Monday, August 08, 2005

Bibi's poverty

My assertion in my previous post (actually not only mine but also one found in the media) that Bibi was "one of the country's finest Finance Ministers" was challenged by a comment which related to this remarkable report on the annual poverty report which was published today. Rather than just leaving a comment in response, I thought it appropriate to sit down with said poverty report and compose an informed answer on the issue.

Why "remarkable"? - because although all the negative facts that it reports are sadly, completely true, it total ignores the fact that the poverty report also notes that the economy is growing, the standard of living, the average wage and GDP per capita are all going up whilst unemployment is down and that all of these trends are continuing in the current year - nor does it mention a single other positive fact.

The report's definition of poverty, as a percentage of the average wage is in itself problematic. Were the income of every person in the economy to rise by $1,000 per month, the average wage would rise accordingly, everyone would clearly be better off, but the number of poor people would be precisely the same.

That the definition only takes into account one's income is no less problematic; a millionaire with a house in London, Paris and Bnei Brak but without an actual income would be considered to be below the poverty line, as would all of those many families whose wealthy parents purchase them a property and sub them a few thousand dollars small change a month (and who claim income support and reductions in the municipal tax based on their low income).

Here's a particularly revealing passage that caught my eye (my translation):

"The rise in the poverty gap was characteristic of all sectors of the population but stood out in particular in large families and families of work age which were not working. These are the two groups that particularly suffered from the cut in children's allowance and income support".
The discovery (I seem to recall a similar passage in last year's report) that families where no-one works are likely to be poor is immediately obvious to anyone with half a brain.

Starting with this fact that families that don't work are likely to be poor and taking into consideration that families which fit this definition are frequently those for whom children in double figures is not unusual, it is easy to see why the number of poor children is growing on a yearly basis. If the poorest sectors of the population reproduce in this manner and educate their children towards a culture where working for a living is bad, the number of poor people on Bituach Leumi's records will continue to grow year by year with more poor children added every nine months in readiness for the following year's poverty report.

Not everything here is rosy - Bibi cut every single National Insurance payment in real terms and this has most certainly affected the weakest sections of the population. Certain of those cuts such as those relating to pensions have been addressed in the 2005 budget and will only start to be felt in next years poverty report, others are designed to force those capable of going back to work to get up and do so and others are plain wrong - but presumably have the long term aim of increasing the wealth in the economy to allow for larger payments for genuinely deserving claimants.

Many items in the poverty report show precisely the good that Bibi has done for the country in the time that he held the purse strings; there is plenty to be upset about but it must be taken in context and lines have to be read between in order to get a complete picture. I stand by what I said - Bibi led the country out of a recession, cut taxes and put the economy back on the rails and headed in the right direction.



Gavriel said...

I'd like to say excellent post, but your thinking seems too clear. Something's got to be wrong here. What you say makes a lot of sense, but we don't hear such deceivingly clear thinking from many of the experts in the papers. So even though I'd like to believe you, I have to side with everybody else. Now pardon me while I crawl back under the table to wait for the sky to fall.

Anonymous said...

I, like you am not an economist, but I have some brief comments regarding the report and the threads.

Report is produced by Bituach Leumi who require reliable info in order to do their job properly, as do all the other relevant government ministries. If the methodology is so obviously flawed as you point out, and presumably also non-standard for reports of this type, (and like Gavriel I'm not saying you're wrong I don’t know), what would be the point of the report full stop?

Thatcherite trickle down economics lies at the heart of the policies of Shalom and Netenyahu but it's bollocks, the wealth doesn’t trickle anywhere, we learned that 20 years ago. And more importantly it is a grave mistake to think you can measure the health of a society by economic factors alone: cutting support for single parent families to sub-subsistence levels to force (usually) women back to work may look good on paper, but has a huge social cost, and considerably ratchets up the numbers of children-at-risk. You may have saved a few pennies today but the social and financial cost tomorrow…

You and Anon below point out how the Hareidi political decision not to work warps the figures somewhat, and while there is obviously something in this, it is only part of the truth. The Arab-Israeli community for example is larger than the Hareidi one, also has a higher than average birth rate, but suffers from a woefully disproportionate cut of state resources, far less than 20% or so that they make up. Lack of Government investment in education, infrastructure, employment etc. is a major contributory factor to the lack of opportunity and poverty faced by the community. If on the other hand you live over the green line, the amount the government invests per citizen (excluding security costs) is many, many times the average.

Another question: you say "Bibi led the country out of a recession, cut taxes and put the economy back on the rails" but how much is that down to a particular individual or even local policy, as opposed to global trends and/or the diplomatic situation here?

Finally, referring back to my point on the other post: NONE of the economic arguments justify the systematic demonisation of the weakest sectors of society by Shalom and Netenyahu.

Phew! So much for brief…

Yellow Boy

Gilly said...

Britain today is in a rather better shape than it was in in 1979 thanks largely to Thatcherite policies. She ran the shop for most of that time and those who have come after her have followed suit. If you prefer to go back to the days of union domination, energy strikes and 3 day weeks then please feel free to vote for Amir Peretz.

Yes it's not right to demonise a sector of the community. I'd argue your choice of verbage but if you insist - the right demonise the left, the left demonise the settlers, the religious demonise the secular and vice versa and we all demonise Manchester United. Wouldn't want anyone to feel left out....

Anonymous said...

Bugger, just lost my post. I'll try again.

That the general level of political 'discourse' in Israel is terrible is irrelevant. The weakest sectors of society- single parents, the disabled, Arabs, the elderly etc. should not be victims of it full stop. It’s what the Torah demands, and we mustn't be blasé about it.

We demonise ManUSA because they are c***'s. Single mothers aren’t.

Yellow Boy