Who Needs Job Security?

By Omer Moav, Ofer Cohen

The benefits of a flexible labor market.

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n early November 2006, the union of temporary employees at Israel’s Ben-Gurion International Airport declared a strike that left the country’s gateway to the world virtually incapacitated. Airport baggage handlers, who had taken over the sorting area and barricaded themselves inside it, refused to load or offload cargo, delaying flights and forcing thousands of furious travelers to wait for hours to pick up their luggage. The pretext for the strike was the Israel Airports Authority’s announcement that it intended to fire one hundred twenty provisional workers, who had been employed for less than five years. In response, the union declared that its members would not return to work unless the more senior temporary workers were given tenure—that is, immunity from dismissal. The leader of the strike, social activist Dr. Ami Veturi, declared in a press release that “we demand what is necessary for every person in Israel: a decent livelihood, job security, and a respectable life.”1
The baggage handlers’ strike at Ben-Gurion airport, terminated after several days by an injunction of the National Labor Court, ultimately failed to achieve its goal. Nevertheless, the strike demonstrated just how important “job security” is to large sections of the Israeli workforce. A steady job, after all, provides the worker with a livelihood over an extended period of time. No less important, it affords a sense of security and psychological well-being that is monetarily unquantifiable. It is not surprising, therefore, that a survey published in May 2007 by BDI, an Israeli company specializing in business and marketing information, found that Israeli workers, as a rule, prefer job security to higher wages.2
In fact, Israeli employees enjoyed a particularly high level of job security for many years, largely on account of the centralized character of Israel’s economy during the early decades of the state. Collective agreements made between Israel’s labor federation, the Histadrut, and other labor unions with their employers—most notably the government—provided far-reaching protections to a significant segment of the workforce. These agreements and the extension orders that followed them, as well as subsequent Israeli employment legislation, have made the process of firing workers cumbersome, lengthy, and expensive.3 Additionally, the practice of granting tenure to long-term employees has become commonplace in the public sector and is viewed by many workers as a major advantage over private employment. The prospect of immunity from dismissal after only a few years of work compensates for the less-than-glorious salaries offered by government jobs.4
To be sure, since the late 1980s, the Israeli economy has undergone sweeping changes, resulting in the decline of organized labor.5 Nonetheless, the number of workers benefiting from job security—while steadily declining—remains substantial. Nearly 800,000 workers are employed in the Israeli public sector, almost a third of the total workforce.6 Over 80 percent of these workers are covered by collective agreements that grant them immunity from dismissal. Some workers in the private sector, especially those who are unionized, also enjoy similar arrangements, though on a much smaller scale.7
Naturally, the changes that have taken place in the Israeli labor market have been cause for concern among social activists. Faced with the decay of the old, centralized, and inflexible employment model, these activists are struggling relentlessly to preserve workers’ traditional employment protections. Many of them continue to identify job security with collective agreements that grant workers the privilege of tenure, and with legislation that restricts an employer’s capacity to dismiss his employees.8 From the activists’ viewpoint, the abolition of these mechanisms is simply malicious, transforming workers into what member of Knesset Shelly Yachimovich of the Labor party called a “poor, desolate, and defenseless population.”9
Despite the grain of truth in these warnings, which indeed merit some attention, the overall picture of the changing Israeli economy is far more complex. Both empirical and theoretical research shows that, in truth, inflexibility in the labor market causes significant economic and social damage. Not only does it impede economic growth and lower the general standard of living, it also extracts a heavy price from the weaker elements of society, making it increasingly difficult for them to improve their condition. Other countries have already learned this lesson, and some, such as Denmark, have adopted alternative welfare policies that provide workers with income security without undermining the flexibility of the labor market. As we will argue in what follows, if Israel wishes to position itself at the forefront of the global economy and maintain its moral stature in the process, it must learn from the experience of these countries and act accordingly.

Omer Moav
is a senior fellow at the Shalem Center and a professor of economics at the Hebrew University of Jerusalem and Royal Holloway, University of London. Ofer Cohen is pursuing a master’s degree in economics at the Hebrew University of Jerusalem.

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