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(photo credit: Daniel Kennemer)
Tired of endless complaints from small manufacturers upset about a lack of skilled specialty labor in the local market, the Israel Craftsmen's Association is calling for the teaching of technical training and entrepreneurship in high schools as well as tax incentives for apprenticeship programs.
"There is no mechanism to bring in workers," said association president Yehuda Alhadef.
Currently, small industrialists must fill the thousands of positions that open annually with poorly trained workers who often don't know how to make the best use of more complex - and more expensive - equipment. "They also don't know how to read the manual, since it's in English," Alhadef added.
The association, which represents Israel's estimated 28,000 manufacturers with 20 employees or less - including nearly 17,000 "one-man workshops" - presented its plan for the promotion of small productive enterprises and the economy as a whole to Prime Minister Ehud Olmert late last week.
Small, independent manufacturers - working in everything from leather, wood, textiles and foodstuffs to plastics, metals, electronics and printing - account for 95 percent of businesses in the country's industrial sector and half of Israel's production capacity, Alhadef noted.
Workers in his own printshop, he said, take in roughly NIS 7,000 to NIS 8,000 net each month, on average, while those who can run more advanced equipment make about NIS 10,000 net monthly, he added, dispelling the notion that work in the sector is underpaid.
Alhadef called on the government to cut taxes on the self-employed and on the business sector in general, and to make it harder for potential workers to receive welfare.
"It is always easiest to go in the direction of unemployment," he said.
Among other measures, the government must allow the self-employed to pay value-added tax on their sales as cash is received, and not the whole sum that has been reported on invoices, regardless of how much actually has been received. Under the current system, small manufacturers are funding their own VAT payments to the tune of NIS 70 million yearly, which could otherwise be directed to absorbing new workers, boosting production and cutting unemployment, Alhadef charged.
"Ultimately, capital to bear the burden of funding is lacking," he said, adding that the proposal would not hurt state revenues, just delay collection somewhat.
"We estimate that it would be possible at present to transfer a portion of the budget surplus to implement this goal, or at least to do so through a gradual program."
The sector would also be helped by a reform allowing spouses of small manufacturers employed in the enterprise to pay income tax individually on the wage received instead of the current regime requiring the couple to pay more tax for the same amount of combined income, Alhadef said.
Small manufacturers also petitioned the government to keep public spending and wages under check and ensure that minimum wage is raised according to a regulated yearly mechanism, and not raised "wildly."
Government should also continue reforms and privatizations to further liberalize the market as a whole while ensuring that competition, security and social justice are benefited by the reform. A plan for further investment in infrastructure should also be formulated, Alhadef said.
"When there is investment in infrastructure, it always trickles down to us for the small things. When the government builds roads, it is [small manufacturers] who make the signs," he commented, adding that the government should implement its decision last year to require 15% of manufacturing in public projects to be done by small enterprises.
"We won't give in," he said, demanding also that a binding definition of what constitutes a small manufacturer be set.
The Craftsmen's Association also called for the removal of non-customs trade barriers and the easing of imports to increase competition in the sector, beyond its call for the government to help small exporters penetrate foreign markets and encourage cooperation between Israeli and foreign manufacturers.
"Competition is good for the market. We are more efficient, intelligent and ensure that the product is better and more aesthetic. There is no need to be afraid of competition," as long as its fair and not dumping of cheap, low-quality imports on the local market, Alhadef said.
Nonetheless, small manufacturers do hope that Israelis prefer to buy domestic goods and take pride in the quality of the country's produce, he added.
"We are certainly appealing to consumer patriotism," he said.
Israeli manufacturers have no natural competitive advantage beyond high-quality human capital and a tendency to adopt new technologies quickly.
"We are only competitive when we are much better in what we do than others are," he said.
Q1 industrial production up 8%
Manufacturing production rose an annualized 8 percent in the first quarter of the year led by an 18.8% jump in hi-tech industries, following similar rates of growth during the previous quarter, the Central Bureau of Statistics said Sunday, citing trend data.
Hi-tech industrial exports have grown 20.5% since the beginning of the year, the bureau said. Last year, hi-tech industrial production rose 5.4%. The hi-tech industry's labor force grew an annualized 6.6% in the first quarter of 2006, having expanded 4.1% in 2005.
Overall industrial production in 2005 grew 3.7%, having risen 7% in 2004 and fallen 0.4% in 2003, 1.9% in 2002 and 4.9% in 2001.
The number of wage-earners employed in the sector rose 2.4% in the first quarter following a 3.2% rise in the last quarter of 2005, while the number of hours worked fell 0.8%, having risen 2.3% in the previous quarter. In 2005, the number of employees rose 1.7% and hours worked increased 1.3%.