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The slowing trend in salary increases is expected to extend into 2007, with experts forecasting that both growth in the minimum wage and high salaries will affect companies' ability to make competitive offers in the job market next year.
"We expect salaries to rise next year but not at the same speed as in the last two years," Dalia Narkis, chief executive officer of Manpower Israel told The Jerusalem Post. "Salaries are already high and companies cannot afford to make increases across the board. They will also be more careful with their hiring practices based on their experiences in the recession years following the hi-tech bubble."
Narkis' comments came after a survey by the Israel Manufacturers Association revealed that 40 percent of companies in industry gave pay raises in 2006 and that the nominal increase was by 3.9 percent, slowing from the 4.3% increase in 2005.
Manufacturers Association economist Daphna Aviram-Nitzan said the slowdown was influenced mainly by the 7.5% increase in the minimum wage, which took affect in two installments this year, as well as other factors such as the rise in raw material and energy prices and the depreciation of the dollar, which hurt Israeli companies' ability to compete.
"There is no reason that the trend should not continue next year, especially since the minimum wage will again increase twice in 2007 as a result of a government decision to do so," Aviram-Nitzan said.
The Manufacturers conducted the survey with research company Pilat, involving dozens of companies in hi-tech and traditional industry, which supplied data on over 12,000 workers in approximately 150 different positions.
The research showed that 92% of companies determined the pay raise based on evaluations of the worker, while 72% also took into consideration successes in the performance of the business, 64% acted as part of a general salary review and 36% considered inflationary factors.
Eighty-one percent of the companies update their salaries once a year, the Association said.
Among the companies surveyed, the average wage of industrial workers was NIS 6,284 while professional employees earned NIS 8,313 per month.
Looking at prospects in the job market for 2007, Manpower's Narkis said the biggest demand would come from the hi-tech industry, particularly for software engineers and quality assurance agents, while the biggest change was the growing demand for team leaders and managers "which reflects a higher demand for company products," she explained.
Narkis added that other growth areas were in the retail and trade services industries and that high demand was expected to come from the telecommunications sector, including service providers like Bezeq, HOT, the cellular companies and Internet providers, particularly for sales and customer service representatives.
Narkis warned, however, that new immigrants, who have difficulties adjusting to a new language and culture may be marginalized in 2007, as may be job seekers over 50 "even though they may be well qualified for the job."
Meanwhile, the Israel Employment Services reported a 17.8% drop in requests for workers from employers in November 2006, compared to the parallel month last year.
The monthly report showed that November saw 19,900 requests at the agency from employers, 4,306 less than last November, but 2,738, or 16%, more than in October. The rise, compared to last month, was influenced by the increase in working days as the Jewish holidays shortened the working month in October, the IES said.
While Narkis noted that the most difficult task in human resources was matching skilled workers with companies' demand, the general outlook for the market remained positive.
"As a whole, the job market is good and will continue to be so," she said. "The demand for workers should remain similar to 2006 as it is dependant on economic growth, which is expected to be around the same next year."