contract workers: justice for some is not justice for all (from the Times of Israel)

A few months ago, the Israeli public finally began discussing the issue on contract workers and what it means to work without any social terms or benefits. Weeks of debates culminated in a four day general strike bringing the issue to the forefront of Israeli media with MKs, businessmen, and labor activists talking about the moral, legal and ethical issues of contract work. But what should have been a platform for change culminated in an agreement for only Histadrut workers, leaving the overwhelming majority of Israel’s struggling working class to suffer.

I’d like to begin by explaining what constitutes a contract worker, because most of the media as well the Israeli government seem to have no idea. A contract worker is any worker, whether part time or full time, who works under a contract that circumvents Israeli labor law. Some of these workers receive wages below minimum wage, many do not receive a pension, and nearly all of them are missing out on at least one of their legal rights, including but not limited to reimbursement of transportation, vacation, sick leave and overtime pay.

There is a reason that we have labor laws. Elected officials enact labor laws on behalf of their constituents as a counterweight to a firm’s desire for strict gains. While it may not be desirable for an individual firm to give vacation days or a sick leave policy, we, the citizens of Israel have the right to enact such laws via our representative government and tell firms that if they want to do business in Israel, these are the rules.

Other labor laws serve not only to help workers in the short run, but also to help stabilize the economy in the long run. For example, the mandatory pension law is designed not only to ensure that all Israelis will be able to retire with dignity, but also to enable the government to ultimately cede the task of supporting the poor, a task that it currently does both begrudgingly and inadequately, to the individual workers. By undermining Israel’s labor laws and allowing employees to pay workers without putting money into their pension funds, Israelis risk not only the continued suffering of the elderly, but also the continued collective economic burden that payouts incur.

Finally, allowing employers to write contracts that circumvent Israeli law leads to lazy governance. For example, most people agree that Israel’s overtime policy, where overtime is paid based on hours worked per day, is excessive and unrealistic, as most jobs require and reciprocate with flexibility. A realistic alternative would be to change the law to mirror the labor laws of other countries, where overtime is paid for excessive hours worked per week or month. But since employers usually sign workers onto a contract for a “global salary,” meaning no overtime whatsoever, the matter never came before the Knesset and they never bothered changing the law. Consequently, instead of having a reasonable overtime policy, most Israelis receive no overtime pay at all.

Much of the media as well as the government claim that by turning contract workers into salaried workers, employers would lose the flexibility they need in order to hire additional labor for seasonal projects, end up giving tenure to more useless workers, and ultimately cost employers too much. In truth, this argument only applies to workers in companies with strong unions, such as the histadrut. For all other Israelis, Israel’s policy for firing a worker is not very strict at all, one day of notice per month with a max of a month’s notice. But if employers insist that following the law is too complicated, then at least some sort of compensation should exist.

To begin, all workers, contract and otherwise, should have a pension paid out of their salary. The pension law isn’t just about the worker; it’s about Isael’s economic stability and in an age of electronic transfers there is no reason why this cannot easily be done. Second, if an employer does not want to pay his employees benefits, then the government should establish a set percentage to be paid as compensation for vacation days and a sick policy. Finally, in order to make sure that all employees follow the laws mentioned above, it should be mandated that all wages should be stated to the potential employee excluding the additional pay for benefits. Just as a regular job quotes its salary figures in gross salary not including benefits, so too salaried workers should have their pay offered in terms of gross pay without benefits. This would also end the current situation where employers pay benefits as a part of a minimum wage, effectively paying their workers below minimum wage. This would also allow potential workers to see the payoff of a job in a consistent, understandable way so that the worker can know if the job is really worthwhile.

Allowing businesses to circumvent labors laws is not only immoral, but make every discussion about labor laws entirely irrelevant. If our Knesset members really believe that minimum wage is just an idea, that the pension law is only an option and that social terms are just a proposal, then they should say so. But if they believe that our labor laws aren’t just a suggestion, but the product of our representative democracy, then the only just thing is to tackle the problem of contract workers and bring order to a labor market plagued with anarchy.

how the Israeli pension system works part 5 – choosing the pension fund that’s right for you

Hi.  I’m recently updated my series on pensions.  In this updated version, I address the different pension fund options beyond the major funds offered by each company.

You’re almost there.  You already know what you’re paying into the system, you know how it works, you know what’s in the funds, and you even know how to compare returns and fees.  This post will discuss how to choose the pension fund that’s right for you.

The first step in choosing your own pension is determining what your pension investment priority is.  Generally speaking, there are three kind of investing preferences for pensions inIsrael: (1) investing in a generally successful fund while minimizing fees, (2) investing in a matter than will enable the investor to have greater control over the level of risk and (3) investing in accordance with Jewish law.

