Haredi Employment and Israel’s Economy: An Opinion

The year began with a controversial statement that added fuel to public debate. Bank of Israel Governor Amir Yaron said that unless the Haredi population became more involved in Israel's labor market, taxes would have to rise.

Bravo, Mr. Amir! How clever and apolitical! Surely that's why you occupy such a high public office — to make such weighty pronouncements!

Yet if we examine the situation more closely, there are much more serious economic factors holding Israel's economy back.

It is hardly a secret that Israel faced a growing budget deficit, which the article put at 4.2% in early 2020, equivalent, it claimed, to NIS 17 billion.

Instead of taking steps to reduce the deficit, our government, in the author's view, was doing little to stop it and was even making it worse. What hypocrisy! At the end of 2019, members of the Knesset — the “servants of the people” — increased their own salaries by NIS 1,400, bringing their “modest” pay to NIS 44,000. Why? Because lawmakers' salaries are linked to the national average wage. Meanwhile, the Israeli media enthusiastically reports that average pay is rising, almost in the style of Soviet-era news broadcasts. But why, the author asks, do ordinary workers fail to feel that increase?

In the author's explanation, a substantial share of Israel's privileged salaried workforce is employed by the public sector: the military, police, ministries, government agencies, public institutions, state enterprises and more. The article estimates that public employees account for roughly 25–30% of the working-age population and asserts that 40% of the state budget goes to their salaries, pensions and benefits. Just think: 40% of the budget!

That, the author argues, is how Israel entered the new decade: with an oversized and excessively privileged public sector.

Now compare this with the familiar claim that one of Israel's main economic problems is the low participation of religious yeshiva students — described in the article as roughly 2% of the working-age population — in the labor market.

Or consider the article's criticism of an increase of NIS 2.2 billion in the National Insurance Institute's budget, allegedly used for staff costs, vehicles and additional personnel. This was discussed against the backdrop of the announced freezing of certain benefits for low-income people in February 2020, including housing support for new immigrants, while the national budget had yet to be approved. Lawmakers were increasing their own pay, the author argued, and the National Insurance Institute was increasing its budget. A theater of the absurd!

In the author's view, officials across the political spectrum were united in distancing themselves from Israel's poorer citizens.

The author went further, arguing that the confrontation between two groups — religious Jews with lower labor-force participation and Russian-speaking workers with high labor-force participation — was deliberately encouraged. In this polemical interpretation, less affluent communities were being set against one another while political and administrative elites benefited.

By Yehoshua Mazia.

Photo credit: Scanned and processed by A. Sdobnikov — personal collection, public domain.