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The Breaking of Organized Labor in Israel


SRAEL OF THE 21st century likes its workers docile, accessible, mobile, and cheap. This wasn’t always the case. The ruling establishment, built by Mapai and the Histadrut, for decades maintained a high level of income equality, accompanied by a ramified system of collective agreements guaranteeing workers’ rights. In the 1950’s, the two top deciles earned 3.3 times more than the two lowest. The society stayed relatively egalitarian until 1985, when the rules of the game changed utterly. Israel proceeded to become, within three decades, the cruelest, most unequal state in the Western world: its two top deciles today earn 21.3 times more than the two lowest. The US comes in second with a factor of 10.6. (1)

Nowadays there is much talk about the poverty afflicting almost 20% of Israel’s population (1.33 out of 7 million). One hears less about the connection between this poverty and the destruction of workers’ rights.

That destruction began in 1985 with the Economic Stabilization Plan, which was aimed at ending triple-digit inflation and reducing an enormous national debt. The Likud, in power since 1977, had inherited a huge inefficient state bureaucracy. It compounded the crisis with unbalanced spending to cover the costs of its settlement program, the Lebanon War, and major public projects. The Plan of 1985 aimed beyond these ills, however, setting about to change the deep structure of the economy. The world was tending toward capitalist globalization, and the government wanted to be part of this. It gave Israeli firms a green light to evade labor laws: they were permitted to get their workers from personnel (“manpower”) companies or subcontractors. Alternatively, they could hire them as freelancers under personal contracts. In all these cases, existing collective labor agreements did not apply. The government chose, in effect, to abandon the workers.

The destruction of organized labor

In the wake of the 1985 Stabilization Plan, the labor market has changed beyond recognition. The employers today receive a series of releases from taxes and wage hikes; they get freedom of action in determining wages and the composition of their labor force. More and more workers are employed through personnel companies and contractors, without regard to collective agreements between the Histadrut and the employers. (2)

As globalization has deepened, the use of personnel companies has gathered steam. Between the years 1996 and 2002, the number of employees in Israel’s public service sector dropped by 15,000. Had the public services become more efficient? No. The places of those who lost their jobs were filled with others, supplied by contractors. These new workers perform the same labor at minimal wages without social benefits and without the job security that the public services once enjoyed. (3)

Hand in hand with such massive replacement of organized labor, there was large-scale privatization of companies owned by the government and the Histadrut. Take, for example, the Histadrut’s company, Solel Boneh, which had been the main pillar of Zionist construction since the 1930’s. In the 80’s, Solel Boneh employed 18,000 workers on the basis of a binding collective labor agreement with the Histadrut. Most were eventually fired and replaced by migrants from Romania, Turkey and China. Many of the migrants have recently been deported. And who takes their places? Local workers hired by subcontractors and personnel companies. They receive no social benefits.

The government first allowed the importation of migrants in 1993 to replace organized Palestinian labor from the West Bank and Gaza. (Israel had just imposed closure on the Territories, after a quarter century of exploiting them as its chief source of manual labor.) This move marked the second major crux in the breaking of organized labor. The migrants were imported by personnel companies, which demanded advance payments for the privilege of working here, amounting in each case to thousands of dollars. They entered, therefore, in a state of family debt. Chained to their employers, they amount – as one researcher has put it – to “indentured servants.” (4)

The extreme exploitation of these weak workers enabled the owners of personnel companies not just to get rich, but to accumulate political power. Wherever migrants worked, the foundations of organized labor collapsed. There was also a broader effect on the economy as a whole, especially on its unskilled workers. Take construction, for instance. At first glance, the numbers here in recent years appear to show improvement. The number of migrants in construction has dropped from 75,000 to 35,000. In June 2006, the Ministry of Construction and Housing published figures showing that the number of Israeli construction workers has grown in the last four years from 115,000 to 135,000. What has happened, in fact, according to a study by WAC, is that the migrants have been replaced by Israelis, mostly Arab, working under slavish conditions via personnel companies and subcontractors. The big building firms reject any proposal that would restore the system of organized employment through collective agreements. (5)

The government violates the law

The exploitation of unorganized workers by personnel contractors isn’t limited to the private sector or construction. Every Israeli government since 1985 has adopted neo-liberal concepts; cutbacks in social budgets are considered an end in themselves. According to a report by the Knesset Research and Information Center, called “Employment of Workers by Personnel Companies” (2002, in Hebrew), “The shrinkage of budgets in government ministries created a situation of bypassing standard procedures, whereby the ministries hire the services of personnel companies in order to get workers. The number of those employed through personnel companies in the public sector amounts to between 70,000 and 80,000.”(6)

