Sunday, August 15, 2010

Crazy Economics

Again, Zvi Bar'el.

This time he claims:

Settlement support will cost more

and "explains" it thus:-

...An estimated 22,000 Palestinians currently work in the settlements, of whom 11,000 are in construction, 8,000 in industry, and about 3,000 in agriculture.

...[there is] Palestinian legislation, a continuation of the decision to boycott products from the settlements. Likewise, the proposal aspires to disengage the economy of Palestine from that of the settlements...

Israeli industrialists and contractors were predictably quick to cry foul. How is it possible to maintain the settlements without cheap labor? If Israel wants to stick with its settlement policy, it must tell the public to pay up. The bill is already on the table. In exchange for every Palestinian worker who will leave, the settlers are asking for NIS 2,000 in compensation to make up the wage difference between an Israeli and a Palestinian worker. That adds up to NIS 44 million for industry alone, with farmers and building contractors waiting in line. This sum covers more than the social benefits paid to Israeli employees and not to Palestinians; some of it is meant to serve as a "bonus" to lure Israeli workers.

But beyond exposing the wage gap between Israeli and Palestinian workers, and the new tax Israelis will be asked to pay the industrialists and contractors in the territories (who had it easy )...

The departure of the Palestinians from the settlements and the entry of Israelis in their place means a rise of about 20,000 settlers. If this includes their families, the number of Israeli labor migrants to the West Bank will reach 60,000 to 80,000 persons, increasing the number of settlers living in the territories by 20 to 25 percent.

a. the Jewish resident is the one who will pay any increase in construction wage costs through a direct rise in his own costs.

b. okay, a certain percentage is public buildings, i.e., schools, but that doesn't justify his sweeping generalization

c. what tax is he talking about? there has never been a tax to pay for building wages?

d. what construction worker moves for his job from 40 minutes travel away? so what families will be pouring in?

e. having Jews in construction aids the economy, no?

- - -


Anonymous said...

Barel's argument is correct on his first point (if industrialists are subsidized by the govenrment for the added cost of employing Israeli workers, of course, it will amount to a new tax). In fact, the tax bill would be considerably higher than he implies. If the subsidiiary of NIS 2,000 a month, which it must be since NIS 2,000 a year is no money at all, then the monthly tab for subsidizing 8,000 Israelis factory workers will be NIS 16 million. On his second point (that this will cause an influx of 20,000 new settlers) is dubious. The kind of jobs now employing Palestinians, even if they pay NIS 2,000 a month more, won't attract Israelis, so factories, contractors and growers will simply hire foreign workers. In any case, the big industrial zones are all within easy commute of green line Israel, so why would any newly hired Israeli move to a settlement if he wasn't inclined to to begin with? Personally, I would let the plants close. Being inside a settlement already entittles them to huge subsidies and if they need even more help by employing cheap Palestinian and/or subsidized Israeli labor, then it is evident they are not commercially viable.

It is correct that forcing Palestinians not to work in the settlements is bad for the Palestinian economy, but since they are opposed to settlements it seems like a perfectly reasonable thing to do. Selling arms to Iran or Syria would be good for the Israeli economy, but we don't because politics and security typically trump economic decisions. In any event, I doubt Fayyad's policy will ever come to fruition. If there was much consensus among Palestinians to boycott the settlements they would have done so a long time ago. The economic damage will undermine the PA.

Anonymous said...

A Palestinian's wage is below an Israeli's wage. If Palestinians are barred from working in settlements then their place will need to be taken by (more expensive) Israelis. Who will pay the difference? Barel is saying that the settlers will want the Israeli government to pay. NIS 2000 per Palestinian worker barred. The "tax" reference assumes this sum will in turn be collected from Israeli taxpayers (ie the public sector deficit will not rise).

What he ignores is that there will be secondary impact, driving up the price of Israeli labour - 22,000 more of which will be being demanded.

Anonymous said...

This is not very good journalism. Forget the math (which is probably right). Who made these demands? When? Where? In what context?

Great argument for expanding the settlements. If 22,000 Palestinians stop working there, expansion is needed to house the workers who take their place. So the freeze should be lifted.

Anonymous said...

it could be inflationary by pushing up all wages

Anonymous said...

This seems to violate Oslo's economic normalization provisions, and more probably the economic relations stuff that was incorporated into Oslo II? In one way it's not as stark as the PA's incitement and pro-BDS activities, but in a different way codified legislation is qualitatively more severe than mere individual behavior or departmental behavior.

Anonymous said...

