For more than a century, the Histadrut shaped the Israeli labor market and helped build the institutions of a young state. That history deserves respect — but history cannot be a shield against accountability. The latest corruption scandal involving senior Histadrut leadership is not an exception but a symptom of a structurally outdated institution whose power no longer serves the public interest.
Israel cannot afford to excuse systemic failure by appealing to past achievements. The gap between what the Histadrut once represented and what it has become is now too great to ignore.
When a labor federation can be raided by police, its chairman detained, and hundreds of public-sector officials questioned in a massive fraud investigation, the problem is not a single leader. It is the concentration of power itself. The Histadrut still holds the power to shut down airports, ports, hospitals, schools, railways, and government services with a single strike declaration — even while being investigated for bribery, political favoritism, and abuse of public trust. No modern democracy should allow an unelected private body to exercise more leverage over the national economy than the elected government itself. The fact that this power remains intact despite an active corruption probe is the clearest proof that reform is no longer enough. Only dismantling the structure can restore legitimacy.
The economic damage is not theoretical. The Histadrut’s wage agreements, strike threats, and cartel-style collective bargaining raise costs without raising productivity, and they protect insiders while excluding younger, poorer, less-connected workers — especially those in the private sector, the periphery, or the tech and freelance economy. In a country with the highest cost of living in the OECD, labor inefficiency is not an abstraction. It is rent, groceries, mortgages, and taxes. When 65% of public-sector workers are unionized but only 15% of private-sector workers are, the inequality is internal, not ideological: a privileged bureaucracy subsidized by an unprotected workforce.
The corruption scandal has finally stripped away the illusion that the Histadrut is a guardian of workers. It is a guardian of its own political power. It negotiates with the state while influencing the very politicians who sit across the table. It collects dues from workers who never actively chose it. It operates not as a union but as a legacy monopoly — one that has not been meaningfully accountable to anyone for decades.
Prof. Ilan Alon Photo: CourtesyIsrael is no longer the collectivist economy of 1950. It is a global innovation nation whose labor market includes data scientists, gig workers, entrepreneurs, caregivers, teachers, and migrant labor. The Histadrut represents only a fraction of that reality but still controls the levers of national disruption. Reforming it is no longer a question of efficiency — it is a question of democratic integrity. A labor system built for the 21st century must be voluntary, competitive, transparent, and decentralized. It must protect workers without threatening the entire economy. It must enable growth instead of blocking modernization.
The heroic role of the Histadrut belongs to the history books. The costs of keeping it alive belong to the present — and if we do nothing, to Israel’s future. The police investigation has simply exposed what economists and policymakers have known for years: a system built on compulsory power always ends in corruption, because no institution is immune when accountability disappears.
Israel does not need to wait for another scandal, another strike, or another lost decade of productivity. The moment to dismantle the Histadrut’s monopoly is now — before the country pays a higher price for inertia than it once paid for nation-building.
- By Prof. Ilan Alon, Professor of Economics and Business at Ariel University (Israel) and the University of Agder (Norway)