Business Sector Says Raising Minimum Wage Will Cost NIS 26 Billion

Raising minimum wage to $1,000 a month will cost NIS 26 billion, according to calculations by the Manufacturers Association of Israel. This constitutes NIS 18 billion for the business sector and NIS 8 billion for the civil services.

Manufacturers Association president Shraga Brosh said before Passover that the calculation was based on the "reasonable assumption" that raising minimum wage would put pressure on the entire pay-scale, from higher-level workers who demanded to continue to be better paid than those in minimum wage jobs.

The business sector umbrella organization, the Economic Organizations Coordination Board, expressed "concern from plans evident in the coalition-building process to raise minimum wage."

Senior representatives of the business sector said that instead of raising minimum wage, it would be better to implement negative income tax, which would ensure the same financial benefit for those who earn minimum wage, but would cost just NIS 12 billion. They argued that negative income tax would specifically benefit those with the lowest salaries and would not cause salary pressure from groups of workers who earn more.

Alternatively, they proposed a joint committee with state, business sector and labor union representatives "to draw up recommendations of the proper way to act."

Chamber of Commerce president Uriel Lynn, who left the Coordination Board a few months ago, opposes negative income tax, claiming it is the same as welfare and is also a cumbersome bureaucratic system. Lynn proposes raising minimum wage to NIS 4,000 and exempting employees and the self-employed who earn less from National Insurance and health tax payments.

On April 1, minimum wage went up to NIS 3,456.58 a month. An estimated 40 percent of Israel's employees make that or less, such as those working for security companies, cleaning services, and workers who are foreign citizens.