When we include the private sector as well, the total number working through personnel companies is huge. Estimates range from 120,000 to 500,000 (in a work force of 2.4 million). This wide variation is due to the fact that personnel contractors are often registered as security companies, cleaning companies, and the like; these employ people outside the framework of the law. Even on a conservative estimate, however, 120,000 Israelis work under a system of two employers: the personnel company and the actual firm. That is 5% of the labor force, compared with 2.5% in Europe and the US. (7)

In 1996 the Knesset passed a law on personnel companies, which was initiated by the New Histadrut. It compelled equalization of conditions for all workers, according to the collective agreements that hold for regular employees at each work place. In fact, this provision has not been implemented. It contravenes the purposes of government policy, as explained by Attorney Linda Efroni in Globes (April 28, 2003):

“Following the Economic Stabilization Plan of July 1985, the government ministries, the other employers in the public sector, the local governments and the institutes of higher education, all agreed to reduce the roster of tenured workers. They invented the system of Israbluff. Accordingly, in exchange for a cutback in the tenured labor force, the activities-budgets of the various ministries would expand considerably. It was possible to compensate for the cutback by buying equivalent services from a personnel company. In this way, there was a mushrooming of personnel companies specializing in cleaning, office services and security. The firms that supplied this labor for government services were made to bid in a tender organized by the General Accountant. A close check of the matter revealed that the conditions of the tender foreclosed any possibility of paying the full costs of labor as determined by the protective laws of the State of Israel, such as minimum wage, overtime, travel expenses, recuperation expenses, annual vacation, sick leave and even compensation for job loss.”

Netanyahu’s contribution

In 2003 Ariel Sharon appointed Binyamin Netanyahu as Finance Minister. This marked another turning point in the breaking of organized labor. Netanyahu enforced budgetary restraint, carrying out a drastic cut in government expenditure. One result was to deepen the practice of “Israbluff” described by Efroni above. With extraordinary diligence, Netanyahu also ended the Histadrut’s control of the large pension funds. He privatized the ports, El Al, Bank Leumi and more.

The weakening of the Histadrut was no casual byproduct of these policies. In an interview, Uri Yogev, head of the Budget Department in the Ministry of Finance under Netanyahu, named his biggest accomplishment: “We managed to exploit the period of recession so as to change the rules of the game and advance the most dramatic revolution of all: the breaking of organized labor in Israel.” (Haaretz May 5, 2004)

Attorney Itai Svirsky, who coordinates the Legal Clinic of Tel Aviv University, recently told Challenge that the Netanyahu period worsened the conditions of employment in public service. On May 24, 2006, Svirsky wrote a letter to the Attorney General and the Commissioner of State Service, demanding enforcement of the article requiring equalization of conditions; he also demanded a stop to the custom of turning a blind eye to the exploitation of workers within the halls of government. Svirsky explained the logic of this law, which is meant “to improve the conditions of employment of those working for personnel companies and to prevent – or reduce as much as is feasible – the possibility of discrimination between people working side by side in the same job and the creating of class differences between them, in the sense of Class A workers and Class B.”

A new sort of trade union

In effect the Israeli labor market has been operating for many years on the principle of Class A and Class B workers. The members of the second sort, without rights, have been increasing in all economic branches. Accompanying this process has been the erosion of the Histadrut’s position as the only workers’ organization.

With the demise of organized labor, the widening of social gaps has shaken the commitment of the workers to the goals set by Israel’s establishment. They feel that by backing private capital, the government has trampled them into the dust. These workers seek new vehicles in which to organize and demand their rights. One such vehicle is Centurion, an organization of workers for security companies. Another is the organization of artists and playwrights. A third is the actors’ organization. There are non-profit associations such as Kav la’Oved (Workers’ Hotline) and Mechuyavut (Commitment). These are filling the vacuum left by the Histadrut when it turned its back on the migrants, the Arabs and the workers of personnel companies.

Within this complicated reality, WAC is taking steps toward forming a trade union with a broad social character, including Arabs and Jews. In the new initiatives for organizing workers, including those of Educational TV, WAC sees a core around which a new union movement can grow."end"

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