Israel remains one of the most poverty- stricken countries in the OECD.
The proportion of people living under the poverty line – defined as half the median salary – declined from 23.5 percent in 2012 to 21.8% in 2013, according to the report, which is based on Central Bureau of Statistics data.
“Overall, we are looking at a downward trend, but there are problematic numbers that we, as a country, must address,” Shlomo Bar-Yosef, head of the NII, said when he presented the report.
More people are working, and that is, of course, good. Participation in the labor market – which includes both those who work and those who are actively looking for work – was up from 72.4% in 2012 to 79.6% in 2013.
Sharp cuts in child allotments – that began in 2002 and continued throughout 2013 – are seen as the main factor that pushed many able-bodied citizens to get off the dole and into the job market.
Still, there are too many working poor. In 2012, 5.5% of families living under the poverty line were families in which both parents work. In 2013, this figure rose slightly to 5.7%. Back in 1999, just 2% were in this category.
Obviously, steps need to be taken to help the working poor as well as those who are incapable of working, such as the elderly – particularly those who do not receive a pension.
Expanding and increasing negative income tax is one good way of helping out. Of course, there are also downsides to negative income tax, such as the bureaucracy it will generate, and the fact that it is paid at a one-year delay and is not paid toward pension savings.
But compared to raising the minimum wage – a step decided upon recently between the Histadrut labor federation and industrialists – a negative income tax is clearly preferable. Raising the minimum wage ultimately deepens unemployment, as employers are forced to fire workers to cover higher labor costs. At least that was the conclusion of most of the studies presented at a recent OECD conference in Paris.
Another good way to help the working poor is to provide training or teach negotiating skills that enable people earning minimum wage or close to it to receive higher wages. The American Jewish Joint Distribution Committee has invested in a program that does precisely that.
Our welfare state also has an obligation to help those who are unable to work. The outgoing government adopted some of the recommendations made by the Alaluf Committee for fighting poverty. One of them was a NIS 340 million plan to increase welfare payments for those aged 80 or more. Unfortunately, the government fell apart before the program’s implementation, which would have lowered the number of poor elderly from about 800,000 to nearly 600,000.
Above and beyond direct action to alleviate poverty, however, much remains to be done to lower the cost of living. Doing so will also make it easier for the poor to make ends meet.
Expensive housing is one of the main causes of the exorbitant cost of living. Former finance minister Yair Lapid’s 0% VAT proposal probably would have done more harm than good. The housing market was paralyzed as building contractors and buyers awaited the program’s implementation. Meanwhile, the real problem – excessive bureaucracy that increases the time it takes to build housing – was left untouched.
More needs to be done to increase competition among banks. Two plans are on the Anti-Trust Authority’s table. The first is a measure to encourage the establishment of credit unions that would charge lower fees and provide loans to small businesses and individuals. The other is to facilitate the creation of another bank for the first time since the 1970s.
And the price of food – particularly of dairy products – can be brought down by a combination of eased imports and forcing increased competition among the big retail chains.
We must be careful, however, not to fall into the trap of increasing welfare payments to those who can work. Cuts to welfare instituted over the past decade have help push the able-bodied into the labor market. Now the challenge is to help the working poor and to lower the cost of living.