A few months ago, the Israeli public finally began discussing the issue on contract workers and what it means to work without any social terms or benefits. Weeks of debates culminated in a four day general strike bringing the issue to the forefront of Israeli media with MKs, businessmen, and labor activists talking about the moral, legal and ethical issues of contract work. But what should have been a platform for change culminated in an agreement for only Histadrut workers, leaving the overwhelming majority of Israel’s struggling working class to suffer.

I’d like to begin by explaining what constitutes a contract worker, because most of the media as well the Israeli government seem to have no idea. A contract worker is any worker, whether part time or full time, who works under a contract that circumvents Israeli labor law. Some of these workers receive wages below minimum wage, many do not receive a pension, and nearly all of them are missing out on at least one of their legal rights, including but not limited to reimbursement of transportation, vacation, sick leave and overtime pay.

There is a reason that we have labor laws. Elected officials enact labor laws on behalf of their constituents as a counterweight to a firm’s desire for strict gains. While it may not be desirable for an individual firm to give vacation days or a sick leave policy, we, the citizens of Israel have the right to enact such laws via our representative government and tell firms that if they want to do business in Israel, these are the rules.

Other labor laws serve not only to help workers in the short run, but also to help stabilize the economy in the long run. For example, the mandatory pension law is designed not only to ensure that all Israelis will be able to retire with dignity, but also to enable the government to ultimately cede the task of supporting the poor, a task that it currently does both begrudgingly and inadequately, to the individual workers. By undermining Israel’s labor laws and allowing employees to pay workers without putting money into their pension funds, Israelis risk not only the continued suffering of the elderly, but also the continued collective economic burden that payouts incur.

Finally, allowing employers to write contracts that circumvent Israeli law leads to lazy governance. For example, most people agree that Israel’s overtime policy, where overtime is paid based on hours worked per day, is excessive and unrealistic, as most jobs require and reciprocate with flexibility. A realistic alternative would be to change the law to mirror the labor laws of other countries, where overtime is paid for excessive hours worked per week or month. But since employers usually sign workers onto a contract for a “global salary,” meaning no overtime whatsoever, the matter never came before the Knesset and they never bothered changing the law. Consequently, instead of having a reasonable overtime policy, most Israelis receive no overtime pay at all.

Much of the media as well as the government claim that by turning contract workers into salaried workers, employers would lose the flexibility they need in order to hire additional labor for seasonal projects, end up giving tenure to more useless workers, and ultimately cost employers too much. In truth, this argument only applies to workers in companies with strong unions, such as the histadrut. For all other Israelis, Israel’s policy for firing a worker is not very strict at all, one day of notice per month with a max of a month’s notice. But if employers insist that following the law is too complicated, then at least some sort of compensation should exist.

To begin, all workers, contract and otherwise, should have a pension paid out of their salary. The pension law isn’t just about the worker; it’s about Isael’s economic stability and in an age of electronic transfers there is no reason why this cannot easily be done. Second, if an employer does not want to pay his employees benefits, then the government should establish a set percentage to be paid as compensation for vacation days and a sick policy. Finally, in order to make sure that all employees follow the laws mentioned above, it should be mandated that all wages should be stated to the potential employee excluding the additional pay for benefits. Just as a regular job quotes its salary figures in gross salary not including benefits, so too salaried workers should have their pay offered in terms of gross pay without benefits. This would also end the current situation where employers pay benefits as a part of a minimum wage, effectively paying their workers below minimum wage. This would also allow potential workers to see the payoff of a job in a consistent, understandable way so that the worker can know if the job is really worthwhile.

Allowing businesses to circumvent labors laws is not only immoral, but make every discussion about labor laws entirely irrelevant. If our Knesset members really believe that minimum wage is just an idea, that the pension law is only an option and that social terms are just a proposal, then they should say so. But if they believe that our labor laws aren’t just a suggestion, but the product of our representative democracy, then the only just thing is to tackle the problem of contract workers and bring order to a labor market plagued with anarchy.

Golda Meir is famously credited for saying, “Moses dragged us for 40 years through the desert to bring us to the one place in the Middle East where there was no oil.”  Her statement, although made in jest, hits on an important note for those who believe in the sanctity of the land and see it as a blessing from God.  Most of my life, I was taught in Yeshiva that God wants the Jewish people to work and pray for their food; so easy money could not be an option.  But in the field of economics, there is a different answer.  A country’s richness in oil is not a blessing; it is a curse, a resource curse.

