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Some 700,000 public sector employees will receive a raise retroactive from 2001, the last year a public-sector collective bargaining agreement was in place, under a deal between the Histadrut labor federation and the treasury. Negotiations on a new public-sector salary deal will start this morning at Histadrut headquarters in Tel Aviv, after a long break for the Histadrut elections in May.

Unions are demanding a 13-percent salary increase, claiming that their wages have been eroded in real terms in recent years. Also, the Histadrut claims that many government employees receive very low salaries and receive supplementary grants to meet minimum wage standards.

The treasury disagrees and proposes a symbolic raise of "slightly more than zero." The treasury says nothing has changed to merit giving employees any significant increase. However, it seems that the state would be willing to grant a small increase in return for changes in work agreements allowing more flexibility in hiring, firing and transferring workers.