Histadrut withdraws strike threat as minimum wage deal struck

General strike, slated for Sunday, would have shut down schools, public transportation, airport and government offices; and cost economy NIS 300 million in first day alone.

DECEMBER 3, 2014 14:47

Deal reached to raise the minimum wage in Israel (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST) — Deal reached to raise the minimum wage in Israel

(photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

The Histadrut labor federation on Wednesday dropped its threat of a general strike after reaching an agreement with the Federation of Israeli Economic Organizations to raise the minimum wage to NIS 5,000 a month from NIS 4,300 over the course of two years.

The Histadrut had scheduled a general strike to begin Sunday.

The increase, which will bring the adult hourly minimum wage from the current NIS 23.12 to roughly NIS 28 an hour, will take place in three stages. On January 1, 2015, it will rise to NIS 4,650, followed by a rise to NIS 4,825 on August 1, 2016, before it reaches NIS 5,000 on January 1, 2017.

The sides agreed further that starting in April 2017 the minimum wage would be set to 52 percent of the median wage on April 1 of each year, but never below NIS 5,000.

By definition, minimum wage workers will be above the poverty line, which is set at 50% of the median.

The Histadrut originally pushed for an increase to NIS 5,300, which equates to about NIS 30 an hour, and industry countered with an offer of NIS 5,000 early into the debate. Progress toward a deal may have been hastened by the collapse of the governing coalition and the firing of Finance Minister Yair Lapid.

“We declared that we would not be satisfied with an increase of NIS 200 and we kept our promise,” said Histadrut Chairman Avi Nissankoren.

“We promised to pave the way for a dignified way of life for 700,000 families, and we did.”

In its threat to strike, the Histadrut had also demanded that the government set a minimum quota for hiring people with disabilities, a policy the cabinet approved last week, and improved conditions for contract workers, on which there was no progress.

While the agreement has the support of most major stakeholders, it does not have the weight of law, as the Knesset has not approved it. Similarly, it does not cover public sector workers, which had been a major sticking point in negotiations.

The Finance Ministry had wanted to exclude those civil servants who took home far above the minimum wage because of a variety of government benefits.

“Without [Prime Minister Benjamin] Netanyahu, without Lapid, without [fired Justice Minister Tzipi] Livni, Histadrut Chairman Avi Nissankoren and Federation of Israeli Economic Organizations president Tzvika Oren signed an agreement. Respect and congratulations on the achievement,” Labor MK Shelly Yacimovich wrote on her Facebook page, calling the decision a “ray of light” in ugly political days.

She went on to say that NIS 5,000 a month was still not enough to support a family, and, like Hadash MK Dov Henin, promised to advance legislation to raise the minimum wage to NIS 30 an hour.

In Tel Aviv, several dozen programmers marched through the streets demanding a larger increase than the 14% agreed upon by the negotiators.

The Federation of Israeli Chambers of Commerce said the deal was welcome, but changes in the minimum wage laws were necessary, such as covering sick days through national insurance and increasing employer flexibility.

Though some economists argue that increases in the minimum wage will lead to further unemployment as it squeezes employers, IBI investment house analyst Dorin Plass said it would find a different outlet: higher prices.

An IBI analysis found that a 10% increase in the minimum wage was correlated with a 0.5-1% increase in prices at retail chains and supermarkets.

Still, Plass said, the increase was the “least bad” problem retailers were facing from the government.