Israel's Labor Federation, Finance Ministry Avert Nationwide Strike in 'Historic Agreement'

The sides agree to a $1.9-billion increase to the public sector's wages over the next five years.

Finance Minister Moshe Kahlon and Histadrut secretary-general Avi Nissenkorn, December 2015.
Olivier Fitoussi

A general strike scheduled for Wednesday was called off as the Histadrut labor federation and the Finance Ministry reached an agreement regarding an across-the-board pay raise for civil servants. The sides agreed to a 7.5 billion shekels (more than $1.9 billion) increase over the next five years, and not 11 billion shekels, as the labor federation demanded.

The treasury had asked that the raise would be paid as a flat shekel sum to each worker, meaning that all workers would receive the same amount of additional money, while the Histadrut had offered that only 20 percent of the total raise be paid as a flat shekel sum to each worker, but insisted that 80 percent of the raise be a straight percentage increase, from which higher-paid workers would benefit more.

The two sides met halfway in their agreement, according to which half of the raises would be distributed in flat shekel sums, while the other half would be paid out as a straight percentage increase.

The Histadrut and the Finance Ministry have also agreed to carry on negotiating on further issues and to present their progress to the National Labor Court by January 3.

Finance Minister Moshe Kahlon called the agreement historic, and said that "following years of agreements that widened the gaps between those with higher wages and those with lower wages in the public sector, we're bringing forward real news today."

Histadrut secretary-general Avi Nissenkorn said that "today we made unprecedented socially meaningful history together, we proved that through real dialogue it's possible to carry out steps that haven't been seen here yet. For the first time, salary agreements became an effective tool in minimizing the gaps for lower earners in the public sector."

Kahlon and Nissenkorn were locked in intensive discussions late on Tuesday in a last-minute bid to avert the country’s first general strike in four years.

The Histadrut called Wednesday’s scheduled strike in a battle over public-sector wages that could have damaged the economy just as it is starting to bounce back from a weak first half of the year.

Officials from the Finance Ministry and the Histadrut labor federation, which represents 700,000 public-sector workers, negotiated for hours on Tuesday before the court hearing in an effort to avert the strike, which could have shut down much of the country.

The Manufacturers Association said the economic damage would have totaled about 900 million shekels ($230 million) on the first day and increased thereafter to 2.8 billion shekels after three days and five billion shekels after five. The government put the damage at one billion to three billion shekels daily.

The strike would have encompassed Ben-Gurion Airport, the seaports, the trains, the Tel Aviv Stock Exchange, government offices, schools, universities, public day-care centers, local governments, firefighters, the National Insurance Institute, the postal service, the Israel Electric Corporation and virtually all other public-sector companies and agencies.

Flag carrier El Al moved up 18 flights to New York and Europe scheduled for Wednesday morning by as much as four hours to avoid the strike, which was slated to start at 6 A.M. Many foreign carriers did the same.

The Histadrut demanded an across-the-board pay raise for civil servants of 11 percent over a period of a few years, saying many Israelis have trouble making ends meet. That would cost the state about 11 billion shekels a year and likely require budget cuts elsewhere.

The government has offered a smaller total increase, of about 7.5 billion shekels. But it insisted that lower-paid workers get bigger raises than higher-paid ones. The government’s position is that instead of each worker getting the same percentage raise – which means that in shekel terms, higher-paid workers would see much bigger increases than lower-paid ones – each worker should see his paycheck increase by the same number of shekels per month.

The Histadrut, in turn, had offered to let 20 percent of the total raise be paid as a flat shekel sum to each worker, but insisted that 80 percent of the raise be a straight percentage increase, from which higher-paid workers would benefit more.

The government also had various other demands, including less union resistance to introducing new technologies into public-sector workplaces and a lengthening of the trial period for new workers, so that they would get tenure only after three years,

The labor court hearing was called for 9 P.M. Tuesday night after the Manufacturers’ Association and Federation of Israeli Chambers of Commerce petitioned it to prevent a strike. The treasury, meanwhile, specifically asked the court to prevent teachers from striking, since their union earlier signed a contract that forbids them from walking out until August 2017.

The business groups argued that not only would the strike cause huge damage to the economy as a whole, and to businesses in particular, but some of this damage would be irreversible. For instance, when the seaports are closed and companies are unable to fill export orders, customers are liable to switch to another supplier, and they won’t necessarily come back once the strike ends.

Uriel Lynn, president of the chambers of commerce, noted that the public sector has grown sharply in the last decade, to 1.26 million workers, from 722,000.

The last strike, which lasted three days in early 2012, cost the economy some six billion shekels and ended with a new wage package for low-earning contract workers. A strike was averted last December when the Histadrut signed a deal with private-sector employers to raise the minimum wage.

Israel’s economy grew slower than expected in the first half of 2015 before posting an annualized 2.5 percent growth rate in the third quarter.