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Wisconsin in Israel: Punishing the Poor
by Assaf Adiv
N early August 2005, steps were taken to implement the Wisconsin Plan in Israel – known here as Me-ha-Lev: “From the Heart.” Applied in the American state of Wisconsin in the mid 1990’s, it signals a new stage in the privatization of social services, with the aim of eliminating the welfare state. The proportion of Israelis receiving welfare (AKA “income maintenance”) is indeed way out of line in comparison with most Western countries. If there were jobs, it would certainly make sense to help them shift to “workfare.” The problem is that there are no jobs. In the Israeli version, the Wisconsin mechanism is set up to strike thousands of people from the caseload without assuring them of employment. The implicit goal is to reduce expenditures by punishing the poor.
Israel’s annual Poverty Report, published on August 9, puts it first among western countries in poverty among children. After distribution of welfare payments, a third of Israel’s children (714,000) are below the poverty line (half the median income). The western country occupying second place in poor children, with 27%, is the US. Like much of what arrives these days bearing the tag “Made in America,” the Wisconsin Plan will deepen poverty.
With the rise of the second Sharon government, in partnership with the neo-liberal Shinui Party, the conditions were ripe for Wisconsin. The Knesset approved the plan in 2003. It jibed well with the reforms of then Finance Minister Binyamin Netanyahu, which included privatization (of the ports, the pension funds, the major telephone company) and drastic cuts in welfare (for the jobless, the physically challenged, single-parent families, and families with children).
During its initial stage, “From the Heart” includes 17,000 of the 160,000 who receive income maintenance. The plan will proceed on an experimental basis for two years in four centers: East and West Jerusalem; Nazareth and Nazareth Ilit; Hadera and the villages of Wadi Ara; and Ashkelon. Of the participants, 30% will be Arabs and 20% new immigrants.
The program will be run by four companies, each consisting of an Israeli firm and a foreign one that has already “done Wisconsin” in its own land. Altogether Israel has budgeted NIS 80 million ($18 million) for the plan.
The crux of the program is this: every participating welfare recipient will be required to remain in the Wisconsin center between 30 and 40 hours per week, receiving counseling, training and job referrals. If he does not succeed in finding salaried employment, the counselor may assign him to full-time non-paid work in a community institution such as a hospital or charity. Only by doing this work will he continue to receive a welfare check (NIS 2200 per family = $488 monthly).
Are the unemployed to blame?
In 1982, when Israel passed legislation providing income maintenance, the number of eligible households was less than 10,000. By 2003, the number had grown 16-fold – to 158,000 households! (Source: Nehemia Strasler, Haaretz July 17, 2003.) What happened in between? The main event was that Israel globalized its economy, canceling protective tariffs, privatizing government corporations, dispensing with labor-intensive industries while promoting hi-tech, and importing migrant workers. These measures created nearly irreversible unemployment but found favor with local and international capital. Welfare payments purchased social calm.
Until Netanyahu’s reforms in 2003-04, a couple with more than two children that was living on welfare received monthly income maintenance amounting to NIS 3200, plus child allowances that could bring the total – say, for a family with four children – up to NIS 6,000. For many people it paid not to work.
The huge welfare outlay did not tally with the kind of economy that modern investors prefer: one with a lean public sector and an anorexic national budget. After Israel had globalized itself, the time had come for Phase Two: Netanyahu’s cuts. Today the income maintenance for a family with more than two children has dropped to NIS 2200, and child allowances have been reduced to NIS 150 per child. One cannot live on that. (The average Israeli family spends NIS 10,000 per month!) The spur to work, therefore, has become very strong. Why then don’t people shift to “workfare”? In most cases, for the reason already stated: no jobs.
All stick, no carrot
Israel’s version of the Wisconsin Plan suffers from three basic problems:
1. Lack of means to create jobs.
Israel’s economy creates zero jobs for non-professionals. Consider, for example, some of the firms discharging workers at the end of July 2005. Delta, the biggest textile producer, fired 500 from its flagship plant in Carmiel. Club Market, the third largest supermarket chain, went bankrupt, failing to pay suppliers, who in turn dismissed hundreds. The firm has recently been bought by a rival chain, but there is concern about the fate of Club Market’s 3500 employees.
In the Arab sector, most people used to work in textiles, construction and agriculture. Half the jobs in textiles – 23,000 – disappeared in a decade. In construction and agriculture, the government permitted almost unlimited import of migrants. These have edged the Arabs out of the “three D’s”: the difficult, dirty, dangerous jobs that alone were open to them. Between 1995 and 2000, for example, 35,000 Israelis – almost all of them Arabs – lost their construction jobs to migrants.
2. The second basic problem: a business venture.
“From the Heart” will be judged on the basis of its ability to reduce welfare expenditures more than on any success it may have in shifting people to productive work or raising their standard of living.
In a meeting at the Finance Ministry, one of the plan’s external advisors, Attorney Adam Eytan, explained that the “reduction in government expenditures doesn’t have to be a result of
placement. It is assumed that it is the result of people hearing about the new requirements and they don’t want to work or are already working so don’t come in.” www.moital.gov.il/NR/exeres/F8B4C069-A688-4921-B8BD-EB24790C9E30.htm
How then will Wisconsin reduce caseloads?
a. Many of those summoned will either fail to report or drop out. The Finance Ministry assumes that about a third of the chronically unemployed are faking: some work in various unofficial jobs, and others don’t want to work. Because the plan requires their presence for 30-40 hours per week, they will prefer to sacrifice the benefits.
b. Others will refuse to do what the Wisconsin companies require, giving the latter a pretext to deny them benefits for two months per refusal.
c. Some will be placed in jobs.
