In 2003, an Israeli family with 10 children received NIS 6,500 (about $1,450) a month in child allowances. Three years later, in 2006, an Israeli family with 10 children received NIS 2,850 (about $640) a month in child allowances. These cuts came about as part of the larger budget cuts Likud Finance Minister Bibi Netanayhu instituted when Prime Minister Ariel Sharon came to power.
The cuts in child allowances struck many people as particularly cruel. Social workers and those who opposed the cuts accurately foretold the poverty these cuts would create. What people didn’t focus on were some of the longer-term consequences. Now, some of these consequences are becoming evident and it is time to look at them.
What happened to these large families when these income supplements fell by 56% was predictable—most became quite poor. Israeli child poverty in general rose precipitously. At 24.7 %, Israeli child poverty is now the highest in the developed world. Such severe and prevalent child poverty is new to Israel. As recently as 1996, the child poverty rate in Israel stood at 11%, or about half of the rate in the US at the time and equivalent to rates in many western European countries.
Children in large families suffer much more than other Israeli children. In 2005, 58% of children in large families lived in poverty. The key cut that thrust these large families into poverty was elimination of larger child allowances for the 5th and subsequent child. In 2001, a family received NIS 850 a month additional allowance for the fifth and subsequent children. Suddenly, after over 50 years of “pro-natalist” government policies subsidizing “jumbo” families, the extra money allotted for these children was eliminated and the allowance for each child became the same. Whether it had ever been a wise public policy to provide families with economic incentives to have “jumbo” families is debatable—but the fact is that parents relied on the promise of government support when they decided to have these children and now they could no longer afford to feed and clothe them.
When the cuts first went into effect, Israelis were shocked to hear that there were Israeli children going to bed hungry. The shock had largely worn off and soup kitchens had become a fixture in many low-income neighborhoods when the Second Lebanon War revealed the extent of poverty and the lack of government services throughout northern Israel. Poor children, hungry children, families without the resources to escape the katyushas, abandoned elderly and disabled citizens—this is not how Israel thought of itself. And then there are the forsaken citizens of Sderot, bombarded by Qassams from Gaza. Certainly not all of this can be laid to the budget cuts and particularly to the cuts in child allowances. But these cuts have become part of a bigger theme—that the Israeli government is not committed to caring for its people, especially those on the margins and those without political clout.
Surely this growing lack of trust in all aspects of the government is not one of the intended consequences of these cuts but despite the booming economy, Israelis increasingly talk about how they can count on no one to help them. Once these words meant that they couldn’t rely on Europe or the US in times of war; now they mean they can’t rely on the government to provide a safety net.
The two sectors that have suffered the most from the cuts in child allowances are the Negev Bedouin and the Ashkenazi Haredim. These two groups have extremely high fertility rates and they also have historically had low labor force participation rates.
Unemployment in Rahat, the largest of the Bedouin towns, hovers around 20%. However, a person is only counted as “unemployed” if that person is seeking employment. In the Bedouin community, men are virtually the only participants in the labor force. Fewer than 40% of Bedouin women complete high school and most never enter the labor force. Overall, Israeli Arab women participate in the labor force at the extremely low rate of 17.8%. Muslim women in general participate at lower rates than Christian and Druze women. Bedouins participate at the lowest rates of all. Some estimates place labor force participation at rates as low as 4%.
However this does not account for such activities as home manufacture of handicrafts and other efforts that earn income under the radar of the tax authority. Still, the rate of labor market participation by Bedouin women is extremely low. When Bedouin husbands are unemployed, wives lack the skills to pick up the slack and enter the labor market so the 20% figure represents households without earners, not just workers without jobs. This poverty-stricken community, characterized by large families, has suffered deeply as a result of the child allowance cuts.
In the overall Haredi community, only 37% of men participate in the labor market and this rate is lower among the Ashkenazi Haredim than the Mizrachi Haredim. Men not in the labor market typically study in Yeshivot. However, this lifetime of study does not include mathematics, science, English or computer skills and therefore Haredi men have few marketable skills. For most men, the only marketable skills they have are those connected to religious study or observance.
In contrast, while schools for Haredi girls are generally seen as less serious than those for boys, these schools do attempt to prepare future wives and mothers for the labor market and so their studies include some math and computer skills, as well as English. About 48-50 % of Haredi women work, a rate that is not as high as the overall 58% Israeli female labor force participation rate. Nevertheless, especially among the Ashkenazi Haredim, the wife is the only earner for the family. But her capacity for earning is limited not only by her limited education and the religious restrictions on her interaction with men, but also by her frequent pregnancies and by the fact that she typically also shoulders all of the household and childcare responsibilities for the family.
Over the past three to four years–the same period in which child allowances have fallen so drastically–there have been several well publicized cases of high tech firms such as Matrix opening offices in Haredi neighborhoods and creating employment conditions that are especially attractive to Haredi female employees. These employers offer sex-segregated work environments, sometimes asking a local rabbi for approval of the arrangements. Infant nurseries and breast pumping facilities encourage new mothers to return to work more quickly. Some employers offer shortened work hours as well so that mothers of older children can coordinate their workday with the extended school day offered in Haredi schools. These features increase worker loyalty to these firms.