1) If you are just looking for a generally successful pension fund and have no specific preference, then take the following steps to choose a find a fund that suits you:

Search פנסיה נט to see the performance history of the general funds.  In order to do this, go to פנסיה נט, and click on חיפוש פשוט.  In part 1 of the search form select the חדשות.  In Part 2, select the lower option and choose a range for how far back you want to see the funds (I personally prefer funds with a range of 7 to 10 years).  Then click הצג דו”ח.  After you see the page, click to download the page as an excel document.  In excel delete any lines that include the words, אג”ח, מניות, עוקב, בינוני, קצר or ארוך, as these are specialty funds that I will discuss in a minute.  What you have left are all the general funds.  Compare the funds to see which has been (1) successful over the long period of time and (2) has been stable – meaning that the average for the past 3 years and five years was not crazy.  According to your research, choose the best 5 – 7 funds from your list.

Now you have to take the lead and force these companies to give you a good deal on finance charges.  Get your list of 5 to 7 possible candidates ready.  After you google the company names to find the relevant phone numbers, call up the first candidate, tell the provider where you work, your salary, how old you are, how much you already have in your pension fund, and ask for the best deal you can get for finance fees.  They will tell you two numbers – the number they’ll take from the deposits (הפקדות) and the number they’ll take from you entire pension fund (נכס).  Each time a person tells you a number take down his name and contact information; you may need to call him back.  As you call each provider, try to bargain him or her down on the charges.  Pit one against the other and call back a provider and tell him that company X will only charge you Y and ask if his company can beat it.  After a while, you’ll find that one company has offered you less in הפקדות and one will offer you the least in נכס.  Use the method of analysis shown in the second part of the last post to choose the company with the least fees and go for it.

Once you have chosen a pension company and a fund, ask the seller about the insurance options and choose the plan that best suits you.  Finally, if relevant, arrange to get all the appropriate paperwork and move your money from your old pension fund to your new one.  Now have a beer and pat yourself on the back for a job well done.

2) If you’re a more hands on kind of investor, you may want to try a fund that will allow you to give you greater control over what is invested.  I divide the hand-on kinds of funds into three categories:  a) funds that have 50% or more of either stocks or bonds (including the possibility of investing solely in indexes), b) funds that are designed for people of different ages and c) funds for people about to retire within a year or two.

a) funds that have 50% or more of either stocks or bonds (including the possibility of investing solely in indexes):  In order to see what is available, so a simple search of the חדשות funds in פנסיה net (see above for more detailed instructions).  The look at פניקס, הראל גלעד, מיטב, and מקפת אישית to see the different types of funds they have available.   Choose a couple of companies and call the companies that interest you and bargain down the price on fees using the method outlined above for option 1.  Choose an insurance program, if applicable, move your money from your old fund and pay yourself on the back for a job well done.

b) funds that are designed for people of different ages:  Both מבטחים and הלמן אלדובי have funds that contain more equity (ie stocks) for younger investors interested in the long run and more debt (ie bonds) for investors who are coming closer to retirement age.  The mix is a good idea and you could use either of these two companies or else some of the funds in option (a) above, specifically those funds that have 50% or more in either stocks or bonds, in order to manage a portfolio that becomes more risk averse at you come closer to retirement.  After looking at the investment history in פנסיה נט, choose the companies you want to contact and then pit one against the other to bargain down fees as much as possible.  After choosing a fund, choose an insurance program, if applicable, move your money from your old fund to your new fund and you’re done.

c) funds for people about to retire.  A year or two from retirement is no time to play the stock market or take a risk.  Without time to recoup a loss, a risky investment could mean a terrible retirement and could even mean the difference between life and death.  Currently, הלן אלדובי ,פניקס, and מקפת אישית offer special funds with minimal risk.  Alternatively, a plan with only bonds could be used (such as the one offered by מבטחים and מיטב) but they would not be as safe.  After considering your options, fight to bring down fees, move your money from your old pension fund and you’re done.

3) If you are an Orthodox Jew who holds like Rav Eliyashiv for matters of investing, then you’ll want to choose a “kosher” fund that follows specific guidelines for the businesses with whom it invests.  If this is the case, then you have 6 options – איילון, הראל גלעד, מבטחים, מיטב, מיטבית, and מקפת אישית.  Compare the results of these funds as far back as you can to see which ones have the best long run track record.  Choose your finalists, use the method outlined above to bring down fees, choose a fund, choose an insurance program and you’re done. (Note: If you are an Orthodox Jew, speak to your Rav before deciding if using one of these funds is necessary.  I cannot recall specifically which Rabbanim other than Rav Elyashiv insist on this although I have heard Rav Hershel Schachter’s name mentioned.  I hope to do further research about the matter and write up an article in the near future).

