The government and Histadrut have signed an agreement to pay public employes a 25.9 percent cost of living allowance next month. Based on average salaries in 1979 — about IL 14,000 — the maximum allowance will amount to IL 3550.
The agreement does not apply to the private sector but private employers are expected to go along despite the outcry from industrialists against it. Avraham Shavit, chairman of the Manufacturers Association, said employers recognized the need to compensate workers for the high cost of living but the government’s policy of tightening credit has made money scarce. “We simply do not know from where we shall get the money to pay this large allowance,” Shavit,” said.
The credit squeeze is already having its effects on the economy. The foreign trade departments of Israeli banks are indicating a significant drop in import orders. Imported goods in banded warehouses are not being cleared because importers lack ready cash and cannot get credit. Finance Ministry officials expressed delight, claiming that these developments are the first signs that inflation is being checked. But the Wholesalers Association has reported a decline in sales and retailers are complaining of excessive inventories.
Meanwhile, prices continue to rise and the value of the Pound declines. The costs of water, coffee, instant coffee, plywood and paper material are expected to go up in the next few weeks as is the price of milk. Cheese producers said their shelves are full and the demand for expensive cheeses has decreased considerably.
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