Steinitz Opposing Proposal to Hike Minimum Wage: 'Too Costly'

Ministerial Committee on Legislation supported the bill, sponsored by Amir Peretz (Labor ), aiming to raise monthly minimum wage from NIS 3,850 to NIS 4,600.

Finance Minister Yuval Steinitz (Likud ) came out yesterday against a proposed law raising the minimum wage. The Ministerial Committee on Legislation on Sunday voted to support the bill, sponsored by Amir Peretz (Labor ), which over 15 months would gradually raise the monthly minimum wage from NIS 3,850 to NIS 4,600.

Steinitz, in appealing the decision to cabinet secretary Zvi Hauser, said that implementing the law would make the cost of labor substantially more expensive. The upshot would be to increase unemployment, he said.

As a result of Steinitz's appeal, Peretz's bill will not be presented to the Knesset for a preliminary reading tomorrow, as originally scheduled. Instead, the cabinet will consider the issue at its meeting next Sunday.

"The minimum wage in Israel is very high by international standards," Steinitz argued, "and raising it again is liable to hurt the feasibility of employing workers." The finance minister said his stance is supported by a comprehensive 2009 study of the economy conducted by the Organization for Economic Cooperation and Development. He said the OECD not only didn't recommend increasing the minimum wage here, but also suggested narrowing its scope over time. The study, Steinitz said, found the minimum wage in Israel to be substantially higher in relation to the median income than in most OECD countries.

"Most of the those employed at minimum wage," the finance minister argued," are in labor-intensive sectors that have had difficulties in recent years in dealing with competition with other industries in the world in which the workforce is immeasurably cheaper compared to Israel."

He said an increase in the minimum wage could lead to dismissals of the very workers the lawmakers are seeking to help and would make it more difficult for the unemployed to rejoin the workforce in sectors contending with price competition.

The finance minister concluded his appeal by notingthe "high probability" that raising the minimum wage would impact other sectors of the economy. Higher-ranking employees would demand raises to maintain currently existing wage differentials, Steinitz projected.

Instead of increasing the minimum wage, priority should be given enforcing the current minimum to ensure workers are paid according to the law, Steinitz said. He said wants personnel at the Industry, Trade and Labor Ministry increased to enforce existing labor law.

Treasury sources said an improved version of the discontinued Wisconsin program and implementing a negative income tax could increase the income of the lowest paid workers. National implementation of such measures, they said, would shift the burden from employers to the government. The Bank of Israel also supports such steps as a way of narrowing social gaps.

MK Peretz had asked that his bill be expedited by agreement of all those involved. Though the treasury and the Manufacturers' Association oppose Peretz's bill, Industry, Trade and Labor Minister Benjamin Ben-Eliezer (Labor ) and Histadrut labor federation chairman Ofer Eini expressed qualified support for increasing the minimum wage. Ben-Eliezer said he discussed the idea with Peretz, Eini and Shraga Brosh, the president of the Manufacturers' Association.

Eini said he supported a minimum wage increase if the three major players involved, the government, the Histadrut and private employers, could come to an agreement on the matter, as they did a year ago, when an agreement on a legislative package strengthened workers' rights.

Histadrut sources also say that in recent months collective agreements have been reached in several sectors that increased the lowest permissible wages for cleaning staff, security guards and retail chain workers, among others.