Government said mulling lowering minimum wage to boost employment

Proposal draws immediate rebuke from left-wing ministers and MKs; one denounces ‘fundamentalist capitalist ideas’ that ‘erode workers’ rights during an unprecedented social crisis’

Israelis protest in Tel Aviv's Rabin Square against the government's economic policies during the coronavirus pandemic, July 11, 2020. (Jack Guez/AFP)
Israelis protest in Tel Aviv's Rabin Square against the government's economic policies during the coronavirus pandemic, July 11, 2020. (Jack Guez/AFP)

The government is considering drastic measures such as lowering the minimum wage to encourage businesses to hire workers amid the coronavirus crisis, a report said Tuesday evening, drawing rebuke from liberal ministers and lawmakers.

The proposal, reported by the Kan public broadcaster, comes as businesses hesitate to rehire employees they’d put on unpaid leave, or recruit new ones, amid the economic crisis caused by closures imposed to curb the coronavirus outbreak.

Unemployment in Israel currently stands at 21 percent, and many business owners cannot afford the extra cost of returning more employees to work.

Other proposals reportedly being weighed by the government include lowering overtime pay and reducing employers’ obligations regarding pensions and other workers rights.

Labor and Welfare Minister Itzik Shmuli of the Labor party told Kan Wednesday morning that he “won’t let this pass.”

“It won’t happen on my watch,” he said. “Maybe we would see more people being employed, but we would see more who cannot provide for their families.”

Labor MKs Itzik Shmuli (L) and Amir Peretz at the party’s headquarters in Tel Aviv on February 13, 2019. (Tomer Neuberg/Flash90)

Economy Minister Amir Peretz, also from Labor, similarly said “the lowering of the minimum wage will not be on the agenda. In this time of coronavirus crisis, we must strengthen marginalized groups rather than weakening them.”

Peretz called for the minimum wage to be raised “to increase consumption and economic activity.” He advocated adopting a German model that “combines unemployment benefits with part-time work but guarantees full salary with social rights.”

The proposal was lambasted as well by Joint List MK Aida Touma-Sliman, a member of the Israeli Communist Party that is part of the Hadash faction within the Arab-majority Joint List alliance.

“The fundamentalist capitalist ideas by the government of Israel to lower the minimum wage and erode workers’ rights during an unprecedented social crisis will not pass,” she said. “We won’t let them pass. Such measures aren’t being weighed even in the most capitalist states.

MK Aida Touma-Sliman leads a Status of Women and Gender Equality Committee meeting at the Knesset on November 21, 2017. (Yonatan Sindel/Flash90)

“The goal of these steps is to use the crisis to harm rights achieved through hard struggles,” Touma-Sliman said.

Minimum wage in Israel stands at a monthly NIS 5,300 ($1,500).

The Prime Minister’s Office, facing widespread criticism and continued mass protests over its economic response to the COVID-19 pandemic, has already introduced and approved a plan to allocate stimulus grants to citizens affected by the ensuing financial crisis.

After initially saying the grants would be paid to all citizens regardless of need, the PMO said Monday that a revised model for the allocation of grants had been settled after consultations with Defense Minister Benny Gantz, Finance Minister Yisrael Katz, and Economy Minister Amir Peretz.

According to the modified plan, NIS 6 billion ($1.75 billion) will be allocated for the grants, which will be given to all citizens with the exception of “those earning over NIS 640,000 (approximately $186,000) per annum and senior civil servants earning over NIS 30,000 (approximately $8,700) per month.”

The PMO also announced that people “receiving support payments for convalescent care, handicapped status, income assurance, needy new immigrants (who have been in the country for at least two years), the unemployed over 67, and the elderly who receive income supplements” will all receive larger (though currently unspecified) grants.

Prime Minister Benjamin Netanyahu at start of the weekly cabinet meeting, July 19, 2020 (GPO)

The original plan, as outlined by Netanyahu last week, would have seen Israelis aged 18 and over receive a one-time payment of NIS 750 ($218), while couples with one child would receive NIS 2,000 ($583), rising to NIS 2,500 ($729) for those with two children, and NIS 3,000 ($875) for those with three or more.

That proposal was roundly criticized by Finance Ministry officials, the premier’s coalition partners and the public, with the criticism mostly centered on the plan to disburse money to all Israelis — regardless of income or whether they were hurt economically by the government-mandated restrictions to contain the virus — and the high cost.

Senior officials in the treasury, including director Keren Terner Eyal, opposed the plan ahead of its unveiling, likening it to “throwing suitcases of money that we don’t have into the sea,” according to Channel 13.

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