The consequences of Israel’s austerity economic program is the erosion of wages. According to figures released at year’s end by the Central Bureau of Statistics, the gross wages of civil service workers were down 22 percent in the second half of 1985 compared to the first half. The erosion for wage-earners in other sectors was 17 percent.
In the past few months, the real value of wages has been lowered to the levels of 1977. Those of public employes sank to the 1967 levels. In some quarters these developments are hailed as a sign of the successful battle against inflation. Housewives and others take a dim view. They say wage-earners have made the greatest sacrifice to make the economic program work.
A concomitance of the wage erosion has been an erosion of private consumption, which is down by two percent. During the first half of 1985, attempts to cool down the economy by means of a package deal freezing wages, prices and taxes were unsuccessful. During the second half, the government launched an overall program aimed at putting a freeze on the entire economy.
FOCUS ON THE NEW PLAN
The focus of the new plan was to freeze the Shekel-Dollar exchange rate at 1,500 Shekels to $1. Agreement was reached with Histadrut on wages while the manufacturers agreed to government price controls. The government, therefore, was able to cut its budget, less by reducing programs than by slashing price subsidies and imposing new taxes. But interest rates were kept at a relatively high level.
As a result of the agreement with Histadrut, wages will improve in the next few months. Private consumption is expected to stay down. But contrary to government expectation, the rate of savings and investment has decreased as well. Israelis have less cash in their pockets, either to spend or to save.
Meanwhile, Israelis have bid goodbye to the old Shekel and have welcomed the new. On January 1 the old 1,000 Shekel note was replaced by a new one Shekel coin worth about 66 cents, or 1.5 to the Dollar. This does not represent an upward valuation of the Shekel; it is simply a matter of removing three zeroes. Banks were closed for 24 hours to allow time for their computers to be re-programmed.
The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.
