Reforms versus Organized Labor

AFTER CUTTING INTO the living flesh of the jobless, the physically challenged, children and the elderly, and after trampling organized labor, the Israeli government in 2007 wakes up to discover...

AFTER CUTTING INTO the living flesh of the jobless, the physically challenged, children and the elderly, and after trampling organized labor, the Israeli government in 2007 wakes up to discover that there is poverty in the land. One fourth of the population is below the poverty line: it has less than half the median disposable income (less than $1070 monthly for a family of four). By this definition, 35% of the country’s children are in poor families (a record among developed nations). Many of the adult poor are working people (60% of the working poor have
full-time jobs). A quarter of the elderly are poor.1

In order to appear to deal with this gloomy situation, on February 4 the government approved a program put forth by Finance Minister Avraham Hirchson. He calls it, “Steps to reduce social gaps and increase the rate of participation in the labor market.” The plan presents four socio-economic reforms:

1. A negative income tax favoring the poorer employees.

2. A compulsory pension to ensure that the elderly do not fall into poverty after leaving the labor market.

3. An increase in the tax on vehicles provided by employers to some employees. (This is to help fund the program.)

4. Subsidies for childcare centers, so that more women can be free to work.

The government has also approved an additional budget for enforcing labor laws. The reforms await Knesset confirmation.

A subsidy for the employers

Despite the appearance of social consciousness, the new reforms deliberately circumvent mechanisms of social justice that are already in place. For example, the government opposes any significant increase in the minimum wage, which, at $860 monthly (3585 NIS), is far below the poverty line. It likewise opposes increases in income maintenance or other benefits. Most significantly, it opposes any gain in strength by the unions.

The chief economic pundit for the Hebrew daily Yediot Aharonot, Sever Plotzker, has leveled sharp critical barbs at the reforms. They give forth, he wrote on February 2, “an aroma that both intoxicates and misleads.” The negative-tax scheme, for example, would require all salaried employees to file annual income reports (not presently required in Israel). If the government wants to increase wages, writes Plotzker, it has at its disposal a mechanism of national insurance that can do this without the complications of making people file. “The law of guaranteed income maintenance amounts to an original [Israeli] implementation, the first such in the world, of the negative-tax concept.” This Israeli law, writes Plotzker, “came in for a good deal of admiration in public discussions among western countries, including America, when they were looking at possible ways of applying a ‘negative income tax.’ What happened next is well known: the allotments for guaranteed income maintenance were decimated by Israeli governments, until they became a mere pittance for the absolutely helpless, excluding most of the working poor.”

Plotzker here refers to the fact that the Israeli system of paying income maintenance through its national insurance system was unique, a model to be copied. Moreover, the worker did not have to put in a certain number of hours in order to qualify. Now the government has cut income maintenance to a sum that can maintain no one, but the reform that’s supposed to take its place applies only to people who work at least half time.

Economist Tamar Gozansky, formerly a Hadash Knesset member, points out a hidden dimension: “A negative income tax is intended, first of all, to perpetuate the shameful phenomenon of ‘poor workers.’ For what is Hirchson telling us? A worker who is employed at least half time, whose total family income amounts to less than 10,000 NIS monthly [ca. $2500], will get a grant of a few hundred shekels each month from the Treasury. The question arises: if we are talking, after all, about a few hundred shekels, why doesn’t the Treasury worry instead that the minimum wage should rise by a few hundred shekels?” The answer, Gozansky writes, “is that the proposal to ‘subsidize’ poor workers is in effect a proposal to subsidize employers. It is easy to see who will gain from this subsidy: the owners of the marketing chains, who employ cashiers, cleaners and maintenance people; the owners of companies employing security guards; manpower contractors in various fields (such as care for the elderly, office services, messenger services); owners of factories in traditional, labor-intensive industries in the north and south of the country; and farm owners.” (Ynet, February 27, 2007)

Harm to the social safety net

The Hirchson program contains another danger. The reforms would harm institutions that are central to the welfare state, namely, the National Insurance Institute (NII), the Histadrut (General Federation of Labor) and collective labor agreements. Take, for instance, the compulsory pension, which on the face of it seems to be a positive social measure. It comes in place of state benefits for the elderly, which have been drastically cut. It also replaces pension plans reached through collective agreements, which have been severely damaged in the last decade.

