'Wage change trivial without proper enforcement'

Industry confident minimum wage will rise but says laws must be observed.

April 5, 2006 06:39
2 minute read.


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With debate over increases in the minimum wage rising as the political parties work to put together a coalition government with great focus on who will take over the Finance Ministry, industry and commerce are concerned about a general lack of enforcement of the law minimum wage law. "I am confident that we will be seeing a change in the minimum wage law. But the increase to a $1,000 as demanded by Labor Party Chairman Amir Peretz will not happen. It was just a slogan," said Vered Dar, chief economist and strategist at Psagot Ofek. Raising the minimum wage to the level proposed by Peretz would take at least a few years, Dar noted. The main issue regarding the minimum wage law to many is the lack of enforcement. "There is a lot of good intention and everyone is talking about raising the minimum wage, which we believe will happen, but the problem of the absence of enforcement needs to be tackled first," said a Histadrut representative. Although there are no exact figures, the Histadrut, said about half of the 700,000 people in minimum wage jobs did not actually receive the minimum wage. The Histadrut added that the union has put forward a proposal to make 300 officers available to monitor obedience of the minimum wage law. Manufacturers' Association of Israel President Shraga Brosh also said that any action regarding the minimum wage ought to be preceded by ensuring the enforcement of the law. According to research carried out by the Israel Institute for Economic Social Research in 2,500 working places, 55 percent of employers trespassed the minimum wage law. Dar believes raising the minimum wage to $1,000 would lead to more employers disobeying the law, as well as more firings. "If employers will be in a situation in which they are not able to pay minimum wage, employees might be put in front of the choice of being fired or accepting salaries below the minimum wage. They are likely to choose the latter," he said. This week the Governor of the Bank of Israel Stanley Fischer said it was dangerous to raise the minimum wage excessively, as it would harm employment. He did agree, however, that increasing the minimum wage gradually, in line with economic growth or some similar index, would likely not have as detrimental an effect on employment. Meanwhile, the Manufacturers' Association also warned of a danger to the business sector should the Labor Party join the coalition, unless the increase is carried out gradually. Negotiations over the minimum wage, Brosh said, must be discussed by a committee involving the government, employers' representatives and the Histadrut. In response to reports in the Hebrew press regarding plans by Acting PM Ehud Olmert to raise the minimum wage by NIS 500 to NIS 4,000 a month this year, Uriel Lynn, president of the Federation of the Israeli Chambers of Commerce said that, beyond the proposal, the available income of minimum wage earners ought to be secured. According to data by the National Insurance Institute, 35% of full-time employees and 50% of all employed earn up to NIS 4,000. As such, the FICC has made a proposal to Olmert in favor of abolishing national income and health taxes for those who do not earn more than NIS 4,000 instead of implementing a negative income tax policy. Kadima did not confirm the reports in the Hebrew press.

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