Raising the Minimum Wage Is the New Isra-bluff

How is that 40 percent of civil servants earn less than the minimum wage? Answer: They don't. They earn nearly three times it.

Women working at an Israeli factory.
Yaron Kaminsky

Let’s say Yair Lapid wanted to sell his car, and let’s say he wanted 30,000 shekels for it, about the market price. Is it conceivable he would publish a notice including the target price, 30,000 shekels ($7,700)? Of course not. He would ask for 33,000, the potential buyer would offer 27,000, and after negotiations they would arrive at 30,000, and they both would be satisfied.

But what happens when Lapid is the finance minister, and he has to conduct negotiations with the Histadrut labor federation over its demand to raise the minimum wage?

Then everything goes awry. Then it’s a matter of politics and public funds. In a normal world, where each side fulfills its role, the finance minister should have said to the Histadrut chairman: “I don’t have it. The budget is stretched, there are no reserves, the economy is in recession, the deficit is large, our credit rating was lowered, and I have to cut salaries, not increase them. Wait for better years.”

In such a case, Avi Nissenkorn would understand that his interlocutor is a serious finance minister who guards the coffers, who isn’t willing to slide down into deficit and a crisis, and would moderate his demands. He wouldn’t demand a 1,000-shekel increase (which is quite exorbitant), he would make do with 600. And then there would be negotiations between the sides and the story would end with a reasonable wage increase. Because on the one hand it’s right to raise the minimum wage, but on the other hand we have to take into account employment, growth and the budget.

But what happens when we have a finance minister who says in advance, even before negotiations, that the minimum wage should be raised? That’s a finance minister who doesn’t understand his job, and with his own hands is causing Nissenkorn to exaggerate his demands. He is leaving him no choice but to make extreme demands, because if Lapid is willing to give 200 shekels in advance, Nissenkorn has to demand much more. After all he, not Lapid, is the representative of the workers.

The entire subject of the minimum wage conceals one big lie. Every year, when the director of the wages department publishes the salary figures of civil servants, there are large headlines in the media: “40 percent of civil servants receive an income supplement to bring them up to minimum wage.” Is that possible? Are we like Sodom and Gomorrah? How is it possible that such a high percentage of civil servants earn less than 4,300 shekels a month?

Not to worry. That’s not their real salary. Throughout the years the Histadrut has forced the treasury to “exceptionalize” many income supplements “for the purpose of calculating minimum wage.” These are very significant supplements that exist in the public sector, such as bonuses for seniority, being on call, havra’ah (convalescence), the 13 months’ pay bonus, car expenses, a clothing allowance, an incentive increase, a “uniform premium” supplement, a reform bonus, a hospitalization supplement, an increase for dealing with special populations, as well as all the latest national wage agreements.

All of these – and we still haven’t even started calculating the minimum wage, and that’s why we have an absurd phenomenon in which those same 40 percent of civil servants who receive “a supplement to reach minimum wage” earn an average of 11,790 shekels a month. Classic Isra-bluff. Got it?

That is the source of Lapid’s demand to pay the supplements to reach minimum wage only to those who bring home a salary, including supplements, of less than 5,300 shekels a month, and there are only a few such people in the public sector. In that case the budgetary burden involved in raising the minimum wage would decline from 4 billion shekels a year to only 150 million shekels.

But that’s an impossible solution. For that you need an “I don’t have it” finance minister who will declare: “Wackos, get down from the roof,” and not a finance minister who declares in advance that we really do have to raise the minimum wage.

If Lapid were to sell his car using the same method with which he’s conducting negotiations with Nissenkorn, he would have to pay the buyer to agree to take the car from him.