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The Labor Union vs. the Finance Ministry

10 April 2003

By Yisrael Ne’eman

So far a general strike by the Histadrut Labor Federation in Israel has been avoided.  The massive work stoppage was planned by union boss MK Amir Peretz when Finance Minister Benyamin (Bibi) Netanyahu threatened to enact labor legislation to retract monies and benefits gained by workers in negotiations with the government over the years.  The state can no longer afford to pay the public sector bill in its entirety and demands a cut in wages and mass firings.  Subsidies to the poor will also be slashed.  The strike was to include transport, the electric company, health services and the state water works.  Such paralysis would have been catastrophic in an already failing economy.

There is no time for long, drawn out negotiations so tactically Netanyahu decided to raise the ante as high as possible and put the state on a collision course with the labor union forcing Peretz to address the major issues.  With the two sides talking the creeping sanctions imposed by the union are now ended.

Peretz plays his game well and is not idiot.  His side wins their public debates with the finance ministry every time since they represent the poor, the unemployed, the sick, the one parent families and the minimum wage working class.  What they forget to say is that they also represent the vastly overpaid employees of the Electric Co., Mekorot Water Works and many officials in the state companies and civil service.

The Histadrut itself has faced many crises.  In the 1980’s they were the owners and workers of many poorly run enterprises (Hevrat Ovdim).  Basically forced into bankruptcy they sold off their profitable holdings and liquidated the failures.  And of course they brought in the capitalist minded manager Benny Ga’on to perform the surgery.  In the end a debt of over $1 billion was cleared.

By the mid-1990’s the Histadrut pension funds were in debt by over $10 billion and by some estimates maybe more.  In 1995 different funds were opened and are doing better (but still not too well).  The original pensions were mismanaged because the union leadership often appointed non-professionals (some say friends and political hacks) to run the funds.  The state is expected to guarantee the pensions and the workers are certainly not at fault for the pension disaster.  But to expect the state to bail out the union when it ‘screws up royally’ is a bit much.  However Peretz knows the state will never consider not bailing out its workers so parts of the state budget are held hostage to union mismanagement.

The union claims the pension funds are in trouble because people live longer but any right thinking person knows there are many retirees living off minimal pensions for many years where monies were invested wisely.  Peretz knows the union was responsible for the Hevrat Ovdim failure.  The government and union know there are too many clerks in government service and unemployment benefits are too high. 

Both know the private sector led by the established and well off can reinvest and get the economy moving.  But they demand a massive tax break.  Most know only capitalization will save the day at the moment.  Years from now the welfare state can be rejuvenated.   Together, the state and the union are responsible for the ‘big mess’.

In the media the Histadrut continues to score points but in reality Netanyahu will get most of what he wants.  Peretz cannot deny reality.  And as usual ‘the people’ will pay for the mistakes of the leaders.

We all must be doing something wrong since as we know ‘nations get the leadership they deserve’.