The following chart explains the entire process for choosing a pension fund (click the chart to enlarge).

Make a date once a year to go through the process of reviewing your policy and making sure that your preferences and needs match up with your current investment.  For example, after around 8 to 10 years, you’ll find that as your pension has grown, so has the significance of the fee for נכס; at this point you should probably switch to a plan with a lower fee for נכס even if it means a higher fee for הפקדות.  Also, as your children grow up, you will need less insurance with your pension.  Finally, as you approach retirement, you may want a more conservative investment.

Just to be clear, I do NOT recommend changing you pension fund every year.  Odds are you will only have to change your pension fund a few times in your life – but even showing the company that you mean business can save you a lot of money.  Just bargaining for better fees saves the average Israeli upwards of ₪ 500,000.  More importantly, the method outlined above enables the average Israeli to understand his or her pension and take control of his or her retirement.  It’s all about enabling you to look after your own money because no one cares about your money more than you.

how the Israeli pension system works part 4 – returns and fees

Hi.  I’m redoing a bit of my series on pensions.  In this updated version, I will address the different pension fund options beyond the major funds offered by each company.  So without further ado, I present the updated version of part 4:

In part one we discussed how you pay into your pension

In part two we discussed why you personally need to watch your pension and make sure it is invested wisely

In part three we discussed what is in a pension fund and how your choice of pension can be divided into the ten categories of investment or four categories of investment by risk.

In part four, we will discuss the two most important skills that one has to learn when choosing a pension: comparing funds and analyzing fees.  In part five, we will discuss how to use these skills and a bit of analysis to help you choose the pension fund that is right for your.

(1) Comparing the results of funds and companies:

To begin, go to pensianet, choose “חיפוש פשוט” and then choose “תשואות (by returns).”  Then go down a bit right below an orange line where it says “תקופת הדו”ח” and choose to go back further than 12 months.  Many investors like to see a track record of ten years, but some are comfortable with a slightly smaller time frame.  Either way, look long term.  Now check the results of your selected funds remaining.  Some did well over the long run and some did not.

Here is an explanation of the report you should be seeing:

• תשואה מצטברת לתקופה – this is the return (interest earned) on the fund during the period we requested – including compound interest.
• ממוצעת שנתית 3 שנים אחרונות – the average annual rate of return on the fund over the last 3 years
• ממוצעת שנתית 5 שנים אחרונות – the average annual rate of return on the fund over the last 5 years
• שארפ – sharpe ratio – this tells us how much of the return on investment was from risk and how much was from management of risk.  The higher the number, the more the return is a result of risk management, the lower the number, the more it is a result or risk
• שיעור דמי ניהול – finance fee – how much of your interest you have to pay to the providence fund provider.  You’ll notice that this is divided into two categories how much you pay for הפקדות, deposits in your account, and how much you pay per year on all the נכסים, or assets in your account.  This number is not honestly portrayed, as some pay much more and some pay much less.  I will discuss its major ramifications later.
• יתרת נכסים לסוף התקופה – how much money is in the fund, or market capitalization – in theory, a huge fund is a stable place to keep your money.  I say “in theory”, because I was not born yesterday.  Sometimes managers of big funds make stupid mistakes.  But if all the other numbers look right, this number could be a measure of stability.
• צבירה נטו – net accumulation – this tells us how much money has either gone into or left the fund during the period we are reviewing.  Money goes in when (1) people put in more money and (2) the funds gains value.  Money goes out when (1) people take out their money (2) the funds lose value and (3) finance charges are taken by the fund managers.  This number should look normal compared to the market cap.  If a fund is loosing ₪ 100 million, but it is an ₪ 8 billion fund, then it could just be that some people took out their savings the past month.  Look at this number along with the return on investment numbers to try to figure out why the money is going in or out.  If you notice everyone is jumping ship on a fund, ask why.  It doesn’t mean you should leave the fund, but it could be a red flag.  Alternatively, if this number is huge, see why it is doing so well – it could be a sign of a successful management, but it could also be the result of a bunch of people blindly put their money there because someone mentioned the fund in an article in the paper.
• מדד נזילות – liquidity index – When a fund invests in less liquid assets, it is harder to value the assets exactly.  This means that the information about the company’s profit (used for the interest rates, sharpe etc) may not be as accurate.  Ideally this number should be as high as possible.  If you want to be a real pessimist, then this number could be taken as a margin of error for the reported income.  Realistically, the margin of error is usually much less.

