No Money for the Poor, but Lots for Strongest Unions

The $2.3 billion question is why the 'poverty panel' recommendations have been dismissed as too costly.

Olivier Fitoussi

After seven months of work, the Alaluf Committee submitted its recommendations for fighting poverty. The cost of these measures totaled 7.8 billion shekels a year, or $2.3 billion, a sum the Finance Ministry dismissed out of hand.

The recommendations are detached from reality and the budget, treasury officials said.

Coincidentally, as the Alaluf committee members were presenting their recommendations at a press conference, treasury officials were sitting with the new Histadrut chairman Avi Nissenkorn to discuss the millions that the Israel Electric Corporation union is demanding. What for? To buy the union's cooperation with reform of Israel's electricity sector.

Coincidentally, 7.8 billion happens to be the sum total that the state is paying workers from three unions at national monopolies – the electric corporation, the ports and the Israel Railways – in order to buy their cooperation with reforms that may or may not actually be happening. In other words, there’s no 7.8 billion to fight poverty because that money is already going to improve the quality of life of a select group of workers who already receive above-average conditions.

This money includes 1.2 billion shekels promised to Haifa and Ashdod port workers, via a 20% raise and a 100,000 shekel bonus per worker, in exchange for a planned privatization that won’t be taking place. In 2009, former State Comptroller Micha Lindenstrauss stated, “The utility from that money is in doubt.” Port workers received at least 80 million shekels more via a 6.25% raise, when the rest of the public sector received only 3%.

Another 1.5 billion was promised to railway workers two years ago. This money included 25% raises and bonuses of 42,000 shekels to 52,000 shekels per worker, in exchange for a “reform” that essentially entrenched the union’s monopoly over the train’s operations, expanded the railway’s workforce by 16% and gave workers lifelong job security. The workers, for their part, are not abstaining from labor action as promised, and are currently demanding more raises while threatening to strike.

And then there’s the electric company. In exchange for a scaled-back reform, the state offered the unionized employees grants totaling 6.5 billion to 7.5 billion. This includes expanded grants for workers who decide to retire – even if they’re not retiring early – and 50,000 shekel bonuses for every worker. When the state met with representatives of the IEC workers in an attempt to determine what it would take to gain their cooperation with the law and the state’s authority over the company, the union representatives suggested that the finance officials think about the reform’s financial benefits. Those benefits should be used to pay the workers compensation. Under this math, though, the benefits would be divided up 100% for the workers, and 0% for the public.

A newer version of that deal reduces the payback for the state even further, doing away with any early retirement programs yet letting the workers keep some 6 billion shekels in benefits .

The 7.8 billion figure does not include benefits for workers retiring early from the IEC or the Israel Military Industries (2 billion per company), the erasure of debt at various government companies, or benefits likely to be granted to workers at the Broadcasting Authority and the Israel Post.

The absurd balance of power between the governments and the unions at state monopolies stems from the mistaken view that these government companies belong to their workers, and not to the public. The companies and their assets were built with public money, of course, yet the workers are taken to have proprietary rights to them, so every change at the company, or to the company’s standing in its sector – even if backed by a law that received the votes of 120 Knesset members, and even if it doesn’t harm a single worker – is conditioned on a kickback to the workers.

It doesn’t have to be this way. The transportation minister pushed forward two tenders to build private ports without paying the port workers a single shekel. He prepared his office for the possibility that the unions might shutter the ports, got the state prosecution to enforce Labor Court rulings via the High Court of Justice, and clashed head on with operatives from his own Likud party, and even blocked a Finance Ministry attempt to boost worker benefits.

Is it naïve to think this will work? Maybe. The IEC for its part is hiring former treasury budgets director Ilan Levin as a consultant. But there’s no excuse for lying to the country’s 1.8 million poor, and instead giving the money to 18,000 of the country’s most powerful workers.