NII: Raising minimum wage will decrease poverty 9%

Report: Up to 130,000 people could escape poverty line if minimum increased by NIS 750.

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July 7, 2010 01:23
2 minute read.
Money

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Raising the minimum wage NIS 750 could decrease the country’s poverty rate by some 9 percent and possibly allow up to 130,000 people to escape the poverty cycle, according to a report released by the National Insurance Institute’s Department of Planning and Research on Tuesday.

Published one day ahead of a Knesset vote on Labor MK Amir Peretz’s bill calling for an increase in the current minimum wage from NIS 3,850 to NIS 4,600, the report says the Finance Ministry “is painting an unrealistic picture of the situation” and that promoting a negative-income-tax program for low earners will not sufficiently ease the burden on those living below the poverty line.

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According to NII figures released last fall, the number of families living in poverty has been increasing. In 2008, roughly 420,100 families, or 1,651,300 Israelis, lived below the poverty line, compared to 1,630,400 in 2007.

Among these figures, 783,600 were children, a slight increase over 773,900 from the previous year.

The Annual Poverty Report, which is released roughly every six months, also showed that a high percentage of those living in poverty were low-wage earners. Tuesday’s report said raising the minimum wage would help this sector.

“We need to be creative in finding a solution to this problem,” NII Director-General Esther Dominissini said in a statement. “We need to find a balance between all the sides – the Histadrut Labor Federation, the employers and the government – to improve conditions for workers.”

“We are disappointed that the NII is trying to paint an unfair picture of the situation and wants to sell only half the findings of this report,” the Finance Ministry said in a statement.



“This report is only a simulation of what could potentially happen and does not take into consideration the entire labor market.”

“Like we have demonstrated to the government, raising the minimum wage might be a solution for tens of thousands of workers, but it could also mean the closure of many businesses and factories in Israel and ultimately increase the numbers of those joining the poverty cycle,” the Finance Ministry said.

On Sunday, the cabinet voted against the support of Peretz’s private member’s bill on the grounds that its implementation would have an adverse effect on unemployment and would increase the need for higher government spending on welfare.

Prime Minister Binyamin Netanyahu said he favored expanding the negative-incometax- credit pilot program nationwide as part of the state budget for 2011 and 2012.

Sharon Wrobel contributed to this report.

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