Use the data above to compare the results of the various funds.  Use the data to tell a story about the profitability of the fund (the return) the stability of the fund (average 3 and five year return) and the size of the fund (market capitalization).  Unfortunately, the sharpe, and net accumulation are not very helpful because they quote the statistics of the company, not the individual fund.  Likewise, the fees quoted mean absolutely nothing because as we’ll see, you’ll be able to bargain these down.

(2) Comparing fees

Finance charges are the biggest inhibitor to the growth of your retirement and you should strive to avoid them like the plague.  Not paying 4% of your pension for fees sounds a lot like making an additional 4% on your money (it’s even more when you take compound interest into account).

As an aside, in theUnited States, women generally run their Roth IRAs better than men.  And what exactly is women’s secret to investment success?  Women don’t buy and sell various assets in the IRA as much as men.  Men take a much stronger hands on approach and while they get better returns, they lose much more money to finance charges.

There are two kinds of fees that you pay from your pension fund: a fee on all deposits (הפקדות) and a fee on all the money in your fund (נכס).

For example, let’s say a particular fund charges 5% on deposits (הפקדות) and 0.75% annually (really it is 1/12 of this number taken off monthly) on the fund (נכס).  I make ₪5,000 amonth and I pay in 5% of my salary with my company paying in 10%.  I already have 50,000 saved in my pension fund.

At the end of each month, ₪750 will go into the fund.

In this case, 5% will be taken off of the ₪750 for הפקדות (₪37.50) and .75%/12*₪50,000 = ₪31.25 will be taken off for נכס.  In this case, I’d be paying ₪68.75 in fees.

When you contact different companies, you will notice that some offer pensions with lower fees on the הפקדות while others offer smalower fees on the נכס.  So which one is more important?  It depends on how much you are depositing and how much you have in your pension fund.  Let me give an example:

Jack was offered 2 good bids from 2 different funds.  Company #1 offered him 5% (on deposits) and .1 (on נכס) and the Company #2 offered him 2% and .5.  Which is better?

Jack has ₪20,000 inhis fund and between Jack and his work, deposits ₪1,000 into his fund every month.

With Company #1 Jack would pay (5%* ₪ 1000+.1/12* ₪ 20,000) = ₪ 51.67.

With Company #2 Jack would pay (2%* ₪ 1000+.5/12* ₪ 20,000) = ₪ 28.33.

So in this case, Company #2 is the best choice.  But if Jack has a lot more in his pension fund, let’s say ₪ 500,000, then things would be very different.

With Company #1 Jack would pay (5%* ₪ 1000+.1/12* ₪ 500,000) = ₪ 91.67

With Company #2 Jack would pay (2%* ₪ 1000+.5/12* ₪ 500,000) = ₪ 228.33.

So now Company #1 is by far the better choice.  As you start out the percentage taken on deposits is more important, but at you build up your savings, the amount taken for נכס is much more important.

For this reason it is important to review your insurance policy annually and make sure you are not having your hard earned money taken through finance fees.

In the next post, I will discuss the various models offered by the various pension funds and how you can help yourself choose a pension that suits you.

more than just food: items you can and should buy in the shuk

Back in the old country, I would search websites and stores in order to find a bargain, but here things are different.  In a country where Amazon.com means nothing and price tags are only a suggestion, shopping is less about making an informed decision and more about finding your prey and going in for the kill.  As any Israeli knows, the best place for aggressive energetic shopping is the shuk.    But while most people think of the shuk when buying food, there are tons of bargains to be had on other items as well.  For example:

(1) Children’s toys:  I know, I spoil my child, after all, everything I ever bought for my son was imported all the way from China and/or Vietnam.  Lead paint and child labor jokes aside, if you’re looking for something simple like a toy truck or a doll for a young child, there is no reason to spend 5 times as much on an identical item in a toy store.  There may be some toys which are worthwhile to get in the store, but the overwhelming majority of toys for your children (and their friends’ birthdays) can be bought in the shuk.

(2) Linens and clothes:  If you’re looking for a nice suit, I wouldn’t recommend beginning with the shuk; but if you’re looking for socks, undergarments, towels, sheets, t-shirts and shorts, there is no point in spending tons of money in the mall when the shuk offers the same thing for less than half the price.

(3) Electronics and Kitchen utensils:  While fancier electronics should be bought at a place with a suitable warranty, simpler household items such as an iron, kettle, space heater, toaster oven, bug zapper, hair curler and telephone are significantly cheaper in the shuk.  Also, common kitchen utensils such as pots, pans, knives, tenderizers, silicon tins and more are usually available in the shuk for very cheap.

Alternatively, these items can be found at bargain prices in Haredi neighborhoods as well.

What other items do you buy at the shuk?  Is there an alternative place you go to buy some of the items mentioned above for cheaper prices?

