Main Employment Issues Are Foreign Workers, Enforcement

Employment reform could be Israel's most profitable reform ever, says deputy governor of the Bank of Israel.

"Employment reform could be Israel's most profitable reform ever - it could increase the GDP by 0.75% a year," says Prof. Zvi Eckstein, deputy governor of the Bank of Israel and head of the committee evaluating Israel's employment policy.

The interministerial committee, which includes representatives of the Industry, Trade and Labor Ministry, the National Economic Council, the Bank of Israel, the Finance Ministry, the Social Affairs Ministry and the National Insurance Institute, is expected to submit its final report to the industry and trade minister within the next few days.

Prof. Zvi Eckstein Sept. 27, 2010 Emil Salman
Emil Salman

Its main recommendation is that the Industry, Trade and Labor Ministry set up a new employment authority that handles all matters in the field. The authority would research what steps are necessary to encourage employment; address communities with low employment rates such as Arabs, ultra-Orthodox and the disabled; and manage the employment service, the Wisconsin welfare-to-work program and the program for retraining the unemployed. The body also would be responsible for enforcing labor laws.

"Our main conclusion is that the employment field needs to be managed," says Eckstein.

The committee set a goal of increasing employment in Israel by 33,000 people a year, beyond the natural workforce growth. In order to help meet this goal, it wants to encourage mothers to work - particularly Arab women, address the issue of foreign workers and better enforce labor laws.

"Israel's biggest problem in terms of employment is foreign workers, and the lack of enforcement of labor laws. Fourteen percent of workers are currently employed under illegal conditions, for pay less than the minimum wage. And that's just the Israeli citizens; it doesn't include the foreigners," says Eckstein.

Employers who violate labor laws should face heavy fines, he says. Once violators are punished, foreign workers will be paid higher wages and demand for them will decrease. Then, Israelis will start to take their places in the workforce. Decreasing the number of foreign workers could create 100,000 new jobs for Israelis, the committee says.

As for the influx of African border infiltrators, Israel has its own policies to blame, he says. "We're seeing African infiltrators because we let the hotels in Eilat employ them, which makes infiltration worthwhile. We should be handling Africans like Europe does - setting up camps that provide for all their needs, but not letting them work, save money and become part of the Israeli economy," he says. That way, it won't be worthwhile for them to take risks to make it to Israel, he explains.

The committee also has high hopes for the Wisconsin Plan, which it hopes could create 30,000 jobs; for a negative income tax, which it says could create 15,000 jobs; implementing legislation on employing the disabled (15,000 jobs ) and expanding daycare centers (20,000 jobs ).

The Wisconsin Plan had operated as a pilot in specific locales; the committee wants to see it expanded nationwide. Currently, the expansion is in legislative limbo.

The committee cites praise from the OECD and International Monetary Fund over the Wisconsin plan, which they say increased employment much more than the employment service did.

"The Wisconsin Plan will pass - if the Knesset members understand its importance and are ready to hold a serious discussion, not a shouting match," says Eckstein.

However, it was a mistake to let Wisconsin Plan workers revoke state stipends from participants who decline to find work, says Eckstein.

"The contractor running the Wisconsin Plan should not be the one punishing, it should be supportive and giving. The government should be the bad guy who takes away stipends from people who refuse to participate in the program," he says.

In addition, the committee wants the country's daycare center policy to be reformulated. The state spends some NIS 1 billion a year on daycare, but is not providing an incentive to get mothers to work, says Eckstein. First off, this is because mothers need to be working in order to enroll their children in government-sponsored daycares; mothers searching for jobs, or not employed full-time, are not eligible. Plus, they're built only in places where there is demand - meaning, places where mothers already are working, he says.