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Public sector has not stopped growing

December 14, 2009. Haaretz

Look around you and check whether your employer has hired new people in the last year. If you work in a private business, the odds are the answer is no. But if you work for the government, not only is the answer probably yes, all of you have most likely also gotten a raise. While there are signs of an economic recovery, the private business sector is still not hiring - and not paying more either.

Since the beginning of 2008, the number of those employed in the private sector has remained unchanged: 1.95 million workers, even though the the population has been growing at a 1.5% to 1.8% rate. In real terms, the number of workers in the business sector has actually shrunk.  
Israeli employers, even though they faced a global economic crisis, have been much slower to fire and have looked for creative solutions, such as wage cuts and four-day work weeks. But unemployment rates have still risen as the population has grown, with jobless rates climbing from 6.6% in 2007 to 7.8% today.

While the private sector bears the impact of the recession, the public sector has gotten off almost scot-free. Public sector employees not only work for the state in civil service positions, but also for local authorities and government companies. The only real sacrifice they made was giving up on half of certain vacation payments in 2009, and possibly in 2010.

The money was supposed to be given instead to a fund to support troubled businesses, though the fund was never established.

In the third quarter of 2009, the number of those employed rose, which led to a decrease in unemployment after four quarters, but the gains were due to a rise in public sector jobs of 20,000 workers, and not from an improvement in private employment.

Public sector employees are also making more money then ever before: In September 2009, the wages in the private sector were almost unchanged from a year earlier, which means a real drop in purchasing power as inflation was 2.7% in that period. But public sector employees actually saw their wages grow in real terms by 0.2% after taking inflation into account.

The domino effect

The state is the largest employer in Israel by far: At the end of 2008 the state employed 145,000 in the civil service and another 300,000 in government companies, etc. If the regular army, police and other such agencies are included, public wage agreements include well over 500,000 Israelis.

The state pays over NIS 90 billion a year in wages and related costs. Every 1% increase in such wages means another NIS 900 million a year from the state coffers.

The Histadrut labor federation is now leading public employees to "return to normal," and many such groups have demanded - and received - higher wages. The Finance Ministry is now worried about a domino effect, since every raise given to one group of workers or union immediately raises the demands by all others. All public sector workers received a cumulative raise of 5% in 2008 and 2009. University faculty received a 24% raise as did doctors in public hospitals. Some teachers also received 25% to 30% raises in return for agreeing to certain reforms and longer hours, and nurses also won a 15% increase.

Employees of many other government bodies, such as the National Insurance Institute and Employment Service also won increases.

Now the rest of the public sector has refound their appetites, and the chairman of the Histadrut, Ofer Eini, has said he wants to revisit all public sector wage agreements in January.

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