From work to welfare

LARRY DERFNER

Israel’s "Wisconsin Plan" was shut down. Why?

Moshe remembers his six years on welfare. “I’d go to the Employment Service, sign in and go home,” he says. “Sometimes I’d do a little work off the books.” Now a full-time, tax-paying pizza chef, Moshe, 44, is sitting in the downtown Jerusalem offices of Amin, the local branch of the controversial “welfare-to-work” program, commiserating with the case workers and managers whom he credits with turning his life around.

Like the other welfare-to-work branches in Ashkelon, Netanya, Hadera and Nazareth, Amin was laying off its employees, referring its job-seeking clients back to the Employment Service and shutting its doors. This follows the Knesset’s April 30 decision to end the privatized jobs program – nicknamed “Wisconsin” for the US state where the prototype was developed in the late 1980s.

“Now all the people who used to come here are going to go back to the Employment Service, and they’re going to become deadbeats and con artists again,” says Moshe. Nationwide, some 18,000 people were signed up in the Wisconsin program.

In the last generation, as the effects of globalization closed down much of the country’s blue-collar industry, a “permanent underclass” took root here – people who hadn’t worked in years, had despaired of ever finding another job and were resigned to a life on welfare. In 1990, the number of Israelis on welfare was roughly 10,000; by this year, it has risen to about 120,000. The most ambitious, expensive and “out-of-the-box” attempt to get these people off welfare and into jobs was the Wisconsin plan.

The basic idea behind Wisconsin is that giant government bureaucracies like the Employment Service cannot or will not give the intensive, personal attention needed to get the long-term, “hard-core” unemployed into jobs – but that smaller, more flexible private companies can. In recent decades, the Wisconsin approach has become a “way of life” in America, says Sari Revkin, director of Yedid, an NGO that was deeply involved in the program here. It is spreading “almost exponentially” in Europe, says Andrew Dutton, a Briton whose investor group owns 70 percent of Amin as well as hundreds of millions of dollars worth of welfare-to-work programs across Europe.

But after less than five years here, the program is finished, branded a failure by the Knesset. The latest announcement from the Industry, Trade and Labor Ministry, which oversaw Wisconsin, is that the handling of the hard-core unemployed – including the 18,000 registered at the five welfare-to-work branches – will revert to the Employment Service.

This comes even as several independent observers found that while the national Wisconsin program ha d very deep problems, it had improved greatly in the last two years, and at any rate was doing a much better job than the Employment Service ever had.

“The program should be fixed, not abandoned,” says Revkin. “I don’t know anybody getting unemployment benefits who thinks the Employment Service is doing a good job.”

A STUDY by the Myers-JDC Brookdale Institute (the Joint) found that the Israeli program “was a success in relation to similar programs in other countries,” says retired Hebrew University social welfare professor Jack Habib, director of the Joint. “About 25% of the participants found jobs within the first eight months, which is very good by international standards and much better than those who were served by the Employment Service. And their income from these jobs was significantly higher than what they were getting in state benefits.”

HU social welfare professor John Gal, who sat on several government committees designing and evaluating the program, disputes the Joint’s finding that the new jobs paid better than welfare, saying, “that wasn’t the case very often. When they found jobs, they lost their state benefits, so in the end they were making more or less the same as when they weren’t working.”

Gal has other criticisms of the program, such as that it was too profit-oriented and didn’t offer much vocational training, but even he says it shouldn’t have been scrapped.

“Welfare-to-work programs can help a certain proportion of the population in times of economic growth,” he says, adding that the Employment Service has never done what the Wisconsin program did for the hard-core unemployed – such as tailor programs to individuals, teach them how to find jobs through the Internet, how to write a CV, how to sell themselves in job interviews, etc. “The Employment Service has never wanted that task,” he says.

HU Emeritus Prof. Jona Rosenfeld, who won an Israel Prize for social welfare research, did a study for the Joint of 20 “success stories” at Amin to see what the program was doing right. “For instance,” he says, “there was a woman whose husband wanted her to become a prostitute, who couldn’t read or write, who’d never worked in her life. In the program she learned to read and write, and with the help of her case worker, she left her husband, moved in with her mother and found a job working with children. It paved her way out of a horrible life.”

