Israel: Regulation ‘Regressing' Under Business, Political Influence

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By Jenny David

Economic interests clash with social interests and often win, and the Israeli regulatory environment is “regressing” under the influence of aligned business and political interests, according to an as-yet-unpublished study by a prestigious Jerusalem think tank. The regulatory failure is sweeping, and recommended solutions—from increased sanctions to enhanced rewards—vary widely by sector, the report says. The five-year study, obtained by Bloomberg BNA March 20, is scheduled for broad release at the end of 2017.

Contrary to statements by Prime Minister Binyamin Netanyahu, the regulatory burden in Israel has actually decreased in recent years, said Eyal Tevet, the Van Leer Institute report's academic director, at a pre-release seminar March 19. Netanyahu's repeatedly proclaimed “war” on overregulation is based on World Economic Forum competitiveness statistics that are “meaningless” because they are based on responses from businessmen, in whose interest it always is to complain of overregulation, Tevet said.

“Capitalists are the real influencers” of Israeli regulation through the politicians they support, Ido Baum, vice dean of the College of Management Law School in Tel Aviv, said. “They want regulations that help them, not that support the public interest,” he added, calling the regulatory failure “intentional” and the report “important to read, just to know how bad the situation is.”

Labor Failures Cost Lives

The report covers numerous sectors, including banking, public transport, environmental quality, labor, health, private broadcasting, civil society and small businesses, but regulatory failure in the labor sector stands out because of its high cost in human life, said Varda Shiffer, an academic expert on privatization and regulation in Israeli local government.

Israel has one of the world's highest rates of employment through subcontracted outsourcing, Shiffer said, and the subcontractors' only motivation, like the workplaces they serve, “is to save costs and increase profits. They benefit at the workers' expense. And the workers don't complain because they can be so easily replaced.”

Deaths of Israeli construction workers—already among the highest in the western world—are again on the rise. According to the Coalition Against Construction Accidents, construction site deaths rose by about 40 percent in 2016 after a similar increase in 2015. Another 6,000 to 7,000 construction worker injuries were reported to the National Insurance Institute, but that number is considered low, since injuries to foreign and Palestinian workers are greatly underreported.

Legislation Reduces Rights

Legislation intended to ensure workers' rights actually achieved the opposite, Shiffer said, since new laws included detailed lists of workers' minimum rights that replaced often better terms in collective work agreements. Labor unions in Israel, as in other countries, were late to identify the trend, Shiffer added, and now it will be “very hard” to get back to International Labor Organization standards.

Shelly Yachimovich, former head of Israel's Labor Party and candidate to lead the Histadrut National Labor Federation, called labor laws passed 10 to 15 years ago “nostalgic and naive” compared to the “Sodom and Gomorrah of today.”

“No one really knows how many contract workers there are today,” Yachimovich said, “but they are no longer just cleaners and security guards. Now core services like social workers, teachers, high-tech workers, nurses and even some doctors are outsourced because it reduces their salaries and rights to a minimum.”

“The solution starts with unionizing” workers employed through service companies despite “strong opposition” from politicians representing business interests, according to Yachimovich.

Broadcast Reform ‘Won't Happen'

With a dispute over political control of a new public broadcasting corporation threatening to bring down the government, the seminar also singled out broadcast regulation for discussion.

Regulation to “protect the independent standing of the media and develop ethical norms to block political influence” can “save the media from censorship,” said Sharon Yadin, a senior lecturer in law at the Peres Academic Center. And that is exactly why it won't happen, said Baum. The government's goal is “to appear to international observers, the Israeli courts and voters as if it is promoting an open communications market” and a broadcasting authority that “looks independent and professional.” But in reality, according to Baum, “the politicians want control.”

The situation is exacerbated by laws that fail to relate to economic issues or rapid technological development and by a lack of “soft” sanctions for broadcasting violations, said Ayelet Metzger, a former deputy director of the public authority that supervises commercial broadcasting in Israel.

Broadcasters know “no one wants to see a blank screen,” and so they “use the situation to advance their own economic interests” of continued centralization with more advertising and less local production, Metzger said, noting that “economic have overcome social interests” in media “and not just in Israel, but worldwide.”

To contact the reporter on this story: Jenny David in Jerusalem at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

A preliminary version of the report on Israeli Regulation 2012-2017 is available in Hebrew here.

For more information on Israeli HR law and regulation, see the Israel primer.

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