Bar-On to Handle Olmert's Hot Potato: Bank of Israel Wages

A public sector strike with far-reaching repercussions in the business world is the last thing Prime Minister Ehud Olmert needs right now. As the leader of a weak government and politically threatened by the former finance minister who leads in the polls -- while Olmert himself is the focus of a police investigation -- Olmert doesn't need upheaval on the economic front. So it's only natural that Olmert's close friend, the new Finance Minister Roni Bar-On, repay him for the appointment by trying to bring quiet to labor relations in the public sector.

A senior finance ministry official who has held talks with the Histadrut labor federation over the past few weeks, Wages Director Eli Cohen, has remained unbending on wage increases at the Bank of Israel during discussions with Histadrut Chairman Ofer Eini.

Cohen objects to paying [monthly] wages of NIS 32,000 wages to dozens of new Bank of Israel employees; more than senior personnel in government ministries. He rejects any additions to salaries other than the correction of specific distortions in particular groups of employees. He agrees to extending the retirement ranking for an additional six months (until the end of 2007), a move that would provide retirees with increased pension stipends.

Cohen's position has made him something like the little Dutch boy who put his finger in the dyke lest the water inundate the country. His stance has been awarded with prestige. But Cohen himself knows that with labor relations, especially in the public sector, where economic considerations are diluted by political struggles for power, there is no such thing as a "zero wage increase." When an employer begins talks with the Histadrut chairman or other labor organizations, he can't expect the results to go 100 percent his way. The reason is simple. The other party cannot present such a result to his constituents.

So it is in the current wage crisis. It's true that Eini's demand is not in keeping with reality, with the economy maintaining only tiny inflation levels. But it's hard to believe that he will permit himself to come out of the negotiations empty-handed. The reasonable solution would be to spread wage hikes over an agreed-upon period of a few years, to avoid burdening the state budget. Any other results in the negotiations will result in an unnecessary round of strikes and sanctions, which will finally end in wage agreements that dictate wage increases.