The people at Amin “did the impossible” for their clients, Rosenfeld says, adding that the heads of the programs in Ashkelon and Netanya likewise struck him as “very unusual people, with a passion for what they were doing – the opposite of bureaucrats.” Noting the program’s official name – Orot Leta’asuka, or “lights to employment,” he says, “I think these people should be seen as leading lights to employment, and what they’ve built should not be dismantled.”

Curiously enough, another enthusiast of the project was Prime Minister Binyamin Netanyahu. “...[T]he plan certainly succeeded. It did not lack problems that must be corrected but the plan’s closure is a blow, a blow to the idea that we want to promote, that Israelis who can work – should work, period,” he said at the May 2 cabinet meeting.

Netanyahu went on to say he “was not prepared to give up on this,” but in the following days the Industry, Trade and Labor Ministry announced the Employment Service was taking over the job of handling the hard-core unemployed. Some Israelis and foreign investors in the Wisconsin program still hope to be involved in a new incarnation of it, but given the political opposition to Lights to Employment – illustrated by the Knesset’s decision to kill it – the chances of reviving a privatized jobs program appear very slim.

WHAT HAPPENED? Why did a seemingly successful approach to an entrenched social and economic malady, an approach that’s gained acceptance throughout the West, get shot down here?

“It was a combination of politics and the program’s bad public image,” says Ran Melamed, Yedid’s deputy director.

The decisive vote to end Wisconsin was cast by the Knesset Labor and Social Affairs Committee, headed by Likud MK Haim Katz. Critics of the decision say Katz, whose power base is the workers at Israel Aerospace Industries, was acting on behalf of another powerful Histadrut interest, the Employment Service workers, who opposed Wisconsin and even went on strike to stop it, seeing the program as a threat to their jobs.

Katz’s spokesman, Ilan Marciano, insists that his boss, like a majority of committee, was moved instead by “a lot of the claims made against the way the program was being run.” Furthermore, Katz believes the system should not be privatized and that the Employment Service, if given the chance, can do as good a job as the welfare-to-work companies, and “on half the money,” says Marciano.

(Rosenfeld is less optimistic, saying, “You know how hard it is to change large bureaucratic structures? It will take many years to transform the Employment Service, and it will require people who have the passion to transform it.”)

But it’s also true that many complaints had been made against the program from the beginning – mainly that the companies were making huge profits, and that they showed much more interest in dumping people off the welfare rolls as quickly as possible than in getting them into decent, long-term jobs.

Supporters of Wisconsin agree that these complaints were completely valid – during the first two years of the program, which opened its doors in August 2005. But they also agree that fundamental improvements were made in late 2007 when Eli Yishai took over as Industry, Trade and Labor Minister.

“He exempted everyone over 45 from having to take part in the program,” says Revkin, noting that this allowed many thousands of people who were unlikely to find jobs because of their age – many if not most of them Russian immigrants – from having to waste 30 hours a week at a Wisconsin center to get their benefit checks.

No less important, says Revkin, Yishai transformed the economic model of the program. “During the first two years, the Treasury just wanted the companies to get people off welfare to save money, and the companies made their profit that way. They made money hand over fist. But Yishai changed it so that the profit incentive was for the companies to get people into decent jobs – jobs that paid above minimum wage and had opportunities for growth.”

Even Bari Bar-Zion, CEO of Jerusalem’s Amin program, acknowledges that “it was not moral to give companies the profit incentive solely to get people off welfare instead of into stable jobs.” The change cut into the companies’ profits, with Dutton saying Amin made good money in the first two years – though not as good as its welfare-to-work programs in Europe – while breaking even at best in the last year.

Had Yishai remained minister of industry, trade and labor, he might have fought in the Knesset for Wisconsin, his “baby,” say the program’s proponents. But now that Yishai has the Interior Ministry, he has other matters on his agenda. (Yishai’s spokesman says the minister has no comment on Wisconsin.)

“From the beginning, the program never had an abba or ima to protect it politically,” says Revkin.

