‘Sharp minimum wage hike will spur unemployment’

FICC agrees with Treasury, saying increase to NIS 5,000 "must be gradual and moderate."

November 20, 2014 02:18
3 minute read.
Finance Ministry

Finance Ministry chief economist Yoel Naveh (left) speaks to the Knesset Finance Committee in Jerusalem. (photo credit: KNESSET)

A sudden and drastic jump in the minimum wage would increase unemployment, especially among the young Finance Ministry Chief Economist Yoel Naveh told the Knesset Finance Committee on Wednesday.

“In deciding on raising the minimum wage we must take into account the salary costs for employers, which will grow beyond the monthly cost of the salary for the worker because of increases in contributions to pensions and so forth,” Naveh said.

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That will make it less worthwhile for employers to hire new and unskilled workers and harm Israel’s industrial competitiveness, he added.

The committee discussion follows the Histadrut labor federation’s Tuesday declaration of a labor dispute on minimum wage, which opens the door to a general strike. The Histadrut has demanded that it rise NIS 1,000 a month from the current NIS 4,300.

Though a strike can follow a labor dispute by two weeks, Histadrut chairman Avi Nissankoren said he was preparing for the strike to begin on December 4, two days after the legally necessary period has passed.

In an eight page statement on the expected strike, the Histadrut devoted seven pages to listing workplaces it expected to include in the strike, among them government offices, municipalities, state-run hospitals, schools and universities, public transport, the seaports and the airport. Further, it listed a slew of private companies, ranging from Visa Israel to Phoenix Insurance, cellular carriers and gas stations, though it was not clear the extent to which the strike would affect their operations.

“In a country where the minimum wage cannot provide workers a basic existence, each day must be a fight against poverty,” Nissankoren said Wednesday, referring to the international day for fighting poverty.

Meanwhile, the Federation of Israeli Chambers of Commerce, a business lobby, laid out its own agenda in the debate.

“The increase must be gradual and moderate, up to the level of NIS 5,000 a month,” the FICC said.

Discussions should start between employers and the state before the Histadrut gets involved, the FICC said. Furthermore, there should be a different set of discussions regarding the minimum wage in the public and private sectors.

To help employers deal with the change, employers and employees should be able to set a flexible framework for hours, and employers should be given leeway in implementing other new labor laws, which also cost them money.

The National Insurance Institute should help cover the costs of sick days for employees, it added.

Employers agreed with the need to raise the minimum wage, it said, making the threat of a strike “nothing more than a grandiose display.

Ultimately, the employers pay the salary, not the Histadrut.”

If it were to strike, the FICC added, the Histadrut would bear a heavy responsibility for damaging the economy, which shrank 0.4 percent in the third quarter of the year as a result of the 50-day war with Gaza.

Yesh Atid MK Rina Frenkel called on Nissankoren to cancel the dispute given the wave of terrorism that has hit Jerusalem in recent weeks.

“When we are dealing with these troubling times, with the wave of terrorist attacks in the region and through the country, we must focus our energy on fighting terrorism, not on internal struggles that are detached from reality,” she said.

The issue of the minimum wage could be resolved without threats, she said.

Earlier on Wednesday, a bill to ban strikes over “political” decisions, sponsored by Bayit Yehudi MK Ayelet Shaked, passed its preliminary reading in the Knesset plenum.

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