Israel Poverty Addressed By Outsourcing From US, UK, Europe

By Joel Leyden
Israel News Agency

(Updated November 2009)

Jerusalem----November 24, 2008...... One Israel child out of three is poor, a poverty report reveals. Every third child in Israel lives below the poverty line, according to an annual National Insurance Institute (NII) poverty report released recently.

Over 400,000 families in Israel suffer from "nutritional insecurity," a euphemistic term for "hunger." 28% of Israeli citizens, or 1,600,000 people are living in poverty. Among them are more than 600,000 hungry children. Those experiencing "nutritional insecurity" eat smaller portions, skip meals and, in extreme cases, don't eat for a whole day. Diets may be high in carbohydrates and lacking or almost devoid of meat, dairy products, vegetables and fruit. In Israel, 22% of families are deemed moderately insecure and 8% suffer from severe insecurity.

A family's situation is considered moderately insecure when the parents deprive themselves of food to ensure their children get what they need. In families whose situation is severe, the children are deprived as well. 60% of nutritionally insecure are Jewish, 20% are Arab, and 20% new immigrants. 80% of nutritionally insecure people reported a deterioration in their situation in the last 22 years, as Israel economic conditions have deteriorated.

About 28 percent of Israelis are forced to make choices between food and other expenses such as mortgage, rent, medicine, heating and electricity. About half choose to get along with less food. The 'poverty line' in Israel in 2002 was NIS 4,500 a month ($937.50) for the average Israeli family of four - mother, father and two children.

Signs of how severe the problem is are all too apparent on the streets of Israel.

In Jerusalem, for example, nearly 1,000 people a day come to four soup kitchens at which hot meals are served. It is also commonplace to see older men and women picking through the garbage at outdoor markets in Israel's cities. The collapse of the economy has taken a great toll on the lives of Israel's poorest families, and many children from middle-class families are now joining their ranks. Unemployment in Israel is around 20%, and the difficult economic situation has taken its toll on huge numbers of Israelis.

But now an effective solution to address and alleviate some of the economic suffering and poverty in Israel is coming from corporate America.

US firms looking to lower costs by outsourcing work abroad, may turn first toward Bangalore or Beijing. Luckily for Israel, it has other charms. In the past year there has been greater enthusiasm for outsourcing services to Israel, which differentiates itself from India and the Far East by offering a vast pool of highly educated workers who are native English speakers and share a cultural affinity with the West.

The heightened interest comes as the Israel government is now offering firms a $200-per-month subsidy for each worker employed by foreign companies. While Israel's workforce still doesn't come as cheap as its rivals, salaries are far less than in America. And perhaps surprisingly, all the figures for economic growth, credit ratings, and investment this year indicate the instability in Israel has not affected business at all.

"In the past 18 months, 700 new jobs have been created in outsourcing in Jerusalem alone. The industry is growing rather rapidly, from 100 employees three years ago to more than 1,500 today," said Jafar Sabbah, codirector of StartUp Jerusalem, a nonprofit created to stimulate employment.

MyPrepForce, a company based in Westport, Conn., that provides Web-based programs for bookkeeping and payroll services for accounting firms and large corporations in the United States, previously outsourced financial functions to India but now says work will be handled by Outsource2Israel.com in Jerusalem.

"Israel has a large population of Anglo-Saxons, they have better English language fluency than in other countries; their customs and values are similar to those of US citizens; the infrastructure and security in Israel is much better than in other foreign countries; and those in Israel have a high work ethic," said Greg Fern, executive vice president of MyPrepForce, a division of FSO Technologies Inc., also based in Westport.

Eli Kazhdan, a former chief of staff for the Israel Ministry of Industry and Trade who is now a consultant to outsourcing companies in Israel, said most of the jobs are medium-to-high-end call center work, legal and paralegal, and information technology. Immigrants have become a major resource because they speak a variety of languages that can benefit a host of international companies.

"Israel is in a unique position due to hundreds of thousands of immigrants from around the world," Kazhdan said. "This is where Israel has its competitive edge. We are able to cut costs without compromising on quality." In a 2005 survey, consulting firm AT Kearney ranked Israel among the most attractive places worldwide for outsourcing. Last year The Economist ranked Israel in the top 20, and Red Herring magazine dubbed Jerusalem a "new hot spot" for outsourcing. Though wages in Israel are generally lower than what companies pay in the United States, Israel is no cost rival for places such as India.

