Almost 41 percent of wage-earners in Israel make less than minimum wage, or NIS 3,000 per month before tax, according to an investigation by the economics department at the Federation of Israeli Chambers of Commerce.
The research also showed that 47.7 percent of self-employed workers - approximately 94,000 people - earn less than half of the average national salary, or NIS 3,482 per month before tax.
FICC President Uriel Lynn sent a letter Wednesday to Interim Finance Minister Ehud Olmert suggesting that the lowest wage-earners be exempt from national insurance payments. Such a measure would be intended to minimize poverty rates and would serve as an alternative to the instatement of a negative income tax.
Lynn also suggested that those receiving less that half of the national average salary be exempt from national and health insurance payments. FICC sources say that wage-earners currently pay NIS 157 per month for national and health insurance, while those self-employed pay NIS 344 each month.
The FICC proposal provides an alternative to the negative income tax, which most senior officials of the Finance Ministry oppose. The FICC also decided to officially oppose such a move following consultations with key figures in academic circles and the Bank of Israel, as it could cost between two to three billion shekels, and there exists concern that it would encourage workers to remain with minimum wage and part-time jobs.
"Past experience in Israel with income supplements and children's budgets has been a failure, and has created the phenomenon of unemployment as a way of life. [Income supplements] encourage part-time work. We believe that a negative income tax can be effective only for specific sectors in society, and only if it is possible to isolate these groups from the broader unemployed population," concluded Lynn.