Top 10 Products You Don’t Need to Buy (Because You Already Have Them In Your Home) (from Lifehacker)

This is one of my favorite posts from Lifehacker.  You can view the orignal post and comments here:

We spend loads on all sorts of cleaning, health, and other household products at the store every week, but quite often you can get the same jobs done with less obvious products already in your house. Here are ten of our favorite household stand-ins.

In a lot of cases, it might not necessarily be cheaper to use something you already have in the house, but if you’re in a bind, any of these will work well—no trip to the store required. Plus, a lot of them get the job done without harsh chemicals or other annoyances, which is a big plus.

10. Surface Cleaners

Whether you’re cleaning the bathroom, the windows, or the kitchen, you probably have everything you need in your pantry. You can clean your toilet with pretty much any acidic beverage, like a can of Coke or a packet of Kool-Aid, and while you’re in the bathroom you can take a grapefruit and some salt to your grimy bathtub. When it comes to the countertops in the kitchen, a bit of wine or some laundry detergent will get things squeaky clean, while some rubbing alcohol and ammonia will make the windows sparkle.

9. Itch Relief

There’s no need to go grab a Benadryl stick when you get bitten by mosquitoes; you probably have a ton of different itch remedies right under your nose. Vick’s VapoRub does wonders, but you could even get by with some Scotch tape, nail polish, or Alka Seltzer. If you have some meat tenderizer around, that can actually get the job done too.

8. Metal Polish

If the chrome on your car or the steel in your sink is looking a little dull or scratched, you can use one of any number of things to polish it up. Baby oil and Cola both work well on Chrome, while flour’s a good choice for stainless steel. Flour plus salt and vinegar makes a good brass polish, and you can shine up that silver with baking soda or a banana peel.  Incidentally, banana peels also work great for polishing shoes.

7. Bug Traps

If your house is infested with bugs, why buy traps to kill them? They’re obviously visiting because you have food they want: use it to your advantage. Trap fruit flies with apple cider vinegar, or sprinkle some baby powder, chalk, or borax around those ants’ favorite hangout to deter them. Alternatively, putting vegetables on your counter makes them realize you’re no longer a source of the good stuff, and they’ll go away.

6. Drain Uncloggers

Skip the harmful Drano, and just grab some baking soda for stubborn drain clogs. If your toilets a little backed up, some laundry detergent can do wonders. If the above products need a little help, you can get in there yourself with a cable tie or duct tape to get the pipes flowing freely again.

5. LCD Cleaner

We all know you aren’t supposed to use things like Windex on an LCD screen, but that doesn’t mean you need to buy a fancy screen cleaner. All you really need is a cloth and a bit of water, although a coffee filter will do the trick too if dust is the only problem. When it comes to full-on scratches, though, the best you can do is take a pencil eraser to it and hope for the best.

4. Dryer Sheets

Dryer sheets are popular, but a bottle of fabric softener will get you much further. Combined with an old towel, you can easily replace those dryer sheets with one big, reusable one, or turn it into an after-the-dryer wrinkle releaser. Alternatively, you can get the anti-static goodness from some aluminum foil, or fluff those clothes in the dryer with a tennis ball. None of this is to say dryer sheets are completely bad—after all, they do have a lot of clever household uses themselves.

3. Sticker Removers

Products like Goo Gone are pretty useful, but you can easily get by with a number of things in your kitchen. From hair dryers to vodka, vinegar, and even lighter fluid, you’ve got more than one way to wash away sticky residue from a surface.

2. Deodorizers

We all have to deal with funky smells every once in a while, but you can remove odors with just about anything, from the usual baking soda and charcoal to vinegar or even newspaper. And if you’ve got to de-stink an entire room, why make it smell like Febreeze-y chemicals when you could just throw some vanilla in the oven and make it smell like fresh baked cookies?

1. Stain Removers

Stains always seem like the end of the world, but with the right household fix, you can clean just about any stain. Vinegar works well for many stains, while shaving cream does a good job on greasier stains (as does rubbing them with chalk). Dish detergent will get rid of that occasional gasoline stain, and asprin will remove those stubborn sweat stains on your clothes. Grab some corn starch for furniture-related stains, and whatever you do for any of these, make sure you act quickly. If you’ve got a stain we didn’t list, you can bet the database over at Stain Solutions has a recommendation, so head there for more info.

the hidden costs of ‘free’ travel insurance policies (from Ha’aretz)

Haaretz put out a great article about the buying insurance when going abroad:

The hidden costs of ‘free’ travel insurance policies

Nobody wants to think about ending their vacation in the hospital. That may be why, unlike car, health and life insurance, travel insurance is usually a last-minute affair.

