Who’s afraid of a minimum wage revolution (and who’s not)?

The reason for the minimum wage increasing twice as much in the US as in Israel is not only to actions of the current Obama administration, but also those of the previous government.

By
January 20, 2016 21:34
3 minute read.
money

Shekel money bills. (photo credit: REUTERS)

‘The minimum wage needs to be raised to $10 an hour. If an American adult is to work, it’s only fair that he will earn $10 per hour.” This quote may sound like a line from a Hillary Clinton election speech, but the truth is that it was said by television host Bill O’Reilly from Fox News – one of the most wellknown journalists within the American conservative Right.

What’s interesting is that, although most conservatives in the US still oppose raising the minimum wage, O’Reilly is far from alone. Around the world, even in America, the capital of capitalism, more and more economists and politicians – even on the “Right” – are expressing their support for raising the minimum wage.

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And they’re not talking about a symbolic raise – they are talking about a dramatic leap.

In 2007, president Bush (hardly a left-winger) signed historic legislation that raised the US minimum wage by 40 percent, from $5.15 to $7.25 per hour. No less than 126 Republican lawmakers in both houses of Congress voted for the law. The current Democratic administration supports an additional increase of the minimum wage to $10.10 an hour which would, if implemented, equate to an increase of 100% over a period of 10 years. In the same time period in Israel, the minimum wage has so far risen less than 50% (and only on the condition that the collective agreement between the Histadrut (General Federation of Labor in Israel) and the business organizations is applied to the entire economy. In this situation, at the end of 2017 Israel’s minimum [monthly] wage will be NIS 5,300, compared with NIS 3,585 in 2006).

The reason for the minimum wage increasing twice as much in the US as in Israel is not only to actions of the current Obama administration, but also those of the previous government.

George W. Bush, during his time as president, understood the need for a dramatic increase in the minimum wage and initiated it, while his counterpart from the Israeli Right, Netanyahu, doesn’t initiate any increases but is dragged along with them. As a result, as long as the prime minister is “forced” to raise the minimum wage, it necessarily remains a slow process compared to what is needed.

Amir Peretz was the first to bring to public awareness in Israel the issue of raising the minimum wage and, in 2006, even achieved a significant increase during coalition negotiations with Ehud Olmert. This historic achievement paved the way for additional steady increases during Netanyahu’s time in government. These increases, however, have always been squeezed from the prime minister, as the latest achievement is the 2015 collective agreement outlined by the chairperson of the Histadrut, Avi Nissenkorn.

The main argument made against a sharp rise in the minimum wage (instead of a gradual, fixed rise), which Netanyahu opposes, is that it would lead to a widespread loss of jobs. It is argued that many businesses would close or transfer their operations overseas.

Nevertheless, more than 600 senior American economists – many of whom are not identified with the economic Left – dispute this claim, and say that it has been scientifically disproven. In an open letter which expressed support for the initiative of the (US?) government to raise the minimum wage again, this time by 40%, they wrote that “in recent years, there have been important developments in academic research dealing with the effects of raising the minimum wage on employment rates.

Most of the recent research suggests that raising the minimum wage had only a minor impact or no negative impact on the employment rate, even in times of weakness in the labor market.”

Hundreds of thousands of working Israelis are waiting for the day when Netanyahu will initiate an increase in the minimum wage, rather than reluctantly accept it. The time has come for Netanyahu, who looks up to capitalist America with admiration, to internalize that “fair wages” is no longer a term to look upon with disdain.

A dramatic increase in the minimum wage is not only for the good of employees, but for the whole Israeli economy; the sooner, the better.

The author is deputy speaker of the Knesset and secretary-general of the Labor Party.


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