Bottom Shekel / Quailing Before the Unions

None of the newspapers reported it, nor did the television news shows. Nevertheless, you'd best be aware that at the start of the week, the Histadrut labor federation declared a work dispute at the Mekorot water utility. That means that in nine days time the workers can legally start sanctions. That in turn means they can disrupt the water supply.

Just as the workers at the Israel Electric Corporation can pull the plug on the nation, which gives them mucho clout in negotiating employment terms, the workers of Mekorot can turn off our taps.

The labor dispute at Mekorot is nominally about a desalination facility but the story is really about outrageous waste and inefficiency at the company.

When the subject of desalination first arose in 2001, Mekorot boasted that it could build a facility far more efficiently than private enterprise could. Water is what it does, the utility deigned to explain, so there was absolutely no point in privatizing the business, having private enterprise build and run water treatment facilities. All could safely be left in the hands of Israel's water monopoly.

Mekorot even undertook to build desalination facilities at 10% below any price offered by private entrepreneurs, who don't understand a thing about the subject anyway.

Happily, the people at the Finance Ministry knew who they were dealing with and set about making sure Mekorot couldn't get its foot in the door. Their aim was to create competition for the monopoly, to some degree at least. But as the pressure began to mount, the government - Ariel Sharon was prime minister at the time, and Binyamin Ben-Eliezer was infrastructures minister - succumbed. They agreed to let Mekorot build one desalination plant, just one, so it could show everybody how it's done.

Many years have passed. Mekorot has thought about building a desalination plant several times, but nothing happened. Each time there's a different excuse; the price it's demanding is too high and the government says no, or it has a falling-out with the contracting company supposed to actually build the thing. (It turns out that the much-vaunted experts at Mekorot do not actually know how to build a desalination facility themselves.)

This time Mekorot (or rather, the contracting company it hired) is supposed to build a desalination plant in Ashdod, that will sell water to the state for NIS 2.86 per cubic meter.

But Shuki Oren, the accountant-general at the Finance Ministry, has nixed the plan. He says private enterprise is supplying desalinated water for less. He is prepared to compromise: he'll agree to buy treated water from Mekorot for NIS 2.36 per cubic meter, not the NIS 2.86 that Mekorot wants, because meanwhile a private desalination plant has been built at Soreq that sells the state water for NIS 2.01 per cubic meter.

Why indeed should we pay Mekorot more than that? Don't forget that the higher cost will be felt in our water bills.

Mekorot's union chief, Meir Elezra, says the desalination facility is supposed to provide jobs for 200 workers. That is adequate rationale for its construction, in his view. Yet that in itself is an outrage. The private desalination plant built in Soreq employs 40 people, not 200. Why on earth should we pay more for water in order to subsidize the employment of 160 people who aren't needed?

Mekorot should stay out of the desalination business entirely. The private sector has proven that it can do the job better, faster and cheaper. Private plants create competition for Mekorot, which is a good thing: it jolts the bloated, complacent monopoly and teaches it just how business should be done.

Moving on to another government company, we find the Israel Military Industries, another shockingly inefficient company. From the day of its establishment (unofficially, that was in 1933, as a secret weapons foundry for the Haganah) it has been bloated, ridden with covert unemployment, which means that it employs more people than it needs, to a degree that boggles the mind. But because it feeds off the table of the Defense Ministry it waddles on.

Waddles? It skates. In 1987, IMI had 15,000 staff. Following "streamlining measures," its payroll dropped to 13,000. It subsequently underwent "restructuring", which involved the taxpayer paying gargantuan compensation to employees taking early retirement. Over the years the state has given the company NIS 10 billion- ten billion shekels! in various weird and unwonderful ways. The IMI boasts the dubious distinction of having milked the most from the state of all government manufacturing companies.

Yet despite these Brobdingnagian infusions IMI just goes from bad to worse. Year in and year out it loses money. Today it's down to 3,000 workers and the management says a third of those have to go, too.

In August 2005 the government decided to privatize the company, but the plan was stymied by political opposition from Amir Peretz, then the defense minister (after a career as firebrand labor leader). Peretz used to chair the Histadrut labor federation.

When he went into politics proper, he was succeeded by Ofer Eini, who agrees that the company should be sold. But Eini insists that IMI be privatized through the stock exchange and that the workers get paid whatever they demand.

Doron Cohen, the head of the Government Companies Authority thinks on the other hand that IMI should be sold to a private investor, because it's too sick to be floated on the stock market. Meanwhile, the workers want a lot. They demand that the government fork over a billion shekels for "bridge pensions" (until they reach the retirement age of 67) for the 950 or so people who all agree should be fired. In other words, that's a million shekels per worker. They also demand that the government give them another billion-shekel safety net covering another 950 workers in case the company really is sold and the new owner fires more.

The treasury is willing to put up one billion, all told. It won't give them another billion "just in case" and it won't put up a third billion to help IMI repay its debts. There are limits, after all.

Now it's up to the politicians. Eini is pressing Defense Minister Ehud Barak to stand by his side. Barak is pressing Prime Minister Benjamin Netanyahu to give the workers everything they want. And what about what the taxpayers want? Nobody even asked.

Generally speaking, our elected representatives are very courageous. They imperil their very tongues pitting themselves against Finance Ministry officials. With their very keyboards they shield an entire population groaning under the weight of the government's decrees. For instance, they have fought the bitter fight against the drought tax and, having killed that, against the increase in water prices.

Just last week Uzi Landau, minister of infrastructures, took up arms against the chairman of the Electricity Board at the Utilities Authority, Amnon Shapira. Landau opposed a cut in electricity rates while Shapira supported it. Yet wonder of wonders, not one of our elected officials gave so much as a peep, not even that queen of populism Miri Regev.

Odd, that. Electricity costs your average family in Israel a lot more than water does, so why is nobody standing by Shapira who wants to lower its price. Could it be because our elected officials are not that courageous after all? That they are abject cowards? They are terrified of the powerful Israel Electric Corporation union, which has connections with every party headquarters in the land (mainly, the Likud). They know the union opposes lowering the cost of electricity. The union wants the public to pay more, so they can earn more. And the moment our elected officials realized that the IEC union opposes the drop in electricity prices, they wilted.

All it takes is the implied threat that 2,000 or 3,000 IEC workers would show up at the Likud party primaries, for instance - and that's that. Not one politician would take them on.