The program contains a contradiction. The apparatus is so structured that the less the companies invest in the services they are required to provide (e.g., financing daycare so that parents of small children can work), the more their profits will increase. In fact, the companies who won the tender to operate the centers did so by stressing low costs and bigger savings. Time is also a whip. A company will not get paid unless it reduces welfare expenditures by 35% within seven months.
The plan, in short, puts the company and the welfare recipient at odds with each other. The company has the authority to deny benefits and, by using it, can increase profits. This raises the suspicion that the profit motive will take precedence, and benefits will be denied to people who need them. (Ibid.)
In fairness, the plan includes an incentive. The company will get a bonus if 40% of those who leave the welfare lists move to registered jobs in which they remain for at least six months. In the present labor market, however, such a goal seems unrealistic. It is stated, one suspects, for the sake of appearances, in order to offset the bad impression given by the negative incentives described above.
A program quite contrary to the Wisconsin Plan has been implemented by the Workers Advice Center (WAC) in the Arab sector for the last three years. WAC understood that unemployment and dependence on welfare are social banes. In addition to aiding the needy, WAC initiated a project called “A Job to Win.” Here it helps people return to work at a fair salary and with social benefits. The results demonstrate that when companies are willing to pay a fair wage, people want to work.
3. Third problem: Wisconsin helps break the labor market.
As mentioned, the plan permits the Wisconsin companies to send participants to voluntary work in hospitals and charities. In a press release on January 12, 2004, the Ministry of Industry wrote: “The purpose of community service will be to instill work habits.” Hogwash. The purpose is to make it not worthwhile for shirkers to claim that they can’t find jobs. But the availability of this costless labor may encourage employers to fire existing salaried workers.
That would be an instance of the more general problem described by Professor Robert Solow, a Nobel Prize winner in Economics:
The labor market is like a game, or several games, of musical chairs. When the music stops, the players scramble for the available chairs. Since there are fewer chairs than players, the losers are left standing. They are, you might say, the unemployed....Adding more players – which is what forcing welfare beneficiaries into the labor market would do – can only increase unemployment. Some former welfare recipients will find jobs, perhaps many will, because among other reasons, they are hungry but only by displacing formerly employed members of the assiduously working poor. (Robert M. Solow from The New York Review, Volume XLV Number 17, 5 November 1998.) (See:www.jobsletter.org.nz/art/artsolow.htm).
In addition to these three basic problems, there is a fourth: Wisconsin has the same nominal goal as the National Employment Service. If successful, it could make the latter redundant. Therefore, the clerks at the Service are in no big hurry to refer the most suitable participants. See the next section.
A rocky beginning
On August 2, as the Wisconsin Plan was about to be inaugurated in Nazareth, a riot broke out, resulting in damage to the company’s offices. The program was shut down for a week.
Asma Agbarieh, monitoring Wisconsin for WAC in the Arab Sector, explained the frustration and confusion that the welfare recipients feel:
“The Wisconsin companies receive the names of the candidates for participation in the program from the National Insurance Institute (NII). The NII has a data base on the unemployed. But there is no cooperation between the NII, the Employment Service, and the companies. One gets the impression that the government clerks are worried that the plan may make them redundant. This conflict lies behind the lack of any substantive discussion in choosing participants for the project.
“According to my information, the Employment Service sent the lists of participants to the companies just one month before the starting date. The companies didn’t have a chance to check the chances of placing these people. For example, when I interviewed the head of Amin, the company for the center in Jerusalem, he told me that a check of the names revealed that several were no longer among the living.”
The people who have been referred to the Wisconsin centers include a high proportion of the sick, the disabled and the elderly. In Hadera, the Agens Company discovered that 67% of the referred participants are 40 or older. “In the US the situation was completely different. In the state of Wisconsin, for instance, more than 80% of support-recipients in the program were under 40. Many of them were young, single-parent mothers.” (Ruti Sinai, Haaretz July 4, 2005.)
In the Arab sector the problems increase exponentially, Agbarieh explains. “During the golden age of welfare benefits, if there were children under seven in the family, only the father would need to report once a week at the Employment Bureau. Netanyahu’s reform has forced women with children older than two to report. For an Arab woman this is harder than it sounds: having reached the Bureau, she must wait on line four or five hours. In Jerusalem the waiting is outdoors, exposed to the weather and with no facilities – an impossibility if she must bring children with her.”
Only 17% of the Arab women in Israel work outside the home, compared with 50% of Jewish women. The problem results not only from lack of jobs, but also from the fact that Arab society looks down on working wives. Now, with Wisconsin, Arab women will be compelled to appear in the placement centers for 30-40 hours a week. It is unlikely that the economy will have jobs for them, except unpaid work in hospitals and such. The Plan is supposed to finance daycare for the children, but even if such a miracle were to occur, the central problem would remain: the husband and his family frown on a working wife. This attitude should be changed, but this won’t happen through shock treatment like Wisconsin. It certainly will not happen unless real jobs are available under fair conditions. “Our worry,” says Agbarieh, “is that entire families in which the father is really unable to work, or stands no chance of finding a job, will lose what little is left in welfare benefits.”
If the fakers and shirkers are dropped, there remain the estimated 70% who have already been hit so hard in the last three years. It is difficult to believe that these people would not accept work if they could find it. What family in Israel can live on benefit checks amounting to NIS 2200? But there is no work. Where the Employment Bureaus failed to lower the caseload, the Wisconsin Centers may succeed – not by shifting recipients to “workfare,” rather by getting them to drop out.
The bottom line: there is no serious effort in Israel to increase the number of jobs. Those who implement the Wisconsin Plan accept, as an accomplished fact, a weak job market where labor rights are not enforced. That is why the riot broke out in Nazareth on August 2, and that is why it will repeat itself if there isn’t a basic change in the official attitude toward the unemployed.