Bank of Israel Calls for Higher Wages

Bank of Israel Governor Karnit Flug has called for an improvement in wage levels for Israeli workers, which she identified as a necessary component in overall economic growth.

Speaking at the Israel Democracy Institute’s Eli Hurvitz Conference on Economy and Society, Flug said: “In order to bring the economy to extended, inclusive growth, whose fruits will be shared among the general population, we must devote the necessary resources to the labor market and work on productivity, which will lead to an improvement in the wage level.”

The BOI governor noted that in terms of GDP, Israel spends only a third the levels of its OECD counterparts on active labor policies. Accordingly, she recommended that the state should spend more on educating and training people; further subsidize employment services for poorer communities; increase hi-tech education (as opposed to vocational training) in high schools; and increase negative income tax. If such a program were followed, she argued, wage levels would rise as a result.

Representing Israeli workers at the same conference, Histadrut chairman Avi Nissenkorn opted for a more direct approach, and declared that a proposal to raise the minimum wage by 200 shekels a month is not enough.

“A working man shouldn’t be poor,” Nissenkorn said. “Each of you should think whether he could feed a family on NIS 4,300, and on the supposed initiative of NIS 4,500. A working man should be beyond the poverty threshold. When you look at the figures, you see that real wages have risen much less than GDP. The profit isn’t disappearing; it’s going to the capitalists. If only the minimum wage were higher, and if only the median wage weren’t so low, the workers’ share of GDP would be higher, and wouldn’t decrease.”

Nissenkorn added, “Where the labor market is concerned, when we look at Israeli society, the worst problem is the income gaps. The fact that one out of every seven people feels poor is horrifying. One of the main tools for narrowing gaps is a minimum wage. If we — the government, the Histadrut, and the Economic Organizations Liaison Committee — don’t manage to make a change, we’ve failed.”

This article appeared in print on page 23 of the November 5th, 2014 edition of Hamodia.