The Israeli media has compared these “in-sourced” back-office operations staffed by Haredi women to back-office operations outsourced to India. It works to keep the jobs in Israel because Haredi women are typically compensated at minimum wage for skilled or semi-skilled labor. Still, these are attractive jobs for Haredi women because their main alternative to working in the high-tech or service sector is teaching, a particularly poorly compensated occupation in Israel.
In a full time position, the annualized minimum wage is about $15,000. Whether this is really enough after tax to make up for the cuts in the child allowance depends in part on how many preschool children the mother needs to place in care in order to take a job.
Increased participation by Haredim in the labor force is seen by many as a positive development. Even in sex-segregated work environments, these women experience a broader slice of Israeli society than they did previously. There are very few other situations in which Haredim regularly interact with members of other segments of society. Schools are separated; neighborhoods are separated and this segregation breeds suspicion and prejudice on both sides. So in addition to the benefits to the individual woman, financial benefit to her family and the benefits to the national budget, there are societal benefits to having Haredi women working outside the home in a corporate setting. What we have yet to see is whether there are societal costs to having women with very large families dividing their attention between their responsibilities at home and their time at a job.
As of yet, it is also difficult to figure out whether these “in-sourced” operations will be a lasting phenomenon or whether it is related to the general strength of the Israeli economy at this time. In recent years, growth as topped 4% and unemployment has dropped from 10.4% in 2003 to 7.3% in the third quarter of 2007. But whether the “in-sourced” jobs last or not, it is possible that Haredi women will slowly venture out of these protected workshops and into the larger labor market where they could earn more money for the same work.
Recently, another effect of the cut in child allowance has become apparent. In addition to the cuts in additional allowance for large families, the allowance for new babies is now only NIS 150 a month, a little more than half of the allowance for children who were born before the cuts took effect. These new child allowances are hardly generous as $400 a year will do very little to help feed and clothe a child. If anything, the message of such a minimal allowance is “if you can’t afford to raise a child, don’t have one in the first place.” Whether this is a fair message or not, it is certainly a different one from the past practice of giving couples a substantial incentive to add more children to the family.
The question has been whether the Haredi community’s childbearing practices, which are tightly regulated by religious rules, would be influenced by a change in economic incentives. Of course, economists would predict such a change but the reasonable question is how this could come about in a society where contraception is prohibited, where martial relations are considered a religious obligation and where the timing of intercourse is regulated to enhance the probability of conception.
Israel has the highest Total Fertility Rate (TFR) (a measure of future, not current, family size) in the developed world. At 2.88 children per woman, it is the only developed country besides the U.S. that has a fertility rate above replacement. The overall Jewish Israeli fertility rate is 2.8 (up slightly in 2006 over 2.7 in 2005). The fertility rate among Arab Israelis is somewhat higher, although the rate among Christian Arab Israelis is only 1.71. Mizrachi Haredim have a rate of 4.57 which is quite a bit less than that of Ashkenazi Haredim, which has hovered around 9.0. The fertility rate among Ashkenazi Haredim is one of the highest—if not the very highest—fertility rate of any community in a developed nation in the world. (By contrast, Mormons in Utah, a group known for its large families, have a lifetime fertility rate of 3.03. For the Old Order Amish, a group that does not practice contraception, the lifetime fertility rate is about 6.5. For Negev Bedouin, it is about 6.8)
Israel’s Central Bureau of Statistics (CBS) recently released the first new TFR statistics since the cut in child allowances took effect. Although the total number of births to women under 20 fell, Bedouin women, often married at a young age to older men, continue to represent a disproportionate share of teenage pregnancies. No notable change in fertility in Bedouin towns was noted in press coverage of the report.
Changes in Haredi fertility, however, has been headline making news. In Betar Ilit, a mostly Haredi suburban neighborhood outside Jerusalem, the rate fell from 8.9 in 2001 to 7.7 in 2006. In Modi’in Ilit, a Haredi town, rates fell from 9.1 in 2001 to 8.0 in 2006. These are drops of 13.4% and 12.1% respectively. While there may be another cause, it is certainly possible that the drops are a response to a combination of the reduced economic incentives to add children to the family and the increase in female labor participation.
Israel does not keep fertility statistics by subgroups so the trends come from geographic information on fertility rates combined with information about the subgroups that dominate different geographic communities. The drops could conceivably reflect other factors and a single data point does not make a trend. But the preliminary data fit a pattern well-known to both economists and demographers: As women move into the workforce, their lifetime fertility decreases. Ashkenazi Haredim have bucked the ways of world in so many respects, but especially with regard to fertility. No other group with so much education or in so wealthy and developed a society has so many children. Only time will tell if ordinary economic factors influencing fertility rates indeed apply to them.