On Monday afternoon, Minister of Finance Benjamin Netanyahu
and Histadrut chairman Amir Peretz signed an agreement that
ended more than three months of work slowdowns, stoppages and
sanctions. Of course, both sides claimed victory. The public
also "won" when all civil servants finally returned to normal
work on Tuesday.
Some issues were not settled. The Histadrut and the Ministry
of Finance have agreed that their teams will continue
discussing investment rules for pension fund money for a
further three months. The two sides also agreed that the
Histadrut would not use any work sanctions in the absence of
an agreement on the issue. It can only take legal action.
Pensions were at the heart of many of the recent problems
between the government and labor. For many years the
Histadrut Labor Federation ran pension funds without
sufficient attention to whether they could pay for what they
promised. As a result of this, and aggravated by poor
investment decisions, the pension funds were deeply
underfunded. The government took them over, promising to make
up about 70 percent of the original pension the workers were
supposed to have earned. New pension funds were started nine
years ago that are on a sounder footing.
The outstanding issue mainly concerns the new pension funds
founded in 1995, which are actuarially valid. The government
wants the new funds to invest 70 percent of their money in
the general capital market and only 30 percent in special
government bonds with a guaranteed return. Before, only 30
percent of the investments were in the capital market. The
Histadrut strongly opposes channeling most pension savings to
the capital market, but reportedly they have relented on this
and the discussions will now focus on a safety net for the
funds in the event of capital market shocks.
The agreement also calls for an increase in the retirement
age to 67 for men and 62 for women. The treasury had wanted
the age for women to be raised to 67 as well.
The Finance Minister felt that the pension system is now on a
sound footing. "We are completing a revolution to save the
pension," said Netanyahu, saying the pension system is now
prepared to absorb all workers. "The pension system is stable
and ready to face the future."
In other areas, it was agreed that there would be no mass
government layoffs this year, that the merger of the income
tax and value added tax divisions in the ministry of Finance
can start immediately but will not bring an layoffs in 2004,
and that changes in the health system would be reduced.
Even though this was settled, the possibility of a local
authority strike is growing because local authority employees
have not been paid for months.
Minister without Portfolio in the ministry of Finance Meir
Sheetrit told Globes that the agreement on pensions
was the Ministry of Finance's most important achievement. He
also pointed to two important structural changes: the Public
Works Department (Ma'atz) becoming a government company, and
streamlining in educational television.
Histadrut Chairman Peretz said he doesn't want people to
perceive the deal as indicating that the Histadrut agrees to
government intervention without its consent. He said that
cooperation with the workers is the most important
element.
The two sides agreed to increase the monthly allotments to
pension funds from 17.5 percent of an employee's salary to
20.5 percent. The treasury had wanted most of this additional
3 percent to be contributed by the employee, but ultimately
agreed to split this amount evenly, with the employee paying
1.5 percent and the employer the rest.
The treasury also dropped its demand to limit the amount of
salary increases for pension purposes to 2 percent per year,
based on the worker's 1996 salary level. Instead, it was
decided to link the increase of pension-covered salary to the
average wage increase in the economy, and to set the base
date for this calculation at October 2003.
The government can begin right away to restructure government
ministries and associated agencies, including moving the
Public Works Department out of the Transportation Ministry
and making it a state company with the aim of eventually
privatizing it. The Histadrut will not have a veto over
merging divisions or other reorganizations. However, the
treasury agreed that there will be no mass layoffs in
2004.
The Histadrut agreed to abandon the current system of
calculating pension payments only on a worker's last three
years of employment. Instead, this calculation will be
averaged over the worker's entire career.
There was another major concession to the government. The
ability of the Histadrut to call a general strike because of
problems in one area was restricted. For example, with regard
to the Public Works Department (PWD), the parties agreed that
if they could not reach an agreement, the Histadrut may call
a strike, but only at the PWD. It may not call a general
civil service strike.
What about the structural reform, breakup of the monopolies,
the Israel Ports Authority, Israel Electric Corporation,
Mekorot National Water Company, Israel Airports Authority,
and others? While the government does not formally need the
Histadrut, there is no mention of these in the memorandum of
understandings. Negotiations will resume next week.
"I know you all want to know who won. Without doubt, the
Israeli public is the winner. We are pleased with the result,
and if the Histadrut is pleased, we are pleased sevenfold.
Because a good agreement is one in which both sides are
pleased," Netanyahu said.
"We are beginning a revolution that saves Israeli pensions
and we did this with the blessing of the central elements in
the economy: the government, the Histadrut and of course the
employers. We have also solved the retirement age problem,
which will rise gradually. I must say that Israel is a
pioneer in this matter. Throughout the developed world, life
expectancy is on the rise. But this is a mixed blessing since
until now the presumption was that many young workers carry a
small number of pensioners. Now, this equation falls
apart.
"The second principle is creating an efficient and reduced
public sector. I am pleased to tell you that as the year
changes, 3700 people have left the public sector out of a
total of 56,000. 1000 left voluntarily, 2,000 temporary
workers have been discharged and will not be rehired, and
only 700 have actually been fired. This is a 7 percent
reduction of the force, totally unheard of in the country's
history," the Finance Minister added.
