Aryeh Deri demonstrates for raising the minimum wage to NIS 30 an hour (2014). The government of which he is a member does nothing for hungry wage earners (Photo: Dov Hanin's office)
The invisible hand in the Israeli economy in 2023 is tightening the belt around the necks of the lower and middle deciles of Israeli society. The invisible hand also puts its hands deep into the pockets of workers, salaried employees, retirees and the self-employed, without a word of mouth and without practical resistance from the field.
Inflation has been fueled by price increases by importers, especially in the food sector. The dismal results already exist on the ground: revenue of food chains at fixed prices (i.e., in real terms, seasonally adjusted) increased by 0.3% in the past year preceding May, while Israel's population growth is at a rate of 2%, meaning that family units buy less food. Eat less.
The depreciation of the shekel also contributes to inflation, a depreciation that is intensified by the possibility of a huge military clash with Iran. The depreciation was also caused by the ongoing demonstrations against the legal legislation that intensified the outflow of capital to investments abroad.The US 500 Index increased by 18.7% in shekel terms in the past year, while in Israel the 35 Index declined by 9.1%, creating a huge gap: the value of the investment in the 500 is more than 30% higher than the investment in the 35 Index in Israel over the past year.
In other words, the public's savings, including pensions, savings and study funds, are also eroding. Investment managers in Israel are trying to make amends: they have finally realized that there is no longer any point in making forward transactions to protect investment abroad for their clients, in order to prevent appreciation losses.
The result is that institutional investors sell much less future foreign currency as part of their appreciation protection, as they have done in recent years. This, too, only increases the depreciation of the shekel.
If employment had been less tight, i.e. lax, the decline in food consumption might have been heavier. In fact, the employment market today is stretched almost to the limit. According to the Central Bureau of Statistics, the labor force participation rate for those wishing to work or working, aged 15 and over, was 63.6% in April, compared with 62.3% in April last year.
The employment rate was 61.4 percent in April, compared with 60.1 percent in April of last year. The unemployment rate among women in April fell to a historic low of 2.9% from 3% in April last year. The employment rate among women was 58.3% in April, compared with 57% in April last year.
The unemployment rate among men declined to 3.6 percent in April from 4.1 percent in April of last year. The employment rate among men is 64.6%, compared with 63.3% in April last year. Simply, there are no employees, every company and employer knows that it is difficult to very difficult to recruit employees, even unskilled ones.
The Prime Minister opens the meeting of the Committee to Combat the Cost of Living. Just talk (Photo: Government Press Office, Kobi Gideon)
Banks celebrate
In the face of this, we are witnessing hollow and embarrassing reactions by government ministers, who are not coordinated at all, who walk around with a real feeling that they have lost their ability to influence, if they even wanted to. They are joined by weak responses from Knesset members and uncovered promises by the prime minister to fight the cost of living.
Even if it is true that they have now set up another committee to deal with the cost of living, after the horses ran away from the stable while the committees fought among themselves, there is no justification for the Bank of Israel to give a green light to the unimaginable exploitation on the part of the Israeli banking system, which harms the value of depositors' assets, harms savers and throws them crumbs of interest (credit interest, in the language of economists, while it is onerous in collecting interest from the public, is the debiter interest).
In this case, it is not an "invisible hand"; it is the long hand of bankers in a monopolistic banking system. Here, too, there is no need on the part of the government to stop the crushing of savers, who are losing the value of their money with inflation currently continuing at an annual rate of 5%.
Inflation erodes, first and foremost, workers' real wages. Even households in which both spouses work, who did not act correctly to support their actions and did not anticipate bad years, are suffocating. Inflation is causing the Bank of Israel's interest rate increase, which has already reached 4.75% and will continue to rise.
The prime rate is already 6.25%. Inflation is causing increased payments in mortgage tracks. Couples who took out CPI-indexed loans pay both the interest rate set in the agreement with the bank that provided the loan for the purchase of an apartment, and also due to the increase in the inflation rate, which automatically increases the amount of the mortgage remaining to be repaid. The increase in the interest rate also harms the movement of forceps for those who took out a mortgage on the prime track – it is the track linked to the variable prime rate, the prime interest rate, which has already risen to 6.25%.
It is a mistake in the hands of employers who pay minimum wage or close to it, as if the power rests only in their invisible hands. The labor market is tight, there are no workers available despite tens of thousands of legal workers from Judea and Samaria, construction workers on a daily scale of 60,000-70,000, alongside illegal aliens, and Israel Security Agency.
The shortage of workers exists in all areas. Anyone who seeks to recruit workers, even unskilled ones, finds it difficult. In fact, the economy is under conditions of full employment, a kind of frictional unemployment resulting from rapid changes in the economy and the labor market, and even a certain lack of information on supply and demand in the interregional labor market.