According to a 2006 survey by consultants at Catalyst IT Partners Ltd., the average fully loaded cost per seat per hour for a call center in Israel was $19, compared with $12 in India and $40 in the United States. The survey also reported typical contact center wages were $7 per hour in Jerusalem, compared with $3 in Mumbai and $10 on the US East Coast.

In Modi'in Illit, a settlement of 22,000 people just inside the West Bank, 150 women are employed at CityBook Services performing paralegal work such as checking lease contracts and property titles for clients across the Northeastern United States. CityBook's arrival in this ultra-Orthodox Jewish, or "haredi," township halfway between Jerusalem and Tel Aviv triggered a small social revolution, as 50 percent of families are below the poverty line and many of the men are full-time students in yeshiva seminaries, drawing social benefits. The community is not a normal part of the Israel workforce because it has been stigmatized as insular, nonproductive, and too dependent on welfare.

Chaya Milgraum, 22, a mother of two originally from Worcester, said she began working at CityBook two years ago because she and her husband, who was then a full-time yeshiva student, "really needed it." "There was a little opposition from my parents and my parents-in-law because they're not used to the woman going out to work; only the husbands go to work," Milgraum said. "At the beginning it was hard but then they said, 'You know what? It's good for you - you're getting out, you're taking care of yourself, and you feel good about going to work.' "

CityBook gives the women four months training and pays well above minimum wage in a modern working environment that respects their religious values. This means strict physical separation between men and women, modest dress by both sexes, kosher kitchens and time allowed for prayer.

"These people would not work in a Tel Aviv high-tech company because it just doesn't fit with their lifestyle," Kazhdan said. Joe Rosenbaum, an ultra-Orthodox Jew from Lakewood, N.J., founded CityBook three years ago as an offshoot of Madison Title, his insurance and property-services firm also based in Lakewood. He said pay is 40 to 50 percent lower in Israel than in the United States, but CityBook pays 60 percent. Rosenbaum plans to create 40 jobs for the ultra-Orthodox community in Jerusalem.

"There's a tremendous reliability, work ethic, and commitment," he said. "They are very careful not to waste time and are extremely grateful for the opportunity afforded them, so they go way beyond the call of duty. It's an unbelievable solution."

The Leyden Communications Internet Marketing, SEO, Digital PR Group has established an Outsource to Israel forum on the Web 2.0, social networking and viral marketing giant Facebook. In this Outsource to Israel forum one may post their company name, industry and contact details for free and be seen by up to 300 million Facebook users.

Leyden is presently constructing an international Outsource to Israel Guide and Directory to Israel.

IDT Global, a Jerusalem unit of US communications giant IDT Corp., leads Israel's outsourcing sector with 1,000 employees operating call centers for clients around the world in a wide variety of languages and providing a broad range of outsourced services from graphic design to accountancy and paralegal work. IDT Global says its clients include AOL, Western Union, Sears, OneTel, and Barnes & Noble. Lloyd Lurie, chief operating officer of IDT Global, said his staffing level has leaped 50 percent in the past 18 months with increasing demand from the United States, Canada, Britain, and Europe. He said Israel was unique in being able to offer multilingual operations under one roof, saving a company from having to farm out each language operation to a different country.

"If someone is looking for a generic, low-cost provider, let them go to India or the Philippines - we're not competing," he said. "What we provide is a quality of work that is the same quality as they would find in their own native country, but the prices are lower. "In Israel we have immigrants who lived in these countries, so they are not only familiar with language and speak it at a high level, but they are also familiar with the culture as well . . It's very difficult to provide from other places. There's only so much you can learn from a crash course."

In 2005, 1.632 million people in Israel lived below the poverty line, the report found. The figure attests to a substantial rise in poverty rates, with 100,000 more poor Israelis in 2004 than there were in 2003. The report also shows that poor families constitute 30.3 percent of Israel's population. The number of children living in poor families has reached 800,000.

The figures indicate that one-third of all poor families are Israeli Arab, according to Mossawa, the Advocacy Center for Arab Palestinian Citizens of Israel. The group said it estimates that 60 percent of all Arab children in Israel live below the poverty line. Mossawa said the percentage of poor families in the Arab sector in 2004 stands at 49.9 percent, up from the 2003 mark of 48.4 percent.

After six years of relative stability in Israel, the year 2003 marked the start of the ascension of poverty rates. In that year, the proportion of poor families rose from 18.1 percent of the population to 19.3 percent. The report was released just as the 2006 budget is expected to come up for cabinet approval. The Finance Ministry responded to the report by saying that two-thirds of the poverty "focuses on the Arab and Haredi population, two groups which are characterized by multi-children families as well as small percentage of people who take part in the job market."

