Pandemic Forced Tens of Thousands of Israeli Families into Poverty

Gottleib’s impressive resume

Gottlieb, who holds a doctorate in economics from HUJI and completed his bachelor’s degree from the University of Zurich and his master’s degree from the London School of Economics, certainly has the credentials and experience that should have made decisionmakers in the government listen to him. He previously worked as an economist for the International Monetary Fund, followed by years in the economic unit of the foreign currency department at the Bank of Israel, and as chief economist in the bank’s research department. He also served for 12 years as a senior consultant to three Bank of Israel governors. 

 

Gottlieb specialized in monetary policy, inflation, the capital account of the balance of payments, public debt, the optimal level of the country’s foreign currency reserves, liberalization of foreign currency, macroeconomic policy and public policy. Over the years, he has published many research studies in professional journals, and has written chapters in books on economy and society.

Refusing to come back to their low-paying jobs

The senior economist was one of those who advised government officials not to offer unpaid leave to young employees in lower-paid jobs who were sent home when businesses closed during Israel’s lockdowns and certainly not to promise that these payments – covering 80% of their wages – would continue to be deposited by the government into their bank accounts until June 2021. 

 

“This,” he told Israel365,” resulted in many of them refusing to come back to their low-paying jobs; instead, they either stayed at home or went to work “under the counter” at jobs in which they got paid in cash and without reporting their income to the tax authorities. 

Having great difficulty finding workers

As a result, many low-paid but key jobs in industry, hotels and other places have had great difficulty finding workers. 

 

Gottlieb added that the Coronavirus has hit Israeli society very hard not only regarding young salaried workers, but also the self-employed and freelancers. Even after the government’s and the National Insurance Institute’s payments, it has pushed families from the upper- and middle-classes into lower economic classes, and many are now near-poverty or actual transitory poverty. Depending on how long the economic crisis continues, their poverty “may well become permanent for many of the 151,300 families economically hurt during the crisis, of which 42,000 fell into poverty. The results of government policy speak for themselves,” he said sadly. 

 

“A suggestion for a simple, means-tested automatic payment, without the need to be file claims that was proposed after the start of the crisis for immediately implementation by the National Insurance Institute’s research department where he was deputy director-general was ignored by government decisionmakers. 

The results of a sharp rise in unemployment benefits

For the first time since the Israel’s National Insurance Institute was established by law in 1953, it has fallen in 2020 into a large deficit due to the sharp rise in unemployment benefits and a decline in revenues. 

 

This, stated Gottlieb, will possibly continue to be so for more than a decade, as repeated warnings in previous years about the actuarial deficit have remained unsolved by the government and the Knesset. “The main challenges for a better future of Israel’s social insurance must be efforts to simplify bureaucracy and strengthen the National Insurance Institute’s independence to care for the financing of the legally determined benefits.

The transition from one economic layer to a lower one

The decline into near-poverty by the middle class will probably be temporary, said Gottlieb, but an estimate of a decrease in the unemployment rate towards the end of 2020 – an assumption that has meanwhile become too optimistic – shows that about 151,000 families (441,000 individuals) have been affected. Of these, about 42,000 have degenerated into poverty even after the division of government payments on two occasions through the National Insurance Institute. “These vulnerabilities leave scars on the material standard of living as well as mental health,” he said sadly.

The transition from one economic layer to a lower one has moved 34,000 families (112,000 individuals) from the lower-middle class to poverty; 8,300 families (20,700 people) from the central-middle class to poverty; 67,000 families (193,000 individuals) from the middle-middle class to the lower-middle class; 32,600 families (92,000 people) from the upper-middle class to the middle-middle class; 6,800 families (18,300 people) from from the rich class to the upper-middle class; and 2,400 families (4,900 people) from the rich class to the middle-middle class. A total of 42,500 families (132,800 individuals) have sunk to the poverty level. 

The National Insurance Institute was overwhelmed

In the general population, there are many, including those in their 60s and above who live on pensions and allowances, who have not been financially harmed. At first, the government made the wrong decision, giving the first grant to all senior citizens even if their economic situation was reasonable and did not change following the crisis,” the senior economist said. “The challenge, however, should have differed — to treat those who had suffered the bulk of the harm – those who had been working but were send home and also people living in poverty for a long time.”

National Insurance Institute was overwhelmed by a sudden gush of claims, which rose within days from about 17,000 new claims a month before the crisis to about a million claims. 

“Falling between the cracks”

Instead of offering all employees sent home without pay an allowance covering 80% of their paycheck and making a commitment to do this until June 2021, the decisionmakers should have offered a payment covering the whole paycheck, gradually reducing it to encourage people to find suitable jobs so they would return to the workforce, conclude Gottlieb. 

Such a payment should have been detached from the unemployment- benefit claim to ensure that there will be no people who “fall between the cracks” because of being self-employed, freelancers, employees who have not completed a qualifying period or people who have long since given up on finding a job. 

handicapping their ability to reach elite units

Gottlieb also worries that high-school pupils who have had to study from home instead of being in the classroom for many months could be regarded with “the mark of Cain” on their foreheads of having accumulated less knowledge during the crisis, thus handicapping them in their ability to reach elite units in the Israel Defense Forces and getting good jobs in civilian life. Youngsters from wealthy families who hired private teachers to educate teens during the school closures will not be affected, but the poor who could not afford such tutors will be harmed, and the social gap will grow.