Poor workers will also become poor pensioners

The poverty report for the first half of 2007, recently released, dampens the optimistic predictions made by the Treasury. The dramatic economic growth of 2007 has failed to lift more...

The poverty report for the first half of 2007, recently released, dampens the optimistic predictions made by the Treasury. The dramatic economic growth of 2007 has failed to lift more people out of poverty; instead, the system has been exposed in all its ugliness.

Published in The Marker (Haaretz) 20.2.08 – In Hebrew

Researchers from the National Insurance Institute were surprised to discover a 2% increase in poverty rates (income per family) among the elderly, who make up about 20% of households. In addition, the number of poor working families continues to increase. This trend can be explained by the entry of workers into a labor market offering low salaries or part time positions. The 90 thousand elderly people noted in the report are only the tip of the iceberg compared to what can be expected within the next couple of decades, when the welfare system will have to support a million pensioners – the poor workers of today who face the new pension agreements negotiated on their behalf by the Histadrut and employers.

These agreements, as presented by Histadrut chairman Ofer Eini, aim to spark a social revolution and save workers from humiliating poverty in old age. Thus the Treasury prides itself on the range of reforms it has initiated in the field of pensions. However, the objective of the Treasury and Histadrut, to ensure a respectable pension for every worker, are certainly not achieved by these agreements.

By definition, a pension can be no more than 70% of the worker’s wage. Thus a worker earning the minimum wage can save for 40 years and still get no more than a negligible pension. A worker who wants to save for a reasonable pension must earn a higher wage. During negotiations with employer’s organizations, the Histadrut should have demanded a higher minimum wage and minimum pension payments of 20% of the worker’s wage. Instead, the Histadrut surrendered its demands for a higher minimum wage and settled for a meager 2.5% minimum pension payment in order to satisfy employers. Lately, Eini has been making an effort to help his friend Shraga Brosh, head of the Manufacturers Association, in light of damages caused by the dollar’s falling exchange rate. If he had dedicated that same effort in helping the million poor workers, their situation could have been very different.

Another fundamental flaw concerns the implementation of the agreements on workers in weak positions. During our many conversations with employers in restaurants, it became clear that no measures have been taken to ensure that employers understand their obligation to secure pension plans for their veteran workers.

In fact, the agreements about which Eini is so proud amount to little more than a money-saving program for the state. At best, when their employers pay into their pension funds, poor workers will be able to pay themselves income support, instead of relying on National Insurance. These workers, who need every penny just to get by, will discover that their pension payments will yield only NIS 1260 per month even after 27 years of saving (assuming they start saving at the age of 40). This is little more than what they would have received as income support even if they had not paid into a pension plan.

The increase in the rate of poverty during continued economic growth is the direct result of anarchy in the labor market, and the lack of effective enforcement of labor laws including the minimum wage law. This labor market produces hundreds of thousands of workers whose right to a pension fund is only a distant dream. In order to change this harsh reality, one thing must be done – workers wages must be increased to enable them to live in dignity, both today and in old age.

Translated by Muna Haddad – WAC/Maan office in Nazareth

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