Middle Israel: The unions are back

The Histadrut made headlines this week with the unexpected resignation of its leader Ofer Eini, but the real story there is about organized labor’s renaissance.

Ofer Eini 311 (photo credit: Channel 10)
Ofer Eini 311
(photo credit: Channel 10)
Unions have vacillated over the years from heroism and infamy to romance and irrelevance, and Israel’s are no exception. As the political system fathoms the causes and implications of this week’s surprise resignation announcement by Histadrut labor federation chairman Ofer Eini, his eight years in office loom as the beginning of a new era in the eventful history of Israel’s organized labor.
In the 1920s, when nearly 2 million British workers went on strike to protest 800,000 coal miners’ salary cuts, King George told the union’s conservative detractors: “Try living in their wages before judging them.”
Such sympathy became common. Though that particular strike actually failed, organized labor in those days was both strong and respectable, a status that was bolstered in the wake of the following decade’s Depression, when US president Franklin D. Roosevelt tried to make the unions a pillar of the new social order.
Israel’s founding fathers were by then well ahead of that game, having established in 1920 a union that soon emerged as the builder of the future Jewish state.
Originally headed by David Ben-Gurion, the Histadrut in its first years created worker services that to this day remain fixtures of Israeli life, from bus company Egged and retail chain Hamashbir to publishing house Am Oved and food producer Tnuva.
Towering above these accomplishments was the creation of a health fund, Kupat Holim. It was one of the world’s first health-maintenance organizations, and by the 1930s became the focus of universal admiration for its quality, accessibility and affordability.
Financing much of its activity through its own bank, Bank Hapoalim, the Histadrut gradually came to own hundreds of industrial plants and commercial concerns that collectively drove much of the evolving Jewish state’s economy. Clearly, it is the only union anywhere that can claim to have largely built a state.
That is also why once the state was built, many felt that the Histadrut had become a state within a state at best, a Frankenstein at worst.
THE GOLDEN AGE of organized labor arrived in postwar Europe, which resolved to avoid the kind of social insecurity that contributed to the Nazi rise to power.
It worked well for about a generation, when repeated surrenders to pay demands and an ongoing siege on big business, coupled with the energy crisis and rising taxes, resulted in running inflation, diminishing growth, rampant strikes and a growing sense of paralysis.
By the time British prime minister Margaret Thatcher defeated the coal miners and US president Ronald Reagan floored the air traffic controllers, organized labor had come to be seen as a social problem and an economic burden, impressions which in America were exacerbated by ties to organized crime, highlighted by the disappearance in 1975 of Jimmy Hoffa, the president of the Teamsters Union who had served jail time for bribery and fraud.
Israel had no Hoffa. However, it had a CEO of Bank Hapoalim and a former head of the Histadrut’s construction companies shoot themselves in the head, the latter in 1977 and the former in 1984, when police investigated them for corruption allegations. Israel also had a former head of the Histadrut’s health fund serve a five-year jail term for bribery.
The consequent hostility to the unions was worsened by the impression that Israel’s hyperinflation in the 1980s was partly caused by the Histadrut’s resistance of salary cuts, layoffs and privatizations begged by the economy.
That is how the Histadrut became ripe for the one-two punch it was dealt, ironically, by two Labor prime ministers.
The first punch was dealt by Shimon Peres in 1985, when he canceled the automatic salary indexations and other compensations for inflation that gave the unions much of their clout opposite the employers. At the same time, the Histadrut’s sprawling industrial empire began to be dismantled when its largest holding company, Koor, reached the brink of bankruptcy and was sold to foreign investors, who summarily fired a third of its workers.
The second and most devastating blow was dealt the following decade by Yitzhak Rabin, when he passed a healthcare reform that allowed the public to select their funds, and to also continue migrating between the funds – as they indeed do to this day. Until then, all employees in the public sector were automatically herded into the Histadrut’s health fund, thus feeding it with a steady inflow of salary deductions – which added up to huge funds that were run incompetently at best, criminally at worst.
Finally, in 2004 the Histadrut lost its grip on the pension industry, when then-finance minister Binyamin Netanyahu expropriated the unions’ mismanaged pension funds in order to prepare them for privatization.
Added together, these setbacks to the Histadrut’s financial resources, legal status, political leverage and public image were such that the once-mighty workers’ union had been marginalized and reached near irrelevance. Reflecting Israel’s transition from socialism to capitalism, the Histadrut’s membership of 2 million in the early ‘90s plunged by two-thirds the following decade.
A decade on, it seems the Histadrut’s eulogies were premature.
WHEN CHAIRMAN Eini this week called an unplanned press conference, Israel Radio stopped its regular programming and broadcast the resignation announcement live. That alone was a sign of the relevance that Eini managed to restore during his eight years at the Histadrut’s helm.
Originally an income tax clerk, the 55-year-old Eini is not particularly charismatic, but he managed to stem the decline in union membership and even moderately offset it, after convincing workers in the cellphone and hi-tech industries to unionize.
Since the 2008 meltdown on Wall Street, and the consequent labor insecurity worldwide and here, some 40,000 new members have joined the Histadrut.
A pragmatist and able negotiator, Eini was no Lech Walesa or for that matter Amir Peretz. He was seldom caught addressing large rallies, rabble rousing or even raising his voice. Instead, he crafted a deal for mandatory pension deductions by all employers for all employees, he got the Knesset to raise the minimum wage from NIS 3,850 to NIS 4,300, and he got the public sector to formally and fully hire the guards and cleaning personnel who were previously hired as contract workers with no rights and benefits.
Eini threatened several times to call a general strike, but actually called one only twice, most recently last year as part of his struggle on behalf of the contract workers – a wise choice, as that cause was backed by practically every citizen. Eini also proved instrumental in ending labor conflicts that were not at his initiative, like the protracted teachers’ strike of 2007 and a university instructors strike that followed it.
Yet Eini’s finest moment came in 2009, following Netanyahu’s narrow victory in that year’s general election.
Reading the map better than all other political players, Eini brokered the alliance between Netanyahu and then-Labor Party leader Ehud Barak. The deal offered Netanyahu a coalition partner who he considered more convenient than the alternative at the time, Tzipi Livni and Kadima. In turn, Eini obtained from the economically conservative Netanyahu agreement to pass social legislation.
It was a political stroke of brilliance that recast Eini as a player in national politics, and a potential contender for Labor’s leadership.
EINI OFFERED no explanation other than “personal exhaustion” for his departure, which comes three years ahead of his four-year term’s expiration. Understandably, this context has made the resignation’s coverage focus on Eini the man, who is indeed far from perfect.
Three years ago Eini divorced the mother of his four children and moved in with an assistant whom he had previously appointed to head the Histadrut’s network of vocational schools, Amal.
In addition, he has been accused of cozying up to business tycoons and ingratiating the monopolies’ strong unions, like that of the Israel Electric Corporation and the Israel Ports Development & Assets Company, passively enshrining their lavish payment deals at the expense of weaker workers elsewhere in the public sector.
Meanwhile, Eini’s recommendation to his colleagues, to appoint his No. 2, Avi Nissenkorn, as the next chairman is being challenged by Labor MK Eitan Cabel, amid charges that the Histadrut is not a kingdom and Eini cannot appoint his successor.
Yet despite all this, the story of Eini’s time at the Histadrut’s helm is institutional rather than personal.
With a growing number of members of the middle class feeling economically insecure and also victimized, Israel’s unions returned to relevance and their services are again in demand – a trend that will not be offset anytime soon, no matter who succeeds Eini.