On not working for a living

The recent International Monetary Fund report on Israel’s workforce, submitted to the governor of the Bank of Israel and the finance minister Feb. 13, cannot possibly come as a surprise for most of us, especially not state authorities. While Israel currently enjoys a low unemployment rate, it has failed miserably in incorporating all sectors of society in its labor force.

The unemployment rate is measured against the number of job seekers; it does not take into account those people who are not seeking work at all. Therefore, though Israel boasts a high rate of entrepreneurship and competitive business, the gross national product is relatively low in comparison with the U.S. and developed European countries, as is the gross domestic product per capita.

When discussing integration into the workforce one usually refers to the ultra-Orthodox and to minorities. But there is another significant group -- people who lack professional training and who have been stigmatized as chronically unemployed.

The government has made four fundamental mistakes over the last decade in this context. The first one is the continued financial support provided to the ultra-Orthodox community of individuals who do not work for a living. This support is well beyond what most other residents or citizens of Israel are entitled to. Among this sector, work is not yet a value in and of itself.

The second mistake was the failure to channel resources into the creation of jobs. Only recently did the government amend the Law for the Encouragement of Capital Investment, which directs NIS 6 billion ($1.6 billion) to Israel’s most powerful and lucrative factories and industries, even if they enact large-scale layoffs or close production lines. The only requirement to qualify for this assistance was to export a quarter of the product. This enormous tax break has so far been enjoyed mainly by companies based in central Israel.

This massive sum could be diverted to Israel’s periphery, those cities with the highest unemployment rates, to create new jobs. This would yield greater exports of products and services. The argument that export companies would leave Israel if they weren’t given tax breaks is invalid.

The third mistake is the populism that prevails among Knesset members. Eight years ago, the Wisconsin Project (based on the American Welfare-to-Work program, active from 2004 to 2010) was launched. For the first time in Israel’s history, an effort was make to integrate the chronically unemployed into the workforce. It had its weak points and could have used some improvement and expansion, but a handful of MKs decided to destroy it and prevent its perpetuation. Thus, one of Israel’s most serious efforts to resolve the issue of chronic unemployment was discontinued.

The fourth mistake was the institution of Earned Income Tax Credit. This negative income tax is the antithesis of encouraging work. It detracts from the value of working by turning working people into welfare recipients. Instead of raising their income level, it implements a negative income tax. The right thing to do would have been to encourage people to work by raising the compensation for the work. This idea was partially implemented in the recent agreements between the Finance Ministry and the Histadrut labor federation regarding the employment of contract workers.

If encouraging people to work were the supreme value and we channeled resources to create new jobs, train unemployed workers and improve wages, welfare assistance would be less appealing than working. If this were the case, we would begin to see the signs of a turnaround and exit from the inflexible employment structure in our economy. In this way, a large part of the Israeli public would cease to view unemployment as a way of life.

If we were wise enough to make integration in the workforce a top priority, and to channel our resources into creating jobs, training unemployed individuals, increasing wages and encouraging people to work without making them reliant on welfare, we would begin to see a shift and eventually depart from the current rigid employment structure. With this method, a large portion of Israel’s population would no longer view unemployment as a permanent way of life.

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