Lynn: Link Minimum Wage Increases to GDP Growth

The Federation of Israeli Chambers of Commerce (FICC) solidified a plan yesterday that proposes raising the current gross minimum wage of NIS 3,335 per month in tandem with growth in gross domestic product.

The Economic Arrangements Bills for 2002 and 2003 decided to freeze minimum wage hikes for three years. It is expected to be updated according to a specific formula in April 2006.

FICC President Uriel Lynn proposes that the minimum wage rate, rather than being frozen again, be based on 47.5 percent of the average wage in the country. According to him, adapting minimum wage to the national average wage would raise minimum wages by 3 percent to NIS 3,444 per month, which translates into an additional NIS 800 million annually for wage earners at this level.

With this, Lynn proposed balancing extra minimum wage costs in the public-government sector with downsizing the sector, which currently employs some 700,000 people.

In the second stage, according to Lynn, minimum wage should be linked to the rise in the per capita rate of annual gross domestic product. "It is an objective criterion, which indicates progress in productivity indices and employment," said Lynn.

GDP rose 2.6 percent in 2004 and is expected to climb another 3.15 percent this year.

"Adapting to GDP will create a mechanism tying successes in the business sector with raising employee salaries at the low end of the wage scale," suggested Lynn.

The FICC head expressed his objections to Labor Party Chairman Amir Peretz's proposal to raise the minimum wage to $1,000 per month. "It's a dangerous proposal," he said. "If it is implemented, factories and businesses won't be able to withstand it. They'll be forced to fire a significant number of their workers, or they'll simply collapse," he warned.