The conference was opened by Prof. Michel Strawczynski, Head of the Economics and Society Program at the Van Leer Jerusalem Institute and Dr. Michael Borchard Head of the Konrad-Adenauer-Stiftung office in Israel. Both of them welcomed the participants and introduced the topic with some opening remarks.

Prof. Michel Strawczynski said that anyone working on these issues knows that poverty is a long-term problem, which cannot be solved quickly. Therefore, in order to deal with it, we have to discuss tools and programs that could be implemented in the long run. Prof. Strawczynski concluded by explaining how important it is that this issue will become once again part of the public discourse.

Dr. Michael Borchard highlighted in his words that although in both Israel and Germany there have been relatively a low unemployment rate in the last few years, the gap between the rich and the poor still kept constantly rising. Dr. Borchard addressed the economic challenges ahead and explained how he believes both countries could serve each other as role models – Germany with its social market economy system and Israel in terms of courage and optimism.

Paper Session

Poverty, Part-time Work and the Earned Income Tax Credit

The first session included the introduction of two separate studies. The first paper was conducted by Prof. Michel Strawczynski and Prof. Leah Achdut from the Van Leer institute in cooperation with Ms. Miri Endeweld from the National Insurance Institute. It showed that the average number of “poor workers” in Israel has increased by 4 percent points in the last 15 years. Thus, the weight of “Poor Workers” in the population of working families in Israel has increased from 9.4% in 1999 to 13.2% in 2014.

Mrs. Miri Endeweld introduced her data sampling from 2004 to 2014, which presented different dimensions of working poor. Her study furthermore presented other low-wage sectors, which were new immigrants, Arabs, Haredi (Ultra-Orthodox), unskilled workers and people who work in the public sector or those who receive an income credit. Mrs. Endeweld concluded her contribution with the proposal to adopt other tools additionally to the working credit program (ITAC).* Prof. Michel Strawczynski went on and highlighted the idea of integrating those groups who participate in low rates into the labor market. In his research, he examined the reasons for non-participation in the labor market. Prof. Strawczynski recommended providing the ITAC from the first Shekel (NIS). Thus, decreasing the rate of poverty and creating additional part-time jobs. That is in accordance to the United States of America, where the same grant is given from the first Dollar. He explained that in Israel today, individuals who work part-time and earn less than 2100 NIS are not valid to receive the employment grant and that the current situation leaves around 1/10 of the part-time workers ineligible for the grant.

Child allowances and human capital accumulation: the case of Israel

The second paper was presented by Mr. Shai Tsur from the Bank of Israel. Mr. Tsur conducted a study that focused on child allowances in Israel. The leading question of his research was – "what impact did the increase of financial means had on Arab families?" He explained that before 1993, child allowances were only attributed to those who served in the army (Which excluded most of the Arab citizens). After 1993, universal child allowances were adopted and therefore, included Arab and orthodox families. Mr. Tsur found out that the policy change in child allowances allowed an increase of education for girls coming from Arab families. Furthermore, the research concluded, that since these Arab girls were better educated, they could be better integrated into the labor market. Finally, this change increased the percentage of the working force and hence, reduced poverty.

Keynote Lecture: Working Poor Reform: Implications for Minimum Wage and Quality of Life

Following a short coffee break, participants heard the keynote lecture of the conference by Prof. Ronnie Schöb from the Freie Universität in Berlin. Prof. Schöb presented the evolution of unemployment in Germany from 1990-2015. He cited long-term unemployment as the main problem in Germany throughout most of this period. This phenomenon only started to decrease in 2005, due to changing governance structure of labor and the Hartz Reforms, which aimed at bringing people back into the labor market. As a result, unemployment declined but other problems were created, one of them being the "working poor". He noted that when there is high unemployment, the state aimed at bringing everyone back to work. However, when unemployment decreased, the aim shifted toward fighting the “working poor”. In fact, in Germany, this eventually lead to rising demands for a statutory minimum wage. Prof. Schöb went on and examined whether the minimum wage has alleviated the problem of the working poor. First results showed that unemployment rates continued to drop with the introduction of the minimum wage. However, Prof. Schöb said that it is yet to be seen whether the minimum wage becomes a success story. He concluded by saying it is necessary to design labor market reforms that alleviates the lot of both groups who were ‘left behind’ - The long-term unemployed and the working poor.

