Minimum wage, maximum wage
Local minimum wage is high, but top salaries must be cut
Israeli law sets the country's minimum wage at 47.5 percent of the average wage. In accordance with this law, the minimum wage was raised this week to about NIS 3,500 (USD 752) per month, or NIS 18.60 (roughly 4 dollars) an hour.
By any standard of comparison, the minimum wage in Israel is very high. There are only a few, rich countries in Western Europe in which minimum wage approaches 50 percent of the country's average wage.
Even Israel's definition of "minimum wage" differs significantly from that of other countries. There are few places where employers are required to provide such fringe benefits as travel expenses. Public workers in Israel can be considered to be receiving "minimum wage," whereas in practice their wages are much higher than that rate.
Overseas
It is not that way in most other countries, in which there is no provision for such expenses outside the wage earner's salary.
The Knesset's generous linkage of minimum wage to average wage is also almost unheard of in the western world. Israel's achievements in the realm of minimum wage are routinely held up as an example to emulate in some of the most developed countries in the world, including Holland, France, Ireland, and even Sweden, which has no minimum wage legislation at all.
Still, Israeli public opinion seems to feel there is something wrong, at the most basic level, with the level of the country's minimum wage, and that there is a need to raise it significantly.
Outrageous salaries
What is the root of this belief? The outrageous salaries received by the CEOs of the Tel Aviv Stock Exchange's most successful companies. As long as there are CEOs and directors general whose monthly salaries must be measured in millions of dollars, even a USD 1,000 minimum wage will look pathetic.
This year, Bank Hapoalim stands out particularly in this area. The bank's directorate pays the bank's senior officials tens of millions of shekels. In theory, there should be nothing wrong with this: Bank Hapoalim is a large, successful, profitable private bank. In theory, shareholders should be free to reward their outstanding senior employees as they wish.
But the key phrase here is "in theory." In practice, Bank Hapoalim carries a lot of weight in the Israeli market. There are branches all over the country, and the bank's decisions have macro-economic significance.
Bank-as-symbol
In light of its current power and its Histadrut labor federation past, the bank is regarded in many circles as a public/national institution, as a symbol of our economic way of life. The bank's senior officials must take into account this special standing and recognize the fact that the salaries of its senior employees create behavioral norms in other circles.
In 2006, this norm is inappropriate. It stands in opposition to most Israelis' natural sense of justice. Salaries of tens of millions of shekels seem wholly inappropriate in the country with the largest poverty rate in the Western world, and with the largest gaps between rich and poor in the Western world. Even people in the business community are appalled.
No America
Israel is not America. Israel's per capita production is just 45 percent of America's. Therefore, Israel's minimum wage cannot be expected to approach American levels.
But neither can the maximum wage. Whatever the personal contributions of Bank Hapoalim's senior officials to that company's profits may be, their salaries must match the values of the society in which they live. They do not.
The government and the Knesset should not be too involved in setting salaries for the business community. Therefore, immediate negotiations between the Histadrut labor federation and business leaders would be preferable to legislation and coalition-building promises.
For the same reason, the directorates of leading stock exchange companies must take it upon themselves to set appropriate salaries and fringe benefits for senior employees, without government intervention. A million shekels (USD 215,000) a month should be the ceiling.
If business leaders fail to have the wisdom to agree to a raise in the minimum wage, and if directorates fail to display the wisdom to put a salary maximum in place – public anger will force them to do so.
