Israel gets creative, but times still tough amid weak economy

jerusalem | After decades of fighting terrorism, Israelis are facing a new and most unwelcome enemy: poverty.

Three years of Palestinian violence have scared away investors, a worldwide economic downturn has devastated Israel’s once thriving high-tech industry, factories are closing because of foreign competition, and government cutbacks in welfare and social spending in response to a $6 billion deficit have taken their toll.

Israel’s unemployment rate is near 11 percent, almost 18 percent of families are living in poverty and the number of poverty-stricken children is on the rise. Israel now has one of the highest poverty rates in the developed world, according to 2002 statistics released recently by the National Insurance Institute.

A study of some 150,000 households, recently released by the JDC-Brookdale Institute, found that 8 percent were having severe difficulty buying enough food.

Meanwhile, Finance Minister Benjamin Netanyahu’s announcement late last year that Israel’s recession was over sparked a storm of protest. Netanyahu swiftly backtracked from his remarks, saying instead that there were signs of economic recovery.

Exports are up and that’s a good sign, said Karnit Flug, who heads the Bank of Israel’s research department. The stock market also has risen in recent months.

But it’s still too early to tell if Israel is headed toward better economic times anytime soon, Flug said.

There is a lot of uncertainty about the “security issue and prospects for improvement of the geopolitical situation,” Flug said. “The ability of Israel to utilize its potential growth will depend on improvement in these areas.”

The government has argued that the economy’s problems stem not only from the intifada but from more inherent problems in the structure of Israeli industry. To address these problems, Israel is trying to privatize many state-owned companies to boost competitiveness.

It has begun aggressively deporting foreign workers, whom government officials say take jobs away from Israelis and bring down wages for unskilled labor. The 1990s saw a dramatic increase in foreign workers in Israel. With 200,000 foreign workers, the Jewish state has one of the highest rates of foreign laborers in the world, experts say.

Whether or not Israelis are interested in taking these unskilled jobs remains to be seen.

Another government project, reducing welfare support payments for the poor, is expected to increase poverty rates, the JDC-Brookdale study found.

By setting a time limit for unemployment benefits, for example, the government hopes to encourage people to go back to work. But in Israel’s present economy, finding work is increasingly difficult.

The reforms “in the short term create a lot more poverty,” said Jack Habib, a social economist who directs the JDC-Brookdale Institute. “More people are in need, but all the services they need are being cut back.”

Rabbi Yechiel Eckstein is the president of the International Fellowship of Christians and Jews, which funds soup kitchens across the country, as well as a network of warehouses where the needy can receive free furniture and other household goods.

The Israeli government, he says, is embarrassed by how its stringent new fiscal policies are affecting the country.

Such policies “have changed the face of Israel. Now the question is how to portray the public image of Israel,” Eckstein said.

“No one wants to portray it as a Third-World nation, but to portray it as an idyllic place where everything is hunky-dory is morally and practically wrong,” he said.

The government is defending its policies, taking out ads in the national press saying the reforms are the only way to help the economy. Netanyahu says the cuts are necessary if Israel wants to have a modern economy.

Critics say other solutions — such as raising taxes and investing massively in infrastructure — could ignite growth and, in turn, boost tax revenue.

According to recent surveys, however, most Israelis think the economy is suffering because of the intifada and won’t improve until the diplomatic impasse is resolved.

In fact, it’s not only unskilled workers who are having trouble finding work: As the economy slides, the highly educated also feel the pinch.

Leah Rizel, 34, has a master’s degree in human genetics and has worked for several years in genetics labs. However, she has been unable to find work for seven months.

At this point, she said, “I’ll do anything for a job because I have bills to pay and a child to raise.”

It can be overwhelming “to see the amount of educated people, people with degrees, at the unemployment office,” she said. “Getting an education these days does not mean you are going to get a job.”

On Jerusalem’s Ben-Yehuda Street, the city’s once-bustling pedestrian shopping mall, the situation is grim. Repeated terror attacks have kept both tourists and locals away.

Shop owners say they barely clear $220 a week.

“Zero. There is nothing,” snapped Yosef Zakai, owner of a Judaica shop. “Except for someone calling from the United States for a Star of David, there is nothing. There is no work.”

A few doors down, a man named Yosef said he wasn’t sure how much longer he could afford to run the women’s clothing store his parents opened in 1949.

“This is the hardest period ever for the store,” he said.

Across from his shop, he pointed out names etched on a memorial plaque — eight victims of a 2001 suicide bombing.

“Here one died,” he said, pointing at a corner of stone pavement. “Here another, here another.’

Yosef’s voice trailed off, and he headed back to his store — where, atypically, a customer was waiting.

Meanwhile, Michael Schneider, former executive director of the American Jewish Joint Distribution Committee, was in San Francisco this week, meeting with donors and fund-raisers, including the S.F.-based JCF’s global Jewish agency committee.

Schneider, who is now a consultant to the JDC, warned that with so much of Israel’s budget being used for security concerns, the unemployment rate is above 10 percent, and many families are going hungry. The JDC is stepping in, funding soup kitchens and providing other services for Israel’s hungry.

Poverty in Israel — Hunger and homelessness surge in the Jewish state

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