A resource curse is a natural resource that, while bringing in money, tends to cause the country to have less economic growth and worse development than if it were to be without the resource.  Looking at Israel’s oil rich neighbors, this theory can shed light on the blessing of milk and honey, but not oil.

Countries with a resource curse become disconnected from their people and are prone to tremendous corruption.  Governments quickly become small clans who fight and cause regional conflict in order to secure the primary asset of wealth and then guard the treasure to make sure it does not leave their jurisdiction.  Pretty soon national money, which should be spent on the country’s citizens, is instead spent on bribing the right people for the right favors in order to ensure that leaders stay in power.  The government no longer sees a need in investing in education; after all, it isn’t the people who bring money to the country, it’s the oil.  In the end, this deadly combination of a selfish government based entirely on withholding from the people and massive amounts of money eventually erupts into massive civil rights violations, ending in disaster and death.

Furthermore, financial dependence on natural resources can cause many economic problems.  The Dutch curse, named for what happened in the Netherlands after finding massive amount of natural gas in 1959, occurs when the natural resource drives people to invest so much in the country that the currency rises tremendously, allowing those selling off the resource to make a lot more, but forcing everyone else working in exports to suffer tremendously (Israel’s strengthening shekel is bringing Israel a similar problem now, which through public policy, is affecting the housing market.)  Finally, reliance on a single source of income tends to cause a country’s income to be extremely volatile with all of its eggs in one basket.

Does this mean that every natural resource is a curse?  Of course not.  In fact, most of the countries with an oil curse were totalitarian beforehand, and there are many oil rich countries without totalitarian regimes.  But when the threat of totalitarianism rises, oil becomes a weapon and a means of subjugation.  Were it not for the power that oil has given our dictatorial friends, much of the Middle East riots going on now would have occurred decades ago and would have been less bloody.  Without oil, Gaddafi would not be able to hire mercenaries to kill his own people and the Kind of Saudia Arabia would not be able to bribe his people temporarily until the regional anger subsides and he returns to the height of his power.

Without oil, Mapai was unable to maintain a grip on Israel and permanently enforce a  socialist ideology on its citizens.  Without oil, Israel learned to develop its human capital and turn into a service economy and high-tech powerhouse.   Without oil, Israeli businesses learned to diversify their investments, so that while Israel was hurt in the recent depression, it was not nearly as damaged as the United States or Europe.

As for Leviathan, stay tuned…

I was going to write this as a proper article, but I’m just going to get to the point.  I hate Mifal HaPayis.  They prey on the poor and ignorant, and are nothing more than a huge deadweight loss in the Israeli Economy.

Mifal HaPayis, like most lottery games, markets heavily toward the poor and preys on desperation and the desire for quick money.  And although I am an outspokenly libertarian and believe that every person is responsible for his or her own actions, I understand that people are affected by the society around them; most parents would not raise their child in a crack den even if it meant cheaper rent.  As a society, we have chosen, and rightfully so, to help those among us who have not succeeded financially and are in desperate need of assistance.  But if we allow a predator in their midst, tempting them with easy money while branding their vice as philanthropy, then we are really just giving our money to the predator instead of giving it to those in need.

But what of all the good Mifal HaPayis does?  What of all the schools they build, the community centers they fund and the other money they give to charity?  If I steal a million shekels from you and generously give back half a million, would you say I was doing any good?  If Mifal HaPayis did not exist, our society would be richer, less welfare money would be wasted, more money would be collected through regular taxes and we would all be better off.

Instead of standing up to a deadweight loss on Israeli society, the Israeli government not only endorses Mifal HaPayis, but they allow Mifal HaPayis to  brand themselves as the builders of Israel, legitimizing themselves on schools buildings and community centers.  I am not sure of the lottery practice all over the US, but I can say that NY, even though it has a lottery, would not dare let the lottery brand itself as a saint and market itself to children the way Israel does.  Even if the lottery funds are used to build schools, the NY government understands that gambling is gambling and school children should not have to associate the lottery with tzedakah.

This past Shabbat, I noticed a flyer for a new contest sponsored by Mifal HaPayis.  This contest challenges religious Jews to submit an essay on the subject of tzedakah to be judged by a distinguished panel including a Rosh Yeshiva of Ponevezh and several other prominent Rabbis.

