In the framework agreement concluded last week between the Histadrut and the Ministry of Finance, a clause that may change the rules of the game in the worlds of organized labor in the public sector passed relatively quietly. Globes learned that in addition to the wage increases and lateral grants for all employees, it was also agreed upon to set up a special fund “for solving specific problems”. If you want, a small pot.
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The Treasury and the Histadrut do not specify exact amounts, but according to estimates it is a high amount of NIS 2.5-3 billion – about a quarter of the total cost of the framework agreement. These funds will be allocated in the next five years for salary increases for certain sectors, such as nurses and social workers.
The stated purpose of the special fund is to provide certainty throughout the period of the new agreement, which will expire at the end of 2027. But from the perspective of the Ministry of Finance, the real benefit is in the mechanism that determines the distribution of funds from the fund.
This mechanism is worded in a way that, in the view of the Treasury, greatly reduces the power of the workers’ committees in the public sector to shut down the economy. If we call the child by his name: this fund is a mandatory mediation mechanism.
From now on, any workers’ organization that demands wage increases will have to go through the mediation scheme of the fund. According to the procedure, demands on behalf of the employees who did not enter into the framework agreement, will first go to the approval of the Histadrut Chairman, Arnon Bar-David, and then to the approval of the payroll department at the Ministry of Finance. From here, a detailed negotiation will begin, during which the employees are not allowed to strike.
And what happens if no agreements are reached? The agreement is worded in a laconic manner and does not establish a clear decision-making mechanism. According to the wording, the decision is shared by the supervisor of wages and the chairman of the Histadrut. None of the parties is given the right of the last word. In some cases, this may be a recipe for repeated discussions around the table and endless contacts, even if they come to a boil – the workers will be prevented from sitting down.
The goal: to prevent potential crises
However, this is not hermetic immunity from shutdowns. First, the fund is designed to solve problems of wage demands, but is unable to prevent potential crises such as privatization of government companies or other structural changes that affect workers. In such cases, the strike option still exists.
The Histadrut’s Vice President of Economics and Policy, Adam Bloomberg, opposes the Treasury’s claim that the agreement will limit the power of the strike, but explains that the need to take measures will be reduced thanks to the fund. earlier, then the silence was also extended. But every rule has an exception, and silence is not hermetic. If now they want to privatize the Port of Ashdod or dismantle the Standards Institute, then we still know how to conduct ourselves regardless of the box.”
Bloomberg adds that “even after the previous framework agreements, various sectors could not come up with proper wage demands. So they depended on external events, such as the introduction of technologies or moving offices, and in this way demanded a wage demand. If an employer comes and takes a unilateral action that fundamentally changes the nature or the work structure, we will not join hands. But this agreement exhausts the standard salary requirements.”
There is logic in the idea. In recent years, there have been fruitful talks between the Ministry of Finance and the Histadrut, as evidenced by the framework agreement that was signed quickly and without any real struggles. However, there is no guarantee that the positive relations will continue throughout the entire period of the agreement.
There are still many open questions, such as the identity of the salary commissioner appointed by Finance Minister Bezalel Smotrich. The previous supervisor, Kobi Bar-Nathan, created a trust between him and Bar-David, which also exists with the acting supervisor, Efi Malkin. If Smotrich decides to further implement his oppositional ideology towards organized labor, he may in theory appoint a permanent supervisor who is compatible with his worldview.
Ritual: a history of “small cash registers”
The mechanism is based on the package deal, which was signed a year and a half ago between the Histadrut and the Treasury. It will now come into full force with the establishment of the special pot for the coming years. The introduction of the fund into the agreement came after a “pilot” in previous years. At the beginning of 2020, the previous framework agreement expired and has not been renewed since then, due to the corona crisis and the political instability – and the wages of public sector employees were frozen (despite creeping upwards) until the signing of the new agreement. As an interim solution, the Treasury then set up a fund of about NIS 400 million, the funds from which went mainly to the workers of the health professions.
That’s when the outline was called a “small coupe”. Now, worth billions, it is no longer small at all.
How will the mechanism work? The treasury will transfer the funds to the fund once a year, in increasing amounts. This is because the Histadrut preferred to receive the bulk of the horizontal salary increases as quickly as possible, and they were indeed set in smaller and smaller amounts, so the cash flow cost to the fund was planned in reverse order of payments. The rationale for the Histadrut is that in any case, the area will be relatively calm after the high wage spikes in 2023-2024, and thus the need for emergency solutions from the fund will decrease.
There is an additional profit from the treasury in the cash register model. According to the package deal, any negotiation with a certain employee sector will discuss not only the additions to the employees – but also what they will give back. For example, the agreement allows the Treasury to demand the introduction of technologies, flexibility for management in firing employees or transferring them to other positions, and more.
It is important to note that the agreement between the Treasury and the Histadrut has not yet been signed. The celebratory press conference that Smotrich and Bar David held on Thursday was actually about summarizing the general principles. In fact, the framework of the framework agreement was determined, and now both sides have freed themselves to break down the understandings into detailed clauses. Small letters can still enter that will affect the anchoring of the cash register mechanism.
The beneficiaries of the agreement: nurses and hospital workers
Which populations will benefit from the billions that will be poured into the coffers? In the near to medium term, the Histadrut allocates the funds from the special fund to nurses, administrative and economic workers in the health system, radiologists, psychologists in the public service, social workers, psychiatric hospital workers as well as court administration workers. This is a long and non-final list, where among the first who are expected to receive an answer will be about 30,000 administrative workers in the hospitals and general health fund. This, as a second blow to the commitment given in the package deal, which was then conditioned on the signing of the framework agreement. The social workers will also receive another boost to increase their salary.
The most significant event that should be resolved by the fund is in the nursing sector. There are about 30,000 nurses in the health funds, in the hospitals and in the local government’s milk drop. After an improvement in conditions during the Corona period for most sectors in the health system, the nurses were still left behind. Here a very large investment is expected from the coffers. However, this will not happen in the immediate term – the Histadrut will probably have to wait at least two years until the coffers are filled enough to subsidize the reform of nurses’ wages.
The most expensive salary agreement in the economy
The framework agreement is the most expensive wage agreement in the economy, signed every few years. In the past, the agreements were not the end of the story. After the signing of the previous agreements, in 2016 and 2011, various workers’ organizations arose and demanded individual additions beyond what was signed, under threats of shutdown. Now, as mentioned, the threat of the strike will weaken and the parties will move to the path of litigation.
However, there is still a question as to whether the amounts currently allocated to the fund will be sufficient over the years to solve all the problems that may still arise. The coming years are marked by uncertainty in the macro arena, when it is difficult to predict exactly when inflation will be curbed and whether the Treasury will be able to meet the ambitious deficit targets it has set. History shows that the previous wage agreements were opened in the middle of the period, when the Treasury sought to postpone wage increases for employees – and in return increased the rate of wage growth. It is not impossible that by 2027, the Treasury and the Histadrut will still have demands on each other, and one of them may concern the increase of the special fund.