Let’s say your employer makes you an offer: You quit immediately, take all the pension and severance pay you deserve, plus a bonus of a million shekels ($252,000). Would you take it?
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Oh, wait a minute — before you answer, you should know to whom this offer does not apply. If you are young, lacking 15-20 years of seniority, this offer is not for you. If you don’t work in one of the banks, the defense industry, the Israel Electric Corporation or the ports, this offer is not for you. But this still leaves us with tens of thousands of workers for whom this offer is very relevant. What will they say to it?
This is no intellectual exercise. It is a traditional, well-known practice with these employers: sending workers home not simply with what they deserve, but offering them particularly generous severance packages — a million shekels per worker, on average. It is the amount set in the voluntary retirement plans of these bodies. It’s tempting enough to seriously consider early retirement.
Thousands of bank workers will soon face this dilemma. The Bank of Israel’s supervisor of the banks, Dr. Hedva Bar, gave them an ultimatum to downsize because they are badly inefficient. Customers pay the price of their inefficiency through very high fees and interest rates. Bank shareholders, primarily the Israeli public, get a very low return on their investments. Too much of what the banks produce goes into the pockets of the workers and managers, and this value should be shrunk.
Consumption patterns of banking services changed in recent years. Bank customers conduct more activity via direct channels — telephone, Internet, mobile and ATM, and that trend will only grow. Thus, efficiency measures and downsizing are required. Some banks have an estimated excess of 2,000 employees, while others have fewer superfluous workers. The bottom line is that the banks will have to part from thousands of workers to be efficient on a global level in the long term.
Of course, the banks have quite rigid collective bargaining agreements and tenure arrangements that do not allow management to simply part from so many workers. If they only send them away with what they amassed in their pensions and compensation funds, it would cost them a labor dispute and an extended strike. So the banks created early retirement arrangements, by which they tempt workers with an average package of 1 million shekels, depending on their seniority and salary.
Take it and leave?
Which brings us to the dilemma of those workers. Is it worth it for them to accept the offer? Many from the private sector would probably take the offer without thinking too much, put the money in the bank, the stock market and/or a small apartment, celebrate with a vacation and start looking for a new job.
But workers in governmental companies and banks are in no rush to be tempted by these early retirement plans. It takes management a long time to convince them to leave, despite the excellent conditions.
The reason is connected to the employment alternatives awaiting them on the outside. If you work in the private sector, the concepts of tenure and job security are not well known to you. People who work in the business world are used to a transition between jobs and salary swings. Few feel secure that they will finish their job in a company at the official retirement age. Their state of their savings is almost a constant, deep worry.
Not so for those who work in the banks and the public sector. There the savings arrangement is completely different. Anyone who works there and got tenure knows with total certainty that his job is secure until pension age. He even knows how his salary will progress — without sharp swings, just a steady rise. Tenure is a wonderful safety net for employees, but it has problematic elements. It can lead at times to mediocrity and low productivity among workers. The need to prove oneself that pushes workers until they get tenure is weakened once they get it.
In the private sector, where there is no tenure, life is different in every respect. There, salary raises and job security depend on the worker, the organization and the department he works in, not on the union or the government. This is what causes those workers with tenure in the public sector or banking to think five times about the temptation of a million shekels.
The million-shekel deal sounds magical, but it comes with harsh side effects. One has to enter the real labor market that most workers experience, in which there is no job security, salaries aren’t necessarily high and there is no one looking out for you. People, I suppose, love having a million shekels in their bank account, but they also love other things, like stability and job security. None of this is guaranteed the day after the million. While there are interesting and varied job opportunities outside banking and the IEC, they don’t necessarily offer the same salary standards.
The more seniority and the higher the salary a bank worker has, the more generous the early retirement package is, heading north toward 2 million shekels. This is the deal: The more you worked, the more compensation you receive — but also the harder it will be for you to adjust to what awaits you outside, if anything awaits you at all.
This deal makes the reorganization of government employers and the banks harder and more expensive. Every departure of 1,000 employees costs a billion shekels on average. It’s an enormous sum drawn from the pockets of the public directly or indirectly, either through taxes or high prices. It certainly aggravates the inequality between workers who enjoy tenure and such severance terms and those who don’t. There are industries in the private sector in which employment conditions are exploitative and the salaries are frozen or very low — which further reduces the temptation to accept that million shekels.
The real dilemma
And this brings us back to the real dilemma. Has the time arrived to use this money (and other funds, like the billions that are given as tax incentives for saving in job-related study funds) to put the labor market in order and build more inclusive safety nets, which don’t include only the well-connected who enjoy tenure? There are at least three reasons that justify such a step:
1. It will narrow inequality and expand solidarity and fairness for all workers.
2. It will make it easier to implement early retirement programs and reorganization of inefficient industries.
3. It will allow anyone who switches from the public employment model, including tenure and job security, to a private model to better adjust to the new situation, thereby enriching the labor market.
Incidentally, Haaretz also had a voluntary retirement program. It determined that every employee who left voluntarily would receive two months’ salary and 1,000 shekels per year of employment. If you worked 10 years and your salary was 10,000 shekels per month, you got a reward of 30,000 shekels — a bit distant from the norm in the banking system or public sector.
This program led to the departure of 130 journalists. Regrettably, the newspaper’s owners don’t pamper us with a million shekels per worker like the banks or the aeronautics industry. They are such misers. But there is a positive side. Had they paid here what the banks usually do, they would have needed to pay those leaving 130 million shekels, and that would have led to the newspaper’s closure.
This is just one difference between the regular private sector, which battles real competitive conditions, and the public or semi-public sector, in which there are deep pockets (ours) to fund such dreamlike retirement conditions. Is it any wonder that people there don’t rush to take the million shekels and run?