This piece is based on complete false assumptions.
First no Israeli's except maybe some Indian Jews will take over jobs in construction in the settlements. We have seen this situation during the Oslo war, mainly foreign workers took over some of the jobs when Palestinian Arabs were banned from entering settlements. There were huge problems in construction sector during those years.
Second the income gap between Jewish and Arab workers in the construction business is alomost non existent. I tend to ask those workers what they get paid and it is roughly the same. The employers make the profit because they tend to pay them cash money (so no taxes and bituach leumi)
Third how will Fayad enforce this boycott on work ? Palestinians I asked about their opinion about this boycott idea reacted furious and said that Fayad could go to hell. It is not only Palestinians actually working in the settlements there are many Palestinian businesses dependant on the settlements. Most of the business dealings are within the black market frame work including labor so they will find ways to continue doing business with the settlements.

Anonymous said...

I think there's a point or two being missed here..this is actually great news.

First of all, if the Jewish communities in the Yesha ( please don't help the enemy by calling them 'settlements') are going to expand and increase in population, that's a good thing for Israel strategically and economically since these new workers will be paying taxes, the more Jews in the area the better to hold on to them and because a number of them are reservists they can help defend the area . Also, the Jews shouldn't be using 'palestinians' anyway - they can get Asian or African guest workers if they really need them.

Second, any financial shortfall can be made up by increasing Palestinian taxes now paid to Israel and withholding larger amounts. Economic war? In the words of an old boss of mine, "You made a joke? I just made a better one."

Third, given the economic chaos in the EU and the US , it's an open question how long they're going to be wiling or able to continue to subsidize the Fatah and Hamas mafias.

Anonymous said...

irrespective of your ideological leanings, the boycott would have a negative effect both on Israelis and Palestinians:

1) Bringing new settlers into the West bank is economically unjustified. If you have to subsidize the jobs they will be taking over from Palestinians at a cost of NIS 2,000 a month per job, then subsidize the cost of constructing their homes and then add all the other benefits they are entitled to (education, preferred mortgage rates, bigger subsidies for local government, subsided infrastructure development) and the subsidies that factories in the settlements get (they are in priority zone A in terms of the investment law), then the whole enterprise is nothing but a big sponge for us taxpayers inside the green line.

2) In any case, those people won't come. Israelis spurn work in construction and unskilled industrial labor both inside the green line and outside it. Just because jobs become available doesn't mean people will take them and, if they do, there is no reaosn why they have to move to a settlement to fill them.

3) It certainly makes no sense to import thousands of more foreign workers on top of the 200,000 here already in order to keep inefficient, uncompetitive factories open with low-paying, unskilled jobs. How does the Israeli economy benefit from that?

4) I don't know what taxes the Palestinians pay to Israel.

5) We should be grateful for any aid coming the PA's way from Europe and America. It is the principal reason why the Palestinian West Bank is relatively prosperous and quiet.

Anonymous said...

What about the tax revenues that Israel remits to the Palestinians? Just withhold some of it to make up the shortfall.

And raise customs duties for anything coming in to 'Palestine'. If necessary, you could even use that money to subsidize higher salaries to attract more Jews to live in Judea and Samaria, the way Israel already gives certain subsidies to live in various parts of the country.

Selim Fayyad, you want to declare economic war against Israel? Take your best shot.

Some costs, at any rate, are necessary to assume as a benefit to national security.

Also, if guest workers are needed, far better as I said to use Africans or Asians.

Anonymous said...

Why does Israel supposedly have to play by the rules and not the 'Palestinians'? After all, they have withheld this tax money before, no? And are you telling me Israel has no freedom to raise tariffs on everything coming in to the 'Palestinian' occupied areas of Judea and Samaria? I find that hard to believe.

As for what you term the nomenclature issue, because one Israeli PM (Sharon) made a silly mistake, ( among several others, like Gaza and the Road Map) we're not allowed to rectify it? After all, if the US can change things by pretending that the agreement between Sharon and GW Bush never happened and Obama can endorse the Saudi peace ultimatum and ignore Article 2 of the Roadmap, Israelis not allowed to change even the language used to refer to this situation?

That's essentially Abbas-type logic, where because he states that Ehud Olmert promised him G-d knows what in private, it's written in stone. Sorry, I don't agree with you here.

If we refuse as a body to utilize this kind of language and don't allow others to do so, it's a victory. And one we need to have.

Anonymous said...

Israel has signed various agreements about what taxes it can withhold & what it can do with the money. It has pushed the envelope (successfully) on occasions, but can you imagine the hysteria the moment that it chooses to keep some & pay it to compensate “settlers” for loss of labour because the Palestinians have exercised their freedom of employment & “chosen” not to work in those “settlements”?

The nomenclature issue – I just think that we are tilting at windmills to try to change it back in the face of all the Israeli officialdom having capitulated and not being willing to even think about it – let alone launch a major program.