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Inflation Issues in Jewish Law
Rabbi Dr. Aaron Levine

Reciprocal Labor Agreements

Inflation, especially when it is accompanied by recession, produces a marked substitution of barter transactions for market transactions. Barter allows a person, in some measure, to maintain his accustomed standard of living despite his loss in income and the higher price level he faces.

Reciprocal work agreements may violate avak ribit law. This occurs when A commits himself to compensate B for his labor services by rendering him, at some future date, a labor service either enjoying a higher market value 28 or requiring greater physical exertion than the service B provided A. Since the arrangement confers A a delay in performing his end of the agreement the differential value or effort involved in his service amounts to compensating B for tolerating the delay in the payment due him (agar natar). No infringement of avak ribit law is, however, involved when the time delay element is absent from the agreement.29 Legitimacy is therefore given to reciprocal labor agreements calling for simultaneous or consecutive performance of the respective services committed. 30

Interpreting R. Joseph Caro's view, R. Mordechai Dov Twersky31 (Hornestopol, 1840-1903) understands the essence of the prohibition to consist of the stipulation between the two parties, rather than the actual reciprocation of a service of higher value or one entailing greater physical exertion than the sevice initially rendered. Hence, should A perform a service for B, and at some future date, A agrees to allow B's higher valued service or service entailing greater physical exertion to constitute compensation for his service, the agreement does not violate avak ribit law when the transaction does not violate the biblical injunction against ribit (ribit kezuzah). While the mere payment of a premium without prior stipulation violates avak ribit law when the transaction involved takes on the character of a loan, no prohibition is violated when the transaction represents payment for service or product rendered. The above point of leniency would not, however, proceed according to the school of thought that regards payment of a premium without prior stipulation as violating avak ribit law even when the transaction does not take on the character of a loan. 31

R. Jacob b. Asher32 (), on the interpretation of R. Joshua ha-Kohen Falk () advances a very stringent view in respect to the reciprocal labor agreement interdict. Reciprocal labor agreements, in his view, may be prohibited even when the committed sevice is not assessed at the time of the stipulation to entail either greater exertion or be of a higher value than the service initially rendered. This occurs when there is merely concern that the committed service may entail greater exertion at the time it will be rendered in reciprocation. 33

R. Abraham b. David of Posquires understands the prohibited cases of reciprocal work agreements to fall under the rubric of the seah bese'ah interdict, discussed above. 34

Proceeding from the above rationale is the applicability of the interdict even when the committed reciprocal service is not assessed as a definite matter to be of greater value than the service already performed.

A point of leniency also proceeds from the se'ah bese'ah rationale of the reciprocal work agreement by assessing the market value of A's initial service and agreeing that should B's service prove to be of a higher market value, A will make the necessary monetary compensation.

R. Jacob Blau posits, however, that R. Abraham b. David's rationale of the reciprocal work agreement interdict represents a minority view and should therefore be rejected. The majority view posits R. Blau, regards the reciprocal labor agreement interdict as separate from the se'ah bese'ah prohibition. Given the distinctiveness of the reciprocal labor agreement interdict, concern that the committed service might entail greater physical exertion as well as it might be more valuable than the service already rendered forms the basis of the prohibition. Consequently, the assessment monetary compensation procedure described above would not be valid when the labor services involved are different, even if they are assessed to be of equal value. 35

The Charity Obligation and Inflation

Judaism's charity obligation consists of a duty to devote one-tenth of net income toward the needs of the poor. Falling within the income base against which the tithing obligation is calculated is the profits earned from the sale of an asset. 37 What is included in the base, according to R. Moshe Peinstein, is the real profit rather than the nominal profit earned. To illustrate, suppose A purchased an asset for $1,000 and sold it two years later for $2,000. Suppose further that the rate of inflation in this interim period was 100%. Taking into account the 100% inflation rate, the nominal profit of 100% on the sale is reduced in real terms to zero. Consequently, the nominal profit earned here would not be subject to any tithing obligation. R. Peinstein further posits that the difference in the purchasing power of the monetary unit in the relevant periods of time hold take into account only changes in the prices of necessities. Changes in the price of residential homes and luxuries, however, do not enter the index. 38

Religious Ministrants and Inflation

Compensation for a religious ministrant hired by the community to devote his time exclusively 39 in the rendering of his service must be in accordance with his need. 40 Need takes into account both family size and the cost of living. This formula may very well allow the religious ministrant to command a salary above what he could earn outside communal religious service. With need serving as the criterion for his compensation, the religious ministrant's salary must be automatically increased when either his family size or the cost of living increases. Contracts of religious ministrants are hence subject to automatic escalator clauses. 41

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