Laughing All the Way to the Bank

Bank of Israel employees complain to IMF about 'low pay.'

It's hard to understand how the Bank of Israel's chiefs didn't blush with shame upon the publication of the International Monetary Fund's annual report. Of course, the report dealt with macroeconomic issues - gross domestic product, unemployment, the public debt, monetary policy and poverty - and one more important issue: pay at the Bank of Israel.

It's hard to believe, but the bank's top people found time to tell the IMF experts how low salaries were at the bank and how the benefits weren't too good either. The "experts" were very impressed and added an unusual paragraph to the report saying that pay at the bank needed to be looked into because it was too low, making it difficult to recruit and keep employees.

If they really were expert economists, they would have discovered that the Bank of Israel is at the top of the public sector's pay pyramid, even after the bank was forced to bring "second generation" employees into its ranks at lower salaries. Please remember: The Bank of Israel's second generation employees still earn more than economists at the Finance Ministry's budget division, tax division and accountant general's office, even though the ministry's people work longer hours and work harder.

Those "experts" never heard about the pay affair at the bank that aims to inflate the top people's salaries. This scandal went on for decades until it exploded about six years ago. And it still isn't over. But what do the IMF experts care? The bank's top people asked and they recommended.

Strange things are also happening at the Bank of Israel's research department. There, a study on individual contracts in the public sector was published recently - contracts not governed by public-sector collective-bargaining agreements. And wonder of wonders: The study found that individual contracts were not highly recommended, and quite by chance, the bank's employees also oppose such contracts. Because what could be bad when you have a job with a collective agreement, high pay, excellent social benefits and total job security?

The "study" finds that the individual contracts in the public sector have failed in their main aim: preventing the departure of good employees. But who says that's the aim? The individual contracts were developed to create management flexibility, not stasis and a hardening of the arteries. But at the Bank of Israel people are used to a situation where whoever comes stays forever. There are no departures and no resignations because salaries in the outside world are lower. That's bad for the organization.

The authors of the "study" didn't understand that some people with individual contracts resigned because they were young, ambitious people who didn't have pensions paid entirely by the state that let them retire at 50. So they had no special reason to cling to their jobs. These are talented people who take risks, move into the business sector and embark on a new career. This is good for the economy and good for the public sector, which can renew itself.

But I wasn't surprised by the study's findings. It conforms with the economic worldview of the head of the research division, Prof. Nathan Sussman, someone known to be unenthusiastic about free competition, a market economy and privatization. Sussman likes big government and high taxes. So his appointment as head of the research division was a mistake by Bank of Israel Governor Stanley Fischer.

As long as Sussman heads the research division, we won't be seeing perceptive studies; for example, one that would reveal the tremendous economic damage caused by the workers committees' control of the large government monopolies - the Electric Corporation, the airports authority, the ports authority and the railroad. We won't be seeing calculations explaining the "tax" we're paying on all products because of the inefficiency, waste and cessation of development caused by the workers committees and big monopolies.

And though we can debate economic beliefs, we can't justify the pathetic move of putting the issue of Bank of Israel salaries into the IMF's annual report. This is simply an injustice to the bank's devoted employees.

Read this article in Hebrew