Beware of Politicians Bearing Gifts

It’s a safe bet that Amir Peretz’s Labor Party will not garner too many votes in the chareidi sector. Religious voters will continue to vote as instructed by their respective gedolei haTorah. And those who do not are far more likely to vote for one of the more right-wing parties.

Yet there are, no doubt, some in our community who nevertheless entertain hopes that Peretz will form the next government and enact his so-called social agenda, including (they assume) drastically increased child support payments. Increased child support payments, after all, would also be popular among development town voters, who often have larger-than-average families, and Arab voters, who constitute a crucial Labor constituency. The Arab sector is by far the largest beneficiary of child support payments.

Those closet Peretz supporters may even convince themselves that Peretz is a man of faith, citing his mother’s visits to various Babas. And indeed, Peretz is a man of faith, albeit a peculiar one. He is apparently the last person in the country who still worships at the shrine of Oslo, and believes that peace is no further away than a more forthcoming negotiating posture vis-a-vis our Palestinian peace partners.

Hopes of Peretz forming the next government, however, are likely to be dashed. And even were he to do so, it is highly unlikely that Peretz would be able to provide even a fraction of the basket of goodies that he is promising. There are simply too many other actors in the budgetary process. The Bank of Israel would never tolerate the increase in government deficits that fulfillment of Peretz’s promises would entail. In addition, many of his potential coalition partners, such as Shinui, do not share his enthusiasm for welfare economics. Any benefit from Peretz’s candidacy has probably already been achieved by forcing Prime Minister Sharon’s Kadima Party to make its own appeal to the "social vote."

The truth is that Peretz’s economic prescriptions would be ruinous to the Israeli economy; nor would their overall impact on the chareidi community be salutary. To understand why, chareidi voters must remember that they are not only recipients of government transfer payments. They are also consumers and, in increasingly greater numbers, participants in the labor market.

As leader of the Histadrut, Peretz wreaked havoc on the economy through numerous strikes. So often was Ben Gurion Airport closed down by repeated labor actions that many foreign businessmen simply stopped coming to Israel, for fear of being grounded.

For all Peretz’s populist rhetoric, his strategy of labor actions has rarely been designed to help the poorer workers, but rather some of the highest-paid workers in the economy. A case in point is the recent agreement of Bank Leumi, gained via a series of labor sanctions, to provide steeply discounted stock options to Bank Leumi employees, whose average salaries are already twice the national average. Those options were apportioned according to salary, with the highest-paid workers receiving the lion’s share of the options.

Most of the strike actions called by Peretz have been designed to protect the perquisites of well-paid government workers. Thus he used strikes to battle then-Finance Minister Binyamin Netanyahu’s plans to privatize Israel’s ports and thereby introduce increased competition in the ports, which would have resulted in lower prices on imported goods. Similarly, he has been zealous in the protection of the large salaries and generous benefits (including free electricity) of Israel Electric Company workers. And he has fought against any attempt to increase the payroll taxes on even the highest-paid government workers to the levels paid by employees in the private sector.

The centerpiece of Peretz’s economic policy has always been an increase in the minimum wage. Though presented as a boon to workers, an increase in the minimum wage could well cost many workers their jobs or prevent those not currently in the labor market from ever entering. There is almost unanimity among economists against increases in the minimum wage, on the grounds that such increases retard the creation of new jobs, and particularly harm those without easily marketable skills.

That is precisely why rises in the minimum wage particularly ill-serve the chareidi community. A variety of factors are currently propelling chareidi men to seek employment at a younger age than formerly. Those factors include: a lack of spaces in existing kollelim to accommodate all those who are seeking a place in kollel; a lack of accessible and suitable jobs for mothers of young families, which makes it difficult for many women to contribute substantially to the family income; the inability of an increasing number of parents to purchase apartments for their children, without the latter taking on substantial mortgage obligations of their own; and, most important, dramatic reductions in child subsidy allowances.

Most chareidi men seeking to enter the labor force for the first time do so without readily marketable skills. The crucial thing for them is to find that first job, in order to develop skills and to overcome the reluctance of employers to take chances on a population of whom they are typically wary. A higher minimum wage will serve to eliminate precisely the type of entry-level jobs that are so crucial for chareidi workers.

The stagnant Western European economies provide the best warning against precisely the type of labor policy advocated by Peretz. Columnist Mona Charen writes that since the end of the Seventies, all the Western European economies combined have produced only four million new jobs. The comparable figure for the United States is fifty-seven million. The reason is simple: all the enshrined rights of labor in Europe have make it too expensive to hire new workers and too difficult to fire them. As a consequence, employers are unwilling to take chances on young, inexperienced workers, and many never find their way into the workforce.

The recent rioting in Paris resulted, in large part, from the unemployment rates of over forty percent among the youngest segment of the immigrant population. Many have never held a job of any kind.

The gifts that Peretz is bearing may look tempting, but we would be well advised to look closely inside the Trojan horse.