Minimum Wage / It Makes Sense

Histadrut chief Ofer Eini celebrated his victory yesterday. First, he defeated his rival, Labor MK Amir Peretz, who 18 months ago proposed raising the minimum wage but failed to deliver. At the time, Eini operated behind the scenes to derail Peretz's proposed law, fearing his predecessor would steal the spotlight from him.

Second, Eini celebrated a victory yesterday over the finance minister. In the natural course of affairs, Finance Minister Steinitz ought to have been the patron of this sort of decision; but logic hardly governs our political affairs. Eini and Shraga Brosh, head of the manufacturers association, turned Steinitz into a laughing stock and showed him who really hold economic power here. They didn't even inform the finance minister of their decision, so he had no choice but to express opposition.

The most amusing aspect of yesterday's news was hearing Brosh wax enthusiastically about raising minimum salaries when just half a year ago, he resolutely opposed Peretz's proposal along the same lines. Back then, he was quick to cite research studies that showed "that raising the minimum wage would lead to the dismissal of workers, and the transfer of manufacturing enterprises to overseas venues." Where, then, did these studies disappear yesterday?

Political foibles aside, the decision to raise the minimum wage makes social and economic sense. It is a step that promotes the country's main economic strategy - the shift from welfare handouts to work. There's much talk in Israel about reducing social gaps between the rich and poor, and the finance minister often joins this chorus. If that is a goal, what could be more prudent than increasing the salaries of those who earn little? Salary increases for high-income earners, like doctors and prosecutors, widen social gaps, but raising the minimum wage reduces these gaps. Hence, it is policy that is easier to justify.

The truth is that the agreement reached yesterday applies mainly to the private sector, because employees in the public sector earn more than the minimum wage. Steinitz now faces a problem. He took some slaps in the face and will try to strike back. So, he could decide to oppose extending the minimum wage increase to other sectors, but that would be unpopular move, and Steinitz wants to be loved.