Raising the minimum wage by 1% relative to the national average salary will increase unemployment by 0.2%, or 5,000 people, within a year, and reduce the number of employed Israelis by 11,900, states Ministry of Finance chief economist Dr. Michael Sarel in his November economic survey, published yesterday.
Sarel said raising the minimum wage by 1% will immediately cause the loss of 7,400 business sector jobs. The public sector will lose 4,500 jobs.
The Histadrut (General Federation of Labor in Israel) proposes raising the minimum wage to NIS 4,500 a month, about $1,000. The proposal could result in the minimum rising 8% to a record 54.5% of GDP per capita by 2007.
The Ministry of Finance survey quotes Manufacturer Association estimates that the Histadrut's proposal would cost 85,000 jobs altogether. It could cause 15% of Israeli factories (300 factories) to close within three to five years, and cause another 1,000 companies to move overseas.
Published by Globes [online] - www.globes.co.il - on November 18, 2004