Should Israel Invest More in Welfare?

Article Summary
According to the latest report on quality of life, Israel is among the Western countries with the highest poverty rates and the lowest level of investment in welfare programs, writes Miki Peled. A leading Israeli professor attempts to explain why.

Quite often, it's the apparently simple questions that turn out to be the most complex. For instance, the question, why is Israel investing so little in welfare programs to the benefit of the lower socio-economic strata? At the annual convention of the Israel Economic Association held Wednesday, May 30, Prof. Momi Dahan, head of the Federmann School of Public Policy & Government at the Hebrew University of Jerusalem and a researcher at the Israel Democracy Institute, presented research recently initiated in an attempt to examine various assumptions that may provide an answer to this question.

Previous research, conducted by Prof. Dahan and Dr. Shlomo Hazan, shows that the welfare budgets allocated for supporting the lower socio-economic strata in Israel account for only 14.5 percent of the gross domestic product (GDP), as compared with an average of 21.5 percent of the GDP in the OECD countries — this, despite the fact that poverty rates in Israel are among the highest in the developed Western countries.

Dahan puts forward ten assumptions which he intends to explore in his research. They are presented below in ascending order of probability, judged intuitively — from the least probable to the most likely. It is not surprising, perhaps, that the first, less plausible assumptions have to do with pure economics while the more likely assumptions are formulated in socio-cultural terms.

1. There is no need for increased welfare budgets

Contrary to officially released figures (19.8 percent of households in Israel are defined as poor), inequality and poverty rates in Israel are in effect lower and, therefore, there is no need for increased welfare budgets. The gap between official figures and the situation in reality may be attributed to tax evasion, specifically in the ultra-orthodox Jewish community and the Arab sector. However, Dahan suggests two reservations. First, if the ultra-orthodox Jewish community and the Arab sector are not taken into account in the statistics, the poverty and inequality rates would be lower, but Israel will still have high poverty rates in comparison to Western countries, with 14 percent of households under the poverty line. Secondly, in other countries, too, there is tax evasion and the poor are commonly charged with biased reporting.

2. Inequality promotes economic growth

It is often claimed that inequality is required as an incentive for driving economic prosperity, that inequality is essential to the exhaustion of talent and that it is indispensable as a means of encouraging entrepreneurship and creativity. Raising taxation on the wealthy to finance Israel's defense expenditures would thus be counterproductive in this respect. On the other hand, the Scandinavian model refutes the claim made. Scandinavian countries have been thriving economically for years, with highly competitive and enterprising markets, regardless of high taxation rates and notably low inequality rates.

3. Welfare programs designed to help the poor encourage unemployment

Welfare programs designed to help the lower socio-economic strata prove to be a negative incentive, in Israel more so than in other countries, and that's why welfare budgets are deliberately limited. According to Dahan, the claim cannot be corroborated by either the research done or the data collected so far. As a matter of fact, Dahan notes, the picture is quite the opposite. According to the figures released by the [Israel Finance Ministry] State Revenue Administration for the year 2008, about 1 million wage earners earned less than 2,200 shekels per month — close to ten times more than the number of those granted minimum subsistence allowance. It appears then that people would rather work than live off aid funds.

4. Private welfare funds provide for the needs of the needy

Private welfare programs in Israel provided by charities, philanthropic associations and other aid organizations answer the needs to a very large extent, so that less governmental support is required. However, according to all the parties involved, private-sector donations in Israel are far from matching up to Western standards and cannot meet the needs.

5. That's what the public wants

The economic policy adopted by the Israeli government reflects the prevailing mood in Israeli society, which tends to sympathize with capitalist views. However, Dahan says, the social protest of last summer casts doubts on this claim. Furthermore, public opinion polls conducted by the Guttman Institute [for applied social research] show that, as far as the national economy is concerned, most Israelis tend to the left. It also emerges [from the surveys done] that about 66 percent of the Israeli public believe that poverty stems from circumstances that the poor have no control of.

6. It's not the public – it's the Treasury

The economic policy adopted by the Israeli government does not reflect the prevailing mood in Israeli society, but rather the views of the professional echelon in the Treasury, which are formed and shaped in a certain way in academia. According to Dahan, "the impression is that the education those economists receive impacts their views. University economics departments apparently put the emphasis on the consideration of efficiency at the expense of welfare."

7. It's actually the tycoons

The economic policy adopted by the Israeli government does not reflect the prevailing mood in Israeli society, but rather the interests of the economic elite — the aristocracy of capital. According to Dahan, "it is in fact the worn out cliché of business-government ties that we are talking about here and it's these inter-relations that should be examined to determine to what extent, if at all, they affect welfare policy decisions."

8. We are no dupes who can be taken advantage of

If there is one thing we Israelis hate, it's being taken advantage of. We would rather opt for modest welfare allocations, even if it is at the expense of the weak, as long as all sorts of opportunists who are trying to jump on the social welfare bandwagon are not given the opportunity of helping themselves to a generous slice of the cake. Dahan notes that it is difficult to verify the truth in this claim. "However, if I had to portray to a non-Israeli the quintessence of the Israeli character, I would certainly mention this trait of hating to be taken advantage of."

9. Those serving in the army should be given preference over non-serving welfare seekers

The Israeli public at large believes that increased welfare budgets would benefit first and foremost the ultra-orthodox Jewish community and the Arab sector. However, neither of the two groups serves in the army, and they should thus be denied social welfare.

10. Those helping themselves deserve to be helped and vice versa

The Israeli public believes that, since the share of the ultra-orthodox Jewish community and the Arab sector in the workforce is rather limited, they do not deserve social welfare. It thus opposes increased welfare budgets, which would benefit first and foremost those who do not help themselves. Dahan says that the general feeling in the Israeli public is that these two groups are violating the unwritten covenant underlying a welfare state, namely, help for the needy who make an honest attempt to provide for themselves and their families but earn too little to secure a decent living.

Found in: welfare, prof. momi dahan, poverty, orthodox, oecd, israel, arabs