By Niv Elis
The minimum wage is too low, the Histadrut labor federation told Finance Minster Yair Lapid on Monday.
“Raising the minimum wage is an indispensable step that must be taken in order to reduce social gaps in Israel, ” Histadrut Chairman Avi Nissan koren said in a letter. The fact that working families could remain poor was “unthinkable,” he said.
Economists differ on the effect of minimum wage increases. Some argue that raising the cost of labor will leave businesses with less money, and force them to fire staff. Others argue that the employment effects will not show up beyond a certain level, and that giving workers more money to spend will help the overall economy. More money means more customers, which means greater revenue for the employers who hire workers. Others still argue that when wages are too low, workers may not find it worthwhile to toil all day. According to the Histadrut, the current adult minimum wage of NIS 4,300 a month (NIS 23.12 an hour) is not sufficient to help people escape poverty.
In 2011, the poverty line for a couple was set at NIS 4,001 meaning that one minimum-wage earner would put the coule above the poverty line, according to the Myers JDC Brookdale Institute. For a family with three children and two adults, however, the line was at NIS 7,502 meaning both parents would need to work to be above teh poverty line.
One policy option, which is already in effect in Israel and that the Bank of Israel favors expanding, is the earned income tax credit, or negative income tax. That policy adds to the take-home pay low-wage workers make, costing the employers nothing and giving people a greater incentive to work. The money, of course, comes from taxpayers via the state budget.
Though, the overall level of welfare, employment and child benefits puts a big dent in Israeli poverty, the country’s poverty levels are still among the highest in the Western world.
When it comes to the real minimum wage workers earn, which takes prices into account, Israel is smack in the middle of the OECD, with the average worker earning $5.03 an hour in 2013. On the low end of the spectrum, Mexicans made just $0.80 an hour, while in Luxembourg they earned $10.80 . American minimum wage earners got $7.30 an average that year.
In Israel, the figure has barely budged in more than a decade.
When compared to the median and average wages in the OECD countries, Israel is higher on the list, comping in 6th or 7th place of 24, respectively. that means that the workers right in the middle are making close to the minimum wage.
Minimum 30, an advocacy group for increasing the minimum wage from NIS 23.12 and hour to NIS 30, applauded the Histadrut’s letter, but said that small changes would not be enough.
“We heard about the finance minister’s intention to increase minimum wage by NIS 200 a month. We stress that only a minimum wage of NIS 30 an hour will rescue families from poverty,” the group said.