It's Organized Labor's Finest Hour, but at Whose Expense?

Guy Rolnik
Guy Rolnik
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Guy Rolnik
Guy Rolnik

Organized labor in Israel achieved a terrific victory last week, when a three-man panel of judges headed by the president of the Labor Court, Nili Arad, ruled that an employer may not interfere, directly or indirectly, in employees' efforts to organize.

The ruling was handed down in the case of mobile provider Pelephone, whose workers have been trying to organize for months. Arad and the other judges handed down a number of clear constraints on employers in respect to unionization. Among them, employers can't tell workers that organizing will harm them or that the specific union will do them no good. Management can't meet with workers in the hope of changing their minds, or persuading them that organiziing will constrict the company's ability to compete.

Should Israel's workers be satisfied and optimistic? Satisfied - yes. Optimistic - no.

Satisfaction is in order because organizing is a basic labor right for workers everywhere. It is how they can achieve a balance of power with the employer.

But there is no place for optimism because the ruling on the Pelephone workers doesn't help workers anywhere else. In some instances it may even cause harm.

Let's start with a hypothetical example. Say workers at Pelephone, and at rival companies Cellcom and Partner, had the horse sense to forge powerful unions five years ago, well before reforms lowered profit in the mobile industry, but rather when the three companies employed some 15,000 people and were gleefully getting through NIS 5 billion cash a year.

If the trio had powerful unions, what would have happened if a reform-minded minister had shown up and announced he meant to introduce competition, in order to lower prices? He'd have found himself fighting on two fronts. Not only would he have to fend off the tycoons' lobbyists in Knesset and in the press, but he'd have to fight off 15,000 workers as well.

Acting as powerful unions have in the past, the workers would join the big parties, steamroll through the Knesset committees, and ally with their buddies at the banks, ports and IEC, and maybe doctors and nurses too. There would be a tidal wave of solidarity and the press would applaud the brave workers standing shoulder to shoulder together against that nasty government trying to eat them alive. The minister would inevitably fold and the reform would die.

Small businesses and households would find their cellular bills climbing to NIS 1,000 a month, compared with a tenth of that today. The mobile operators would become financial monsters, akin to banks; and the piles of profit squeezed from every man, woman and small business in Israel would be shared between the tycoons and their hundreds or thousands of completely unnecessary workers.

Taxpayers pay

Most of Israel's labor organizations don't take on the rich or represent a legitimate struggle between the fruits of work versus the fruits of capital. Most of the powerful unions that do mark achievements for their members belong to the great public and private monopolies - in other words, you the taxpayer pay for their accomplishments.

The costs run up by the bank unions are covered by the hundreds of thousands of small businesses and ordinary folk, not the bank shareholders, because there is no real competition in Israel's banking industry. And when the government starts to think about reform at the banks, the unions at the various banks join forces with the bank managers and owners to quash the idea before it goes anywhere.

Similarly, achievements by the unions at IEC, the Mekorot water company, the ports and so on are borne by the treasury. Where does it get the money? From taxes, meaning you again, the taxpayers. And by cutting health services, education or welfare.

In 2013, every Israeli will feel very directly exactly how the system works. After four years of Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz handing out wage hikes and funds to small, organized powerful groups in the public sector, huge budget cuts loom. Who will bear the cost? Probably, as usual, the weakest members of society -- the unorganized.

It is no coincidence that in successful social-democratic countries, most workers are union members. When 60% or 70% or 80% of the workers are organized, the ability of one group to roll over the cost of its perks or inefficiencies onto the others is limited.

So, don't think that the structures in the Nordic countries are reminiscent of the Histadrut. In Sweden, Denmark and Finland, most workers are organized and there are few groups whose pay differs from that of others to the point of being in a different ballpark. Which means, the workers groups must demonstrate the utmost responsibility towards competitiveness.

In social-democratic countries, workers, like employers and the government, know that their prosperity depends first and foremost on the competitiveness of the economy as a whole. They know that if they do not uphold competitiveness, fiscal discipline, efficiency and quality the economy will collapse.

Pinpoint victories like at Pelephone don't assure all workers in Israel a better future. Most Israeli workers remain vulnerable and exposed. Attempts to introduce the cushy conditions at the Electric Corp or banks to other branches of the economy would bankrupt the state.

The solution is dramatic change of the entire labor market in Israel: Abandon the policy of protecting jobs, for instance, at the banks, power company and water company, to protecting all workers across the board.

Protecting all workers is harder and more comprehensive. A state that wants to protect its workers has to provide safety nets when they can't work; it must provide training, social security and keep the cost of living in check. The Israeli system doesn't do most of that. Our cost of living is sky high, welfare service is poor to terrible, our pension system is feeble, and workers are only protected when the cost of their employment (or inefficiency ) can be rolled onto the hapless taxpayer or consumer.

Protecting all workers, rather than a select few, is a macroeconomic process that will change the face of the economy and labor market. The economy needs rebuilding to be more competitive, productive, efficient and mainly, fair. The fruits of success should be equally shared, not saved for the people with the clout to get it, whether by virtue of high office or union power.

Striking Pelephone workers.Credit: Daniel Bar- On