Israel Needs a Leaner Public Sector

Israel's public sector is inflated, wasteful and extremely inefficient. Too many government workers is a drain on the private sector, which finances the former via taxes.

The problems facing part of the private sector are receiving lots of attention these days. But the public sector faces even larger problems, even though they are better camouflaged - when you don't need to produce an end-of-the-year audit of costs and revenues and when you rely on the state budget, you can continue with business as usual.

Israel's public sector is inflated, wasteful and extremely inefficient. Hundreds of thousands of workers have tenured positions that don't allow for change - not even the movement of a worker from one job to another within a ministry. Certainly there are no dismissals. In the public sector, workers' committees believe they must defend all workers; this approach doesn't let managers manage and impairs service to the public.

The situation at large government companies is worse than at ministries. Workers employed by the electric company, the port authority, the airport authority and Israel Military Industries enjoy high salaries; these firms swell with excess staff and are plagued by nepotism.

For these reasons, the prime minister has instructed his office's director general, Harel Locker, to draft a bill to increase managerial flexibility at ministries; the bill would give authority to ministries' director generals - it would let them dismiss workers or move them from one branch to another. This is a step in the right direction. That only firms in the private sector lay off workers and streamline is absurd; the public sector should not be immune to such processes.

The public sector's exaggerated number of employees is a serious drain on the private sector, which finances this extravagance via tax revenues. This drain slows growth and decreases the employment of productive labor.

Locker should be encouraged to apply his ideas to the public sector as a whole; he should review employment models used in Scandinavia. There, public sector workers can be fired or moved to new jobs. Meanwhile, the state awards them high unemployment benefits for long periods. It also takes responsibility to retrain workers for employment in more relevant positions.

National Insurance Institute workers receive members of the public in Ashkelon, February 2012.
Ilan Assayag