Is the average wage in Israel on a sharp trend of a real increase – or is it eroding so much in the face of inflation that the government will have to determine horizontal wage increases in the economy? Depending on whether you ask the Ministry of Finance or the Histadrut, when both addressed the issue today (Sunday).
The chief economist at the Ministry of Finance, Shira Greenberg, published today (Sunday) a review of the average wage in the economy during the Corona crisis. The review refutes the thesis that the increase in the average wage in the last two years is a statistical fiction, created due to the masses and mass layoffs of low-wage workers in the economy. The average in the economy in the last two years.
On paper, this is pretty impressive data. The Treasury Review shows that the real increase in average wages was particularly high in 2020-2021, despite the corona: “In annual terms, this increase reflects a real annual increase of 3.2%. This is compared to a real annual increase of 2.0% on average between 2019-2011. “Wages have risen at a relatively high rate over the past two years,” the document said.
The average wage per employee in 2021 was NIS 11,773 – an increase of 2.3% compared to 2020, according to CBS data.
The Ministry of Finance offers a number of possible explanations for the increase in the average wage during the crisis, chief among them the galloping locomotive of high-tech salaries. “Global demand for technological services after the outbreak of the corona plague has led to wage increases in the high-tech industry in Israel,” the review said.
Another reason given is in fact a critique of the previous government’s application policy: “It is possible that there has been a temporary decline in the supply of workers against the background of the government’s policy of dealing with the spread of the virus and the fear of workers being infected.”
But not everyone benefited from the average wage increase. According to the data, in a number of industries there was a slower growth in wages, such as in the restaurants and hospitality industries, and even a decrease in the average wage, such as in the field of art, entertainment and leisure.
The average wage jump of 3.2% per year is high, but not as high as the rise in the consumer price index. The index has jumped 3.5% over the past 12 months, a rate that breaks the upper range of the Bank of Israel’s inflation target. Prices are rising at an increasing rate, after in 2021 the consumer price index rose by 2.8%, and in 2020 it fell by 0.7%.
The Histadrut demands an extra cost
Although the economist’s review does not refer to rising prices, the data it has published may serve as a position paper for the Treasury in the face of the Histadrut’s new demand. Arnon Bar-David, chairman of the Histadrut, today sent a letter to Finance Minister Avigdor Lieberman, in which he called for “jointly promoting with the presidency of the business sector and with the government an agreement that regulates a mechanism of additional cost, depending on the economy’s inflation rate.”
Extra cost is a mechanism that has not been used for about 20 years. It means a horizontal wage increase for all workers in the economy, both in the public sector and in the private sector, in order to deal with the erosion of wages against price increases.
Bar-David proposed to apply a “90% cost-of-living mechanism above an annual inflation rate of 3% for each of the years 2022 and 2023, which will be reviewed in December each year. Stability and earning capacity appropriate for the working public in Israel. “
Bar-David, who is campaigning in the run-up to the Histadrut elections this May, spoke on the issue with the president of the business sector, Dovi Amitai, who agreed to raise the proposal at the next executive meeting of the presidency. He represents.
Finance officials, for their part, will certainly not be in a hurry to get their hands on the state coffers and finance the extra cost themselves, so it is not clear at the moment whether the Histadrut’s proposal is feasible.