Saturday, September 29, 2007

The Poverty Definition & The Birth Crisis

I have discussed before the fact that the reason why Israel has such an apparent high level of inequality and poverty is due to the fact that its Muslim and ultra-Orthodox Jewish minorities in effect chooses this status by having many children. Certainly nothing wrong with this if they finance it themselves, but the problem is that Muslim and ultra-Orthodox Jewish advocates use this self-chosen status as poor to argue for more subsidies from Israel secular Jewish majority.

Unlike most other rich countries, Israel has no problem with low birth rates. Most rich countries have birth rates well below the 2 children per woman needed to sustain the population in the long run, while 5 countries (the United States, New Zealand, France, Iceland and Ireland) have birth rates at roughly 2 children per woman. Israel stands out by having a fertility rate well above that level, with a fertility rate as high as 2.84 women per children.

So, although most Israeli politicians probably want high birth rates in order not to be demographically overrun by the Palestinians and neighboring countries, the main reason cited for subsidizing families with children is not really to increase the birth rate but to reduce poverty.

Yet the question is, what is poverty really? Most countries define it by either relative or absolute income, adjusted for family size. I see now an interesting Jerusalem Post article questioning this view. The author Asher Meir points out that if we have two households with the same income, wherein one decides to use their income on getting a really large garden whereas the other decides to spend it on having a really large family. Both use their income to attain what they desire and both thus improves their well-being, but in official poverty statistics, the household with the large family would be classified as poor while the household with the large garden would not be classified as poor. Official statistics thus presume that children should be seen as a burden, while large gardens or flat screen televisions or other inanimate material objects should be seen as economic well-being.

But since both constitute well-being that is an invalid classification. This means that a lot of people classified as poor shouldn't be seen as poor and that the poverty justification for these subsidies is invalid.

Ironically, the underlying mentality of this poverty statistics assumption is in fact arguably the root cause of the low birth rates in most rich countries which are then used as an argument for subsidizes to families with children in these countries. As children are discussed as an economic burden which prevents people who have children from living a good life and as this view becomes part of the cultural value system, this leads people to abstain from having children. If instead children were considered a form of high standard of living just as much or more as SUV:s or flat screen televisions are, then most people would choose to have 2 or more children without government subsidies. Changing that cultural deficiency in most rich countries would be far more effective in raising birth rates than any subsidy program.


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