The next looming demographic disaster

Shas must not get its way. Don't restore child benefit allowances to their pre-reform levels.

haredi in old city 224  (photo credit: AP)
haredi in old city 224
(photo credit: AP)
This is not in today's headlines, but it will be in the coming years. Shas is demanding the reinstatement of child benefit payments, insisting that they be restored to the level they were at before Binyamin Netanyahu's economic reforms. These are the same payments that discriminated against anyone with fewer than five children. They provided NIS 171 per month for the first child compared to NIS 856 shekels for the fifth child and up, despite the fact that the greatest expense is incurred by the first child. The child benefit payments now provided are the same for each child. The full import of this demand can be comprehended only if one takes into account's the comments made at the Herzliya Conference by Yossi Hollander and members of the Economic Planning Institute. Socio-economically, Israel is made up of three sectors: the majority, which includes the Jewish secular, traditional and national-religious population, and two poor minorities: the ultra-Orthodox and the Arabs. There are huge differences between these three components. The majority works for a living at a proportion similar to the accepted levels in the West, and although its population growth is higher than that of the West, it is lower in comparison to the two poor minorities. The majority also does difficult, long and sometimes dangerous service in the IDF. At present, Israel's population is divided between the majority (71 percent) and the two minorities: haredim (10 percent), and the Arabs (20 percent). The Institute for Economic Planning has found that the turning point will come in the year 2025, when there will be a significant turn for the worse: The majority will shrink to 64 percent and the two minorities will together total 36 percent - and this will occur even if there is no increase in child benefit payments. This means that fewer people will be forced to bear an even greater economic burden in order to cover the cost of the continually expanding families of the two impoverished minorities. The result: greater taxation on the working population, a brain drain, ever-growing gaps, even more poverty. But that is not where the story will end. In the year 2025, Israel's population growth - among the highest in the Western world - will require, in order to maintain the current economic level, an addition of more than a million jobs! In order to accomplish this, a huge amount of capital will be needed as well as Israelis willing to work. Consequently, an increase in participation in the work force is crucial in order to provide both of these things - the capital, as well as the demand for jobs. If we want to boost Israel's economy, we must step up our growth rate as well as participation in the work force. All this remains true even if the birth rate is maintained at its current level - about 2 percent for the majority; about 6 percent for the ultra-Orthodox; about 3 percent for the Arabs. But if the birth rate should increase, the situation will become even more serious. It is feared that increasing the child benefit payments will generate even greater discrepancies in the birth rate between the working majority and the poor minorities that work less. In the years 2000 to 2006 - the years of the reform in the child benefit payments - the birth rate among Muslims dropped from 4.7 percent to 4 percent and the increase in the Muslim population in the same years sharply decreased - from 3.8 percent to 2.9 percent. These very dramatic changes cannot be ignored. IS THERE a connection between the reduction in the payments and these demographic changes? This subject is being hotly debated but a new and comprehensive study of international importance recently carried out in Israel for an American think tank has found a significant correlation between the reduction in the child benefit payments and the drop in the birth rate - particularly among the poorer levels of society, among both Arabs and the ultra-Orthodox. The researchers - two Israelis and an American - were provided with all the data of the Central Bureau of Statistics, including data that is of restricted access. This thorough and comprehensive study is important because it covers the period in which two radical changes in the size of the benefit payments were made (the Halper law, which increased the payments, and Netanyahu's reform, which cut them back). The study's findings are unequivocal: "The child benefit payments exert a significant positive influence on the birth rate. This influence is apparent among all the religious groups, including Orthodox Jews, whose religious principles forbid family planning. [...] The greatest impact [of the reduction in the child benefit payments] was evident among the ultra-Orthodox Jews and Muslim Arabs." It cannot be ignored that in those same years, participation in the work force also grew. In other words, although restoring the benefit payments as Shas demands may alleviate distress in the short term among large, low-income families, it means a future of growing poverty and recession for Israel's economy. The result will be a further reduction in the proportion of the majority that works for a living and serves in the IDF. I DIRECT these words to the prime minister and the Kadima Party: Do not capitulate on this crucial matter. Staying in power is not a supreme value and it would be preferable to hold new elections than to condemn Israel to a social catastrophe. This article is also directed at Ehud Barak and the Labor Party: Do not lend a hand to this negative social change. And it is of course also directed at Binyamin Netanyahu and the Likud Party: Do not allow fleeting political considerations to eradicate one of your greatest accomplishments. The writer is a professor of law at the Interdisciplinary Center (IDC) Herzliya, a former minister of education and MK, as well as the recipient of the 2006 Israel Prize in Law.