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BoI: When Minimum Wage Increases, So Do Violations

When the minimum wage rises, so does the incidence of violations, says the Bank of Israel. The bank's researchers looked at the years 1988 to 2009 and found a statistically significant correlation between any increase in the minimum wage and the proportion of employers breaking the law by under-paying their workers.

Adjusted for inflation, the minimum wage has risen sharply in the last 20 years, the central bank says, from about NIS 3,000 a month in 1988 to NIS 3,700 at present. Most of that increase took place between 1995 and 2000. Since 2002, the minimum wage has remained more or less unchanged, in inflation-adjusted terms.

But as the minimum wage increased, so did violations. The proportion of full-time workers earning less than minimum wage was 8% in 1988. Today that figure has nearly doubled, to 15%.

The incidence of violation for workers paid by the hour jumped from 15% in 1988 to 30% today, Bank of Israel figures show.

The Bank of Israel doesn't feel that correlation is a coincidence: The higher the wage, the greater the temptation among employers not to pay it.