How to Manage the Impact of Aliyah on the Israeli Economy

1/16/2022

By: HaRav Menashe Sasson
Reporting from Jerusalem, Israel
Published in the U.S.A.

Michael B. Oren, author, former Israeli ambassador to the United States, and former member of the Knesset, recently wrote an article titled “Israel needs Olim.” In his article, Dr. Oren reveals that, on the heels of a 31% increase in Aliyah from North America during 2021, some members of the Israeli government want to discourage, or at a minimum, not promote, Aliyah (Jewish immigration to Eretz Yisra’el). Dr. Oren, who supports Jews making Aliyah, relates these objections as including:

1. “Why should we subsidize people who are better off than we are?”

2. “Why should we welcome people who going to take our jobs and increase the already sky-high price of housing?”

3. Israel [is] already too crowded, they argue, with the highest natural growth rate in the industrialized world. “The last thing we need is a larger population.”

Let us analyze each of these objections to Aliyah:

Why Should Israel Subsidize Jewish Immigrants
Who Are “Better Off” than Israelis?

As Dr. Oren points out, a significant percentage of Jews who make Aliyah do so, at least in part, to flee anti-Semitism which exists in their country of birth or current residence.

Medinat Yisra’el (the State of Israel), the only Jewish state in the world, arose from the ashes of Auschwitz. For a Jewish member of the Israeli government to ask, “Why should Israel subsidize Jewish immigrants who are “better off” than Israelis” begs the question: “How can a Jew who is coming home to the Land of his forefathers, Avraham, Yizhaq, and Ya’aqov, be “better off” before making Aliyah than are his Jewish-Israeli brethren who already reside in the Land, especially if the immigrating Jew is fleeing to Israel to escape anti-Semitism in his country of birth or current residence?

However, those who complain about “Israel subsidizing Jewish immigrants who are ‘better off’ than Israelis” are probably not referring to anti-Semitism, but rather to economic considerations.

If we understand the term “better off” to mean having a greater financial net worth, the allegation that Olim (Jewish immigrants to Israel) are financially “better off” than native-born Israelis may be true in some cases and may not be true in other cases. That assessment, however, not only misses the real issue, it obfuscates it through what is little more than a Socialist class-warfare argument.

To say that a person should not be allowed to immigrate to a country because the immigrant is “better off” financially than a majority of the country’s current citizens is much more an indictment of the country’s economic policies than it is of the intended immigrant. Assuming the truth of the allegation, the questions the country should be asking include: “Why are the citizens of our country financially poorer than people who want to immigrate to our country?” and “What economic policies can we change that would make it easier for our citizens to be more economically successful?”

Lastly, if a country is going to base its immigration policy on an intended immigrant’s net worth, it would make a lot more sense for the country to encourage immigration by wealth, rather than economically disadvantaged, individuals. After all, wealthy immigrants are more likely than other immigrants to start businesses and spend money in their new country, and less likely than their less affluent fellow immigrants to need government financial assistance after immigrating.

As for providing direct subsidies to Olim, perhaps such subsidies would not be necessary, and perhaps the county’s current citizens would not be as economically disadvantaged as they are, if the State of Israel would lower its income tax rates (33% on the equivalent of about $68,500 of income; 45% on the equivalent of about $150,000 or more of income), lower its value-added tax (VAT) rate of 17%, and lower its real property tax rates.

Why Should Israel Welcome Jewish Immigrants Who Will Take Israeli Jobs & Drive up the Price of Housing?

EMPLOYMENT

Israel’s Basic Laws (quasi-constitutional provisions) proclaim that Medinat Yisra’el is a “Jewish state.” When Medinat Yisra’el came into existence in 1948, shortly after the Shoah (Holocaust), one of the foundational ideas upon which the country was established was that any Jew, from anywhere in the world, was welcome — and indeed encouraged — to make Aliyah; that is, to immigrate to Israel. This foundational idea was given concrete meaning through the enactment of Israel’s Law of Return, which remains the law of the Holy Land to this day.

To restrict, or discourage, Aliyah out of fear that Olim “will take Israeli jobs” would constitute a violation of both Israel’s Basic Law which, declares that Israel is a “Jewish State,” and Israel’s Law of Return.