By Rina Rozenberg

Nobody wants to think about ending their vacation in the hospital. That may be why, unlike car, health and life insurance, which most people investigate thoroughly before choosing a provider – consulting with friends and experts, comparing prices, even (shudder) reading the policies – travel insurance is usually a last-minute affair, arranged in between packing your bags and checking the weather forecast at your destination.

Another reason people take travel insurance so casually could be that it’s relatively inexpensive. Somebody offers you a policy with your ticket, or you get it through your credit card. Roughly half the travel insurance policies in Israel are issued by the country’s health maintenance organizations, the kupot holim, according to estimates by industry insiders. Most of the rest are from credit card companies and travel agencies, while actual insurance agents are believed to control only 10% of the market.

The price differences among these sources are negligible. But when it comes to coverage the differences are significant, making it important for travelers to do a little homework before setting out for the airport.

1 Don’t make do with the free coverage provided by your credit card issuer. It may not cover the cost of hospitalization.

The credit card companies do not charge customers for basic travel coverage, and in some cases it is automatic; the customer doesn’t even need to contact the company for it to kick in. The problem is that free policies tend to have more constraints and limitations than policies you pay for. Any serious injury or illness requiring surgery or protracted hospitalization will probably leave the policy holder owing huge sums to the overseas hospital.

That’s because they do not provide for full reimbursement. Free policies issued by the credit card companies set a cap on daily hospitalization and other costs, while policies that cost money generally cover more.

For instance, the Visa Cal credit card company will pay up to $450,000 for hospitalization and other medical costs, but has a $2,000-per-day limit on hospitalization reimbursement. If your medical care costs more per day (or in total ), you are responsible for the balance. Isracard has the same daily cap. Leumi Card’s is lower, at $1,350 a day. Sources in the insurance sector say hospitals in Europe and the United States charge at least $3,000 a day.

The credit card companies do offer policy upgrades – for a fee, of course.

2 Do you have high blood pressure, heart disease or some other preexisting condition, chronic or otherwise? You may need special coverage as part of your travel insurance.

A preexisting medical condition is a “medical condition for which the policy holder received drug treatment, medical care or hospitalization in the six months before the trip,” says Michal Weiner, head of the medical-insurance and personal accident department at AIG Israel. If you travel abroad without coverage for a preexisting medical condition that causes you trouble you will wind up footing the entire cost of care yourself, she warns.

The credit card companies’ basic, free policies do not provide this coverage; you can get it, but you have to pay.

Anyone with a chronic condition such as asthma, slipped disc, heart disease or diabetes – even if the condition is stable – should think about this carefully.

Of the kupot holim, Leumit and Maccabi each offers a one-size-fits-all travel insurance policy that cover preexisting conditions. Clalit and Meuhedet both offer riders, supplemental insurance, at a reasonable per diem rate.

3 Even if you bought an insurance policy through your health care fund, it isn’t the actual insurer, and the actual insurance company won’t be aware of your medical condition. You should advise your insurance agent accordingly.

A few months ago the insurance commissioner at the Finance Ministry, Oded Sarig, issued a draft clarification on medical insurance policies sold by insurance agents, which for the purposes of this article include the health-care funds.

One of the reasons for his paper was that, as Sarig noted, a health-care fund member could mistakenly think that when they purchase travel insurance from their health care provider, the policy is tailored to their medical profile. That’s a big mistake.

“The policy holder figures the health-care provider knows them thoroughly and checked their medical records before offering the policy, but it isn’t so,” says Yaron Baron, sales manager at the DavidShield insurance agency. “The kupat holim is serving as a marketing channel. Clal Insurance or Harel is providing the actual insurance.”

4 Usually a $500,000 policy is adequate. All travel insurance policies have a coverage ceiling of between $500,000 to $1 million; the truth is that the number usually doesn’t matter much.

“In most cases the coverage offered by medical and hospitalization policies is high enough,” says Baron, even though his agency offers PassportCard, with coverage of up to a million dollars. He thinks the number is mainly a marketing gimmick: He says he cannot recall a single case of a traveler needing more than $500,000, the lowest ceiling of any Israel travel insurance policy.

That does not mean that such cases do not exist, of course. Gabi Nakibly, VP marketing and sales at Clal Health Insurance, recalls the case of a customer who collapsed while in the United States and ended up in the hospital for 10 weeks. The bills came to $2 million. “Since we have working relations with hospitals, we managed to get the bill reduced,” Nakibly says, adding, “But that was an extreme case.”

5 Tailor your policy to your trip. If you’re going to spend your vacation mountain-biking on single-track trails skirting deep gorges, white-water rafting or doing some other extreme sport, do mention it to your insurance agent so you can purchase appropriate coverage. If you’re taking along expensive equipment mention that too, and find out how to get it insured as well.

