Who is poor and why

The Histadrut should, however, be the last entity allowed to plead for the poor. Together with Israeli governments it has been the cause of most of Israel’s economic woes, pushing policies that inhibited economic growth and depressed employment and wages. Thus the economy remains highly dysfunctional, despite Israel’s first-rate human capital (and plenty of invested capital). With government help, the Histadrut fashioned regressive labor laws and politicized the work place, causing a great lag in productivity.

Histadrut-owned or supported enterprises squander billions upon billions of the taxpayers’ money, directing it to politically connected crony enterprises. Strikes, called so often by the Histadrut, have advanced the political ambitions of its shabby leadership and the rapacious interests of public monopoly unions. They have cost the Israeli economy billions and damaged employment.

By inflating the cost of goods and services the Histadrut has also allowed our monopolies and banks to bilk the Israeli consumer of between 15-30% of his income. No wonder that last week Dov Lautman, a prominent captain of industry, castigated Finance Minister Netanyahu for being too hard on the Histadrut.

There are other ways in which the Histadrut and the social lobby have been condemning the lower-income strata to continued poverty. Especially cynical has been their employment of half-truths and falsehoods and their manipulation of statistics to obfuscate the real causes of poverty; and their promotion of economic snake oil, of costly and damaging “solutions” ironically called welfare policies.

Let’s first examine the basis of the Genie Coefficient, the statistical device used to define the poverty line.

If, say, Bill Gates or any other billionaire settled in Israel, this would promptly result in many more thousands of Israelis falling below the poverty—because the Genie Coefficient, a statistical contrivance based on median income, does not reflect the real state of the putative poor.

Moreover, the survey of incomes, which determines the median income, includes only urban households’ income, not independent wage earners’ and farmers’. Those who participate in the survey probably seldom disclose their full income, although they are assured by the government survey-takers that it will be kept secret (ha, ha).

In addition, the survey does not take into account the non-cash income from property, services, self-production and occasional employment. The considerable income from the informal economy, which the economists estimate at between 15-30% of GNP, is also not counted.

So the survey really provides a distorted picture of actual income. Still, those who formulated the Genie Coefficient, statisticians who would balk at any data possibly containing a more than 3% standard deviation, are, without batting an eyelash, promoting a standard based on very shaky data and assumptions, extrapolated from the annual sensation of the imaginary number of the poor.

THE POVERTY line is so absurd that American workers who fall below the American poverty line actually earn more than the Histadrut’s “protected” Israeli worker. It is claimed that numbers seldom lie. But numbers certainly do not disclose the entire truth, especially when they are politically manipulated.

Poverty is a very serious and complicated social issue. Therefore finding solutions to it should not be entrusted to special pleading groups, especially not to a Histadrut that has routinely exploited lower-paid workers in order to enhance the interests of its politically strong and highly paid public monopoly unions.

Even when the intentions of some of the groups included in the social lobby are arguably good, they often inflict great irreversible harm on the poor. Just witness what happened to residents of the so-called development towns, who have “benefited” for over 50 years from handouts from the Israeli welfare system.

It is claimed that there was simply not enough money put into this system. But Israel probably spends more than any other country on transfer payments, over 30% of its bloated $70 billion budget. Still, the income gap keeps growing, as does the number of those seeking supplementary income.

The annual poverty line festival promoted by the media has given the issue extensive coverage but done nothing to promote a productive economy which could secure the prosperity which is the only hope for helping the poor.

Take housing. The poor often demonstrate for affordable housing, demanding that the government either grant them social housing or heavily subsidize it. Yet most of the inaccessibility of housing for lower-paid workers is the result of government interference. The government monopolizes land, driving prices sky-high. The government sanctions a financial market monopoly that greatly inflates the cost of capital.

Government monopoly-granted rights to building material manufacturers and its support for a contractors’ monopoly has enabled these groups to exact extraordinary profits, at least when the industry is not in recession, as it is now. It has been—calculated that over half the cost of housing is due to the government.

Had the Histadrut really wanted to help the poor acquire affordable housing, it would try to address these artificially inflated costs and use the considerable clout that it had for many decades to curb them. Instead the Histadrut has always supported monopolies (it owned many!), enabling them to exploit the Israeli consumer, especially the lower-paid ones. Monopolies were permitted to amputate the consumers’ limbs, after which the Histadrut offered them crutches, at best, so it could reap the political credit that comes with such protection.

Now that the public seems to have wised up to the Histadrut’s hypocrisy regarding the poor, the Histadrut has the nerve to try to mobilize resistance against economic reform, claiming it may hurt the workers’ pension funds.

But it is the Histadrut that has caused these funds to go bankrupt, by offering excessive benefits to politically strong unions at the expense of the lower-paid workers.

The Histadrut squandered billions from the pension funds as well as by offering dozens of its faithful high-paying, non-work jobs in the pension funds. It wasted additional billions on various political activities. On this issue too the public will, I hope, call the Histadrut’s bluff.

Indeed, by drawing attention to the dismal situation of the pension funds the Histadrut may be inviting lawsuits seeking to make it accountable for the billions missing from these funds.

Netanyahu should be congratulated on trying to solve an enormously difficult pension problem, one bedeviling most Western democracies. But instead of being supportive the Histadrut, in its venerable destructive tradition, is doing all it can to frustrate a reasonable solution.

If the Histadrut succeeds in undermining reform most pensioners will soon find themselves without any pension at all. Talk about protecting the needy and the poor.