Ever since the Economic Stabilization Plan of 1985, all Israeli governments have increasingly released employers from making payments to the NII. Likewise, the cut in state benefits for the elderly, made by Binyamin Netanyahu when he was Finance Minister in 2003-2005, was the natural child of a policy that viewed social benefits as the root of all evil.

Instead of increasing benefits for the elderly (another step which could easily be taken through the existing mechanism of National Insurance), the Treasury now proposes to compel low wage-earners to save for a pension fund. In this way they are to guarantee themselves an additional income from private sources in their old age, lessening the burden on the government. Such a measure harmonizes with the neo-liberal notion that the worker, and not the state, ought to take care of himself.

A blow to union organization

The Israeli pension system was once based completely on the power of the Histadrut, which organized more than 80% of the workers and created an infrastructure of collective agreements. Because of this power, it could ensure economic security to each of its members. The process of privatization undergone by the country’s economy since 1985 has included the bargain-basement sale of Histadrut companies and the transfer of whole sectors to personnel (“manpower”) firms. As a result, today only 30% of Israel’s workers are organized. (See Challenge 98, “The Breaking of Organized Labor in Israel.”2) The million without pension plans are victims of a policy to weaken organized labor and destroy collective agreements, a policy which the Hirchson Plan perpetuates.

The Compulsory Pension Law will not be presented for confirmation until 2008. This gives the Histadrut and the employers time to reach their own agreements on pensions. But Hirchson knows how unlikely it is that such agreements would be implemented: the less educated workers carry no weight in the Histadrut, and they lack the strength to pressure their employers. For example, consider a collective agreement reached by the Histadrut and the personnel companies in 2005, according to which the companies would contribute to their employees’ pension funds after the latter had worked nine months. Two years later, of the 100,000+ who work for these companies, very few have pension plans.

These plans add, of course, to the cost of labor, sometimes as much as 20%. Employers will always try to circumvent them, using foreign laborers, subcontractors or whatever means they can find. They will succeed unless a powerful union is watching.

It is one thing to legislate a compulsory pension, it is quite another to enforce the legislation. Where labor laws are concerned, the government consistently fails (or does not bother) to implement them. Workers can only depend on their own power, which is achieved through organizing. Strong unions are precisely what the government seeks to avoid by taking labor matters into its own hands. To deal with the pension issue by passing a law, rather than by agreements between unions and employers, amounts to erosion of union power.

The Hirchson reforms cannot change these basic principles of the labor market. Even if the negative income tax yields more cash money for some, the overall effect will be to weaken workers. The essential task of a labor union is to apply pressure for improving the worker’s wage and for ensuring his or her rights, such as holidays, sick days, accident benefits, unemployment benefits and a high enough pension for old age. When a wage supplement comes in place of all this, it amounts to a kind of bribery, dulling the worker’s perception that those rights are being violated.

Organization is the answer to poverty

In great measure we can view the current reforms as a half-hearted attempt to cover up the crimes of privatization. In effect, the government is bribing workers not to organize.
The reforms are an attempt to escape from having to cope with the problem of poverty. But the latter will not be solved by mere payoffs, which can be given one day and annulled the next. Workers must never be dependent on the kindness of strangers.

The reforms don’t answer the crucial question about the manner of employment in Israel. In almost every field and industrial branch, workers are exposed to exploitation in the name of a flexible labor market. The salient features are the use of contracted labor, the importation of foreign labor under slave-like conditions, and the Wisconsin Plan (see preceding article).

The current bribes, in short, will not solve the problem of poverty. In order to guarantee the ability of workers to gain their rights, a new balance of forces will have to arise between them and their employers. They must adopt a path of unionization that inscribes on its banner the principle of equality for all: Jews, Arabs and foreigners. The establishment of such a union will demand persistent effort, but this alone will guarantee achievements that can endure.

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