Note that standard baggage insurance also has a cap, usually $1,000 per piece but sometimes as much as $3,000.

If you’re taking expensive items, such as a laptop, gold jewelry or a smartphone, you’ll need extended coverage.

6 Make sure your travel insurance picks up the cost of flying you back to Israel for medical care, if necessary. It will raise your premium for your entire trip by about $15 at Meuhedet, for instance.

7 No matter what insurance policy you buy, there will be co-payments: You will pay part of the bill. How much depends on the policy and the issuer.

And one other thing. Make sure to hold onto all your receipts; without them your insurer won’t reimburse a single cent.

dealing with discrimination

A while ago, I spoke with an olah chadasha in her mid 50′s about her stalling job search.  She expressed her disgust at various firms that did not call her back once they saw how old she was, as she did not include her age on her CV.  When I asked her why she did not simply just tell the potential employer her age in advance by including it on her CV, as it would save her the trip to the discriminatory employer for an interview, she replied that she believes that if she were honest on her CV, no one would call her at all.

Towing the line of discrimination is not easy.  While it would be ideal for all employers to act within the confines of the law, or even act economically rational (workers in their 50′s tend to stay at their jobs longer and take less sick days than their younger counterparts), the sad truth is that the front line in HR is usually filled with discrimination.

Perhaps the answer is simply to avoid anyone that practices any discrimination; after all, no one wants to work for a bigoted boss.  But while this solution may seem right at first glance, it may actually lead to a more frustrating and prolonged job search while not actually avoiding a workplace that practices discrimination.  In many cases, the first person who sees a potential CV, the one who wrongly rejects a CV when he or she sees that the candidate is married and of child bearing age or is in his or her 50′s, is not the person who would be supervising this women were she to have gotten the job.  Certainly this is the case of manpower agencies and companies with large distinct HR departments, but surprisingly, this is the case for many smaller companies as well.  Alternatively, the person who looks at the CV first may not be the type to discriminate, but the potential supervisor may do so once you meet him or her in the second round of interviews.  

So how can a potential candidate minimize the effects of discrimination?  I would not sugest withholding information, since is usually comes back to bite the candidate, nor to simply suck it up and play the victim.  I believe that the solution is to call out the elephant in the room and sell it.  If you’re in you’re 50′s, sell your CV on your experience.  List specific goals that you reached in your lifetime, the type that some 25 year old pisher could only dream of accomplishing.  If you’re a married woman, you should mention that you’re looking for a long term job and use the term stability more than once.  Let the person reading your CV come to the conclusion that losing you for 3 months of maternity leave is worth it in order to have a stable worker for 7 years.  If you’re single and afraid that the company wants someone more stable, mention your flexibility.

Once you get your foot in the door, past the first person reading your CV and finally to the level of the interview when you meet your supervisor, then you can see if he or she indeed discriminates.  At this point, it’s okay to not get hired; you don’t want to work for a bigot anyway.  But at least you know that you’re avoiding a job with a terrible boss and not missing out on a really good job with a great boss because of a bigot in HR.

the best time to buy

Sometimes getting the best deal isn’t just about where you go, but when you go as well.  Once a year, lifehacker.com puts together a list of the best time of the year to buy everything.

I think most of the items in this article apply here as well.

What items do you think have a different best time to buy in Israel?

Import duties and the Israeli Laffer curve

If you’re like most Americans, you tell your relatives who send you packages not to declare that anything is new or has a value over $5.  You do this because one time a relative sent you something and the post office held it hostage until you paid some sort of ridiculously large tax/fine/payment that is calculated using what I can only assume is some sort of mixture between random numbers and witchcraft.  Well, a tiny bit of that is about to change.

As of January 30^th, Yuval Steinitz signed a reformation of two import taxes.

- No import taxes on anything ordered by the internet up to ₪ 1,200, although you’ll still have to pay 16% for VAT.

- No taxes (even VAT) on personal packages valued at $75 (up from $50).

The first reform is a great piece of legislation that decreases the cost of alternatives and fosters more competition.  The ₪ 1,200 limit means that the increased competition will only affect lower end items, not luxuries.  I would be interested to know why the government chose such a low number (why not, let’s say ₪ 2,000), but I agree with the idea.

The second price of legislation is also a step in the right direction, but is telling of the government’s ignorance of the issue at hand.  When someone does not declare the full value on the package, he is really only giving up the insurance on the package in the case of loss or destruction.  The value of something is what you pay to get it and I am not willing to pay customs duties in order to receive insurance on the package sent.  This legislation is not going to make any difference to me on any packages valued over $75 because the cost of customs is still too much for me to declare the items.

If the government want to both maximize tax revenue and help its citizens, it should analyze how much people would be willing to pay for insurance on packages and lower the import duty to that level.

