After many years of relative indifference to the fate of poorer workers, and under growing pressure from workers organized in the framework of the "Democratic Workers' Organization (Koach La Ovdim)," the Histadrut (General Federation of Labor in Israel) has suddenly remembered that the minimum wage in Israel is too low.
Even if the Histadrut is only jumping on the bandwagon, however, and even if it comes late in the day, its power is likely to help bring about a needed change in the Israeli labor market. In an economy in which poor workers are increasingly common, productivity is low outside the high-tech sector, and positive incentives are very small, raising the minimum wage is really necessary in order encourage a higher rate of participation in the labor force.
Israeli governments nurtured an Israeli labor market for many years having three sectors in which workers, especially the senior ones, earned relatively high pay: high-tech segments, the large government companies, and financial and business services. All the rest were outside of these three sectors, including teachers and waiters, shop assistants and production workers, night watchmen and social workers, and state employees and personnel agency employees. What all of these had in common was low pay, low productivity, and poverty among quite a few families with at least one breadwinner.
The monthly minimum wage was raised a number of times in 2006-2012, starting from NIS 3,585 and culminating in the current figure of NIS 4,300. The current demand is for a rise in the minimum wage to NIS 30 an hour, amounting to NIS 5,300 a month. It can be assumed that this demand will lead to threats of layoffs and warnings that businesses will collapse, especially small businesses. In this case, it is important to keep in mind that the biggest employers of these workers are personnel agencies and the government. It can be assumed that they will continue operating in the new situation.
Furthermore, if the cumulative inflation during the past eight years and the growth in labor productivity since 2006 are taken into account, the minimum wage has fallen substantially. A precise calculation depends on an assumption of the increase in labor productivity during those years, but it is clear that employers' profits have risen at the expense of their workers, who are the weakest ones.
To tell the truth, raising the minimum wage will not solve all the of the problems and distress fostered by economic policy for many years, but at least some of the working families in Israel will be able to increase their income without the help of the National Insurance Institute, income supplements, and negative income tax.
Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2014
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