In mid-March, the airport will be closed
The wage demands are tremendous, and the prime minister and the finance minister will have to understand that this is the most significant threat to the economy. This is a threat that is liable to bust the budget and bring growth to a halt.
If you are planning to travel abroad in March - watch out. All the signs indicate that toward the middle of next month, the economy will be on strike. And when we talk strike, we don't just mean the government ministries and piles of garbage. The public can take that. We're talking about the doomsday weapon: a strike at Ben-Gurion International Airport. No one enters and no one leaves. And why the middle of March? Because the negotiations with the Finance Ministry over a raise in the public sector are dragging, and the Histadrut labor federation has elections scheduled for May 15. The chairman, Ofer Eini, has to prove to his public that despite his moderate image, he is not afraid to use the strike weapon.
If so, why not hold the strike in April? Because Passover falls this year at the beginning of April, and the last thing the workers want is for Eini to stop them from celebrating it properly, that is to say, by preventing trips abroad. Passover also comes with a lot of vacation days, which makes a strike not worthwhile. And after Passover is already too close to the Histadrut elections. Therefore, the only time to strike is March.
In the framework of negotiations, the Histadrut is demanding a 10-percent wage hike as compensation for wage erosion in the public sector, and an additional 3 percent increase in real wages. This involves 700,000 workers in the public sector, and every percentage point in a wage hike equals an additional expenditure of NIS 800 million. This comes to a tremendous outlay of NIS 10 billion a year. And that's not all, because there are a number of workers' organizations that aren't affiliated with the Histadrut, and they too have demands. The doctors, for example, are expecting big raises in the wake of the mediation they are conducting with the treasury. The teachers, too, are expecting significant raises amounting to about NIS 20 billion, a tremendous and fantastic sum.
Eini claims that during Benjamin Netanyahu's time as finance minister (2003-2005), wages were cut by 4 to 17 percent, and that this eroded income has to be returned to the workers. This sounds good to anyone who has forgotten that Netanyahu himself returned these sums in July 2005.
The Finance Ministry, however, is claiming that not only have wages in the public sector not been eroded, but also they have grown in recent years, because there is annual wage creep of 2 percent as a result of workers' advancement on the rank and seniority scales. And when inflation is at zero, this is a hefty real increase. Therefore, in face of the demand for a 13 percent raise, the Finance Ministry is offering no raise. At the treasury, they know that if one of the workers' organizations "breaks" them and succeeds in getting a big raise, all the other organizations will immediately be standing in line, and that raise will become a "floor" for the others. The moment they break, even if it is just that once, the war's outcome will already be decided.
Therefore the fight with the Bank of Israel, over the wage agreements there, is also important. Ostensibly this is a different dispute over a cut in exaggerated past agreements. In actuality, however, everyone is looking at Eli Cohen, the director of wages at the treasury: Will he cave in to the pressure from Bank of Israel Governor Stanley Fischer and Prime Minister Ehud Olmert, or will he withstand the heat? If he doesn't break in face of the Bank of Israel, he should have a better chance of protecting the state coffers from the Histadrut's demands.
The treasury is afraid of not getting backing from the political establishment, which is currently weak and fragile. The prime minister is worried about an indictment being filed against him, the finance minister is anticipating becoming the subject of a police investigation himself, and every Knesset member is acting like a free agent. In situations like this, it is hard to stand up to the threat of a strike. It's hard to stand up to the criticism that will come from every direction. There's a temptation to sign an agreement quickly and give the Histadrut everything it wants. The main thing is not to get into confrontations and strikes.
Therefore, the finance minister and prime minister must remember what happened in the 1990s when Yitzhak Rabin was prime minister and Avraham Shochat was finance minister. In response to the pressures that came at that time from exactly the same organizations, the government handed out huge wage hikes to the teachers, university lecturers and doctors, which immediately overflowed to all public-sector employees. The domino theory worked, which led to a huge deviation in the 1995 budget, which, in turn, necessitated a program of sharp cuts in 1996, which led to a recession, increased unemployment and severe economic damage. We are now in a similar situation. The wage demands are tremendous, and the prime minister and finance minister will have to understand that this is the most significant threat to the economy. This is a threat that is liable to bust the budget and bring growth to a halt.
Everyone knows that in economics there are no free lunches. When high wage hikes are given, it will be at the expense of investments in the educational system, and in health and welfare. It is, after all, a matter of the same budget. Therefore, March will be the test month for Olmert and Finance Minister Abraham Hirchson. Will they withstand the pressures? Will they be able to keep their cool in the face of heaps of uncollected garbage in the streets? Will they not surrender even when the airport is closed down?
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