Ronald Reagan won the 1980 election by using the Laffer curve to prove that he could raise government revenue by reducing certain taxes.  For those who are not economics nerds, the Laffer curve is a curve that shows the relationship between tax revenue and the various possible rates of taxation.  History shows us that his application was entirely incorrect, but the theory stills holds.  It seems that this is one of those very rare cases when tax cuts along the Laffer curve could be very useful.

Do you instruct your relatives declare the value of items that are sent to Israel?  If not, how low would the tax have to drop in order for you to tell them to declare the true value?

Trajtenberg: More tax breaks for the rich

this article is a slightly more in-depth version of the op-ed I wrote that was published in the Jerusalem Post.

This past summer, hundreds of thousands of Israelis gathered to protest for social justice; an end to the widening economic gap plaguing Israel’s poor. The demands were simple: cut down on the government corruption and change the monetary policy that work in favor of big business and begin taxing the rich and redistributing wealth. Unfortunately, after months of protesting, the Israeli government on the advice of the Trajtenberg Committee, only marginally changed the tax system, not only failing to address the economic gap with income redistribution or monetary policy, but worsening it by giving disproportionately large tax cuts to the wealthy.

How exactly in the midst of public outcry for reform did the Netanyahu government manage to fit in more tax cuts for the wealthy? The secret was the expansion of a tax loophole using Bituach Leumi, National Insurance. For absolutely no reason, Bituach Leumi, unlike all other programs that are either controlled by the government or sponsored entirely by it, collects its revenue through a separate income tax.

This tax, along with the bureaucracy of Bituach Leumi, has a long history of working against the less fortunate. In particular, Bituach Leumi ignores tax credits and disenfranchises Israelis working more than one job from doing a full tax alignment by demanding that workers do an additional Bituach Leumi alignment and then systematically drowning the workers in confusion, bureaucratic incompetence and paperwork until processing such an alignment becomes economically prohibitive.

Worst of all, Bituach Leumi’s income tax makes Israel’s tax system regressive for the super wealthy, dropping the marginal tax rate for those who earn above a declared ceiling. Previously, the ceiling for Bituach Leumi income tax was NIS 73,422 per month – up to that amount the tax rate was 12 percent, and any income over that amount was not taxed. The Trajtenberg Committee advised dropping that ceiling to NIS 41,850 – in other words, giving a substantial tax cut to both those earning between NIS 41,850 and NIS 73,422 per month and those earning above NIS 73,422 per month. The government approved the measure, which will go into effect next month.

A comparison of the overall income tax rates from 2011 and 2012 shows that Trajtenberg Committee’s reforms ended up not only giving the super wealthy a greater tax break than their less fortunate counterparts in absolute terms, but also in percentage of total income earned.

Consider the charts below of a simple male worker in 2011 and 2012 with 2.25 points.

Notice in the second chart that once a worker makes a bit more than ₪ 40,000, his tax break rises significantly.  That’s the Bituach Leumi ceiling kicking in.

But what about the points?  Certainly all the new points for young fathers should fix this up, right?  Alright, let’s completely disregard women (after all, the Trajtenberg Committee certainly does…) and deal with the case of a father getting 4 extra points for his children.  The graphs would look a bit better:

In this case the less fortunate father would only get a slightly bigger tax cut than his wealthy counterpart.

And this is completely justified; with the price of daycare through the roof and working mothers unable to use their tax credits, helping fathers is a fantastic idea proposed by the Trajtenberg Committee, although an obviously better solution would be to let married couple share points, like they do in the US.

Regardless, giving a few tax credits to the poor does not justify the tremendous tax cuts given to the rich.

The justification for the Trajtenberg committee’s recommendation to cut taxes for the rich is that high income earners were setting up shadow companies to get around paying Bituach Leumi taxes. It was reasoned that by lowering the Bituach Leumi income tax, high earners would be more likely to pay their taxes.

But exploiting one loophole to avoid another is unacceptable, especially when the government can easily close both. The government seems to fear a mass exodus of the rich, which is absurd. No intelligent CEO will just up and leave his job, family and country because he has to pay his taxes, and if he or she does, Israel has more than enough local talent to compensate. This is exactly the kind of corrupt kowtowing to the super wealthy that sparked last summer’s protests.

Israelis need real economic reform that rolls back some of the supply side policies and takes a fresh look at what is supposed to be a progressive tax system. Bituach Leumi should be incorporated into regular income taxes, laws that enable tax loopholes need to be closed and points should be awarded not only based on the individual worker, but also on his or her respective family unit. One we take these preliminary steps, perhaps the Israeli government will finally be able to legislate kind of reform that was promised this past summer.