The Industrial Development Bank should have been history long ago. According to a government decision, the bank should have sold its assets and liabilities portfolio by the end of 2002, and closed its doors. But this is a government-held bank, managed with amazing irresponsibility, with plenty of political appointments, which had given adventurous credit to Gad Zeevi, Peled-Givony and other swashbucklers, and managed to tot up the extraordinary loss of NIS 430 million in 2002. Without the injection of cash from the Bank of Israel (NIS 2 billion's worth), it would have gone bankrupt many moons ago.
As a token of recognition for Ra'anan Cohen's excellent service to the Labor party, his friends arranged for him to get the chairman's seat at Industrial Development Bank - with great pay, a plush office and not a little honor. Cohen is now doing his best to see that the bank - and his job - keep going. And as part of his efforts he has granted himself a personal chauffeur, a practice that is quite new to the bank. Well, a man such as he (someone who speaks so earnestly of the poor) should not have to ride to work all on his own.
An anecdote such as this makes the wage cuts and dismissals in the public sector all that much clearer. Yossi Cucik, Prof. Zvi Zussman and Prof. Haim Levy all recently said that no-one should lose their jobs in the public sector. But what of the thousands in the private sector who have lost their employment? Are they not people too? Whoever objects to dismissals in the public sector, should have to explain how the private sector is meant to recover. If the wages in the public sector were to be cut by 8 percent (as the Finance Ministry proposes), the real size of the public sector (one-third of the economy) would not change at all. So the private sector wouldn't benefit. The only change would be the reduction in public expenditure as a percentage of the GDP, an expense that stands today at 55 percent of GDP - only the effect would be temporary. Because once the present crisis passes and the feeling of emergency is but a memory, then the workers will get a wage rise that will restore their pay to what it is now - and public expenditure will return once more to 55 percent of GDP - exactly like today - and we will have profited nothing from the exercise.
Cucik, Zussman and Levy make an additional error. Dismissing staffers from the bloated public sector will not only not reduce productivity, but will actually increase it, because efficient layoffs will remove those whose additional output is marginal at best, if not negative. Every cabinet minister and ministry director general knows there are redundant local authorities, wasteful duplication and public units that simply create superfluous paperwork that disrupts, reduces and interferes with the workings of the private sector.
Equal wage cuts all round would be the worst solution. Pay in the public sector is not high (apart from at the very top), so there is no justification for lowering wages equally for all. This would leave the same redundant activities in place, as well as superfluous workers and even efficiency would drop. And how would a good and conscientious teacher feel to "win" a pay cut just like the bad and disdainful teacher?
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