Furthermore, to argue that Jewish immigration to Israel will result in a loss of Israeli jobs is really nothing more than a veiled argument which states that Israel is already at, or that it already exceeds, its optimum population point. The fear is not so much a growth in population through immigration, but, rather, a fear of any population growth, as any growth in population has the potential to impact the Israeli labor market. Thus, in order to be consistent, those who advocate against Jewish immigration to the Jewish homeland, would also have to advocate for population control devices such as compulsory birth control, as an increase in population through natural growth, all other things being equal, will also result in a loss of Israeli jobs, albeit over a longer period of time.

Extreme methods such as refusing to allow Jews to immigrate to Israel and other population control devices are not necessary to ensure that Medinat Yisra’el has a growing and vibrant economy and labor market. Consider the following proposals:

1. Eliminate import taxes.
The State of Israel imposes taxes on the import of most items, which, in turn cripples, or at least severely restricts the ability of businesses to import and sell both consumer goods and factors of production at affordable prices. If import taxes were eliminated, more Olim, as well as foreign businesses and Israeli entrepreneurs, would be willing and able to start businesses in Israel.

2. Reform labor laws.
The State of Israel, having been founded by Socialists, continues to be plagued to this day by labor laws which restrict a free market in labor services. A good start at labor law reform would be to:

a. Dissolve all labor unions;

b. Pass a law which states that unless an employer and employee voluntarily enter into a contract which states otherwise, all employment relationship are at “at-will,” meaning that either party can terminate the employment relationship at-will, without penalty; and

c. Repeal all laws which mandate the form or amount of compensation that an employer must pay and employee.

If implemented, these labor law reforms would, on an annual basis, create many more private-sector jobs than there are new Olim.

3. Reform government employment practices.
According to its Basic Law, the State of Israel is officially a “Jewish State.” Thus, a law should be passed which states that one qualification for government employment is that an applicant/employee must be Jewish. Such a law would apply to all government employees. Such a law, if implemented, would not merely offset the effects of Jewish immigration, it would also bring the State of Israel into compliance with Jewish religious law (Halakha) on this issue.

COST OF HOUSING

It’s true that the larger cities in Medinat Yisra’el, like the larger cities in most other nations, have some degree of congestion. However, even for a comparatively small country, there are vast amounts of undeveloped land in Israel. The following are just a few laws which, if implemented, would result in more than ample land being available for Olim and other Jews:

1. Reform government land ownership law.
In keeping with its Socialist roots, an estimated 93% of the real property which constitutes the State of Israel, excluding Samaria, Judea, and Gaza, is owned by the Israeli government. A reform of the Basic Law, which currently provides “The ownership of Israel lands, being the lands in Israel of the State, the Development Authority or the Keren Kayemet Le-Israel, shall not be transferred either by sale or in any other manner” should be repealed. In its place, a new Basic Law should be enacted which states, in essence, that all Israeli lands are to be privately owned, except for those lands that the government purchases or acquires through a law of eminent domain for a legitimate government use.

2. Reform general land ownership law.
Enact a Basic Law which states that only Jews shall have the legal right to purchase real property, and that no rental of real property to non-Jews shall exceed a term of 1 year in duration.

3. Sovereignty over Jewish lands.
Bring all lands within the borders of the State of Israel under the control and sovereignty of the State, including the entirety of Judea, Samaria, and Gaza.

These proposed reforms to Israeli real property law, if enacted, would ensure that there would be no shortage of land for Olim and an increasing Jewish population, which, in turn, means that, all other things being equal, Jewish immigration to Israel would not negatively impact the cost of housing. Additionally, implementing these proposed laws would have the benefit of bringing Israeli law more in line with Halakha.

Conclusion

Not only would these proposed reforms, if implemented, more than offset any adverse impact on the Israeli economy that might be attributed to Jews who make Aliyah, these reforms would greatly benefit the Israeli economy by a factor which is beyond what many currently believe is even possible. Furthermore, implementing these reforms would result in the State of Israel changing course, from one which is going away from Torah, to one which is directly aligned with Israel’s true constitution: The Torah.

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How to Manage the Impact of Aliyah on the Israeli Economy

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