Let me make a point loud and clear to the distinguished Rabbis endorsing Mifal HaPayis – stop endorsing an agency that is stealing my money!  You want to make me pay more taxes to support Torah learning – fine, raise my taxes.  But do not advocate an agency designed to ensnare the poorest among us just so that the said agency can take money for itself and then decide to play God as it allocates what they think is generous.  The ends do not justify the means.

To be fair to the reputation of Israeli Gedolim, I would like to mention those who has been a major opponent of Mifal HaPayis since day one.  Rabbi Ovadia Yosef, former Chief Sephardic Rabbi and current Leader of Israeli Sephardic Jewry, has time and time again referred to Mifal HaPayis’s actions as theft and has ruled that no Jew should participate in any of their games. 

I am not a posek, but this is not simply a matter of kashrus or anything else that affects the people for whom the halacha is being determined.  The Ashkenazic Poskim who endorse Mifal HaPayis not only allow their own followers to throw their money into the trash and perpetuate a cycle of poverty, but endorse the theft of money from every tax paying citizen of Israel.

So what can we do about this Mifal HaProblem?  Educate your children to associate Mifal HaPayis with gambling, not charity.  Contact prominent Rabbis who endorse Payis and teach them to understand the error of their ways.  Finally, reverse the branding of Payis and when you see their emblem, call it what HaRav Ovadia does – theft.

Unless you’re a very strict carnivore, you’ve probably noticed that the price of tomatoes in Israel has skyrocketed while the quality has plummeted.  According to an article on Ynet, stores in Israel are blaming the hot summer and low supply during the High Holidays for the expensive low quality tomatoes.  But this only tells one piece of the story.  Israeli farmers are still producing better quality tomatoes for export, but we in Israel are unable to buy such tomatoes, even if we are willing to pay more.  Why is this?  Where have all the good tomatoes gone?

The answer to this economic conundrum is what is commonly referred to as the “shipping the good apples out” theorem.  This theorem was developed by economists Armen Alchian and William R. Allen when observing a letter written to a local paper asking why no good apples were available to purchase in the region where the apples grew.  Alchian and Allen explained that when two grades of a product are increased by a fixed per-unit amount such as a transportation cost or a lump-sum tax, consumption will shift toward the higher-grade product. This is true because the added per-unit amount decreases the relative price of the higher-grade product (thanks wikipedia!)

Okay, now in English:

Suppose that better quality tomatoes (BQ) cost ₪ 25 a kilo and lesser quality (LQ) tomatoes cost ₪ 10 a kilo.  This means that the cost of eating one kilo of better quality tomatoes costs the same as eating 2.5 kilos of lesser quality tomatoes or 1 BQ = 2.5 LQ.  

Now suppose that it costs ₪ 5 to ship a kilo of tomatoes out of Israel, no matter what the quality.  This means that outside of Israel BQ will cost ₪ 30 (25 + 5) and LQ will cost ₪ 15 (10+ 5) or 1 BQ = 2 LQ.

Since the relative price of BQ to LQ changes, the people who live out of Israel consider it more worthwhile to buy the better quality tomatoes.  This will ultimately drive up the price out of the country and make it more worthwhile for producers to ship their better tomatoes abroad.

This theorem has plenty of applications beyond produce.

1 – War – According to some historians, this theorem explains why the North’s blockade was so successful during the American Civil War.  During the Civil War, blockade runners mostly smuggled in luxuries, not necessities, leaving the South to starve.

2 – Criminal Policy – By giving harsher punishments to marijuana users, the government may actually encourage marijuana users to use harder drugs like cocaine and heroine.

3 – Other Luxuries – According to Economist Tyler Cowen, the Alchien – Allen theorem implies that Australians drink better quality California wine and Californians drink better quality Australian wine.

Getting back to tomatoes.  My personal advice in the short run is to try to buy fewer tomatoes and that the tomatoes you do buy should be cherry tomatoes.  Cherry tomatoes may cost a bit more (I bought a kilo for ₪ 15 last week) but they last much longer, so you know that while you are spending a lot of money, you will at least be able to cut down the risk of wasting tomatoes that already cost an arm and a leg.  Also keep tomatoes in mind a week from this Friday when we begin asking for rain (“ותן טל ומטר”).

 On a happier note, clementines hit the market recently. They are tasty and very cheap (₪  5 a kilo.)  Maybe I’ll have a fruit salad instead…

When I first came to Israel, I was a generous tipper.  I used to tip cab drivers, barbers, and, of course, waiters and waitresses.  But as I became more Israeli, my tipping habit became less and less frequent, reserving tips almost exclusively for waiters and waitresses.  But isn’t there a good reason for tipping?  Should I go back to the American way?

