Knesset rejects minimum wage hike

Finance Minister Yuval Steinitz accuses bill sponsor MK Amir Peretz of being a “populist.”

July 8, 2010 07:03
2 minute read.
Finance Minister Yuval Steinitz.

steinitz 311. (photo credit: Ariel Jerozolimski)

The Knesset on Wednesday voted against two private member’s bills demanding an increase in the minimum wage.

In a stormy plenum session, MK Amir Peretz (Labor), sponsor of the bill to gradually raise the monthly minimum wage from the current NIS 3,850 to NIS 4,600 over the next 15 months, was accused by Finance Minister Yuval Steinitz of being a “populist.”

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“I would rather be a populist than a coward in facing opposition from employers and the business sector!” Peretz said. “The vote by a majority of the Labor Party against the bill is closing the option of presenting a social agenda.”

Peretz’s bill was rejected in a first reading when 59 MKs voted against and 39 MKs in favor. Supporters of the bill included MK Haim Katz (Likud) and Labor MKs Shelly Yacimovich, Daniel Ben-Simon and Eitan Cabel.

Furthermore, the Knesset rejected another private member’s bill presented by MK Meir Sheetrit (Kadima) to raise the minimum wage to 50 percent of the average wage in the economy. Fifty-seven MKs voted against the measure and 34 in favor.

“No finance minister would raise the minimum wage in a situation of economic uncertainty, when the global crisis is not behind us,” Steinitz said. “No developed country has raised the minimum wage over the past year. The cost of raising the minimum wage would be NIS 5 billion [a year], as a result of which we would have to cut other ministries’ budgets, including welfare, education, health and defense.”

Steinitz warned the ministers before the votes that supporting the bills in the current economic situation would be akin to voting in favor of unemployment.

On Sunday, the cabinet voted against Peretz’s bill on the grounds that it would increase unemployment and so the need for government spending on welfare. Furthermore, it was argued that higher labor costs would make Israel less competitive as a place for doing business, in particular in light of the sharp depreciation of the dollar and euro against the shekel in recent months, and force companies to relocate their activities to cheaper labor cost countries.

“Raising the minimum wage is putting at risk thousands of jobs, in particular in the periphery. I worry about the survival of employers in the periphery, who are already suffering from a difficult global economic environment and a weak US and European currency,” Steinitz said. “A factory like Arad Towels is not likely to survive an increase in labor costs under the current economic conditions and as a result might have to shut down, making 500 workers in the South unemployed.”

Following the vote, Histadrut labor federation chairman Ofer Eini said that he intends, in the next couple of days, to bring the minimum wage hike question for discussion to the economic round table that is attended by employer organizations and the finance minister.

“The Histadrut supports a minimum wage hike,” Eini said. “We want the talks to lead to a framework for raising the minimum wage that is agreeable to all sides – the Histadrut, employers and the goverrnment.”

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