Meanwhile, the early word-of-mouth from clients and the horror stories in the media stuck to the program’s image, even after Yishai’s fundamental reforms, making Wisconsin politically unpopular.

Conservative-minded Israeli Arabs didn’t like the program because it forced Arab women to leave the house for work. Immigrants who’d been professionals in the former Soviet Union didn’t like the program because it forced them into menial jobs. Many social activists didn’t like it because they’re opposed in principle to privatizing government services. And on the Knesset’s Labor and Social Affairs Committee, Israeli Arabs had the ear of MK Muhammad Barakei (Hadash), immigrants had the ear of MK Orly Levy (Israel Beiteinu), and social activists had the ear of MKs Shelly Yacimovich (Labor) and Ilan Gilon (Meretz).

Unfortunately, past governments and their bureaucracies – those who planned the program in the early 2000s – have no one to blame but themselves.

COMPARING THE local program to those in the US, Revkin, once a social activist in the US, says much greater forethought and planning went into the American system.

“One of greatest growth industries that came of Wisconsin in the States was child care – single mothers in the program needed child care to go to work, and the natural, most efficient thing was to train them to become professional child-care-givers themselves,” she says. “By comparison, after the Nazareth program opened, it found that there were no child care centers in the city for the clients, so the program itself had to create a local child care network from scratch. Couldn’t that problem have been anticipated beforehand?”

In the Treasury’s eagerness to save money, Russian immigrants who found jobs were forced to give up their immigrants’ basket of benefits and services, which made it not worth their while to work; that changed with Yishai.

In the early days, Russian immigrants in their 50s often felt humiliated having to answer to case workers 20 years younger than them; that also changed when the cut-off age changed to 45.

There were grievous stories, such as the one about a group of Israeli Arab women who got a job picking mushrooms, then, after the farmer went bankrupt, had to sue the man and wait eight months to get paid. “We told the Treasury and the Industry, Trade and Labor Ministry, ‘Look, you forced these people to work, they went to work and never got paid. Shouldn’t you give them a few months’ salary?’ The ministries told us it wasn’t their problem,” recalls Melamed.

Certain problems were never solved, such as vocational training, which was superficial, says Revkin. “If people don’t have job skills, they’re never going to get better than menial, minimum-wage work, which means they’re never going to get out of poverty,” she says. “They’ll just go from the ranks of the nonworking poor to the ranks of the working poor.”

It was a rickety system, heavily regulated, running by trial and error; not all the case workers were compassionate, not all the clients found jobs or even hope. But many did, which wasn’t the case before Wisconsin began.

“For two years I used to sign up at the Employment Service and go home. No one there ever helped me find a job, no one there ever asked me what I was going through, no one had a good word for me,” recalls Shoshana, 42, sitting in the Amin office. “When I came here I started taking course after course, and then I worked as a volunteer fund-raiser at a charity. I began to feel confident that I could help people who were in the same situation I was in, and I asked the people here to give me a chance to work here, and they did.”

Shoshana was a case worker at Amin for a year. Like the other staffers, she’s just gotten laid off. She is on her way back to the Employment Service in the coming days to see what jobs were available.

“I feel like the state has given up on me and everyone else in my position,” she says. “From the first day I started here, I felt a sense of mission. I gave everything I could to the people who come in here, they trusted me. I got them all the government support I could – grants, discounts, rent subsidies. I told them to believe in themselves, and a lot of them found work. Now I’m laid off like everyone else, and I’m afraid I’m going to slip back into the misery I got out of.”

Nobody, not even the people who ran the welfare-to-work companies, is suggesting that Wisconsin was a “magic bullet” for the long-term unemployed. There are entrenched problems in the Israeli job market that no private or public program can solve, above all, that so many jobs – roughly 40% – pay minimum wage, or about NIS 3,800 a month. This means that in many if not most cases, a minimum-wage employee may make less money than he did on welfare.

“People who are out of work and living on benefits can get rent subsidies, municipal tax subsidies, child care subsidies and once he starts working, these benefits get reduced if not cut out altogether,” says Revkin. “If you’re not earning NIS 6,000 a month at your job, you’re probably going to be in worse financial shape than you were on welfare.”

