Labor-industry Alliance Cracking

Is the strategic alliance between the head of the Manufacturers Association of Israel, Shraga Brosh, and Histadrut labor federation chairman Ofer Eini breaking down?

One sign of strain between the representatives of industry and labor, respectively, came this week with discussion of the positions they are expected to take in next week's round-table talks with Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz. Brosh is expected to urge Netanyahu to keep to his plan to reduce taxes for corporations and individuals already this year, making up for the revenue losses by taxing the profits of training funds (kranot hishtalmut) to at least some degree.

As of February, the country's training funds were capitalized at a total of NIS 76 billion. The funds, into which both employers and employees contribute through payroll deductions, commonly at rates of 7.5% and 2.5% of pretax wages, respectively, are considered a popular benefit for middle- and upper-middle-class employees in both the private and public sectors. As the country's umbrella trade union organization, the Histadrut is considered the watchdog of the kranot hishtalmut. In the last decade, mainly through strike threats, it has managed to fend off at least ten separate attempts by the Finance Ministry to tax the funds.

Brosh, despite representing the country's industrialists, has supported nearly all of Eini's demands from the treasury. The two cooked up the recent reform in the country's seaports in the days when Eini headed the Histadrut's trade unions department. They often appear together, presenting a united front in public forums, and they submit joint plans to the cabinet - a few of which have been adopted by Netanyahu.

Histadrut officials say the training funds and their tax-free status are protected by the collective bargaining agreements guaranteeing the employment terms of many employee sectors.

Suzy Levy, chairwoman of one of the most powerful public-sector union, that of the Ministry of Industry, Trade and Labor, said in response that she supports taxing the funds - but only of employees with individual, i.e. not collective bargaining, employment contracts. "These workers make tens of thousands of shekels a month and can absorb the tax hit," Levy said.