[Israel] Lawmakers seek to raise a minimum wage that is the highest in the region

In a rare show of cooperation between Israel’s Government coalition and opposition, nine members of the Knesset from seven different parties submitted a bill to raise the country’s minimum wage by more than a third to 40 NIS ($12.50), The Media Line reports.

The group was led by Labor lawmaker Naama Lazimi. The bill was introduced on October 13 and Lazimi wrote in its explanation that the number of those employed and still living beneath the poverty line has increased in recent years, and that “raising the minimum wage will increase the buying power, the incentive to be active in the market and will help small businesses.” 

According to reporting from Israeli news website Ynet, the bill’s supporters expect the raise to encourage those unemployed as a result of the COVID-19 crisis to seek employment.

The effectiveness of this policy, however, is still under debate.

Dr Michael Sarel heads the Economic Forum at the Kohelet Policy Forum. “I haven’t seen strong evidence that this reduces inequality,” Dr Sarel said of the potential minimum wage rise. One reason for this, he told The Media Line, is that minimum wage workers often are employed by small businesses, whose owners themselves usually do not earn high salaries.

On the other hand, Dr Sarel said that increasing the minimum wage will “almost certainly push unemployment upward, especially of young unskilled [workers] who have a hard time finding a job.”

Professor Joseph Zeira - an expert on the economy of Israel at the Hebrew University in Jerusalem - has a different perspective. “The laws of economics apply to Israel as well,” Zeira told The Media Line, referring to the recent research which, he explained, shows that an increase in the minimum wage has little to no influence on unemployment.

“The question of what should be the rate of minimum wage is not a scientific question – the only answer we can get comes from comparing to other countries,” Zeira said. The professor explained that a proper comparison entails comparing what percentage a country’s minimum wage makes up of its hourly workforce productivity.

When analysed this way, Israel joins countries such as Spain and the Netherlands at the low end of the list of developed countries. Bringing the minimum wage up to 40 NIS will move Israel closer to countries such as Australia, which top the chart. It also will put Israel more or less in line with a $15 minimum wage in the US, which has been at the centre of a years-long struggle.

“It doesn’t cause economic damage, and it certainly has social benefits because it will greatly influence the gap between workers,” Zeira said. He does, however, believe that the bill will be hard to push forward for political reasons.

Dr Sarel says the increase may be too much at one time. “I expect that no one would be willing to raise the minimum wage by 35 per cent in one go,” he said. However, an increase is possible if the right political elements align, but it will most likely be a gradual increase.

It remains to be seen whether the bill will receive the approval of the Israeli parliament but even without the proposed increase Israel’s minimum wage still leads regionally. A 2020-2021 report by the United Nation’s International Labor Organization (ILO) noted that the Arab states are lagging behind globally in the implementation of minimum wage laws.

Only 64 per cent of Arab countries - the majority in the region - have enshrined minimum wage rates in legislation. By contrast in the Americas, for example, 94 per cent of countries have minimum wage laws.

It is unsurprising that Israel, with its strong economy, has a higher minimum wage than many of its neighbours. And it is notable that regional economic leaders such as Saudi Arabia and the United Arab Emirates do not have minimum wage laws, according to the ILO, which excludes laws that apply only to civil servants.

Source: The Media Line

(Quotes via original reporting)

In a rare show of cooperation between Israel’s Government coalition and opposition, nine members of the Knesset from seven different parties submitted a bill to raise the country’s minimum wage by more than a third to 40 NIS ($12.50), The Media Line reports.

The group was led by Labor lawmaker Naama Lazimi. The bill was introduced on October 13 and Lazimi wrote in its explanation that the number of those employed and still living beneath the poverty line has increased in recent years, and that “raising the minimum wage will increase the buying power, the incentive to be active in the market and will help small businesses.” 

According to reporting from Israeli news website Ynet, the bill’s supporters expect the raise to encourage those unemployed as a result of the COVID-19 crisis to seek employment.

The effectiveness of this policy, however, is still under debate.

Dr Michael Sarel heads the Economic Forum at the Kohelet Policy Forum. “I haven’t seen strong evidence that this reduces inequality,” Dr Sarel said of the potential minimum wage rise. One reason for this, he told The Media Line, is that minimum wage workers often are employed by small businesses, whose owners themselves usually do not earn high salaries.

On the other hand, Dr Sarel said that increasing the minimum wage will “almost certainly push unemployment upward, especially of young unskilled [workers] who have a hard time finding a job.”

Professor Joseph Zeira - an expert on the economy of Israel at the Hebrew University in Jerusalem - has a different perspective. “The laws of economics apply to Israel as well,” Zeira told The Media Line, referring to the recent research which, he explained, shows that an increase in the minimum wage has little to no influence on unemployment.

“The question of what should be the rate of minimum wage is not a scientific question – the only answer we can get comes from comparing to other countries,” Zeira said. The professor explained that a proper comparison entails comparing what percentage a country’s minimum wage makes up of its hourly workforce productivity.

When analysed this way, Israel joins countries such as Spain and the Netherlands at the low end of the list of developed countries. Bringing the minimum wage up to 40 NIS will move Israel closer to countries such as Australia, which top the chart. It also will put Israel more or less in line with a $15 minimum wage in the US, which has been at the centre of a years-long struggle.

“It doesn’t cause economic damage, and it certainly has social benefits because it will greatly influence the gap between workers,” Zeira said. He does, however, believe that the bill will be hard to push forward for political reasons.

Dr Sarel says the increase may be too much at one time. “I expect that no one would be willing to raise the minimum wage by 35 per cent in one go,” he said. However, an increase is possible if the right political elements align, but it will most likely be a gradual increase.

It remains to be seen whether the bill will receive the approval of the Israeli parliament but even without the proposed increase Israel’s minimum wage still leads regionally. A 2020-2021 report by the United Nation’s International Labor Organization (ILO) noted that the Arab states are lagging behind globally in the implementation of minimum wage laws.

Only 64 per cent of Arab countries - the majority in the region - have enshrined minimum wage rates in legislation. By contrast in the Americas, for example, 94 per cent of countries have minimum wage laws.

It is unsurprising that Israel, with its strong economy, has a higher minimum wage than many of its neighbours. And it is notable that regional economic leaders such as Saudi Arabia and the United Arab Emirates do not have minimum wage laws, according to the ILO, which excludes laws that apply only to civil servants.

Source: The Media Line

(Quotes via original reporting)