Demographics And Poverty

We've all read about how the welfare cutbacks in Israel has led to a lower birthrate in the Chareidi and Arab communities. Amnon Rubinstein argues in yesterday's JPost that greatest demographic threat to Israel is the high birthrates of its poorer communities.

Right now the majority (comprised of everyone but pretty much the Chareidim and Arabs) is 70% of the population, meaning that 70% is supporting 30%. While such a high percentage of poor people is detrimental to Israel's economy, the size of those communities is expected to grow to close to 40% by 2025. Can 60% support 40%?

In exchange for staying in the government, Shas is asking for a return to the olden days, when large families received greater benefits per child. Rubenstein asks Olmert to refuse Shas' demand, even if it costs Olmert the premiership.

Rubinstein correctly, in my view, recognizes that cutting back on welfare will create incentives to look for work outside of the Yeshiva, as well as to decrease family size. These are good things for a society, even one like Israel with another demographic problem. But having a number of children in poverty is not beneficial to society, especially when the majority is obligated to support them. Moreover, the policies that lead to a decrease in the Chareidi birthrate caused an even greater drop in the Arab population growth.

Using welfare benefits as a tool to influence policy worked very well in the US. In 1996 Congress passed a welfare reform bill, which drastically cut back on the amount of child poverty and even got people off the state welfare rolls. In Neoconservatism: The Autobiography of an Idea, Irving Kristol argued that welfare is a good idea in theory, but it creates all kinds of disincentives to work. Cut people off of welfare and they'll look for actual employment.

The socialist Israel could never accept such a conclusion, given their ideals of equality of result. But if anything is good about Netanyahu, it is his idea that economic growth is predicated on people working, rather than accepting money without providing any benefits to the economy. Bibi implemented these reforms and there have been measurable positive effects. If Israel reverts back to its socialist ethos and reenacts large welfare grants to large families, those economic benefits will be undermined. Let's hope Olmert gets that.