The Alchemist's Formula

This is not the first time Peretz is peddling this philosopher's stone. He is relying on the public's short memory, but in 2000 he proposed raising the minimum wage to $1,000 a month, and did so again in 2002.

It is difficult to understand why Histadrut Labor Federation Chairman Amir Peretz is so modest. Why is he demanding that the minimum wage be raised to just NIS 4,500, and over a three-year period?

After all, according to him this increase will boost purchasing power, raise production, spur growth, "the stores will fill up, and the economy will revive." If that's the case, why stop at a measly 4,500? Why not "revive" the economy big time, and demand NIS 7,000? And the doubling of salaries at other levels, too, such that whoever earns NIS 10,000 will earn NIS 20,000, and so on.

That way growth will not just increase, it will take off like a rocket, jobs will be created at a dizzying pace - and unemployment will be eliminated. If one is going to be an alchemist, then go all the way.

This is not the first time Peretz is peddling this philosopher's stone. He is relying on the public's short memory, but in 2000 he proposed raising the minimum wage to $1,000 a month, and did so again in 2002.

This time the campaign, with its message broadcast frequently on radio and television, is aimed at advancing Peretz's march on the Labor party leadership, against his rival, Ehud Barak, and will earn him raucous applause in all the "social" circles.

After all, who can be more popular than he who promises fantastic wage hikes, brimming with purpose, achievements, growth and reduced unemployment - just like turning lead into gold? The reality is much drearier, alas.

There are around 300 factories in Israel that pay minimum wages to a good many of their workers. These are manufactures in old traditional industries - textiles, metal and wood. The moment minimum wages rise, these factories will not be able to compete with similar factories in the Far East and will be forced to close their doors.

Others will transfer some of their production lines to Jordan, Egypt, Turkey, the Philippines and Thailand - in an attempt to survive - and such things have already happened.

It must be remembered that it is impossible to raise only the minimum wage. If the bottom of the ladder is raised, the other rungs must be raised, too, otherwise the scale will be destroyed, resulting in layoffs and increased unemployment.

But Peretz does not get excited over increased unemployment, because whoever gets higher wages will be grateful to him. When unemployment rises, on the other hand, the first to oppose the evil government and the foundering finance minister will be - Peretz.

If only raising wages did generate growth - every politician would pounce on this golden opportunity. The problem is that wages are a derivative of the economy's condition, and not the opposite. In order to raise wages, production must first be increased and the economy's dependency shifted from traditional industries to advanced industries.

For that to happen, the workers need to gain a better education and broader professional training - and these require long-term investment that does not end with lip service. Still, it is worth examining the minimum wage.

The actual setting of a minimum at all reflects society's moral principle that a person who works deserves to live in dignity. Raising the minimum wage will also narrow the income gaps, which is important to the quality of society.

In addition, raising the minimum wage will elevate people from a life dependent on guaranteed income supplements to one supported by work. Still, since raising wages via legislation could cause the closure of factories and businesses, a balance must be found between setting a wage sufficient for a reasonable life and risking unemployment.

This fine tuning should be done via negotiations between employers and employees, between the Manufacturers Association president Oded Tira and Peretz - not by legislation. This is not flexible enough, does not consider the economy's situation or that of various industries or factories facing a crisis.

One matter should be addressed immediately - enforcing the existing law. Many employers do not pay their workers even the legal minimum and should therefore be prosecuted to the full extent of the law.