NEITHER THE Wisconsin program nor the Employment Service can force employers to pay higher wages, or force the Histadrut to represent low-paid private sector workers instead of just well-paid public sector employees, say labor market observers. Neither the Wisconsin program nor the Employment Service can force haredi yeshiva students to find jobs, nor force Israeli Arab society to accept the idea of women working, nor force Jewish-owned businesses to hire Israeli Arab employees in good jobs.

This was the reality the welfare-to-work companies had to contend with. Few haredim came to the program because yeshiva students who receive government stipends are not technically welfare recipients. However, there was a high proportion of Arabs, especially in Jerusalem and Nazareth – and their economic prospects were slim.

“By the end, a majority of the clients in Jerusalem were from [Arab] east Jerusalem. Most of them didn’t know Hebrew; some of them couldn’t read or write Arabic; the women had never worked outside their homes. Who in west Jerusalem was going to hire them? And what jobs are there in east Jerusalem?” insists Revkin, whose organization served as an address for thousands of clients in Jerusalem, Nazareth and Ashkelon who needed assistance with debts, housing, legal challenges and other financial issues.

Another harsh reality faced by the welfare-to-work companies was the geography of the economy: The program went to where the unemployed live, but also to where the jobs are scarce. “There was a single mother in Ashkelon who got a full-time job cleaning offices in the Azrieli building in Tel Aviv. She’s commuting from Ashkelon to Tel Aviv every morning and every evening for a minimum-wage job while she’s trying to raise her kids. That’s a solution?” asks Revkin.

For many poor people, the way around this lose-lose situation – the choice between poverty on welfare and poverty on the job – is to work off-the-books in the “black” economy. This cheats society out of money for public services and cheats the employees out of legal benefits, but it’s a fact of life. One of the goals of the Wisconsin program was to make sure welfare recipients were not working on the side off-the-books, so they were required to spend 30 hours a week in the program’s office or lose their benefits.

“We started with 5,000 clients and finished with 1,200. Half of the ones who are gone found jobs; the other half did not find jobs but are no longer getting benefits,” says Bar-Zion, CEO of Amin, implying that a great proportion of the latter group decided it wasn’t worth their while to give up their jobs in the black economy.

Tirza Bar-Chaim, head of the welfare-to-work program in Nazareth, is in the process of firing 75 employees and sending a couple of thousand clients to the Employment Service. “These have been a very, very difficult few days,” she says.

She’s feels like it’s all going down the drain. “Everything that was learned by trial and error for five years – what’s going to happen with it? Who’s going to use it?”

She doesn’t know what’s going to happen to her employees and the clients, most of whom are Arab; the office took clients from Nazareth, Upper Nazareth and the Arab town of Ein Mahil. “They’re good people, a lot of them will integrate into the job market – but I’m also realistic, we know the difficulties and discrimination.”

Bar-Chaim says 10,000 welfare recipients were referred to the program, 5,000 showed up, and of these 5,000, 44% found jobs, and four out of five who found jobs remained in them for at least a year. “Everything we set out to achieve was achieved, over and above what we expected.” Now, she says, the chill is setting in and a lot of people are going to be left outside.


“We just put 18 women, mainly Arabs, on a job-training course at WIZO, mainly in child care. We got them financial support, we paid for the transportation. This was like a dream for them – and now it’s stopped. I wonder what the government is going to do for them now.”

Since the closure order came down on April 30, Bar-Chaim says she’s gotten a whole “rainbow” of responses from clients. “The great majority are worried, they feel terrible, they’re very, very unhappy about this,” she says. “But yes, there were some who were happy. A small minority. You can always find people who will criticize, who never found jobs. But the point is that there were thousands who did.”

In Jerusalem, Dutton, one of the British investors in Amin, says he still hopes at least some part of Lights to Employment will be salvaged. Meanwhile, he says his investor group won an £800 million contract to start additional welfare-to-work programs in the UK, and is bidding on a 1 billion euro contract to set up a new network of programs in France.