Histadrut signals flexibility on austerity measures

Histadrut chairperson Arnon Bar-David and Minister of Finance Bezalel Smotrich  credit: Histadrut spokesperson; Noam Moskowitz, Office of the Knesset Spokesperson
Histadrut chairperson Arnon Bar-David and Minister of Finance Bezalel Smotrich credit: Histadrut spokesperson; Noam Moskowitz, Office of the Knesset Spokesperson

The gap remaining between the workers' organization and the Ministry of Finance on the 2025 budget is NIS 3-5 billion.

Minister of Finance Bezalel Smotrich and Histadrut (General Federation of Labor in Israel) chairperson Arnon Bar-David met last week in an attempt to advance the negotiations on the austerity measures in the 2025 that will affect workers. At the meeting, Smotrich tried to persuade Bar-David of the seriousness of his intention of abiding by the NIS 40 billion in spending cuts and tax increases in the upcoming budget. The Ministry of Finance seeks to achieve about half of the amount, at least NIS 20 billion shekels, through agreements with the Histadrut. The Ministry of Finance presented a tough package of measures aimed at workers: cuts in tax benefits on advanced training and pension funds; freezing of income tax brackets, the minimum wage, and National Insurance benefits; postponement of the public sector salary increases planned for the coming years; and the plan reported by "Globes" to take vacation pay supplements from workers to the Ministry of Finance’s depleted coffers.

Sitting at the negotiation table allows the Histadrut to prioritize the various measures. If they agree to some of them, they will be able to bring about the cancellation of others. As far as is known, the gap at this stage between the minimum that the Ministry of Finance wants to take and the maximum that the Histadrut is willing to give is of the order of NIS 3-5 billion for the 2025 budget. Beyond the numbers, however, there is mistrust between the government and the workers’ organization on the issue of equality in the imposition of austerity measures on the various sectors of the population.

Talking to "Globes", Adam Blumenberg, VP of Economics and Policy at the Histadrut, explains the organization's position on the issue and details the demands and conditions they set for the Ministry of Finance. "The Histadrut chairperson wants to see that we are not left to cope alone in this battle. His demand is that, first of all, everyone should share the burden. Everyone means the government itself, the employers, the capital market, and everyone else. It also means people on welfare payments, yeshiva students, and people who at present make a lower contribution to productivity."

Subject to equitable distribution of the spending cuts, there is willingness on the part of the workers' organization to consider postponement of some of the wage increases scheduled for hundreds of thousands of public sector workers. "We are talking about the postponement of salary increase stages. We have not yet finalized how it will be done," explains Blumenberg. The first stage that could be postponed is the 2% wage increase planned for this December, in accordance with the framework agreement signed between the Ministry of Finance and the Histadrut last year. Regarding the next stages, the Histadrut is still considering its position.

The Histadrut is also open to talking about taking vacation pay supplements from the workers to help cover defense expenditure in 2025, as was done this year. "If we say no on pensions and no on advanced training funds, then I think that vacation payments are an alternative that is more than adequate," says Blumenberg.

"Four long weekends are equal to 2% salary"

Unlike in the past, when in exchange for wage freezes the Ministry of Finance agreed to a higher increase in wages in the future, this time the Histadrut is making a unique demand: "We are specifically targeting long weekends or shortening the work week to 40 hours in the private sector," says Blumenberg. In the framework agreement, the Histadrut achieved a shortening of the work week in the public sector from 42 hours to 40 hours, and now the demand is to expand this by legislation to apply to the entire working population. This is an interesting approach on the part of the Histadrut, if the compensation for the wage freeze in the public sector will indeed be a benefit for private sector workers.

Blumenberg explains the thinking behind the demand: "Economically, four long weekends are almost equivalent to 2% of salary. If you look at four out of 220 working days, it's almost 2%. So in economic terms it's almost equivalent." The Manufacturers’ Association of Israel is expected to oppose the Histadrut's demand to shorten the work week, which will come at the expense of the employers. The employers’ organization made clear that labor relations issues are handled in a room in which the employers sit around the table along with the Histadrut and the Ministry of Finance, and that in the absence of that, the issue of shortening the work week is not on the agenda.

The prerequisite: closing unnecessary ministries

The Histadrut also sets clear red lines: "I can tell you what we will not agree to in any way," says Blumenberg. "There will be no harm to the minimum wage, there will be no harm to pensions, and there will be no harm to the advanced training funds." He appreciates that some of these proposals by the Ministry of Finance are bargaining chips, but he is convinced that unless there are agreements between the Ministry of Finance and the Histadrut - the Ministry of Finance will try to implement them.

In addition, the Histadrut demands special attention to disadvantaged populations. "We demand that even if we come to freezing benefits, we need to take care of the populations that rely on these benefits, such as the elderly and disabled."

One of the preconditions set by Bar-David in advance is the closure of unnecessary government ministries and a cut in coalition funds. Smotrich, for his part, proposed to close five ministries as part of the arrangements taking shape. In the draft 2025 budget bill, there is an intention to establish a team led by the director general of the Prime Minister's Office, Yossi Shelley, to examine the closing the ministries. Blumenberg expresses skepticism: "We see difficulty at the moment for the Ministry of Finance in cutting unnecessary ministries. They are currently talking in drafts about closing five ministries. Since the proposal was published, another minister without portfolio has been added to the government." (Gideon Sa'ar - O.D.)

The Ministry of Finance’s draft bill mentions a wage freeze in the public sector for 2025-2028, amounting to about NIS 3 billion a year. Blumenberg, on the other hand, emphasizes the importance of a time limit for economic measures: "We see the need for adjustments for the next year, at most for the next two years. This is the period when we really need to step up our help for the country to recover, and therefore the cuts should also be appropriately timed. We insist on this."

Describing the tight timetable for negotiations with the Ministry of Finance, Blumenberg says, "We’re in time added on for injuries. On October 31, the budget proposal is due to go to the government. We’re trying to find common ground with alternatives by then."

Published by Globes, Israel business news - en.globes.co.il - on October 15, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Histadrut chairperson Arnon Bar-David and Minister of Finance Bezalel Smotrich  credit: Histadrut spokesperson; Noam Moskowitz, Office of the Knesset Spokesperson
Histadrut chairperson Arnon Bar-David and Minister of Finance Bezalel Smotrich credit: Histadrut spokesperson; Noam Moskowitz, Office of the Knesset Spokesperson
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