The Israel treasury added that the report reflects data from 2004 and thus does not take into account those who have attained employment in 2005 as a result of cuts in government welfare payments. Treasury officials predicted that tens of thousands of senior citizens will rise above the poverty line in the coming year due to a planned increase in welfare payments.

In response to the report's publication, Israel President Moshe Katsav said that a prerequisite for economic recovery is minimizing poverty in the country. Before the publication of the report, NII officials quipped that former Finance Minister Benjamin Netanyahu resigned to evade facing the 2004 poverty report. "This is a stain which Netanyahu cannot escape from even if he escaped from the Finance Ministry," said Histadrut labor federation chairman MK Amir Peretz (Labor). "This (report) is an indictment against the entire government," said Peretz, who called on the acting finance minister, Ehud Olmert, to raise the minimum wage as well as senior citizen allowances.

While Netanyahu's resignation is aimed at achieving a political agenda, he is identified more than any other politician as the one who contributed to the increase of the country's poor population, whose total reached nearly 1.5 million last year. The poverty report shows the results of Netanyahu's policy in the last two years - primarily the drastic cut in income allowance for which he is so proud. Intended to drive unemployed people to work, the cut was carried out in the middle of 2003, and its full effect was reflected in the 2004 poverty report.

The gradual cutback in child allowances in Israel, which began in mid-2003, also affected the poverty rate. Children's allowances were slashed three times last year, a move which is scheduled to be continued through 2009. By then, the allowances of large families will be 70 percent lower than in 2003. The cutbacks apparently forced people to work, but according to 2004 Bank of Israel figures, most of the newly created jobs were part time, at very low wages. The allowance cutback on the one hand, and the part-time jobs and low pay on the other pushed tens of thousands of Israelis below the poverty line.

"Netanyahu's resignation came too late for 1.5 million Israelis, 800,000 of whom are children," attorney Yuval Albashan, the director of Hebrew University's legal clinics and a leading social activist, said. "Netanyahu restored ideology to the public discourse. He accelerated the privatization and cutback trends, and these are the results," he said. The main result of the outgoing minister's policy is an increase in inequality.

The Central Bureau of Statistics (CBS) reported that the index of the gap between the rich and poor increased reached 0.379 in 2004, compared to 0.370 in previous years. Members of the Yadid association, which aids the needy, said it received 50 percent more requests for help last year, primarily from people who could not meet their mortgage payments and had accumulated heavy debts due to the treasury having slashed their income.

"We are witnessing the emergence of two new poverty sectors - the working poor and the new poor," said Yadid Director General Sari Rivkin. The working poor are those who managed to find work at a meager pay dooming them to continued poverty. The new poor in Israel are those who used to belong to the middle class but cannot meet their mortgage payments or buy medication, school books and other items.

The association issued a list of the government's broken promises for 2004: It promised to feed 100,000 school children, but provided meals for only 30,000; it promised to find profitable work for thousands of single mothers whose allowances were cut, but only 600 of them managed to increase their income to the minimal amount qualifying them for a grant promised by the state; it slashed the budget for professional training by 50 percent and drastically reduced the number of people eligible to attend courses. "Perhaps the depression is over for a small number of families, but the standard of living has not risen in 2004 among the lower percentiles," members of Yadid said.

Netanyahu reiterated that if the government continues his policies, economic growth would continue, and the standard of living of the lower-income population would rise. But NII officials find it difficult to believe. They predicted in November that things would only get worse.

Over 1.6 million people, or 26.4 percent of the Israel population, were classified as poor last year. That number included 652,000 children, representing 30.8 percent of the country's children. After six years of stability, the number of poor families rose sharply last year from 18.1 percent to 19.3 percent of all families.

Some organizations, such as Meals4Israel, Table toTable, Meals On Wheels, and WIZO are now rushing in to feed starving children. You can help by entering one of these sites and making an immediate contribution to feeding to the Israel poor.

"Some relatives of mine state that they simply do not care whether their grandchildren eat," said a former resident of Chicago. "They live 6,000, 7,000 miles away in their insulated and comfortable two or three million dollar homes not having the slightest clue as to economic reality in Israel.

The 42 year-old mother of three continues: "Modern Israel was created out of the ashes of the holocaust. Those few Jews and Christians who turn their backs on us today are actually shooting themselves in the foot as they lose focus on their origins and of the last country of refuge for the Jewish people."

"Thank g-d for those good people in the States and Europe who understand, who outsource, who identify with the sacrifice that many of us make to keep Israel alive."

 

With The Boston Globe