311_ amir peretz.
(photo credit: Ariel Jerozolimski/The Jerusalem Post))
The government on Sunday voted against a bill that would raise the minimum wage
from NIS 3,850 to NIS 4,600.
After hours of discussion at the weekly
cabinet meeting and pressure from Prime Minister Binyamin Netanyahu and Finance
Minister Yuval Steinitz, 20 cabinet ministers voted against and 10 in favor of
The bill, which was advanced by Labor MK Amir Peretz, would
gradually increase the minimum wage over 15 months.
plans to expand an income-tax credit program nationwide as part of the
budget for 2011 and 2012. The Earned Income Tax Credit, or negative
was launched in September 2008 in four locations and aims to help
“I support the finance minister’s plans to include the
nationwide expansion of the negative-income-tax program in the next
Netanyahu said. “It is the right measure for working people who receive
wages. This will encourage employment, while other proposals would have
Steinitz had warned that raising the minimum
wage would be costly and result in budget cuts to welfare, defense,
and other ministries.
“As a result of an approval of the proposal to
raise the minimum wage, the government would need to cut NIS 5 billion
all ministerial budgets to cover for the additional financial cost of
implementation in the years 2011 and 2012,” he said at a meeting of
ministers, which took place before the cabinet meeting. “The measure
negatively affect local authorities in general and the weak ones in
as they are struggling to survive the burden of budgetary
Anyone who votes in favor of the bill to raise the minimum
wage cannot complain about cuts that will be made in their ministry’s
In May, the Ministerial Committee on Legislation voted in favor
of Peretz’s minimum-wage bill. But the Finance Ministry said its
would have an adverse effect on unemployment and would increase the need
higher government spending on welfare.
“The threatening way the Finance
Minister put pressure on government ministries and ministers to vote
bill is not legitimate and possibly even illegal,” Peretz said.
Finance Ministry, Netanyahu and employer organizations have vehemently
the bill, arguing that higher labor costs would make Israel less
business, especially in light of the recent depreciation of the euro
shekel, and force companies to relocate their activities to countries
cheaper labor costs.
The Finance Ministry said supervising and enforcing
a higher minimum wage would be difficult. Compliance with the current
minimum-wage law is relatively low, with about 14 percent of all
employees being paid less than the minimum wage. An OECD report on
the number of inspectors dealing with labor-law enforcement was less
quarter of the International Labor Organization benchmarks for the
workers per inspector.
“The minimum wage in Israel is high in comparison
to the average market wage in OECD countries, risking negative
effects, and the ratio should be progressively reduced over time,
increased enforcement,” the OECD said in a recent economic report on
The Bank of Israel has also expressed opposition against raising
the minimum wage.
“Some of those affected would indeed benefit from an
increase in their wages, and their economic situation would improve,”
central bank said in a recent report. “In some instances, however, it is
reasonable to assume that employers would not comply, since there will
greater incentive to noncompliance, as the difference between the
and the competitive wage widens, and the economic situation of those
will not change.
“In contrast, it is also reasonable to assume that some
employees, particularly in tradable-goods industries, will be fired, so
their situation will deteriorate.
Therefore, an examination of the range
of implications of the proposed change gives cause for concern that it
have a negative effect on a considerable share of low-wage earners –
those it is
aimed at helping.”
The Finance Ministry wants to help the working poor by
increasing investment in education and training of skilled staff, aimed
expanding the hi-tech sector, especially biotechnology and technology
financial services, and boosting participation of certain population
the labor market.