Reduce bureaucracy to fight poverty

Getting aid takes so much time and energy that the poor have little left over to help themselves

An OECD report released last week found that Israel has the highest poverty rate in the developed world – 20.9%, compared to an OECD average of 11.3%. Granted, this number may be exaggerated: Only 9.3% of Israelis said they couldn’t afford adequate food, which is significantly less than the OECD average of 13.2%. Nevertheless, Israel’s official poverty rate has been persistently high for years, and the government consequently established a commission on how to fight poverty last year.

Unfortunately, based on media reports, the recommendations the Alalouf Committee is slated to issue next month seem unlikely to break much new ground: They center on time-honored measures like raising various types of welfare allowances.  But Western countries have been throwing money at poverty for decades with limited success; thus there’s no reason to think more of the same will produce different results. What’s needed is a broader reform of Israel’s anti-poverty efforts – and a new study by Israeli-born Eldar Shafir, a psychology professor at Princeton University, offers useful insights.

Shafir, whose book Scarcity: Why Having Too Little Means So Much came out last year, concluded that the pressure of poverty leads otherwise sensible people to make poor choices. In one of his experiments, for instance, volunteers at a New Jersey mall were presented with two scenarios – a car repair costing $150 and one costing $1,500 – and then asked to solve cognitive puzzles. Afterward, the researchers asked the volunteers about their incomes.

Rich and poor proved to be cognitively identical when presented with the $150 scenario. But in the $1,500 scenario, the poor scored significantly worse on the cognitive tests: Just thinking about how they would cope with such a bill reduced their cognitive function by the equivalent of 13 to 14 IQ points. That, Shafir noted in an interview last month, is the difference between borderline and normal intelligence, or between normal and gifted.

This has real-world consequences. For instance, college greatly improves earning power, yet only 30% of Americans eligible for financial aid actually take the money and go to college, Shafir said. Even people who take the trouble to get financial aid forms often don’t fill them out, he noted, because the forms are long and complicated, and the poor, preoccupied with the day-to-day pressures of survival, lack the time and mental energy to cope with them.

Here in Israel, a friend who used to run a charity told me she frequently saw people saddled with thousands of shekels in debt due to a single bad decision: Unable to pay a relatively small bill and uncertain how to solve the problem, they simply put it off – and meanwhile, the debt ballooned, thanks to interest, fines and inflation adjustments.

All this suggests an obvious conclusion: Reducing the bureaucracy of poverty, and thereby reducing the time and mental energy people must expend to obtain help, might leave them with more mental energy to make better decisions. And that would do far more to help them escape poverty in the long run than simply giving them a bit more money.

Currently, Israel’s poverty bureaucracy is enormous, with each type of financial aid handled by a different office: Welfare allowances are handled by the National Insurance Institute, housing assistance by the Housing Ministry, municipal tax discounts by municipalities, etc. Thus to get the aid to which they are legally entitled, people must spend dozens, if not hundreds, of hours running around to various government offices, in between trying to hold down a job, care for a sick child, do the grocery shopping and so forth. Not surprisingly, many people find this so overwhelming that they end up forgoing assistance to which they are entitled. Indeed, an NII official told the Alalouf Committee that in her office’s estimation, about half of all people eligible for welfare allowances never apply for them.

Moreover, for the working poor – of whom Israel has a growing number – time spent at government offices is literally money out of their pocket. Salaried employees can take a morning off for such purposes without reducing their monthly paycheck. But the poor are usually hourly workers, for whom every hour spent in government offices is an hour not spent on the job earning money.

So what if, instead, we turned the poverty bureaucracy into a one-stop shop – a single office where the poor could obtain all relevant types of financial aid with a single visit to a single clerk? With modern computerization, that’s certainly feasible: If, for instance, someone is eligible for a municipal tax break, the poverty office’s computers should automatically forward the relevant data to the municipality’s computers.

Additionally, our one-stop shop should provide help in filling out the paperwork. Many people find government paperwork beyond them; the difference, as Shafir noted, is that the poor can’t solve the problem the way other people do – by hiring professionals to deal with it. Aside from reducing the drain on applicants’ mental energy, such assistance would also reduce the number of people who forgo needed benefits because they can’t handle the paperwork.

Finally, the current crazy quilt of disparate benefits should be simplified so that people must apply for only a few instead of many, and our one-stop shop should include experts who can tell the poor what these benefits are. Most people have no clue what benefits they might be eligible for, and trying to find out can consume enormous quantities of time and energy. That’s another reason why many forgo aid they should receive.

To its credit, the Alalouf Committee apparently does plan to recommend establishing special offices whose job would be to help the poor exercise their rights. But while such help would be beneficial, making people run to yet another government office definitely won’t be.

Simplifying the poverty bureaucracy is admittedly much harder than raising allowances, because it requires forcing numerous entrenched bureaucratic fiefdoms to cede power. And it clearly won’t eradicate poverty all by itself. But as Shafir’s research shows, it could make a significant contribution toward this end. Thus any government serious about fighting poverty must make reducing the bureaucracy part of its plan.