Israel: Minimum Wage to Increase More and More Gradually

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by Jenny David

April 7—Israel's minimum wage increased April 1, but by less than planned, after the Histadrut (General Federation of Labor) and the Manufacturers Association of Israel agreed a day earlier to a more gradual but ultimately greater increase.

The total increase is expected to cost employers 9 billion shekels ($2.27 billion) a year.

Histadrut Chairman Avi Nissenkorn and Manufacturers Association President Shraga Brosh announced March 31 that the monthly minimum salary for April would rise to 47.9 percent of Israel's median salary or 4,650 shekels ($1,181) on April 1 rather than to the 52 percent negotiated in December.

In return, however, the employers agreed to add a fourth installment to the three-step plan that will raise the minimum wage to 5,300 shekels ($1,346) on Dec. 1, 2017. The April 1 increase was delayed from January as the sides negotiated.

Israel's minimum wage will again rise on Aug. 1, 2016, to 4,825 shekels ($1,225) and on Jan. 1, 2017, to 5,000 shekels ($1,270).

The agreement also stipulates that going forward the minimum wage will be tied to 47.5 percent of Israel's median salary and further increases will be granted for growth in economic productivity.

“This is a historic moment for Israel's economy and society, aimed at raising productivity in Israel—which is 23 percent lower than the OECD average,” Nissenkorn said, adding that “there is a significant correlation between the level of productivity and the level ofwages,” which in Israel are 25 percent lower than the OECD average.

Although the agreement does not bear the force of law, its economywide adoption is essentially a foregone conclusion, since the Histadrut and the Manufacturers Association represent the vast majority of Israeli employees and employers, respectively.