Following a wave of public criticism over Teva Pharmaceutical’s decision to lay off 700-800 Israeli employees as part of a companywide restructuring program, Teva announced an agreement with the Histadrut labour federation not to dismiss any workers without the federation’s consent.
The debate over the fate of Teva’s workforce reached a fever pitch earlier in the week when opposition leader Shelly Yachimovich (Labor) called Teva’s plan “a mass terror attack,” saying that given the near-zero taxes the pharmaceutical giant pays, the plan was an “act of cannibalism.”
The problem with Yachimovich’s populist blather is that it spares her the necessity of having to explain how Israel is strengthened – economically and socially – by the Histadrut’s strong arm tactics. While claiming to be acting in the interest of Israel’s workers, Histadrut has actually made things worse for the middle class.
Histadrut has increased the burden on Israel’s middle class by rigorously protecting thousands of jobs – no matter how overpaid or badly performed – at the ports, the Israel Electric Corporation, the banks, the water utility Mekorot, local municipalities, the military industries, Israel Railways, and elsewhere.
Employees at these government monopolies are paid in excess of a billion shekels a year, far above what they would earn in a competitive market. The salaries of these overpaid union members and government workers are financed directly by the middle class.
Yes, the same middle class that Yachimovich and her Histadrut cronies claim to be helping has seen its standard of living plummet as a result of rampant government intervention.
To listen to Yachimovich and Histadrut, one might be tempted to believe that they are earnestly trying to save Israel from becoming Russia, a country where corruption has penetrated all levels of government and most other aspects of life.
Sure – the Israeli economy has problems, in particular, a startling degree of income inequality. But in the span of just a few decades, Israel has transformed itself from a semisocialist backwater into a high-tech superpower.
While most of the world is afflicted by an economic meltdown, Israel demonstrates fiscal responsibility, sustained economic growth and a conservative, well-regulated banking system. Furthermore, the emergence of Israel as a hi-tech hub has allowed it to get through the global economic downturn with no deficit or stimulus package.
Yet, Yachimovich and the Histadrut continue to chase the windmills powered by the memories of 450 percent inflation. But 2013 is not 1973. It turns out that the elixir for Israel’s societal ills was to free itself from one-party control of the government and the economy. Today, economists around the world agree that free trade creates jobs through economic expansion.
If Israel’s powerful organization of trade unions and liberal politicians are truly interested in protecting the country’s workers, they should focus less on preventing ‘mass terror’ attacks and more on opening up the country to competition and international trade, which would allow all Israelis to raise their standard of living.