Paying the price so the rich can get richer
צילום: ג'רמי פלדמן
Creating a just society
Israel must strengthen organized labor to correct inequality
Israel's economic policy over the last 20 years has been crafted in light of the lessons from the fight against inflation that were learned following the program to stabilize the market in 1985.
According to these policy makers, Israel must ensure stability (in other words, low inflation), while the policy's job on the "realistic" side is extremely limited.
Thus, inflation and deficit goals were set in the budget without agreeing on goals for growth and lowering unemployment. More than that, the issue of wealth distribution is not considered worthy of treatment by policy makers.
Growing inequality
Inequality in Israel is greater than in other similar countries. According to studies carried out by the Economic and Society Program at the Van Leer Institute, the reasons for this run deep.
One study, by Salem abu-Zaid and Itzik Sporta, comparing inequality between households headed by employees, finds that inequality in Israel stems from the fact that since the mid-1970s, Israel's richest 10 percent increased its share of the economic pie, at the expense of the bottom nine-tenths.
The main factors that contribute to growing inequality are economic forces that work against low-income families and in favor of high earners. Welfare transfer payments, considered by so many as the root of all evil, have slowed the growth of inequality in terns of gross wages.
Tax cuts for the rich
Until recently, the tax structure worked to reduce the par in net wages. But the changes in economic policy that have taken hold in recent years, especially tax cuts to high-income earners, will cause this inequality to grow in the future.
In order to deal with inequality, we must deal with its root causes: To reduce inequality in pre-benefit and pre-tax income. To do this using the tools that will intercede with the market distribution of goods.
For example, to enforce minimum wage laws, and to match their level to agreed upon goals of income distribution. At the same time, we must reduce exaggerated benefits to the rich with steps that will reverse too-high payments.
Weak unions, inequality connected
According to a study conducted by Tali Crystal, Yinon Cohen and Guy Mondlack, there is a strong connection between growing inequality and the weakening of worker's unions.
A reduction in unionized workers in various sectors and in the number of collective bargaining agreements has contributed to growing inequality.
It follows, then, that a society interested in equality must support organized labor and collective bargaining practices.
This is practiced in Scandanavia, for example. Economic forces that promote inequality can be reined in to some degree here, too.
There is no other way, if we want Israel to move in the direction of social "solidarity," and if we want the phrase "social justice" to be more than an empty catchphrase.
Prof. Arieh Arnon is the head of the Program on Economics and Society at the Van Leer Institute in Jerusalem
