The Finance Ministry is willing to raise public sector wages, the treasury's wages director, Ilan Levin, told TheMarker yesterday. "We are not deceiving ourselves that the salaries of those workers have been frozen, and it is clear to us that the Histadrut [labor federation] will come with legitimate demands to increase [salaries]," said Levin.

The treasury and the Histadrut are on the verge of opening negotiations on a new collective bargaining agreement for the over 700,000 public sector workers. The present agreement ran through the end of 2009, and the two sides have been sending out feelers about a new agreement, without opening official negotiations. Talks will start on Sunday in the Histadrut headquarters in Tel Aviv.

The treasury estimates the Histadrut will demand raises worth about NIS 1 billion a year - at the very least.

The treasury refuses to say what it views as a reasonable amount for the salary hikes. "We will not refuse wage increases, since the last year was one of inflation without any exceptional salary rises, and therefore we do not expect the negotiations to end with a zero percent increase," said Levin.

This represents a major change from his predecessors in the job, who made sure to declare their objections to any real increases at the start of negotiations.

State objects to another package deal for budget

A meeting of the economic round table forum, which includes representatives of the state, the Histadrut and the Manufacturers Association, was held yesterday. The members agreed to meet again to coordinate their approaches to the state budget. Finance Minister Yuval Steinitz represented the government, Histadrut chairman Ofer Eini the workers and Shraga Brosh, the president of the Manufacturers Association, the business side.

Sources in the treasury and the Prime Minister's Office said the government was not interested in reaching a new economic package deal with unions and employers, as it did for the 2009-2010 two-year budget.

Public sector wage costs total NIS 100 billion a year for the over 1 million employees working for the public sector in one form another. Every 1% raise for them means another NIS 1 billion in wage costs for the country’s biggest employer. But this 1% raise only translates into about NIS 84 gross a month − a rather modest amount.

The last agreement covering 2004-2008 gave public employees a 5% raise spread over the period − not a lot, but something. An agreement both sides could live with.
Histadrut officials refused to speak to TheMarker on the subject yesterday, but it seems the union will demand a 5% to 7% increase. The treasury’s red line seems to be about 3%.