10 Policy Initiatives Israel Must Do to Spur Job Creation Through Small Business

Minister Bennet With Head of German Standards AssociationFollowing my last post on the coming wave of unemployment from the slowdown in physical retail and its attendant industries, I want to suggest 10 policy initiatives that the governments should undertake to solve it. I call on Minister of the Economy Naftali Bennet to implement these proposals ASAP.

1. Appoint a Small Business Czar who can serve as ombudsman IN government so that the voice and needs of small business will be heard. The Czar can then always present Small Business’ priorities front and center in a systemic and consistent way in the same way big business uses lobbyists that only they can afford.

2. Provide automatic and unlimited visas for technology talent to enter Israel provided that they are paid at least as much as an Israeli counterpart. Israel’s current foreign worker policy is completely absurd. Currently, we let in hundreds of thousands of uneducated Philippino, Thai and Romanian workers for building, homecare and agriculture who then take blue collar jobs for cheap wages. They take these jobs from Israelis. At the same time, we keep out the high IQ potential immigrants who actually create jobs.

3. Make University degrees in any area of science free while raising the tuition for law and business degrees by 5x. Additionally, we should subsidize continuing technology and engineering education for those tech workers over 40 years old and for recently discharged soldiers ( חיילים משוחררים). The current incentive law for preferred employment (תעסוקה מועדפת) for discharged soldiers (חיילים משוחררים) is completely ass-backwards in that it incentivizes work in blue collar service businesses such as tourism etc. (I would still encourage work in agriculture).

4. Expand and enhance the definition of the current Angel Investment Law (tax deduction/credit) to include ALL new small companies and not only those that fit the arbitrary Chief Scientist definition of an R&D company. Also, we should give angels a zero capital gains tax rate IF they reinvest the profits in a small business within 12 months of gain. The US has had a real estate tax credit like this for years.

5. Zero corporate and personal taxes for new business’s starters/founders for 5 years provided that they grow exports 20% per year in first 4 years (with look back) and grow employee base 15% per year. This will significantly improve chances of success for small businesses by increasing cash flow and reducing cash drain in the early critical years.

6. Full reimbursement of costs of standards checks or a relaxation of standards for businesses up to $5mm in revenues.Standards Institute checks are killing small businesses (I should point out that Minister Bennet has already made some strides on this issue). Plus, we must insist that the standards bodies conform to an SLA (service level agreement) with all small businesses on the speed of approval. My good friend Dan Peguine has enlightened me on how the cost of inspection by the Israel Standards Institute for a tea pot his father wanted to import cost almost 20X the amount of the teapot and in small quantities for small business, that can kill you.

7. The Government should provide insurance to banks on up to 25% of working capital loans to small businesses in their first 3 years of operation. For some reason, Israel’s banks keep lending to these tycoons who are super risky both to the bank and the economy. The tycoons’ collateral is a mirage because when the structures collapse, there becomes little recourse for the creditors. When you lose money in a small business loan, it is truly anti-fragile (see below) both for the business and the overall economy. We need a government incentive to change the thinking of the career credit approval people at the banks.

8. We need to provide training for entrepreneurs in online selling of yourself and your wares on elance, odesk, eBay and other platforms. It is a big world out there and the global market is available even to the Faran organic soap provider in Mitzpe Ramon (today’s equivalent of maasudda from Netivot). Odesk says this really well in a blog post from earlier this year:

“Today, we’ve seen the Amazon example played out in thousands of new long-tail markets — the Internet has thrown open the doors to distributed global demand so that suppliers of goods and services can find demand beyond traditional local markets. There’s Netflix for movies, Zappos for shoes, Etsy for crafts (where I bought a custom bandana from Hungary last month), and the list goes on. However, most of the common examples of long-tail markets refer to consumer goods. We need to evolve our thinking as adoption of Internet marketplaces matures.

Is a similar long-tail market emerging in the labor market?
What if the long tail phenomenon spread to a more advanced market, one that would bring a broader economic impact? In other words, what if it spread to the world of work? As oDesk approached $1 billion cumulative spent hiring via our site (a landmark we
announced today), I wondered if the long tail was taking hold in our Internet-based marketplace for work (also known as an “online workplace”). With the Internet opening up access to businesses and professionals worldwide, I hypothesized that plotting oDesk skills data would show a long tail.”

9. 48 hour guaranteed licensing for new business and penalties on banks if they are slow opening accounts. It is sooo painful today for a small business to open a bank account unless they only accept bitcoin in which case they do not need a bank. We need to literally beat the banks into opening accounts. Trust me, it was not easy for even Aleph to open a bank account. It literally took weeks!

10. Close לשכת התעסוקה. We should replace the unemployment agency with a Public-Private-Partnership where the government gives vouchers to unemployed ( maybe even extra for Haredim and Arabs) to get trained at companies such as start ups or Teva and Checkpoint. This training will be far better than the low class employment that the unemployment agency currently offers. The Voucher pays both for a salary and training and gives a tax deduction for double the unemployed persons’ salary if they are still employed after two years.

These are my ten suggestions to solve our urgent coming employment crisis. What are yours? Please share, comment and make your own suggestions so that this is not a repeat of Cassandra.

[Originally published on 24th December 2013 by MIchael Eisenberg]