NIS 5,831. That's the median monthly wage of employees in Israel in 2011, which is the most up-to-date, accurate and reliable figure available from the National Insurance Institute.
One the Israeli economy's main problems, if not the main one, is dismal wages. The fact that half the employed workers in Israel, some 3.3 million people, earn up to NIS 5,831 gross per month is what should be uppermost in the minds of those drafting the 2015 budget.
The monthly wage is the basis of the existence and survival of every citizen in Israel, the basis of every household's consumption, and in fact one of the chief measures of the health of any society. If somewhere in the corridors of the Bank of Israel and the Ministry of Finance they don't start to understand and digest why wages are so low and what needs to be done to push them upwards, then this year's annual budget festival will be more of the same: endless disputes over how to share out the cake better (which is undoubtedly also important), and not serious discussions on how to make the cake bigger in order to enable as many people as possible to earn more. If once more we are witness to loud and prolonged arguments over the defense budget, as is turning out to be the case, then we shall end up with some kind of compromise of a few billions hither or thither, and miss the opportunity to deal with the really important things.
At the moment, the combination of a real estate bubble and miserably low wages is the mother of all problems in the economy. The generation that is mortgaging itself in purchasing a home at an inflated price divorced from any logic, is tied to it till old age because of its low earning power. Their earning power is inevitably eroded over the years, because there are not enough high quality jobs in the economy with decent pay, and there is insufficient enforcement and regulation to restrain the erosion of low wages. In Israel there are too many low quality jobs with low productivity, with correspondingly low wages. At the same time, there are not enough high quality jobs with high productivity and high wages to match. Such jobs are mainly to be found in the high-tech sector, which, for all its success, accounts for a low proportion of the labor market. This imbalance has been described many times, and is the root of all evil in the Israeli economy.
The only way out of this is to make the cake bigger through long-term measures. In the end, this must be a result of selling innovative products and services overseas. Expanding exports is one way to expand the offering of high quality jobs in Israel and raising wages substantially from their present squalid level, a bad outcome of exaggerated reliance on service industries that is dragging the economy down.
The basis of exports is investment in research and development and preserving Israeli know-how. Intel is a good example. For all the legitimate debate over tax breaks, Intel has established research and production here that has become a seedbed for the start-up industry. But there are plenty of contrary examples: Israel sells its know-how, its research base, to the highest bidder; it hires its brains out to the world; and it generally receives zero tax on the activity in its R&D centers. Annual sales of drugs invented in Israel in the labs of the Weizmann Institute and research universities amount to $30 billion, but only $6-7 billion comes from drugs developed in Israel, and even less from drugs produced here. In other words, Israel has missed a tremendous opportunity to set up a major pharmaceuticals industry that will generate high quality jobs and also contribute tax revenues. In the end, the main beneficiaries of these inventions are the pharma companies that buy the intellectual property, the inventors themselves, and the academic institutions. The Weizmann Institute, for example, earns about NIS 1 billion a year in royalties on drugs invented in its laboratories. Imagine what added value the State of Israel would gain if all these drugs were also developed and commercialized here in Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on September 4, 2014
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