Some say that tipping rewards and encourages good service.  This is true, but in the overwhelming majority of service industries, no one gets a tip.  If a worker works well, he or she can receive a raise or bonus, but it is up to the boss to decide.  Perhaps the industries in which we tip are different, because the workers make much less money.  That’s a good argument.  But then, would one consider using tzedakah money to tip a waiter?  What about waiters who make more money working at nicer restaurants?  Finally, why does the waiter get a tip and not the busboy or the cleaning crew?  Although I do like the idea of giving my tzedakah to one who already works, I doubt one could  consider tipping the same as giving tzedakah.

Moreover, there is a problem I call the Jersey effect, where tips do not really benefit the waitresses as much as they should.  In places like New Jersey, waiters and waitresses are allowed (or at least when I was in High School) to receive less than half of minimum wage, the logic being that the tips will make up for the unpaid wages.  In this case, the business owners are benefiting and, in reality, taking some of the tips from the waiters.  So even if you hold by the tzedakah theory of tipping, realize that in places like New Jersey, sometimes less than half of what you give it actually going to your tzedakah; the other half subsidizes and employer to underpay his workers.

Another tipping theory is that tipping allows one to communicate his or her likes and dislikes to a service oriented industry.  If one thinks the service was fantastic, one will tip more; if one thinks the service was lousy, one will tip less.  But economically, we communicate our likes and dislikes by choosing whether or not to be a repeat customer.  So why do we need this additional method of communication?

So as a matter or principle, I am against tipping.  I would rather a system where the market rewarded every service industry like everyone else, with regular compensation.  But I do not live on principles alone; since we do live in a society where tipping is preferred, I tip around 15% at restaurants, 10% if the service is lousy, 20% if it is fantastic (I choose these numbers because the math is simple).

There are some circumstances where I have learned not to tip, for example, after negotiating a price.  I have had more than one cab driver / barber get upset and tell me “why do you bargain down a price and then pay more in the end?  Are you just trying to upset me?”

Have your tipping habits changed in Israel?

PS – never upset a man who about to cut your hair.  It never works out in the end

Imagine you are choosing which path to follow to get to your destination.  You’re unsure which path to take so you decide to follow the person you think is smartest.  You follow this person for about a kilometer or so and then suddenly you see that this person trip over a tremendous log, breaking his leg.  He is laying there bleeding, crying out in pain.  So, because you admire this person so much and think so much of him decisions, you trip over the same log and break your leg as well. 

As the world bares witness to the dishonesty and underhandedness of the banks and credit card companies in America and the devastation they are causing, one would hope that at the very least the rest of the world would learn not to do the exact same thing.  These banks and credit card companies baited high interest rates and property liens with easy money, hoping to find the next friar and lure him in.

I remember once coming home from High School to find a $5,000 check in the mail – all signed and approved from a bank I have never heard of.  All I had to do was cash it, which would of course enroll me in a loan with interest so high it could make a loan shark blush.  This of course was just one of several checks that came amongst the myriads of pre-approved credit cards in the mail. 

Such tactics played an integral part in the recent collapse of the American economy.  And I hoped, I really hoped, that I would not see the same tactics in Israel…

But then I did. 

During Pesach, when I saw How to Train your Dragon (which was a fantastic movie and worthwhile to see in 3-D), I saw a commercial for an Israeli credit card company.  The commercial featured some woman bragging about how she was able to buy stuff because her credit card gave her a loan with no questions asked.  I couldn’t believe it so I had to check out their web site to see if this is true.

Apparently, this credit card company is offering “loans to everybody.”  And I ask why?  Why would Israel allow a credit card company to do to Israel what they did to America?  America is the most marketed to culture in the history of mankind and the most marketed product of all is debt.  It is the marketing of debt that turned America into a world leader on the rise to a nations who’s distribution of wealth looks less like a first world democracy and more like a third world tyranny.

Don’t let credit card companies destroy Israel.  Do not let them persist in the marketing of debt until this country becomes as pathetic as my last home country.  Tell others what they are trying to do.  If you can, preach financial responsibility and make it a number one priority among your family.

Let them all know – if we wanted to live in a country that looks like a pale shadow of a falling empire, we would have never left the US.