Symposium: Can the labor market be the only medicine for the poor? Insights from Israel and Abroad

The final symposium of the day included several speakers who discussed whether the labor market be the only medicine for the poor. The first speaker, Prof. Ronnie Schöb, addressed the topic of interdependency between the government and the labor market. He explained that the German government does not offer too many services in this field. Prof. Schöb explained that the question here is who should pay in order to guarantee the subsistence minimum level of income – The society or private companies. The dilemma is situated between the society, which would act in solidarity with those left behind, and private firms, which would externalize solidarity. Prof. Schöb explained that in Germany the accepted notion is that society should pay for it. Finally, as a policy change he recommended reducing social security contribution rates for low-wage incomes combined with a minimum wage moratorium, as a cure for the dealing with this phenomenon.

The second speaker, Mr. Yoel Naveh, The Chief Economist in the Israeli Ministry of Finance, examined trends of inequality and unemployment in the last two decades in Israel. First, he drew a comparison between western countries and Israel and concentrated then on the latter. He stated that there was a significant increase of people in the labor market, an improvement of income and consumption, a rise of the minimum wage as well as of the poverty rate. Mr. Naveh subsequently made the prediction that unskilled workers will eventually mostly suffer from the results of the recent planned increase in the minimum wage. He ended his presentation with the statement that those who have more people in their household are the working poor and brought up the question whether we should accept the fact that in some cases poverty might be a choice.

Dr. Sami Miaari from The Israel Institute for Democracy and The Tel Aviv University discussed the poverty in the Arab sector, while focusing on gender issues within both the Arab society and the labor market. He stated that the participation rate of Arabs in the labor market rose constantly since 2003. However, he mentioned that the positions, in which they were employed, were mostly not compatible with their level of qualification. This, Dr. Miaari explained, indicated the inequality and discrimination in the labor market. He continued with exposing the gaps in wages and in gender in Israel. Dr. Miaari stated that due to these gaps, no one guarantees an Arab woman that by joining the labor market she would see her household getting out of poverty. Dr. Miaari proposed not only encouraging women to enter the labor market, but providing them with a guarantee of equality in job opportunities.

To conclude the symposium, member of Knesset MK Michal Biran addressed the topic of the working poor in Israel from a more social perspective. She disagreed with the optimistic notion of Mr. Naveh from the Ministry of Finance and described a rather gloomy socioeconomic situation. Ms. Biran asserted that recent survey has found that more than 40% of middle-class families in Israel would not be able to pay a big unexpected expense. Furthermore, she added that almost all young people today rely on their parents and financial problems are omnipresent for most Israelis. MK Biran denounced the government for encouraging this phenomenon of working poor by encouraging employers to hire employers through an external contractor rather than directly. She explained that in fact, even people with higher education who work today, still need compensatory help to the salary, which they obtain from the government. MK Biran invoked the government to take action against the phenomenon of the working poor in Israel and promised to fight herself against this, starting from the working conditions of cleaning staff in the Knesset.

In the closing discussion of the symposium, the audience had a chance to ask the speakers questions and debate the points that were raised. While there was much disagreement regarding the measures that had to be taken to deal with the problem, all participants agreed eventually on two points. First, that economic growth in Israel can be reached through investing in the Arab population and in women employment. Second, that discrimination in the labor market needs end by providing more opportunities for quality jobs and by imposing quotas. Yet the question of the proper governmental intervention in the market in order to deal with the issue of working poor remains opens for the upcoming future. It remains to be seen whether this phenomenon is simply a byproduct of the modern labor market or rather a symptom for a growing social rift.

• This program is also known as the Employment Grant Program (previously named “regressive income tax”) is intended as an enticement to participate in the job market, to increase the disposable income of those employed at the lower income brackets and to reduce income inequality.