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Salary increase
The minimum wage in April of this year was NIS 5,572 a month, barely enough to pay for a nanny, a minimal payment for kindergarten, and basic food. Labor organizations, even those not organized within existing archaic frameworks, must, through pressure in the workplace – and later on Knesset members of the coalition and opposition parties – make it clear that within a few months, until Rosh Hashanah, the minimum wage must be raised generously, including an additional increase ahead of Passover next year.
The existing minimum wage agreements are no longer relevant to the outbreak of price increases that are eroding previous wage increases. If the Histadrut opens the labor agreements, in order to raise the minimum wage to NIS 6,400 in order to protect the inflation in the pipeline.
But if the minimum wage is not raised at a rate that respects the workers, then the pressure will come from below, out of the workers' distress – and then the Histadrut, which will be happy to show that it is at the forefront in favor of the workers, will be dragged into systems of wage increases, sometimes while reducing working hours, which will actually worsen the situation of business companies.
In such a case, companies and employers will find it difficult to stand at the forefront in the face of wage increases and reductions in working hours, as if there is a magic wand of efficiency on the part of the employees. Everything will be the result of the ongoing delay in making the right decisions, which will sometimes result in drastic measures to keep families off the waterfront, allow for a life with minimal dignity and meet mortgage payments or rent that have gotten out of control.
It is true that minimum wage will cause an increase in expenses for companies or businesses, perhaps some of them will even close, which is a shame. In particular, relatively simple businesses of unskilled manual workers will suffer. Companies and businesses will have to become more efficient in order to continue to survive, exist and make a profit, whether in industry through the continuation of the robotization process or in service systems through heavy computing systems and big data.
The government and the entire public sector will also be forced to raise the minimum wage, which is liable to harm the budget structure and the expected government deficit. Therefore, the proposal for a surplus tax by the oppressive banking system is justified. Banks earn more than is necessary to maintain their stability. The new tax will be able to finance public sector expenses for raising the minimum wage. You don't have to invent the wheel.
Britain has imposed special taxes on the banking system in the form of a special levy on banks beyond the regular corporate tax, which will bring about £1.25 billion a year into the kingdom's coffers starting next fiscal year. An additional tax on banks at a rate of 3 percent, starting from the next tax year, will bring the total tax on the banking system to 28 percent.
Back in the days of former Prime Minister Tony Blair, special levies were imposed on the British banking system. Back in 2009, the government imposed a 50% excess tax on any bonus banks paid beyond £25,000.
Spain passed a law imposing a surplus tax on the banking system, a levy of 5% for two years. The Spanish Association of Banks estimates that they will be charged about 3 billion euros, which will reduce their ability to provide credit. The European Central Bank opposes burdening Spain's banking system, and tax necessity will be reassessed in the first quarter of 2024.
Here is a strike. It's time for those who claim to represent the workers to wake up before the field forces them to wake up (Photo: Yoav Etiel)
Here strike
It must be said that these days are the time for unionized and non-unionized workers to show their power vis-à-vis employers, with or without trade unions. At a time of potentially rising unemployment, it is more difficult to make upward wage corrections. Those who will start the campaign in the direction of wage increases are public sector workers, perhaps strikes and sudden sanctions will break out – and in the end compromises will be reached.
Once there are public sector wage increases, there will be a spread to the business sector where workers will go on strike after legally declaring their intention. The reason can be simple: fear of real wage erosion that makes it difficult to survive while mortgage payments soar.
For the time being – until March – there was no real wage erosion in most sectors, but for some workers there was wage erosion prior to March 2023 based on seasonally adjusted data, in agriculture, wholesale and retail trade, financial services and insurance, real estate activity and professional services.
Only in the public sector has there been a sharp increase due to a one-time payment, and later their wages will also erode. Nominal wages in high-tech increased by 5.8 percent in the past year preceding March, beyond inflation, to NIS 31,685 per month, mainly in the pharmaceutical industry, with an increase of 14 percent. The number of high-tech employees increased between March 2022 and March 2023, by 3.3% to 397,200.
Unlike in the past, there are now several labor unions, there is competition between workers' organizations, and the Histadrut does not represent all workers. It is possible to move from one trade union to another, and within the framework of the new hostel to declare comprehensive strikes in the economy, all by law. Those who want to be more militant can make Italian strikes, slowing down the pace of work or sanctions, preferably unannounced, that break out within a few days just as price increases break out every few days.
The workers will not wait until the Histadrut and the other labor unions wake up from their slumber. Past experience shows that it is better to reach agreements at an early stage – because after strikes and disruptions, compromises can come in the form of higher wage increases than giving generously now, before friction breaks out. There is no escape from this. The economy will lose work days and labor relations will worsen, and service recipients in the general public will be harmed.
It is time to mention that there is no need to reach an agreement after marathon negotiations in the early morning after a night of canning. It can be done differently, for the benefit of all employees and employers alike.
- money
Tags
- Strike
- Labor dispute
- Minimum wage
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