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Get out of the position, there is a logic in the grant program

2020-07-20T13:26:38.005Z


Kuti ShohamSince Prime Minister Netanyahu announced equal financial grants to all citizens of the country, waves of criticism have been attacking him non-stop. There is no economic logic, critics argue, in distributing funds indiscriminately, it is not right to scatter six billion shekels just like that between those who need them more and those who need them less or not at all. In the absence of economic lo...


Since Prime Minister Netanyahu announced equal financial grants to all citizens of the country, waves of criticism have been attacking him non-stop. There is no economic logic, critics argue, in distributing funds indiscriminately, it is not right to scatter six billion shekels just like that between those who need them more and those who need them less or not at all. In the absence of economic logic, the inevitable conclusion of opponents of the plan is that it is a fee of silence that the government distributes in the face of public unrest and lively protest.

But there is economic logic to the idea of ​​equal grants, and to understand it one must remember that in Israel there are two types of inequality: current and cumulative. Current inequality is related to income disparities. We know that the minimum wage in Israel is NIS 5,300, the net median wage is about NIS 6,500 and the average net wage is about NIS 9,000. This means that most employees in Israel, about 70 percent, put a sum in the bank that does not allow them to close the month. If we add the hundreds of thousands who are in the IDF or receive unemployment benefits because of the corona crisis, we will only strengthen this claim.

The cumulative inequality concerns the wealth disparities in Israel. In a study published about a year ago in the Quarterly for Economics, Maor Milgrom and Gilad Bar-Levav examined how wealth is distributed in Israel. Their conclusion is that "wealth inequality in Israel is significantly greater than income inequality. While the top decile holds 27 percent of national income, it holds 51 percent of wealth. The top fortune of the richest households holds 5.22 percent of national wealth, a share. Compare their share in the wealth of the bottom seven deciles together. " Simply put, the vast majority of the population in Israel does not have deep pockets that will allow them to get through the corona crisis in peace, even if their fortunes improve and their monthly income is average.

The economic logic of the program is based on the assumption that the absolute majority of the population in Israel needs grants, and therefore a program that gives to everyone - gives the absolute majority to those who really need it. The data, as mentioned, show that almost everyone really needs help. This conclusion will not change if we now begin to set income criteria based on wages and wealth to decide who needs more and who needs less. Only the mighty bureaucratic mechanism that the state will employ to create the list of those eligible will cost a great deal of capital in working hours and other resources. In addition, it will allow the economists of the budget department in the Treasury to complicate the eligibility calculations and make the transfer of funds cumbersome and slow, perhaps even stopping it altogether.

We also need to say something about the demonization we are doing to the upper deciles in Israel. The top three deciles pay about 95 percent of the total income taxes in Israel. The tenth decile transfers to the state treasury alone about 70 percent of the volume of income taxes. To be clear, decile 8 earns about 13,000 shekels or more gross; Decile 9 earns about NIS 18,700 or more, while decile 10 earns about NIS 37,000 or more. Those who criticize the distribution of grants program actually claim that those who bring taxes into the country will not actually be entitled to assistance from it when it seeks to assist the entire population during the crisis. Take taxes yes, but get a grant no. And perhaps another point in this context: Studies show that in Israeli society, those whose economic situation allows it, contribute generously to social organizations and charities throughout the year, and so will the grant money.

The public and political sentiment against Netanyahu seems to be growing, and everyone is looking for a comfortable angle to hit him. But it is precisely in times of crisis that we must examine the decisions of the government and its head in a matter-of-fact manner.

Dr. Koti Shoham is a lecturer in philosophy in the multidisciplinary program in the humanities at Tel Aviv University.

For more opinions of Koti Shoham

Source: israelhayom

All news articles on 2020-07-20

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